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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, 2008
 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
   YES o NO þ
 YES þ NO o
 þ o
 þ
  Large Accelerated filer o
    
    Accelerated filer oNon-Accelerated filer
þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    25Item 2. Properties
    
    
    36Item 3. Legal Proceedings
    
    
    36Item 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
    
    
    64Item 8. Financial Statements and Supplementary Data
    
    
    65Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    99Item 9A(T). Controls and Procedures
    
    
    99Item 9B. Other Information
    
    
    100PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    100Item 11. Executive Compensation
    
    
    104Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    124Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    126Item 14. Principal Accountant Fees and Services
    
    
    128PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    128Exhibit 10.10Exhibit 10.17Exhibit 10.18Exhibit 21Exhibit 31.1Exhibit 31.2
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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
  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;
    
    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.
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Provide High-Quality Services
 
    
    dedicated corporate and hospital resources, including a Chief Quality Officer;
    
    on-going training and education of both medical and non-medical personnel;
    
    utilizing our hospital medical management quality program (HMMQP) to drive improvements
in case management and quality of care;
    
    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.
 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, including expansion
of outpatient surgery, imaging and other specialty services.
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Employing Physicians to Meet Community Needs in Certain Markets.
 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 hospital campuses;
    
    sponsoring training programs to educate physicians on advanced medical procedures; and
    
    allowing physicians to remotely access clinical data through our information systems,
facilitating more convenient and timely patient care.
 Continue to Develop Favorable Managed Care Relationships
 Selectively Pursue Acquisitions and Strategic Alliances
  Our Markets
  Salt Lake City, Utah
   3




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Phoenix, Arizona
    Tampa-St. Petersburg, Florida
    4




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Texas
     Las Vegas, Nevada
  West Monroe, Louisiana
    5




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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 (4)
    
    Salt Lake City
    
    
    168ArizonaMountain Vista Medical Center (5)
    
    Mesa
    
    
    178St. Lukes Medical Center (6)
    
    Phoenix
    
    
    356Tempe 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 (10)
    
    West Monroe
    
    
    247Total
    
    
    
    
    3,027
 
 (1)
    
    Owned by a limited partnership in which we own a 96.2% 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 95.6% 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)
    
    Owned by a limited partnership in which we own an 97.8% interest.(5)
    
    Owned by a limited partnership in which we own an 90.8% interest.(6)
    
    Includes St. Lukes Behavioral Hospital, which has 124 licensed beds.(7)
    
    Owned by a limited partnership in which we own an 87.7% interest.(8)
    
    Owned by a limited partnership in which we own a 93.7% interest.(9)
    
    Owned by a limited partnership in which we own an 87.9% interest.(10)
    
    Includes Ouachita, a surgical hospital with 10 licensed beds.  6




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Hospital Operations
   
    
    local economic conditions;
    
    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; 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 Acute Care 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
    
    2008
    
    
    2007
    
    
    2006Medicare
    
    
    23.8
    %
    
    
    22.8
    %
    
    
    23.8
    %Managed Medicare
    
    
    2.6
    
    
    
    2.1
    
    
    
    1.9Medicaid
    
    
    5.3
    
    
    
    5.2
    
    
    
    5.0Managed Medicaid
    
    
    8.2
    
    
    
    9.0
    
    
    
    8.4Managed care
    
    
    48.1
    
    
    
    49.5
    
    
    
    48.7Self-pay and other
    
    
    12.0
    
    
    
    11.4
    
    
    
    12.2Total(1)
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 
 (1)
    
    For the years ended September 30, 2008, 2007 and 2006,
net patient revenue comprised 73.3%, 73.8% and 73.0%, respectively, of our consolidated net revenue.  Medicare
    8




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Managed Medicare
  Medicaid
   11




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Managed Medicaid
   Annual Cost Reports
   Managed Care
   12




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Commercial Insurance
   Charity Care
  Competition
  
    
    the local economies in which we operate;
    
    decline in tourism in our service areas;
    
    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;
    
    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.
   13




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Employees And Medical Staff
     14




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Compliance Program
  Government Regulation and Other Factors
 Licensure, Certification and Accreditation
   Utilization Review
   15




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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
 qui tam qui tam
   Corporate Practice of Medicine/Fee Splitting
   19




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The Health Insurance Portability and Accountability Act of 1996 and Privacy and Security
Requirements
    The Emergency Medical Treatment and Active Labor Act
   20




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Healthcare Reform
     Conversion Legislation
  Healthcare Industry Investigations
   21




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qui tam qui tam qui tam
 Certificates of Need
   22




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Health Choice
         
    
    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
    
    certain price reductions offered by contractors with substantial financial risk to
managed care organizations.
  23




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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
    24




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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 and collecting data on quality measures necessary for
full Medicare payment updates.
  
    
    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.
  
 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
   25




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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;
    
    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.
   26




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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.
     27




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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 Volume And Revenue Related To Uncompensated Care, 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.
    28




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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 May 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 individually
identifiable 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.
   
    
    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.
  29




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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.
  We May Incur Material Fees, Costs and Expenses In Connection With An Appeal of the Court Order
Dismissing With Prejudice the Qui Tam Action And Investigation of IAS.
 qui tam qui tam qui tam qui tam qui tam qui tam
  30




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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.
 qui tam
  
    
    cost reporting and billing practices;
    
    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.
    31




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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 and collecting data on quality measures necessary for full
Medicare payment updates.
  If Any One Of The Regions In Which We Operate Experiences An Economic Downturn Or Other
Material Change, Our Overall Business Results May Suffer.
   Health Choice
    
    
    26.2
    %Salt Lake City, Utah
    
    
    20.5
    %Phoenix, Arizona (excluding Health Choice)
    
    
    13.7
    %Three cities in Texas, including San Antonio
    
    
    18.5
    %Tampa-St. Petersburg, Florida
    
    
    10.6
    %Other
    
    
    10.5
    %
   32




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We May Be Subject To Liabilities Because Of Claims Brought Against Our Facilities.
     Our Hospitals May Face Increasing Insurance Costs That May Reduce Our Cash Flows And Net
Earnings .
  Operations At Our Hospitals Have Been And May Be Negatively Impacted By Certain Factors,
Including Severe Weather Conditions And The Impact Of Natural Disasters.
   33




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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 AHCCCS Significantly Alters The Payment Structure Of Its Contracts, Our Net Revenue And
Profitability Would Be Adversely Affected.
  If Health Choices Contract With AHCCCS Was Discontinued, Our Net Revenue And Profitability
Would Be Adversely Affected.
  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.
   34




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Difficulties With The Integration Of Acquisitions May Disrupt Our Ongoing Operations.
  Difficulties With Current Construction Projects Or New Construction Projects Would Involve
Significant Capital Expenditures Which Could Have An Adverse Impact On Our Liquidity.
  
    
    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.
  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.
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Our Hospitals Are Subject To Potential Responsibilities And Costs Under Environmental Laws
That Could Lead To Material Expenditures Or Liability.
   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
 
 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
   IASISYear Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004 (7)Statement
of Operations Data (1)(6):Net revenue
    
    $
    2,065,536
    
    
    $
    1,766,079
    
    
    $
    1,539,577
    
    
    $
    1,429,429
    
    
    $
    1,300,489Costs and expenses:Salaries and benefits
    
    
    632,109
    
    
    
    533,792
    
    
    
    439,349
    
    
    
    410,119
    
    
    
    394,066Supplies
    
    
    231,259
    
    
    
    194,915
    
    
    
    167,616
    
    
    
    166,159
    
    
    
    156,957Medical claims
    
    
    452,055
    
    
    
    376,505
    
    
    
    347,217
    
    
    
    302,204
    
    
    
    242,389Operating expenses
    
    
    283,123
    
    
    
    266,263
    
    
    
    223,946
    
    
    
    191,538
    
    
    
    183,933Provision for bad debts
    
    
    161,936
    
    
    
    136,233
    
    
    
    134,614
    
    
    
    123,728
    
    
    
    117,384Rentals and leases
    
    
    36,633
    
    
    
    31,546
    
    
    
    30,277
    
    
    
    28,502
    
    
    
    27,596Interest expense, net
    
    
    75,665
    
    
    
    71,206
    
    
    
    67,124
    
    
    
    63,398
    
    
    
    55,569Depreciation and amortization
    
    
    96,741
    
    
    
    75,388
    
    
    
    69,137
    
    
    
    68,358
    
    
    
    64,910Management fees
    
    
    5,000
    
    
    
    4,746
    
    
    
    4,189
    
    
    
    3,791
    
    
    
    746Hurricane-related
property damage (2)
    
    
    3,589
    
    
    
    
    
    
    
    
    
    
    
    4,762
    
    
    
    Business
interruption insurance recoveries
(3)
    
    
    
    
    
    
    (3,443
    )
    
    
    (8,974
    )
    
    
    
    
    
    
    Loss on extinguishment of debt
(4)
    
    
    
    
    
    
    6,229
    
    
    
    
    
    
    
    
    
    
    
    52,084Merger
expenses (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,750Write-off of debt issue costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,850Total costs and expenses
    
    
    1,978,110
    
    
    
    1,693,380
    
    
    
    1,474,495
    
    
    
    1,362,559
    
    
    
    1,324,234Earning (loss) from continuing operations
before gain (loss) on disposal of assets,
minority interests and income taxes
    
    
    87,426
    
    
    
    72,699
    
    
    
    65,082
    
    
    
    66,870
    
    
    
    (23,745
    )Gain (loss) on disposal of assets, net
    
    
    (75
    )
    
    
    (1,359
    )
    
    
    913
    
    
    
    (231
    )
    
    
    3,624Minority interests
    
    
    (4,437
    )
    
    
    (4,496
    )
    
    
    (3,546
    )
    
    
    (2,891
    )
    
    
    (4,305
    )Earnings (loss) from continuing operations
before income taxes
    
    
    82,914
    
    
    
    66,844
    
    
    
    62,449
    
    
    
    63,748
    
    
    
    (24,426
    )Income tax expense
    
    
    35,325
    
    
    
    25,909
    
    
    
    22,515
    
    
    
    25,402
    
    
    
    5,856Net earnings (loss) from continuing operations
    
    
    47,589
    
    
    
    40,935
    
    
    
    39,934
    
    
    
    38,346
    
    
    
    (30,282
    )Earnings (loss) from discontinued operations,
net of income taxes
    
    
    (11,275
    )
    
    
    669
    
    
    
    (385
    )
    
    
    2,246
    
    
    
    (2,143
    )Net earnings (loss)
    
    $
    36,314
    
    
    $
    41,604
    
    
    $
    39,549
    
    
    $
    40,592
    
    
    $
    (32,425
    )Balance Sheet Data (at end of period):Cash and cash equivalents
    
    $
    80,738
    
    
    $
    
    
    
    $
    95,415
    
    
    $
    89,097
    
    
    $
    98,805Total assets
    
    $
    2,308,147
    
    
    $
    2,186,422
    
    
    $
    1,967,835
    
    
    $
    1,852,724
    
    
    $
    1,724,161Long-term debt and capital lease obligations
(including current portion)
    
    $
    1,114,622
    
    
    $
    1,031,657
    
    
    $
    896,945
    
    
    $
    904,808
    
    
    $
    912,754Members equity
    
    $
    727,769
    
    
    $
    691,514
    
    
    $
    656,496
    
    
    $
    616,947
    
    
    $
    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 acquisition.(2)
    
    Results for the year ended September 30, 2008, include an adverse financial impact totaling
$3.6 million before income taxes relating to property damage to The Medical Center of
Southeast Texas, as a result of Hurricane Ike. Results for the year ended September 30, 2005, include an adverse financial impact totaling
$4.8 million before income taxes relating to property damage to The Medical Center of
Southeast Texas, as a result of Hurricane Rita.  37




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##### Table of Contents



(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, 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. Results for the
year ended September 30, 2004, include a $52.1 million loss on extinguishment of debt of IAS
related to its acquisition by the investor group led by TPG.(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)
    
    Excludes Mesa General and Biltmore, where operations were
discontinued effective May 31, 2008 and April 30, 2008,
respectively.(7)
    
    On June 22, 2004, an investor group led by TPG acquired IAS through a merger, which
ultimately resulted in the formation of IASIS. The selected historical financial data for the fiscal year
ended September 30, 2004, represents the combined results of the successor (for the period June 23,
2004 through September 30, 2004) and predecessor (for the period ended June 22, 2004), and was
derived from the audited consolidated financial statements for the respective periods in fiscal 2004. Selected Operating Data
  Year Ended September 30,2008
    
    
    2007
    
    
    2006Acute CareNumber of acute care hospital facilities at end of period (1)
    
    
    15
    
    
    
    15
    
    
    
    13Beds in service at end of period
    
    
    2,644
    
    
    
    2,565
    
    
    
    2,080Average length of stay (days) (2)
    
    
    4.66
    
    
    
    4.63
    
    
    
    4.62Occupancy rates (average beds in service)
    
    
    48.9
    %
    
    
    49.5
    %
    
    
    51.2
    %Admissions (3)
    
    
    101,302
    
    
    
    92,198
    
    
    
    82,862Adjusted admissions (4)
    
    
    165,819
    
    
    
    150,774
    
    
    
    137,703Patient days (5)
    
    
    471,853
    
    
    
    427,244
    
    
    
    383,175Adjusted patient days (4)
    
    
    741,466
    
    
    
    669,999
    
    
    
    612,058Net patient revenue per adjusted admission (6)
    
    $
    9,101
    
    
    $
    8,639
    
    
    $
    8,157Health Choice (7):Medicaid covered lives
    
    
    142,193
    
    
    
    122,437
    
    
    
    110,813Dual-eligible lives (8)
    
    
    3,300
    
    
    
    3,482
    
    
    
    3,937Medical loss ratio (9)
    
    
    85.2
    %
    
    
    85.2
    %
    
    
    87.2
    %
 
 (1)
    
    Excludes Mesa General Hospital, which discontinued services effective May 31, 2008. Excludes
St. Lukes Behavioral Hospital. Beginning January 31, 2007, includes Glenwood. Beginning July
23, 2007, includes Mountain Vista.(2)
    
    Represents the average number of days that a patient stayed in our hospitals.  38




---



##### Table of Contents



(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
    
    Recent Accounting Pronouncements.
  FORWARD LOOKING STATEMENTS
   39




---



##### Table of Contents



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.
   qui tam qui tam qui tam
     40




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##### Table of Contents



Revenue and Volume Trends
   Acute Care Revenue
     41




---



##### Table of Contents



Year EndedSeptember 30,2008
    
    
    2007
    
    
    2006Medicare
    
    
    32.3
    %
    
    
    30.9
    %
    
    
    32.2
    %Managed Medicare
    
    
    3.8
    
    
    
    3.0
    
    
    
    2.8Medicaid
    
    
    7.4
    
    
    
    7.3
    
    
    
    6.7Managed Medicaid
    
    
    10.6
    
    
    
    11.1
    
    
    
    10.3Managed care
    
    
    40.2
    
    
    
    41.6
    
    
    
    42.0Self-pay and other
    
    
    5.7
    
    
    
    6.1
    
    
    
    6.0Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
     42




---



##### Table of Contents



Premium Revenue
   Significant Industry Trends
  General Economic Environment
  Value-Based Reimbursement
    43




---



##### Table of Contents



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, with a goal of ultimately providing an improved
continuum of care through continuity;
    
    Development and implementation of a hospital medical management program;
    
    Hiring of a Chief Quality Officer;
    
    Ongoing training and education of medical and non-medical personnel related to quality
performance indicators;
    
    Monthly review of the 30 quality indicators prescribed by CMS for reporting;
    
    Monitoring of quality measures in addition to those required 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
    
    Realignment of  staffing to collect and report quality information and to facilitate action
plans to address areas for improvement.
  44




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##### Table of Contents



Physician Integration
    Growth in Uncompensated Care
   September 30,
    
    
    September 30,2008
    
    
    2007Insured receivables
    
    
    64.8
    %
    
    
    66.7
    %Uninsured receivables
    
    
    35.2
    %
    
    
    33.3
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  45




---



##### Table of Contents



September 30,
    
    
    September 30,2008
    
    
    20070 to 90 days
    
    
    67.5
    %
    
    
    71.8
    %91 to 180 days
    
    
    17.9
    %
    
    
    15.5
    %Over 180 days
    
    
    14.6
    %
    
    
    12.7
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  Sub-Acute Care Services
  Nursing Shortage
   Decreased Federal and State Funding for Medicaid Programs
   46




---



##### Table of Contents



Changes in Patient Service Mix
  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
    
    Various allowance coverage statistics.
    47




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##### Table of Contents



Allowance for Contractual Discounts and Settlement Estimates.
       48




---



##### Table of Contents



Insurance Reserves.
   Year ended September 30, 2008
    
    $
    (6.8
    )Year ended September 30, 2007
    
    $
    (6.6
    )Year ended September 30, 2006
    
    $
    0.6
  Year ended September 30, 2008
    
    $
    0.8Year ended September 30, 2007
    
    $
    (1.0
    )Year ended September 30, 2006
    
    $
    (3.3
    )
 Medical Claims Payable.
  49




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##### Table of Contents



Goodwill and Other Intangibles. Business Combinations
 Income Taxes.
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB
Statement No. 109 Accounting for
Income Taxes
     50




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##### Table of Contents



RESULTS OF OPERATIONS SUMMARY
  Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30, 2008
    
    
    September 30, 2007
    
    
    September 30, 2006Consolidated ($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    1,523,790
    
    
    
    73.8
    %
    
    $
    1,315,438
    
    
    
    74.5
    %
    
    $
    1,133,055
    
    
    
    73.6
    %Premium revenue
    
    
    541,746
    
    
    
    26.2
    %
    
    
    450,641
    
    
    
    25.5
    %
    
    
    406,522
    
    
    
    26.4
    %Total net revenue
    
    
    2,065,536
    
    
    
    100.0
    %
    
    
    1,766,079
    
    
    
    100.0
    %
    
    
    1,539,577
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    632,109
    
    
    
    30.6
    %
    
    
    533,792
    
    
    
    30.2
    %
    
    
    439,349
    
    
    
    28.5
    %Supplies
    
    
    231,259
    
    
    
    11.2
    %
    
    
    194,915
    
    
    
    11.0
    %
    
    
    167,616
    
    
    
    10.9
    %Medical claims
    
    
    452,055
    
    
    
    21.9
    %
    
    
    376,505
    
    
    
    21.3
    %
    
    
    347,217
    
    
    
    22.6
    %Other operating expenses
    
    
    283,123
    
    
    
    13.7
    %
    
    
    266,263
    
    
    
    15.1
    %
    
    
    223,946
    
    
    
    14.5
    %Provision for bad debts
    
    
    161,936
    
    
    
    7.8
    %
    
    
    136,233
    
    
    
    7.7
    %
    
    
    134,614
    
    
    
    8.7
    %Rentals and leases
    
    
    36,633
    
    
    
    1.8
    %
    
    
    31,546
    
    
    
    1.8
    %
    
    
    30,277
    
    
    
    2.0
    %Interest expense, net
    
    
    75,665
    
    
    
    3.7
    %
    
    
    71,206
    
    
    
    4.0
    %
    
    
    67,124
    
    
    
    4.4
    %Depreciation and amortization
    
    
    96,741
    
    
    
    4.7
    %
    
    
    75,388
    
    
    
    4.3
    %
    
    
    69,137
    
    
    
    4.5
    %Management fees
    
    
    5,000
    
    
    
    0.2
    %
    
    
    4,746
    
    
    
    0.3
    %
    
    
    4,189
    
    
    
    0.3
    %Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    6,229
    
    
    
    0.4
    %
    
    
    
    
    
    
    Hurricane-related property damage
    
    
    3,589
    
    
    
    0.2
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Business interruption insurance
recoveries
    
    
    
    
    
    
    
    
    
    
    (3,443
    )
    
    
    (0.2
    )%
    
    
    (8,974
    )
    
    
    (0.6
    )%Total costs and expenses
    
    
    1,978,110
    
    
    
    95.8
    %
    
    
    1,693,380
    
    
    
    95.9
    %
    
    
    1,474,495
    
    
    
    95.8
    %Earnings from continuing operations
before gain (loss) on disposal of
assets, minority interests and income
taxes
    
    
    87,426
    
    
    
    4.2
    %
    
    
    72,699
    
    
    
    4.1
    %
    
    
    65,082
    
    
    
    4.2
    %Gain (loss) on disposal of assets, net
    
    
    (75
    )
    
    
    (0.0
    )%
    
    
    (1,359
    )
    
    
    (0.1
    )%
    
    
    913
    
    
    
    0.1
    %Minority interests
    
    
    (4,437
    )
    
    
    (0.2
    )%
    
    
    (4,496
    )
    
    
    (0.2
    )%
    
    
    (3,546
    )
    
    
    (0.2
    )%Earnings from continuing operations
before income taxes
    
    
    82,914
    
    
    
    4.0
    %
    
    
    66,844
    
    
    
    3.8
    %
    
    
    62,449
    
    
    
    4.1
    %Income tax expense
    
    
    35,325
    
    
    
    1.7
    %
    
    
    25,909
    
    
    
    1.5
    %
    
    
    22,515
    
    
    
    1.5
    %Net earnings from continuing
operations
    
    
    47,589
    
    
    
    2.3
    %
    
    
    40,935
    
    
    
    2.3
    %
    
    
    39,934
    
    
    
    2.6
    %Earnings (loss) from discontinued
operations, net of income taxes
    
    
    (11,275
    )
    
    
    (0.5
    )%
    
    
    669
    
    
    
    0.0
    %
    
    
    (385
    )
    
    
    (0.0
    )%Net earnings
    
    $
    36,314
    
    
    
    1.8
    %
    
    $
    41,604
    
    
    
    2.3
    %
    
    $
    39,549
    
    
    
    2.6
    %
  51




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##### Table of Contents



Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30, 2008
    
    
    September 30, 2007
    
    
    September 30, 2006Acute Care ($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    1,523,790
    
    
    
    99.4
    %
    
    $
    1,315,438
    
    
    
    99.4
    %
    
    $
    1,133,055
    
    
    
    99.4
    %Revenue between segments
    
    
    9,594
    
    
    
    0.6
    %
    
    
    7,540
    
    
    
    0.6
    %
    
    
    7,300
    
    
    
    0.6
    %Total net revenue (1)
    
    
    1,533,384
    
    
    
    100.0
    %
    
    
    1,322,978
    
    
    
    100.0
    %
    
    
    1,140,355
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    614,442
    
    
    
    40.1
    %
    
    
    518,989
    
    
    
    39.2
    %
    
    
    426,718
    
    
    
    37.4
    %Supplies
    
    
    231,001
    
    
    
    15.1
    %
    
    
    194,630
    
    
    
    14.7
    %
    
    
    167,332
    
    
    
    14.7
    %Other operating expenses
    
    
    264,814
    
    
    
    17.3
    %
    
    
    251,167
    
    
    
    19.0
    %
    
    
    210,662
    
    
    
    18.5
    %Provision for bad debts
    
    
    161,936
    
    
    
    10.6
    %
    
    
    136,233
    
    
    
    10.3
    %
    
    
    134,614
    
    
    
    11.8
    %Rentals and leases
    
    
    35,466
    
    
    
    2.3
    %
    
    
    30,384
    
    
    
    2.3
    %
    
    
    29,195
    
    
    
    2.6
    %Interest expense, net
    
    
    75,665
    
    
    
    4.9
    %
    
    
    71,206
    
    
    
    5.4
    %
    
    
    67,124
    
    
    
    5.9
    %Depreciation and amortization
    
    
    93,003
    
    
    
    6.0
    %
    
    
    71,828
    
    
    
    5.4
    %
    
    
    65,751
    
    
    
    5.8
    %Management fees
    
    
    5,000
    
    
    
    0.3
    %
    
    
    4,746
    
    
    
    0.4
    %
    
    
    4,189
    
    
    
    0.3
    %Loss on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    6,229
    
    
    
    0.5
    %
    
    
    
    
    
    
    Hurricane-related property damage
    
    
    3,589
    
    
    
    0.2
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Business interruption insurance recoveries
    
    
    
    
    
    
    
    
    
    
    (3,443
    )
    
    
    (0.3
    )%
    
    
    (8,974
    )
    
    
    (0.8
    )%Total costs and expenses
    
    
    1,484,916
    
    
    
    96.8
    %
    
    
    1,281,969
    
    
    
    96.9
    %
    
    
    1,096,611
    
    
    
    96.2
    %Earnings from continuing operations before
gain (loss) on disposal of assets, minority
interests and income taxes
    
    
    48,468
    
    
    
    3.2
    %
    
    
    41,009
    
    
    
    3.1
    %
    
    
    43,744
    
    
    
    3.8
    %Gain (loss) on disposal of assets, net
    
    
    (75
    )
    
    
    (0.0
    )%
    
    
    (1,359
    )
    
    
    (0.1
    )%
    
    
    967
    
    
    
    0.1
    %Minority interests
    
    
    (4,437
    )
    
    
    (0.3
    )%
    
    
    (4,496
    )
    
    
    (0.3
    )%
    
    
    (3,546
    )
    
    
    (0.3
    )%Earnings from continuing operations before
income taxes
    
    $
    43,956
    
    
    
    2.9
    %
    
    $
    35,154
    
    
    
    2.7
    %
    
    $
    41,165
    
    
    
    3.6
    %
 
 (1)
    
    Revenue between segments is eliminated in our consolidated results. Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30, 2008
    
    
    September 30, 2007
    
    
    September 30, 2006Health Choice ($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentagePremium revenue
    
    $
    541,746
    
    
    
    100.0
    %
    
    $
    450,641
    
    
    
    100.0
    %
    
    $
    406,522
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    17,667
    
    
    
    3.3
    %
    
    
    14,803
    
    
    
    3.3
    %
    
    
    12,631
    
    
    
    3.1
    %Supplies
    
    
    258
    
    
    
    0.0
    %
    
    
    285
    
    
    
    0.1
    %
    
    
    284
    
    
    
    0.1
    %Medical claims (1)
    
    
    461,649
    
    
    
    85.2
    %
    
    
    384,045
    
    
    
    85.2
    %
    
    
    354,517
    
    
    
    87.2
    %Other operating expenses
    
    
    18,309
    
    
    
    3.4
    %
    
    
    15,096
    
    
    
    3.3
    %
    
    
    13,284
    
    
    
    3.3
    %Rentals and leases
    
    
    1,167
    
    
    
    0.2
    %
    
    
    1,162
    
    
    
    0.3
    %
    
    
    1,082
    
    
    
    0.3
    %Depreciation and amortization
    
    
    3,738
    
    
    
    0.7
    %
    
    
    3,560
    
    
    
    0.8
    %
    
    
    3,386
    
    
    
    0.8
    %Total costs and expenses
    
    
    502,788
    
    
    
    92.8
    %
    
    
    418,951
    
    
    
    93.0
    %
    
    
    385,184
    
    
    
    94.8
    %Earnings before loss on disposal of assets
    
    
    38,958
    
    
    
    7.2
    %
    
    
    31,690
    
    
    
    7.0
    %
    
    
    21,338
    
    
    
    5.2
    %Loss on disposal of assets, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    0.0
    %Earnings before income taxes
    
    $
    38,958
    
    
    
    7.2
    %
    
    $
    31,690
    
    
    
    7.0
    %
    
    $
    21,284
    
    
    
    5.2
    %
 
 (1)
    
    Medical claims paid to our hospitals of $9.6 million, $7.5 million and $7.3 million for the
years ended September 30, 2008, 2007 and 2006, respectively, are eliminated in our consolidated
results.  52




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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)
    
    $
    1,322,978
    
    
    $
    50,335
    
    
    $
    1,373,313
    
    
    
    100.0
    %
    
    
    100.0
    %Salaries and benefits
    
    
    518,989
    
    
    
    
    
    
    
    518,989
    
    
    
    39.2
    
    
    
    37.8Supplies
    
    
    194,630
    
    
    
    
    
    
    
    194,630
    
    
    
    14.7
    
    
    
    14.2Other operating expenses
    
    
    251,167
    
    
    
    
    
    
    
    251,167
    
    
    
    19.0
    
    
    
    18.3Provision for bad debts
    
    
    136,233
    
    
    
    50,335
    
    
    
    186,568
    
    
    
    10.3
    
    
    
    13.6Rentals and leases
    
    
    30,384
    
    
    
    
    
    
    
    30,384
    
    
    
    2.3
    
    
    
    2.2Net patient revenue per
adjusted admission
    
    $
    8,639
    
    
    $
    334
    
    
    $
    8,973Percentage change from prior
year
    
    
    5.9
    %
    
    
    
    
    
    
    7.9
    %Same-Facility(4)Net revenue(3)
    
    $
    1,243,922
    
    
    $
    47,931
    
    
    $
    1,291,853Net patient revenue per
adjusted admission
    
    $
    8,727
    
    
    $
    341
    
    
    $
    9,068Percentage change from prior
year
    
    
    7.0
    %
    
    
    
    
    
    
    9.0
    %
 Year Ended September 30, 2006Non-GAAPGAAP
    
    
    Uninsured
    
    
    Adjusted
    
    
    GAAP %
    
    
    Non-GAAP %Amounts
    
    
    Discounts (1)
    
    
    Amounts (2)
    
    
    of Revenue
    
    
    of Revenue (2)Acute Care SegmentNet revenue(3)
    
    $
    1,140,355
    
    
    $
    19,462
    
    
    $
    1,159,817
    
    
    
    100.0
    %
    
    
    100.0
    %Salaries and benefits
    
    
    426,718
    
    
    
    
    
    
    
    426,718
    
    
    
    37.4
    
    
    
    36.8Supplies
    
    
    167,332
    
    
    
    
    
    
    
    167,332
    
    
    
    14.7
    
    
    
    14.4Other operating expenses
    
    
    210,662
    
    
    
    
    
    
    
    210,662
    
    
    
    18.5
    
    
    
    18.2Provision for bad debts
    
    
    134,614
    
    
    
    19,462
    
    
    
    154,076
    
    
    
    11.8
    
    
    
    13.3Rentals and leases
    
    
    29,195
    
    
    
    
    
    
    
    29,195
    
    
    
    2.6
    
    
    
    2.5Net patient revenue per
adjusted admission
    
    $
    8,157
    
    
    $
    160
    
    
    $
    8,317Percentage change from
prior year
    
    
    5.1
    %
    
    
    
    
    
    
    7.1
    %
 
 (1)
    
    Includes the impact of discounts provided to uninsured patients for the period. In
the acute care segment, we recorded $50.3 million and $19.5 million of uninsured discounts
during the years ended September 30, 2007 and 2006, respectively.  53




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(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 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, 2008 and 2007
 Net revenue
       54




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Salaries and benefits
 Supplies
 Medical claims
 Other operating expenses qui tam qui tam
 Provision for bad debts
 Interest expense, net
  55




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Depreciation and amortization
 Income tax expense
 Net earnings from continuing operations
 Years Ended September 30, 2007 and 2006
 Net revenue
     56




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Salaries and benefits
 Supplies
 Medical claims
 Other operating expenses qui tam
  57




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Provision for bad debts
 Interest expense, net
 Depreciation and amortization
 Income tax expense
 Net earnings
 Summary of Operations by Quarter
  Quarter EndedSept. 30,
    
    
    June 30,
    
    
    March 31,
    
    
    Dec. 31,2008(1)
    
    
    2008
    
    
    2008(2)
    
    
    2007(in thousands)Net revenue
    
    $
    515,419
    
    
    $
    532,560
    
    
    $
    524,820
    
    
    $
    492,737Earnings from continuing operations before income taxes
    
    
    12,491
    
    
    
    24,492
    
    
    
    26,681
    
    
    
    19,250Net earnings from continuing operations
    
    
    5,446
    
    
    
    14,964
    
    
    
    15,885
    
    
    
    11,294
  58




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Quarter EndedSept. 30,
    
    
    June 30
    
    
    March 31,
    
    
    Dec. 31,2007(3)
    
    
    2007(4)
    
    
    2007(5)
    
    
    2006(in thousands)Net revenue
    
    $
    472,258
    
    
    $
    450,718
    
    
    $
    446,414
    
    
    $
    396,689Earnings from continuing operations before income taxes
    
    
    13,860
    
    
    
    9,766
    
    
    
    25,791
    
    
    
    17,427Net earnings from continuing operations
    
    
    8,278
    
    
    
    6,931
    
    
    
    15,203
    
    
    
    10,523
 
 (1)
    
    Results for the quarter ended September 30, 2008, include a $2.9 million and $44,000
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, and $3.6
million in property damage sustained at The Medical Center of Southeast Texas, as a result of
Hurricane Ike in September 2008.(2)
    
    Results for the quarter ended March 31, 2008, include a $3.9 million reduction and an
$803,000 increase in prior year estimates for professional and general liability losses and
workers compensation claims, respectively, as a result of our semi-annual actuarial studies.(3)
    
    Results for the quarter ended September 30, 2007, include a $2.9 million and $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.(4)
    
    Results for the quarter ended June 30, 2007, include $1.5 million in business interruption
insurance recoveries and a $6.2 million loss on extinguishment of debt.(5)
    
    Results for the quarter ended March 31, 2007, include a $3.8 million and $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. LIQUIDITY AND CAPITAL RESOURCES
     Available cash
    
    $
    80.7Available capacity under our senior secured revolving credit facility
    
    
    155.7Net available liquidity at September 30, 2008
    
    $
    236.4
   59




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
    
    $25.0 million to $30.0 million for the two patient tower expansions in Utah;
    
    $55.0 million to $60.0 million for other growth and new business projects;
    
    $40.0 million to $45.0 million in replacement or maintenance related projects at our
hospitals; and
    
    $10.0 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, 2008 and 2007
  2008
    
    
    2007Cash flows from operating activities  continuing operations
    
    $
    141,063
    
    
    $
    121,673Cash flows from investing activities  continuing operations
    
    
    (149,263
    )
    
    
    (328,709
    )Cash flows from financing activities  continuing operations
    
    
    88,144
    
    
    
    108,364
  60




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Operating Activities
  Investing Activities
    
    
    $47.1 million for the construction of our two patient tower expansion projects in our
Utah market;
 
    
    $79.5 million for various other expansion and renovation projects at our hospitals; and
 
    
    $10.8 million for hardware and software related to 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
   61




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$475.0 Million 8 3 4 Senior Subordinated Notes Due 2014
 3 4 3 4 8 3/4% 3 4 3 4 3 4
 $300.0 Million Holdings Senior PIK Loans
  Other
   62




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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)
    
    $
    80.1
    
    
    $
    160.4
    
    
    $
    478.2
    
    
    $
    789.8
    
    
       $
    1,508.5Capital lease obligations, with interest
    
    
    1.6
    
    
    
    2.0
    
    
    
    1.2
    
    
    
    5.8
    
    
    
    10.6Medical claims
    
    
    97.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97.3Operating leases
    
    
    25.9
    
    
    
    37.5
    
    
    
    29.2
    
    
    
    44.2
    
    
    
    136.8Estimated self-insurance liabilities
    
    
    20.4
    
    
    
    9.2
    
    
    
    12.4
    
    
    
    11.6
    
    
    
    53.6Purchase obligations
    
    
    24.2
    
    
    
    7.0
    
    
    
    2.4
    
    
    
    0.3
    
    
    
    33.9Subtotal
    
    $
    249.5
    
    
    $
    216.1
    
    
    $
    523.4
    
    
    $
    851.7
    
    
    $
    1,840.7
 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
    
    $
    55.8
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    55.8Guarantees of surety bonds
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9Letters of credit
    
    
    
    
    
    
    
    
    
    
    21.5
    
    
    
    20.8
    
    
    
    42.3Minimum revenue guarantees
    
    
    2.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.6Other commitments
    
    
    5.3
    
    
    
    4.7
    
    
    
    
    
    
    
    
    
    
    
    10.0Subtotal
    
    
    64.6
    
    
    
    4.7
    
    
    
    21.5
    
    
    
    20.8
    
    
    
    111.6Total obligations and commitments
    
    $
    314.1
    
    
    $
    220.8
    
    
    $
    544.9
    
    
    $
    872.5
    
    
    $
    1,952.3
 
 (1)
    
    We used 5.6%, the weighted average interest rate incurred on our senior secured credit
facilities in fiscal 2008, which accrues actual interest at a variable rate. Actual interest
will vary based on changes in interest rates. Seasonality
   63




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RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Business
Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  3 4 3 4
   64




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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
    
    
    66Consolidated Balance Sheets at September 30, 2008 and 2007
    
    
    67Consolidated Statements of Operations for the Years Ended September 30, 2008, 2007 and 2006
    
    
    68Consolidated Statements of Members Equity for the Years Ended September 30, 2008, 2007 and 2006
    
    
    69Consolidated Statements of Cash Flows for the Years Ended September 30, 2008, 2007 and 2006
    
    
    70Notes to Consolidated Financial Statements
    
    
    71
  65




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Report of Independent Registered Public Accounting Firm
 
     
  66




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IASIS HEALTHCARE LLC
 
 CONSOLIDATED BALANCE SHEETS
 (In thousands)
 September 30,
    
    
    September 30,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    80,738
    
    
    $
    Accounts receivable, less allowance for doubtful accounts of
$108,500 and $97,800 at September 30, 2008 and 2007,
respectively
    
    
    224,138
    
    
    
    248,281Inventories
    
    
    49,454
    
    
    
    43,697Deferred income taxes
    
    
    38,860
    
    
    
    29,629Prepaid expenses and other current assets
    
    
    60,053
    
    
    
    45,023Total current assets
    
    
    453,243
    
    
    
    366,630Property and equipment, net
    
    
    1,004,248
    
    
    
    980,437Goodwill
    
    
    780,599
    
    
    
    756,593Other intangible assets, net
    
    
    33,000
    
    
    
    36,000Other assets, net
    
    
    37,057
    
    
    
    46,762Total assets
    
    $
    2,308,147
    
    
    $
    2,186,422LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Accounts payable
    
    $
    64,851
    
    
    $
    98,488Salaries and benefits payable
    
    
    31,807
    
    
    
    40,124Accrued interest payable
    
    
    12,460
    
    
    
    18,865Medical claims payable
    
    
    97,343
    
    
    
    81,309Other accrued expenses and other current liabilities
    
    
    51,802
    
    
    
    44,276Current portion of long-term debt and capital lease obligations
    
    
    7,623
    
    
    
    8,036Total current liabilities
    
    
    265,886
    
    
    
    291,098Long-term debt and capital lease obligations
    
    
    1,106,999
    
    
    
    1,023,621Deferred income taxes
    
    
    111,092
    
    
    
    93,402Other long-term liabilities
    
    
    44,526
    
    
    
    50,831Minority
interests
    
    
    51,875
    
    
    
    35,956Members equity:Members equity
    
    
    727,769
    
    
    
    691,514Total liabilities and members equity
    
    $
    2,308,147
    
    
    $
    2,186,422
   67




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IASIS HEALTHCARE LLC
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands)
 Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2006Net revenue:Acute care revenue
    
    $
    1,523,790
    
    
    $
    1,315,438
    
    
    $
    1,133,055Premium revenue
    
    
    541,746
    
    
    
    450,641
    
    
    
    406,522Total net revenue
    
    
    2,065,536
    
    
    
    1,766,079
    
    
    
    1,539,577Costs and expenses:Salaries and benefits
    
    
    632,109
    
    
    
    533,792
    
    
    
    439,349Supplies
    
    
    231,259
    
    
    
    194,915
    
    
    
    167,616Medical claims
    
    
    452,055
    
    
    
    376,505
    
    
    
    347,217Other operating expenses
    
    
    283,123
    
    
    
    266,263
    
    
    
    223,946Provision for bad debts
    
    
    161,936
    
    
    
    136,233
    
    
    
    134,614Rentals and leases
    
    
    36,633
    
    
    
    31,546
    
    
    
    30,277Interest expense, net
    
    
    75,665
    
    
    
    71,206
    
    
    
    67,124Depreciation and amortization
    
    
    96,741
    
    
    
    75,388
    
    
    
    69,137Management fees
    
    
    5,000
    
    
    
    4,746
    
    
    
    4,189Loss on extinguishment of debt
    
    
    
    
    
    
    6,229
    
    
    
    Hurricane-related property damage
    
    
    3,589
    
    
    
    
    
    
    
    Business interruption insurance recoveries
    
    
    
    
    
    
    (3,443
    )
    
    
    (8,974
    )Total costs and expenses
    
    
    1,978,110
    
    
    
    1,693,380
    
    
    
    1,474,495Earnings from continuing operations before gain (loss)
on disposal of assets, minority interests and income
taxes
    
    
    87,426
    
    
    
    72,699
    
    
    
    65,082Gain (loss) on disposal of assets, net
    
    
    (75
    )
    
    
    (1,359
    )
    
    
    913Minority interests
    
    
    (4,437
    )
    
    
    (4,496
    )
    
    
    (3,546
    )Earnings from continuing operations before income taxes
    
    
    82,914
    
    
    
    66,844
    
    
    
    62,449Income tax expense
    
    
    35,325
    
    
    
    25,909
    
    
    
    22,515Net earnings from continuing operations
    
    
    47,589
    
    
    
    40,935
    
    
    
    39,934Earnings (loss) from discontinued operations,
net of income taxes
    
    
    (11,275
    )
    
    
    669
    
    
    
    (385
    )Net earnings
    
    $
    36,314
    
    
    $
    41,604
    
    
    $
    39,549
   68




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IASIS HEALTHCARE LLC
 
 CONSOLIDATED STATEMENTS OF MEMBERS EQUITY
 (In thousands)
 MembersEquityBalance 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
    
    $
    691,514Cumulative effect of adoption of FIN 48
    
    
    (59
    )Net earnings
    
    
    36,314Balance at September 30, 2008
    
    $
    727,769
   69




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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 30,2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net earnings
    
    $
    36,314
    
    
    $
    41,604
    
    
    $
    39,549Adjustments to reconcile net earnings to net cash provided by
operating activities:Loss (earnings) from discontinued operations
    
    
    11,275
    
    
    
    (669
    )
    
    
    385Depreciation and amortization
    
    
    96,741
    
    
    
    75,388
    
    
    
    69,137Amortization of loan costs
    
    
    2,913
    
    
    
    2,942
    
    
    
    2,960Minority interests
    
    
    4,437
    
    
    
    4,496
    
    
    
    3,546Deferred income taxes
    
    
    19,368
    
    
    
    24,103
    
    
    
    21,021Loss (gain) on disposal of assets, net
    
    
    75
    
    
    
    1,359
    
    
    
    (913
    )Hurricane-related
property damage
    
    
    3,589
    
    
    
    
    
    
    
    Loss on extinguishment of debt
    
    
    
    
    
    
    5,091
    
    
    
    Changes in operating assets and liabilities, net of the
effect of acquisitions and dispositions:Accounts receivable, net
    
    
    17,131
    
    
    
    (52,749
    )
    
    
    (13,963
    )Inventories, prepaid expenses and other current assets
    
    
    (21,361
    )
    
    
    (5,894
    )
    
    
    (15,517
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    (29,419
    )
    
    
    26,002
    
    
    
    51,530Net cash provided by operating activities  continuing operations
    
    
    141,063
    
    
    
    121,673
    
    
    
    157,735Net cash provided by (used in) operating activities 
discontinued operations
    
    
    2,313
    
    
    
    4,661
    
    
    
    (591
    )Net cash provided by operating activities
    
    
    143,376
    
    
    
    126,334
    
    
    
    157,144Cash flows from investing activities:Purchases of property and equipment
    
    
    (137,415
    )
    
    
    (194,043
    )
    
    
    (146,262
    )Cash paid for acquisitions
    
    
    (16,821
    )
    
    
    (141,585
    )
    
    
    Proceeds from sale of assets
    
    
    360
    
    
    
    1,026
    
    
    
    147Change in other assets
    
    
    4,613
    
    
    
    5,893
    
    
    
    166Net cash used in investing activities  continuing operations
    
    
    (149,263
    )
    
    
    (328,709
    )
    
    
    (145,949
    )Net cash used in investing activities  discontinued operations
    
    
    (1,017
    )
    
    
    (929
    )
    
    
    (234
    )Net cash used in investing activities
    
    
    (150,280
    )
    
    
    (329,638
    )
    
    
    (146,183
    )Cash flows from financing activities:Payment of debt and capital lease obligations
    
    
    (306,611
    )
    
    
    (650,305
    )
    
    
    (7,319
    )Proceeds from debt borrowings
    
    
    384,978
    
    
    
    778,800
    
    
    
    Debt financing costs incurred
    
    
    
    
    
    
    (8,200
    )
    
    
    Distribution to parent for debt financing costs
    
    
    
    
    
    
    (6,586
    )
    
    
    Distribution of minority interests
    
    
    (5,485
    )
    
    
    (4,850
    )
    
    
    (2,507
    )Proceeds received from sale of (costs paid for) partnership
interests
    
    
    15,070
    
    
    
    (495
    )
    
    
    5,727Other
    
    
    192
    
    
    
    
    
    
    
    Net cash provided by (used in) financing activities  continuing
operations
    
    
    88,144
    
    
    
    108,364
    
    
    
    (4,099
    )Net cash used in financing activities  discontinued operations
    
    
    (502
    )
    
    
    (475
    )
    
    
    (544
    )Net cash provided by (used in) financing activities
    
    
    87,642
    
    
    
    107,889
    
    
    
    (4,643
    )Increase (decrease) in cash and cash equivalents
    
    
    80,738
    
    
    
    (95,415
    )
    
    
    6,318Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    95,415
    
    
    
    89,097Cash and cash equivalents at end of period
    
    $
    80,738
    
    
    $
    
    
    
    $
    95,415Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    83,126
    
    
    $
    80,647
    
    
    $
    72,271Cash paid (received) for income taxes, net
    
    $
    (925
    )
    
    $
    7,710
    
    
    $
    1,082Cash paid in loss on extinguishment of debt
    
    $
    
    
    
    $
    1,138
    
    
    $
    Supplemental schedule of noncash investing and financing activities:Capital lease obligations resulting from acquisitions
    
    $
    4,849
    
    
    $
    5,037
    
    
    $
    Property and equipment in accounts payable
    
    $
    4,788
    
    
    $
    6,401
    
    
    $
    14,546Partnership interests issued for acquisition
    
    $
    
    
    
    $
    3,517
    
    
    $
    
   70




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. ORGANIZATION AND BASIS OF PRESENTATION
 Organization
  
    
    Salt Lake City, Utah;
    
    Phoenix, Arizona;
    
    Tampa-St. Petersburg, Florida;
    
    three cities in Texas, including San Antonio;
    
    Las Vegas, Nevada; and
    
    West Monroe, Louisiana.
  Principles of Consolidation
  Use of Estimates
  Reclassifications
  General and Administrative
  2. SIGNIFICANT ACCOUNTING POLICIES
 Net Revenue
 Acute Care Revenue
   71




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Premium Revenue
      72




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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
   73




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Long-lived Assets
 Accounting for the Impairment or Disposal of Long-Lived Asset
 Property and Equipment
  Goodwill and Other Intangible Assets
   Other Assets
  Insurance Reserves
   74




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Income Taxes
 Accounting for Income Taxes Accounting for Uncertainty
in Income Taxes  An Interpretation of FASB Statement No. 109
 Minority Interest in Consolidated Entities
  Minimum Revenue Guarantees
 Application of FASB Interpretation No.
45 to Minimum Revenue Guarantees Granted to a Business or Its Owners
 Medical Claims Payable
    75




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2006Medical claims payable as of October 1
    
    $
    81,309
    
    
    $
    81,822
    
    
    $
    60,201Medical claims expense incurred during the year:Related to current year
    
    
    464,055
    
    
    
    396,152
    
    
    
    362,636Related to prior years
    
    
    (2,406
    )
    
    
    (12,107
    )
    
    
    (8,119
    )Total expenses
    
    
    461,649
    
    
    
    384,045
    
    
    
    354,517Medical claims payments during the year:Related to current year
    
    
    (368,392
    )
    
    
    (317,798
    )
    
    
    (282,326
    )Related to prior years
    
    
    (77,223
    )
    
    
    (66,760
    )
    
    
    (50,570
    )Total payments
    
    
    (445,615
    )
    
    
    (384,558
    )
    
    
    (332,896
    )Medical claims payable as of September 30
    
    $
    97,343
    
    
    $
    81,309
    
    
    $
    81,822
  Stock Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock Based Compensation
 Share-Based Payment Statement of Cash Flows
  Fair Value of Financial Instruments
 3 4 8
3/4%
  76




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Management Services Agreement
  Recently Issued Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
  September 30,
    
    
    September 30,2008
    
    
    2007Senior secured credit facilities
    
    $
    629,818
    
    
    $
    547,805Senior subordinated notes
    
    
    475,000
    
    
    
    475,000Capital leases and other obligations
    
    
    9,804
    
    
    
    8,8521,114,622
    
    
    
    1,031,657Less current maturities
    
    
    7,623
    
    
    
    8,036$
    1,106,999
    
    
    $
    1,023,621
  77




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Senior Secured Credit Facilities
       8 3/4% Senior Subordinated Notes
 3 4 3 4 3 4 3 4 3 4
  78




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 $300.0 Million Holdings Senior Paid-in-Kind Loans
  4. DISCONTINUED OPERATIONS
  Year ended
    
    
    Year ended
    
    
    Year endedSeptember 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2006Total net revenue
    
    $
    49,974
    
    
    $
    88,335
    
    
    $
    89,976Operating expenses
    
    
    64,648
    
    
    
    87,254
    
    
    
    90,587Loss on disposal of assets
    
    
    3,928
    
    
    
    
    
    
    
    Income tax expense (benefit)
    
    
    (7,327
    )
    
    
    412
    
    
    
    (226
    )Earning (loss) from discontinued
operations, net of income
taxes
    
    $
    (11,275
    )
    
    $
    669
    
    
    $
    (385
    )
   5. ACQUISITIONS
 Acquisition of Glenwood Regional Medical Center
   79




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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
    
    $
    13,727Inventory, prepaid expenses and other current assets
    
    
    4,354Property and equipment
    
    
    66,640Other long-term assets
    
    
    1,529Total assets acquired
    
    $
    86,250Liabilities assumed
    
    $
    8,004
 Acquisition of Alliance Hospital
   Fair value of assets acquired and liabilities assumed:Assets acquiredAccounts receivable, net
    
    $
    4,230Inventory, prepaid expenses and other current assets
    
    
    1,873Property and equipment
    
    
    60,965Goodwill
    
    
    10,593Total assets acquired
    
    $
    77,661Liabilities assumed
    
    $
    10,932
 Other
  6. PROPERTY AND EQUIPMENT
  September 30,
    
    
    September 30,2008
    
    
    2007Land
    
    $
    103,763
    
    
    $
    102,427Buildings and improvements
    
    
    693,113
    
    
    
    597,942Equipment
    
    
    471,207
    
    
    
    476,3591,268,083
    
    
    
    1,176,728Less accumulated depreciation and amortization
    
    
    (325,560
    )
    
    
    (241,268
    )942,523
    
    
    
    935,460Construction-in-progress (estimated cost to
complete at September 30, 2008  $55.8
million)
    
    
    61,725
    
    
    
    44,977$
    1,004,248
    
    
    $
    980,437
   80




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7. GOODWILL AND OTHER INTANGIBLE ASSETS
  Acute
    
    
    HealthCare
    
    
    Choice
    
    
    TotalBalance 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
    
    
    
    756,593Adjustments in deferred tax assets and liabilities
    
    
    (3,769
    )
    
    
    
    
    
    
    (3,769
    )Adjustment resulting from Ouachita Community Hospital
    
    
    17,134
    
    
    
    
    
    
    
    17,134Adjustments resulting from purchase price allocation of Alliance Hospital
    
    
    10,593
    
    
    
    
    
    
    
    10,593Other
purchase price adjustments
    
    
    48
    
    
    
    
    
    
    
    48Balance at September 30, 2008
    
    $
    774,842
    
    
    $
    5,757
    
    
    $
    780,599
  8. MEMBERS EQUITY
 Common Interests of IASIS
  9. STOCK OPTIONS
 Management Rollover Options
   2004 Stock Option Plan
   81




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2004 Stock Option Plan
    
    
    Rollover OptionsWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageOption Price
    
    
    Exercise
    
    
    
    
    
    
    Option Price
    
    
    ExerciseOptions
    
    
    Per Share
    
    
    Price
    
    
    Options
    
    
    Per Share
    
    
    PriceOptions 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
    
    
    $
    8.75Granted
    
    
    1,080
    
    
    $
    34.75
    
    
    $
    34.75
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (9,600
    )
    
    $
    20.00
    
    
    $
    20.00
    
    
    
    
    
    
    
    
    
    
    
    Cancelled/forfeited
    
    
    (80,720
    )
    
    $
    20.00-$35.68
    
    
    $
    26.04
    
    
    
    
    
    
    
    
    
    
    
    Options outstanding
at September 30, 2008
    
    
    1,401,885
    
    
    $
    20.00-$35.68
    
    
    $
    21.82
    
    
    
    163,150
    
    
    $
    8.75
    
    
    $
    8.75Options exercisable
at September 30, 2008
    
    
    1,067,945
    
    
    $
    20.00-$35.68
    
    
    $
    21.02
    
    
    
    163,150
    
    
    $
    8.75
    
    
    $
    8.75
 SFAS 123(R)
 Year EndedSeptember 30, 
2006Net earnings as reported
    
    $
    39,549Deduct: Total stock based employee compensation
determined under fair value based method for all
awards, net of related tax effects
    
    
    (1,360
    )Pro forma net earnings
    
    $
    38,189
  Options Granted
    
    
    Options GrantedOn or After
    
    
    Prior toOctober 1, 2006
    
    
    October 1, 2006Risk-free interest
    
    
    3.4
    %
    
    
    4.6
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Volatility
    
    
    30.0
    %
    
    
    N/AExpected option life
    
    6.2 years
    
    
    8.8 years
   82




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10. INCOME TAXES
  Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    12,631
    
    
    $
    132
    
    
    $
    1,280State
    
    
    3,326
    
    
    
    1,674
    
    
    
    214Deferred:Federal
    
    
    15,522
    
    
    
    23,172
    
    
    
    19,737State
    
    
    3,846
    
    
    
    931
    
    
    
    1,284$
    35,325
    
    
    $
    25,909
    
    
    $
    22,515
  Year Ended
    
    
    Year Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2006Federal statutory rate
    
    $
    29,020
    
    
    $
    23,396
    
    
    $
    21,857State income taxes, net of
federal income tax benefit
    
    
    4,663
    
    
    
    1,693
    
    
    
    974Other non-deductible expenses
    
    
    418
    
    
    
    328
    
    
    
    678Change in valuation
allowance charged to federal
tax provision
    
    
    970
    
    
    
    541
    
    
    
    Other items, net
    
    
    254
    
    
    
    (49
    )
    
    
    (994
    )Income tax expense
    
    $
    35,325
    
    
    $
    25,909
    
    
    $
    22,515
  September 30,
    
    
    September 30,2008
    
    
    2007Assets
    
    
    Liabilities
    
    
    Assets
    
    
    LiabilitiesDepreciation and fixed asset basis differences
    
    $
    
    
    
    $
    67,317
    
    
    $
    
    
    
    $
    57,492Amortization and intangible asset basis differences
    
    
    
    
    
    
    64,742
    
    
    
    
    
    
    
    55,509Allowance for doubtful accounts
    
    
    29,958
    
    
    
    
    
    
    
    15,303
    
    
    
    Professional liability
    
    
    12,801
    
    
    
    
    
    
    
    14,459
    
    
    
    Accrued expenses and other liabilities
    
    
    13,436
    
    
    
    
    
    
    
    12,803
    
    
    
    Deductible carryforwards and credits
    
    
    8,709
    
    
    
    
    
    
    
    9,955
    
    
    
    Other, net
    
    
    570
    
    
    
    
    
    
    
    594
    
    
    
    Valuation allowance
    
    
    (5,647
    )
    
    
    
    
    
    
    (3,886
    )
    
    
    Total
    
    $
    59,827
    
    
    $
    132,059
    
    
    $
    49,228
    
    
    $
    113,001
     83




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      Year EndedSeptember 30,2008Unrecognized tax benefits at October 1, 2007
    
    $
    17,942Additions resulting from tax positions taken in a prior period
    
    
    937Reductions resulting from tax positions taken in a prior period
    
    
    (6,258)Additions resulting from tax positions taken in the current period
    
    
    2,929Unrecognized tax benefits at September 30, 2008
    
    $
    15,550
    84




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. COMMITMENTS AND CONTINGENCIES
 Net Revenue
  Professional, General and Workers Compensation Liability Risks
   Health Choice
   85




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Capital Expenditure Commitments
  Minimum Revenue Guarantees
   Acquisitions
  Other
 qui tam qui tam qui tam qui tam
  86




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  12. LEASES
   Capital
    
    
    OperatingLeases
    
    
    Leases2009
    
    $
    1,589
    
    
    $
    25,9412010
    
    
    1,071
    
    
    
    20,6162011
    
    
    919
    
    
    
    16,8872012
    
    
    651
    
    
    
    15,3512013
    
    
    561
    
    
    
    13,841Thereafter
    
    
    5,802
    
    
    
    44,191Total minimum lease payments
    
    $
    10,593
    
    
    $
    136,827Amount representing interest (at rates ranging from 4.4% to 14.2%)
    
    
    4,214Present value of net minimum lease payments (including $1.6 million classified as current)
    
    $
    6,379
  13. RETIREMENT PLANS
   87




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IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14. SEGMENT AND GEOGRAPHIC INFORMATION
  For the Year Ended September 30, 2008Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    1,523,790
    
    
    $
    
    
    
    $
    
    
    
    $
    1,523,790Premium revenue
    
    
    
    
    
    
    541,746
    
    
    
    
    
    
    
    541,746Revenue between segments
    
    
    9,594
    
    
    
    
    
    
    
    (9,594
    )
    
    
    Total net revenue
    
    
    1,533,384
    
    
    
    541,746
    
    
    
    (9,594
    )
    
    
    2,065,536Salaries and benefits
    
    
    614,442
    
    
    
    17,667
    
    
    
    
    
    
    
    632,109Supplies
    
    
    231,001
    
    
    
    258
    
    
    
    
    
    
    
    231,259Medical claims
    
    
    
    
    
    
    461,649
    
    
    
    (9,594
    )
    
    
    452,055Other operating expenses
    
    
    264,814
    
    
    
    18,309
    
    
    
    
    
    
    
    283,123Provision for bad debts
    
    
    161,936
    
    
    
    
    
    
    
    
    
    
    
    161,936Rentals and leases
    
    
    35,466
    
    
    
    1,167
    
    
    
    
    
    
    
    36,633Hurricane-related property damage
    
    
    3,589
    
    
    
    
    
    
    
    
    
    
    
    3,589Adjusted EBITDA(1)
    
    
    222,136
    
    
    
    42,696
    
    
    
    
    
    
    
    264,832Interest expense, net
    
    
    75,665
    
    
    
    
    
    
    
    
    
    
    
    75,665Depreciation and amortization
    
    
    93,003
    
    
    
    3,738
    
    
    
    
    
    
    
    96,741Management fees
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    5,000Earnings from continuing operations before loss on
disposal of assets, minority interests and income taxes
    
    
    48,468
    
    
    
    38,958
    
    
    
    
    
    
    
    87,426Loss on disposal of assets, net
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    (75
    )Minority interests
    
    
    (4,437
    )
    
    
    
    
    
    
    
    
    
    
    (4,437
    )Earnings from continuing operations before income taxes
    
    $
    43,956
    
    
    $
    38,958
    
    
    $
    
    
    
    $
    82,914Segment assets
    
    $
    2,123,069
    
    
    $
    185,078
    
    
    
    
    
    
    $
    2,308,147Capital expenditures  continuing operations
    
    $
    136,425
    
    
    $
    990
    
    
    
    
    
    
    $
    137,415Goodwill
    
    $
    774,842
    
    
    $
    5,757
    
    
    
    
    
    
    $
    780,599
 For the Year Ended September 30, 2007Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    1,315,438
    
    
    $
    
    
    
    $
    
    
    
    $
    1,315,438Premium revenue
    
    
    
    
    
    
    450,641
    
    
    
    
    
    
    
    450,641Revenue between segments
    
    
    7,540
    
    
    
    
    
    
    
    (7,540
    )
    
    
    Total net revenue
    
    
    1,322,978
    
    
    
    450,641
    
    
    
    (7,540
    )
    
    
    1,766,079Salaries and benefits
    
    
    518,989
    
    
    
    14,803
    
    
    
    
    
    
    
    533,792Supplies
    
    
    194,630
    
    
    
    285
    
    
    
    
    
    
    
    194,915Medical claims
    
    
    
    
    
    
    384,045
    
    
    
    (7,540
    )
    
    
    376,505Other operating expenses
    
    
    251,167
    
    
    
    15,096
    
    
    
    
    
    
    
    266,263Provision for bad debts
    
    
    136,233
    
    
    
    
    
    
    
    
    
    
    
    136,233Rentals and leases
    
    
    30,384
    
    
    
    1,162
    
    
    
    
    
    
    
    31,546Business interruption insurance recoveries
    
    
    (3,443
    )
    
    
    
    
    
    
    
    
    
    
    (3,443
    )Adjusted EBITDA(1)
    
    
    195,018
    
    
    
    35,250
    
    
    
    
    
    
    
    230,268Interest expense, net
    
    
    71,206
    
    
    
    
    
    
    
    
    
    
    
    71,206Depreciation and amortization
    
    
    71,828
    
    
    
    3,560
    
    
    
    
    
    
    
    75,388Loss on extinguishment of debt
    
    
    6,229
    
    
    
    
    
    
    
    
    
    
    
    6,229Management fees
    
    
    4,746
    
    
    
    
    
    
    
    
    
    
    
    4,746Earnings from continuing operations before loss on
disposal of assets, minority interests and income taxes
    
    
    41,009
    
    
    
    31,690
    
    
    
    
    
    
    
    72,699Loss on disposal of assets, net
    
    
    (1,359
    )
    
    
    
    
    
    
    
    
    
    
    (1,359
    )Minority interests
    
    
    (4,496
    )
    
    
    
    
    
    
    
    
    
    
    (4,496
    )Earnings from continuing operations before income taxes
    
    $
    35,154
    
    
    $
    31,690
    
    
    $
    
    
    
    $
    66,844Segment assets
    
    $
    2,035,386
    
    
    $
    151,036
    
    
    
    
    
    
    $
    2,186,422Capital expenditures  continuing operations
    
    $
    193,570
    
    
    $
    473
    
    
    
    
    
    
    $
    194,043Goodwill
    
    $
    750,836
    
    
    $
    5,757
    
    
    
    
    
    
    $
    756,593
  88




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IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the Year Ended September 30, 2006Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    1,133,055
    
    
    $
    
    
    
    $
    
    
    
    $
    1,133,055Premium revenue
    
    
    
    
    
    
    406,522
    
    
    
    
    
    
    
    406,522Revenue between segments
    
    
    7,300
    
    
    
    
    
    
    
    (7,300
    )
    
    
    Total net revenue
    
    
    1,140,355
    
    
    
    406,522
    
    
    
    (7,300
    )
    
    
    1,539,577Salaries and benefits
    
    
    426,718
    
    
    
    12,631
    
    
    
    
    
    
    
    439,349Supplies
    
    
    167,332
    
    
    
    284
    
    
    
    
    
    
    
    167,616Medical claims
    
    
    
    
    
    
    354,517
    
    
    
    (7,300
    )
    
    
    347,217Other operating expenses
    
    
    210,662
    
    
    
    13,284
    
    
    
    
    
    
    
    223,946Provision for bad debts
    
    
    134,614
    
    
    
    
    
    
    
    
    
    
    
    134,614Rentals and leases
    
    
    29,195
    
    
    
    1,082
    
    
    
    
    
    
    
    30,277Business interruption insurance recoveries
    
    
    (8,974
    )
    
    
    
    
    
    
    
    
    
    
    (8,974
    )Adjusted EBITDA(1)
    
    
    180,808
    
    
    
    24,724
    
    
    
    
    
    
    
    205,532Interest expense, net
    
    
    67,124
    
    
    
    
    
    
    
    
    
    
    
    67,124Depreciation and amortization
    
    
    65,751
    
    
    
    3,386
    
    
    
    
    
    
    
    69,137Management fees
    
    
    4,189
    
    
    
    
    
    
    
    
    
    
    
    4,189Earnings from continuing operations before
gain (loss) on disposal of assets, minority
interests and income taxes
    
    
    43,744
    
    
    
    21,338
    
    
    
    
    
    
    
    65,082Gain (loss) on disposal of assets, net
    
    
    967
    
    
    
    (54
    )
    
    
    
    
    
    
    913Minority interests
    
    
    (3,546
    )
    
    
    
    
    
    
    
    
    
    
    (3,546
    )Earnings before income taxes
    
    $
    41,165
    
    
    $
    21,284
    
    
    $
    
    
    
    $
    62,449Segment assets
    
    $
    1,833,737
    
    
    $
    134,098
    
    
    
    
    
    
    $
    1,967,835Capital expenditures  continuing operations
    
    $
    145,633
    
    
    $
    629
    
    
    
    
    
    
    $
    146,262Goodwill
    
    $
    750,722
    
    
    $
    5,757
    
    
    
    
    
    
    $
    756,479
 
 (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 30,2008
    
    
    2007Employee health insurance payable
    
    $
    10,834
    
    
    $
    8,622Accrued property taxes
    
    
    10,041
    
    
    
    8,847Construction retention payable
    
    
    4,429
    
    
    
    2,190Other
    
    
    26,498
    
    
    
    24,617$
    51,802
    
    
    $
    44,276
  89




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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, 2006
    
    $
    103,619
    
    
    
    134,614
    
    
    
    7,160
    
    
    
    (135,516
    )
    
    
    
    
    
    $
    109,877Year Ended September 30, 2007
    
    $
    109,877
    
    
    
    136,233
    
    
    
    6,475
    
    
    
    (167,900
    )
    
    
    13,144
    
    
    $
    97,829Year Ended September 30, 2008
    
    $
    97,829
    
    
    
    161,936
    
    
    
    6,782
    
    
    
    (158,092
    )
    
    
    
    
    
    $
    108,455
 
 (1)
    
    Represents provision for bad debts recorded at facilities which are now included in
discontinued operations.  17.
IMPACT OF HURRICANE ACTIVITY
   18. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
 8
3/4%
 8
3/4%
    90




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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
    
    $
    
    
    
    $
    80,336
    
    
    $
    402
    
    
    $
    
    
    
    $
    80,738Accounts receivable, net
    
    
    
    
    
    
    101,291
    
    
    
    122,847
    
    
    
    
    
    
    
    224,138Inventories
    
    
    
    
    
    
    21,236
    
    
    
    28,218
    
    
    
    
    
    
    
    49,454Deferred income taxes
    
    
    38,860
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,860Prepaid expenses and other
current assets
    
    
    
    
    
    
    19,688
    
    
    
    40,365
    
    
    
    
    
    
    
    60,053Total current assets
    
    
    38,860
    
    
    
    222,551
    
    
    
    191,832
    
    
    
    
    
    
    
    453,243Property and equipment, net
    
    
    
    
    
    
    363,106
    
    
    
    641,142
    
    
    
    
    
    
    
    1,004,248Intercompany
    
    
    
    
    
    
    (190,870
    )
    
    
    190,870
    
    
    
    
    
    
    
    Net investment in and advances
to subsidiaries
    
    
    1,717,907
    
    
    
    
    
    
    
    
    
    
    
    (1,717,907
    )
    
    
    Goodwill
    
    
    18,609
    
    
    
    128,764
    
    
    
    633,226
    
    
    
    
    
    
    
    780,599Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    33,000
    
    
    
    
    
    
    
    33,000Other assets, net
    
    
    18,210
    
    
    
    12,944
    
    
    
    5,903
    
    
    
    
    
    
    
    37,057Total assets
    
    $
    1,793,586
    
    
    $
    536,495
    
    
    $
    1,695,973
    
    
    $
    (1,717,907
    )
    
    $
    2,308,147Liabilities and Members EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    24,708
    
    
    $
    40,143
    
    
    $
    
    
    
    $
    64,851Salaries and benefits payable
    
    
    
    
    
    
    16,819
    
    
    
    14,988
    
    
    
    
    
    
    
    31,807Accrued interest payable
    
    
    12,460
    
    
    
    (3,242
    )
    
    
    3,242
    
    
    
    
    
    
    
    12,460Medical claims payable
    
    
    
    
    
    
    
    
    
    
    97,343
    
    
    
    
    
    
    
    97,343Other accrued expenses and
other current liabilities
    
    
    
    
    
    
    38,552
    
    
    
    13,250
    
    
    
    
    
    
    
    51,802Current portion of long-term
debt and capital lease
obligations
    
    
    6,042
    
    
    
    1,581
    
    
    
    15,255
    
    
    
    (15,255
    )
    
    
    7,623Total current liabilities
    
    
    18,502
    
    
    
    78,418
    
    
    
    184,221
    
    
    
    (15,255
    )
    
    
    265,886Long-term debt and capital lease
obligations
    
    
    1,098,928
    
    
    
    8,071
    
    
    
    588,172
    
    
    
    (588,172
    )
    
    
    1,106,999Deferred income taxes
    
    
    111,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    111,092Other long-term liabilities
    
    
    
    
    
    
    43,871
    
    
    
    655
    
    
    
    
    
    
    
    44,526Minority interests
    
    
    
    
    
    
    51,875
    
    
    
    
    
    
    
    
    
    
    
    51,875Total liabilities
    
    
    1,228,522
    
    
    
    182,235
    
    
    
    773,048
    
    
    
    (603,427
    )
    
    
    1,580,378Members equity
    
    
    565,064
    
    
    
    354,260
    
    
    
    922,925
    
    
    
    (1,114,480
    )
    
    
    727,769Total liabilities and
members equity
    
    $
    1,793,586
    
    
    $
    536,495
    
    
    $
    1,695,973
    
    
    $
    (1,717,907
    )
    
    $
    2,308,147
  91




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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
    
    
    
    
    
    
    131,180
    
    
    
    117,101
    
    
    
    
    
    
    
    248,281Inventories
    
    
    
    
    
    
    19,961
    
    
    
    23,736
    
    
    
    
    
    
    
    43,697Deferred income taxes
    
    
    29,629
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,629Prepaid expenses and other
current assets
    
    
    
    
    
    
    23,509
    
    
    
    21,514
    
    
    
    
    
    
    
    45,023Total current assets
    
    
    29,629
    
    
    
    170,598
    
    
    
    166,403
    
    
    
    
    
    
    
    366,630Property and equipment, net
    
    
    
    
    
    
    363,295
    
    
    
    617,142
    
    
    
    
    
    
    
    980,437Intercompany
    
    
    
    
    
    
    23,173
    
    
    
    (23,173
    )
    
    
    
    
    
    
    Net investment in and advances
to subsidiaries
    
    
    1,627,879
    
    
    
    
    
    
    
    
    
    
    
    (1,627,879
    )
    
    
    Goodwill
    
    
    21,774
    
    
    
    111,593
    
    
    
    623,226
    
    
    
    
    
    
    
    756,593Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    36,000
    
    
    
    
    
    
    
    36,000Other assets, net
    
    
    21,006
    
    
    
    19,668
    
    
    
    6,088
    
    
    
    
    
    
    
    46,762Total assets
    
    $
    1,700,288
    
    
    $
    688,327
    
    
    $
    1,425,686
    
    
    $
    (1,627,879
    )
    
    $
    2,186,422Liabilities and Members EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    55,980
    
    
    $
    42,508
    
    
    $
    
    
    
    $
    98,488Salaries and benefits payable
    
    
    
    
    
    
    24,338
    
    
    
    15,786
    
    
    
    
    
    
    
    40,124Accrued interest payable
    
    
    18,865
    
    
    
    (2,301
    )
    
    
    2,301
    
    
    
    
    
    
    
    18,865Medical claims payable
    
    
    
    
    
    
    
    
    
    
    81,309
    
    
    
    
    
    
    
    81,309Other accrued expenses and
other current liabilities
    
    
    
    
    
    
    24,567
    
    
    
    19,709
    
    
    
    
    
    
    
    44,276Current portion of long-term
debt and capital lease
obligations
    
    
    4,542
    
    
    
    3,494
    
    
    
    11,054
    
    
    
    (11,054
    )
    
    
    8,036Total current liabilities
    
    
    23,407
    
    
    
    106,078
    
    
    
    172,667
    
    
    
    (11,054
    )
    
    
    291,098Long-term debt and capital lease
obligations
    
    
    1,018,415
    
    
    
    5,206
    
    
    
    470,569
    
    
    
    (470,569
    )
    
    
    1,023,621Deferred income taxes
    
    
    93,402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,402Other long-term liabilities
    
    
    
    
    
    
    49,809
    
    
    
    1,022
    
    
    
    
    
    
    
    50,831Minority interests
    
    
    
    
    
    
    35,956
    
    
    
    
    
    
    
    
    
    
    
    35,956Total liabilities
    
    
    1,135,224
    
    
    
    197,049
    
    
    
    644,258
    
    
    
    (481,623
    )
    
    
    1,494,908Members equity
    
    
    565,064
    
    
    
    491,278
    
    
    
    781,428
    
    
    
    (1,146,256
    )
    
    
    691,514Total liabilities and
members equity
    
    $
    1,700,288
    
    
    $
    688,327
    
    
    $
    1,425,686
    
    
    $
    (1,627,879
    )
    
    $
    2,186,422
  92




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 For the Year Ended September 30, 2008Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    637,773
    
    
    $
    895,611
    
    
    $
    (9,594
    )
    
    $
    1,523,790Premium revenue
    
    
    
    
    
    
    
    
    
    
    541,746
    
    
    
    
    
    
    
    541,746Total net revenue
    
    
    
    
    
    
    637,773
    
    
    
    1,437,357
    
    
    
    (9,594
    )
    
    
    2,065,536Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    319,243
    
    
    
    312,866
    
    
    
    
    
    
    
    632,109Supplies
    
    
    
    
    
    
    104,698
    
    
    
    126,561
    
    
    
    
    
    
    
    231,259Medical claims
    
    
    
    
    
    
    
    
    
    
    461,649
    
    
    
    (9,594
    )
    
    
    452,055Other operating expenses
    
    
    
    
    
    
    111,781
    
    
    
    171,342
    
    
    
    
    
    
    
    283,123Provision for bad debts
    
    
    
    
    
    
    80,139
    
    
    
    81,797
    
    
    
    
    
    
    
    161,936Rentals and leases
    
    
    
    
    
    
    14,891
    
    
    
    21,742
    
    
    
    
    
    
    
    36,633Interest expense, net
    
    
    75,665
    
    
    
    
    
    
    
    54,716
    
    
    
    (54,716
    )
    
    
    75,665Depreciation and amortization
    
    
    
    
    
    
    42,721
    
    
    
    54,020
    
    
    
    
    
    
    
    96,741Management fees
    
    
    5,000
    
    
    
    (19,337
    )
    
    
    19,337
    
    
    
    
    
    
    
    5,000Hurricane-related property damage
    
    
    
    
    
    
    
    
    
    
    3,589
    
    
    
    
    
    
    
    3,589Equity in earnings of affiliates
    
    
    (91,476
    )
    
    
    
    
    
    
    
    
    
    
    91,476
    
    
    
    Total costs and expenses
    
    
    (10,811
    )
    
    
    654,136
    
    
    
    1,307,619
    
    
    
    27,166
    
    
    
    1,978,110Earnings (loss) from continuing
operations before gain (loss) on disposal of
assets, minority interests and income
taxes
    
    
    10,811
    
    
    
    (16,363
    )
    
    
    129,738
    
    
    
    (36,760
    )
    
    
    87,426Gain (loss) on disposal of assets, net
    
    
    
    
    
    
    (81
    )
    
    
    6
    
    
    
    
    
    
    
    (75
    )Minority interests
    
    
    
    
    
    
    (4,437
    )
    
    
    
    
    
    
    
    
    
    
    (4,437
    )Earnings (loss) from continuing
operations before income taxes
    
    
    10,811
    
    
    
    (20,881
    )
    
    
    129,744
    
    
    
    (36,760
    )
    
    
    82,914Income tax expense
    
    
    34,996
    
    
    
    
    
    
    
    329
    
    
    
    
    
    
    
    35,325Net earnings (loss) from
continuing operations
    
    
    (24,185
    )
    
    
    (20,881
    )
    
    
    129,415
    
    
    
    (36,760
    )
    
    
    47,589Earnings (loss) from discontinued
operations, net of income taxes
    
    
    5,783
    
    
    
    (12,257
    )
    
    
    (4,801
    )
    
    
    
    
    
    
    (11,275
    )Net earnings (loss)
    
    $
    (18,402
    )
    
    $
    (33,138
    )
    
    $
    124,614
    
    
    $
    (36,760
    )
    
    $
    36,314
  93




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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
    
    $
    
    
    
    $
    577,891
    
    
    $
    745,087
    
    
    $
    (7,540
    )
    
    $
    1,315,438Premium revenue
    
    
    
    
    
    
    
    
    
    
    450,641
    
    
    
    
    
    
    
    450,641Total net revenue
    
    
    
    
    
    
    577,891
    
    
    
    1,195,728
    
    
    
    (7,540
    )
    
    
    1,766,079Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    284,520
    
    
    
    249,272
    
    
    
    
    
    
    
    533,792Supplies
    
    
    
    
    
    
    97,043
    
    
    
    97,872
    
    
    
    
    
    
    
    194,915Medical claims
    
    
    
    
    
    
    
    
    
    
    384,045
    
    
    
    (7,540
    )
    
    
    376,505Other operating expenses
    
    
    
    
    
    
    115,542
    
    
    
    150,721
    
    
    
    
    
    
    
    266,263Provision for bad debts
    
    
    
    
    
    
    68,824
    
    
    
    67,409
    
    
    
    
    
    
    
    136,233Rentals and leases
    
    
    
    
    
    
    11,985
    
    
    
    19,561
    
    
    
    
    
    
    
    31,546Interest expense, net
    
    
    71,206
    
    
    
    
    
    
    
    34,684
    
    
    
    (34,684
    )
    
    
    71,206Depreciation and amortization
    
    
    
    
    
    
    37,161
    
    
    
    38,227
    
    
    
    
    
    
    
    75,388Loss on extinguishment of debt
    
    
    6,229
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,229Management fees
    
    
    4,746
    
    
    
    (16,030
    )
    
    
    16,030
    
    
    
    
    
    
    
    4,746Business interruption insurance
recoveries
    
    
    
    
    
    
    
    
    
    
    (3,443
    )
    
    
    
    
    
    
    (3,443
    )Equity in earnings of affiliates
    
    
    (117,212
    )
    
    
    
    
    
    
    
    
    
    
    117,212
    
    
    
    Total costs and expenses
    
    
    (35,031
    )
    
    
    599,045
    
    
    
    1,054,378
    
    
    
    74,988
    
    
    
    1,693,380Earnings (loss) from continuing
operations before loss on disposal of
assets, minority interests and income
taxes
    
    
    35,031
    
    
    
    (21,154
    )
    
    
    141,350
    
    
    
    (82,528
    )
    
    
    72,699Loss on disposal of assets, net
    
    
    
    
    
    
    (774
    )
    
    
    (585
    )
    
    
    
    
    
    
    (1,359
    )Minority interests
    
    
    
    
    
    
    (4,496
    )
    
    
    
    
    
    
    
    
    
    
    (4,496
    )Earnings (loss) from continuing
operations before income taxes
    
    
    35,031
    
    
    
    (26,424
    )
    
    
    140,765
    
    
    
    (82,528
    )
    
    
    66,844Income tax expense
    
    
    25,909
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,909Net earnings (loss) from
continuing operations
    
    
    9,122
    
    
    
    (26,424
    )
    
    
    140,765
    
    
    
    (82,528
    )
    
    
    40,935Earnings (loss) from discontinued
operations, net of income taxes
    
    
    (2,202
    )
    
    
    6,314
    
    
    
    (3,443
    )
    
    
    
    
    
    
    669Net earnings (loss)
    
    $
    6,920
    
    
    $
    (20,110
    )
    
    $
    137,322
    
    
    $
    (82,528
    )
    
    $
    41,604
  94




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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
    
    $
    
    
    
    $
    498,794
    
    
    $
    641,561
    
    
    $
    (7,300
    )
    
    $
    1,133,055Premium revenue
    
    
    
    
    
    
    
    
    
    
    406,522
    
    
    
    
    
    
    
    406,522Total net revenue
    
    
    
    
    
    
    498,794
    
    
    
    1,048,083
    
    
    
    (7,300
    )
    
    
    1,539,577Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    223,129
    
    
    
    216,220
    
    
    
    
    
    
    
    439,349Supplies
    
    
    
    
    
    
    83,137
    
    
    
    84,479
    
    
    
    
    
    
    
    167,616Medical claims
    
    
    
    
    
    
    
    
    
    
    354,517
    
    
    
    (7,300
    )
    
    
    347,217Other operating expenses
    
    
    
    
    
    
    110,841
    
    
    
    113,105
    
    
    
    
    
    
    
    223,946Provision for bad debts
    
    
    
    
    
    
    67,895
    
    
    
    66,719
    
    
    
    
    
    
    
    134,614Rentals and leases
    
    
    
    
    
    
    10,525
    
    
    
    19,752
    
    
    
    
    
    
    
    30,277Interest expense, net
    
    
    67,124
    
    
    
    
    
    
    
    26,548
    
    
    
    (26,548
    )
    
    
    67,124Depreciation and amortization
    
    
    
    
    
    
    32,859
    
    
    
    36,278
    
    
    
    
    
    
    
    69,137Management fees
    
    
    4,189
    
    
    
    (14,106
    )
    
    
    14,106
    
    
    
    
    
    
    
    4,189Business interruption insurance
recoveries
    
    
    
    
    
    
    
    
    
    
    (8,974
    )
    
    
    
    
    
    
    (8,974
    )Equity in earnings of affiliates
    
    
    (108,720
    )
    
    
    
    
    
    
    
    
    
    
    108,720
    
    
    
    Total costs and expenses
    
    
    (37,407
    )
    
    
    514,280
    
    
    
    922,750
    
    
    
    74,872
    
    
    
    1,474,495Earnings (loss) from continuing
operations before gain (loss) on
disposal of assets, minority
interests and income taxes
    
    
    37,407
    
    
    
    (15,486
    )
    
    
    125,333
    
    
    
    (82,172
    )
    
    
    65,082Gain (loss) on disposal of assets, net
    
    
    
    
    
    
    2,249
    
    
    
    (1,336
    )
    
    
    
    
    
    
    913Minority interests
    
    
    
    
    
    
    (3,546
    )
    
    
    
    
    
    
    
    
    
    
    (3,546
    )Earnings (loss) from continuing
operations before income taxes
    
    
    37,407
    
    
    
    (16,783
    )
    
    
    123,997
    
    
    
    (82,172
    )
    
    
    62,449Income tax expense
    
    
    22,515
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,515Net earnings (loss) from
continuing operations
    
    
    14,892
    
    
    
    (16,783
    )
    
    
    123,997
    
    
    
    (82,172
    )
    
    
    39,934Earnings (loss) from discontinued
operations, net of income taxes
    
    
    (1,891
    )
    
    
    4,175
    
    
    
    (2,669
    )
    
    
    
    
    
    
    (385
    )Net earnings (loss)
    
    $
    13,001
    
    
    $
    (12,608
    )
    
    $
    121,328
    
    
    $
    (82,172
    )
    
    $
    39,549
  95




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands)
 For the Year Ended September 30, 2008Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    (18,402
    )
    
    $
    (33,138
    )
    
    $
    124,614
    
    
    $
    (36,760
    )
    
    $
    36,314Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in) operating
activities:Loss (earnings) from
discontinued operations
    
    
    (5,783
    )
    
    
    12,257
    
    
    
    4,801
    
    
    
    
    
    
    
    11,275Depreciation and amortization
    
    
    
    
    
    
    42,721
    
    
    
    54,020
    
    
    
    
    
    
    
    96,741Amortization of loan costs
    
    
    2,913
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,913Minority interests
    
    
    
    
    
    
    4,437
    
    
    
    
    
    
    
    
    
    
    
    4,437Deferred income taxes
    
    
    19,368
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,368Loss (gain) on disposal of assets
    
    
    
    
    
    
    81
    
    
    
    (6
    )
    
    
    
    
    
    
    75Hurricane-related
property damage
    
    
    
    
    
    
    
    
    
    
    3,589
    
    
    
    
    
    
    
    3,589Equity in earnings of affiliates
    
    
    (91,476
    )
    
    
    
    
    
    
    
    
    
    
    91,476
    
    
    
    Changes in operating assets and
liabilities, net of the effect
of acquisitions and
dispositions:Accounts receivable, net
    
    
    
    
    
    
    23,114
    
    
    
    (5,983
    )
    
    
    
    
    
    
    17,131Inventories, prepaid
expenses and other current
assets
    
    
    
    
    
    
    2,328
    
    
    
    (23,689
    )
    
    
    
    
    
    
    (21,361
    )Accounts payable, other
accrued expenses and other
accrued liabilities
    
    
    (10,947
    )
    
    
    (13,040
    )
    
    
    (5,432
    )
    
    
    
    
    
    
    (29,419
    )Net cash provided by (used in)
operating activities 
continuing operations
    
    
    (104,327
    )
    
    
    38,760
    
    
    
    151,914
    
    
    
    54,716
    
    
    
    141,063Net cash provided by (used in)
operating activities 
discontinued operations
    
    
    5,783
    
    
    
    (884
    )
    
    
    (2,586
    )
    
    
    
    
    
    
    2,313Net cash provided by (used in)
operating activities
    
    
    (98,544
    )
    
    
    37,876
    
    
    
    149,328
    
    
    
    54,716
    
    
    
    143,376Cash flows from investing activitiesPurchases of property and equipment
    
    
    
    
    
    
    (45,109
    )
    
    
    (92,306
    )
    
    
    
    
    
    
    (137,415
    )Cash paid for acquisitions
    
    
    
    
    
    
    (16,799
    )
    
    
    (22
    )
    
    
    
    
    
    
    (16,821
    )Proceeds from sale of assets
    
    
    
    
    
    
    94
    
    
    
    266
    
    
    
    
    
    
    
    360Change in other assets
    
    
    
    
    
    
    5,226
    
    
    
    (613
    )
    
    
    
    
    
    
    4,613Net cash used in investing
activities  continuing
operations
    
    
    
    
    
    
    (56,588
    )
    
    
    (92,675
    )
    
    
    
    
    
    
    (149,263
    )Net cash provided by (used in) investing
activities  discontinued
operations
    
    
    
    
    
    
    (1,040
    )
    
    
    23
    
    
    
    
    
    
    
    (1,017
    )Net cash used in investing
activities
    
    
    
    
    
    
    (57,628
    )
    
    
    (92,652
    )
    
    
    
    
    
    
    (150,280
    )Cash flows from financing activitiesPayment of debt and capital lease
obligations
    
    
    (303,190
    )
    
    
    (849
    )
    
    
    (2,572
    )
    
    
    
    
    
    
    (306,611
    )Proceeds from debt borrowings
    
    
    384,978
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    384,978Distribution of minority interests
    
    
    
    
    
    
    (171
    )
    
    
    (5,314
    )
    
    
    
    
    
    
    (5,485
    )Proceeds received from sale of
partnership interests
    
    
    
    
    
    
    15,070
    
    
    
    
    
    
    
    
    
    
    
    15,070Other
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192Change in intercompany balances
with affiliates, net
    
    
    16,564
    
    
    
    90,592
    
    
    
    (52,440
    )
    
    
    (54,716
    )
    
    
    Net cash provided by (used in)
financing activities 
continuing operations
    
    
    98,544
    
    
    
    104,642
    
    
    
    (60,326
    )
    
    
    (54,716
    )
    
    
    88,144Net cash used in
financing activities 
discontinued operations
    
    
    
    
    
    
    (502
    )
    
    
    
    
    
    
    
    
    
    
    (502
    )Net cash provided by (used in)
financing activities
    
    
    98,544
    
    
    
    104,140
    
    
    
    (60,326
    )
    
    
    (54,716
    )
    
    
    87,642Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    84,388
    
    
    
    (3,650
    )
    
    
    
    
    
    
    80,738Cash and cash equivalents at
beginning of period
    
    
    
    
    
    
    (4,052
    )
    
    
    4,052
    
    
    
    
    
    
    
    Cash and cash equivalents at end
of period
    
    $
    
    
    
    $
    80,336
    
    
    $
    402
    
    
    $
    
    
    
    $
    80,738
  96




---



##### 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)
    
    $
    6,920
    
    
    $
    (20,110
    )
    
    $
    137,322
    
    
    $
    (82,528
    )
    
    $
    41,604Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in) operating
activities:Loss (earnings) from
discontinued operations
    
    
    2,202
    
    
    
    (6,314
    )
    
    
    3,443
    
    
    
    
    
    
    
    (669
    )Depreciation and amortization
    
    
    
    
    
    
    37,161
    
    
    
    38,227
    
    
    
    
    
    
    
    75,388Amortization of loan costs
    
    
    2,942
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,942Minority interests
    
    
    
    
    
    
    4,496
    
    
    
    
    
    
    
    
    
    
    
    4,496Deferred income taxes
    
    
    24,103
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,103Loss on disposal of assets
    
    
    
    
    
    
    774
    
    
    
    585
    
    
    
    
    
    
    
    1,359Loss on extinguishment of debt
    
    
    5,091
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,091Equity in earnings of affiliates
    
    
    (117,212
    )
    
    
    
    
    
    
    
    
    
    
    117,212
    
    
    
    Changes in operating assets and
liabilities, net of the effect
of acquisitions and
dispositions:Accounts receivable, net
    
    
    
    
    
    
    (37,182
    )
    
    
    (15,567
    )
    
    
    
    
    
    
    (52,749
    )Inventories, prepaid expenses
and other current assets
    
    
    
    
    
    
    (3,204
    )
    
    
    (2,690
    )
    
    
    
    
    
    
    (5,894
    )Accounts payable, other
accrued expenses and other
accrued liabilities
    
    
    (1,100
    )
    
    
    25,090
    
    
    
    2,012
    
    
    
    
    
    
    
    26,002Net cash provided by (used in)
operating activities 
continuing operations
    
    
    (77,054
    )
    
    
    711
    
    
    
    163,332
    
    
    
    34,684
    
    
    
    121,673Net cash provided by (used in)
operating activities 
discontinued operations
    
    
    (2,202
    )
    
    
    9,306
    
    
    
    (2,443
    )
    
    
    
    
    
    
    4,661Net cash provided by (used in)
operating activities
    
    
    (79,256
    )
    
    
    10,017
    
    
    
    160,889
    
    
    
    34,684
    
    
    
    126,334Cash flows from investing activitiesPurchases of property and equipment
    
    
    
    
    
    
    (41,987
    )
    
    
    (152,056
    )
    
    
    
    
    
    
    (194,043
    )Cash paid for acquisitions
    
    
    
    
    
    
    (78,083
    )
    
    
    (63,502
    )
    
    
    
    
    
    
    (141,585
    )Proceeds from sale of assets
    
    
    
    
    
    
    1,026
    
    
    
    
    
    
    
    
    
    
    
    1,026Change in other assets
    
    
    
    
    
    
    4,272
    
    
    
    1,621
    
    
    
    
    
    
    
    5,893Net cash used in investing
activities  continuing
operations
    
    
    
    
    
    
    (114,772
    )
    
    
    (213,937
    )
    
    
    
    
    
    
    (328,709
    )Net cash used in investing
activities  discontinued
operations
    
    
    
    
    
    
    (874
    )
    
    
    (55
    )
    
    
    
    
    
    
    (929
    )Net cash used in investing
activities
    
    
    
    
    
    
    (115,646
    )
    
    
    (213,992
    )
    
    
    
    
    
    
    (329,638
    )Cash flows from financing activitiesPayment of debt and capital lease
obligations
    
    
    (646,663
    )
    
    
    (1,447
    )
    
    
    (2,195
    )
    
    
    
    
    
    
    (650,305
    )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
    )Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (4,850
    )
    
    
    
    
    
    
    (4,850
    )Costs paid for partnership interests
    
    
    
    
    
    
    (495
    )
    
    
    
    
    
    
    
    
    
    
    (495
    )Change in intercompany balances
with affiliates, net
    
    
    (38,095
    )
    
    
    9,736
    
    
    
    63,043
    
    
    
    (34,684
    )
    
    
    Net cash provided by (used in)
financing activities 
continuing operations
    
    
    79,256
    
    
    
    7,794
    
    
    
    55,998
    
    
    
    (34,684
    )
    
    
    108,364Net cash used in
financing activities 
discontinued operations
    
    
    
    
    
    
    (475
    )
    
    
    
    
    
    
    
    
    
    
    (475
    )Net cash provided by (used in)
financing activities
    
    
    79,256
    
    
    
    7,319
    
    
    
    55,998
    
    
    
    (34,684
    )
    
    
    107,889Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    (98,310
    )
    
    
    2,895
    
    
    
    
    
    
    
    (95,415
    )Cash and cash equivalents at
beginning of period
    
    
    
    
    
    
    94,258
    
    
    
    1,157
    
    
    
    
    
    
    
    95,415Cash and cash equivalents at end of
period
    
    $
    
    
    
    $
    (4,052
    )
    
    $
    4,052
    
    
    $
    
    
    
    $
    
  97




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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
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    13,001
    
    
    $
    (12,608
    )
    
    $
    121,328
    
    
    $
    (82,172
    )
    
    $
    39,549Adjustments to reconcile net
earnings (loss) to net cash
provided by (used in) operating
activities:Loss (earnings) from
discontinued operations
    
    
    1,891
    
    
    
    (4,175
    )
    
    
    2,669
    
    
    
    
    
    
    
    385Depreciation and amortization
    
    
    
    
    
    
    32,859
    
    
    
    36,278
    
    
    
    
    
    
    
    69,137Amortization of loan costs
    
    
    2,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,960Minority interests
    
    
    
    
    
    
    3,546
    
    
    
    
    
    
    
    
    
    
    
    3,546Deferred income taxes
    
    
    21,021
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,021Loss (gain) on disposal of assets
    
    
    
    
    
    
    (2,249
    )
    
    
    1,336
    
    
    
    
    
    
    
    (913
    )Equity in earnings of affiliates
    
    
    (108,720
    )
    
    
    
    
    
    
    
    
    
    
    108,720
    
    
    
    Changes in operating assets and
liabilities, net of the effect
of dispositions:Accounts receivable, net
    
    
    
    
    
    
    (1,416
    )
    
    
    (12,547
    )
    
    
    
    
    
    
    (13,963
    )Inventories, prepaid expenses
and other current assets
    
    
    
    
    
    
    (8,076
    )
    
    
    (7,441
    )
    
    
    
    
    
    
    (15,517
    )Accounts payable, other
accrued expenses and other
accrued liabilities
    
    
    1,476
    
    
    
    27,552
    
    
    
    22,502
    
    
    
    
    
    
    
    51,530Net cash provided by (used in)
operating activities 
continuing operations
    
    
    (68,371
    )
    
    
    35,433
    
    
    
    164,125
    
    
    
    26,548
    
    
    
    157,735Net cash provided by (used in)
operating activities 
discontinued operations
    
    
    (1,891
    )
    
    
    3,171
    
    
    
    (1,871
    )
    
    
    
    
    
    
    (591
    )Net cash provided by (used in)
operating activities
    
    
    (70,262
    )
    
    
    38,604
    
    
    
    162,254
    
    
    
    26,548
    
    
    
    157,144Cash flows from investing activitiesPurchases of property and
equipment
    
    
    
    
    
    
    (40,175
    )
    
    
    (106,087
    )
    
    
    
    
    
    
    (146,262
    )Proceeds from sale of assets
    
    
    
    
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    147Change in other assets
    
    
    
    
    
    
    673
    
    
    
    (507
    )
    
    
    
    
    
    
    166Net cash used in investing
activities  continuing
operations
    
    
    
    
    
    
    (39,355
    )
    
    
    (106,594
    )
    
    
    
    
    
    
    (145,949
    )Net cash used in investing
activities  discontinued
operations
    
    
    
    
    
    
    (163
    )
    
    
    (71
    )
    
    
    
    
    
    
    (234
    )Net cash used in investing
activities
    
    
    
    
    
    
    (39,518
    )
    
    
    (106,665
    )
    
    
    
    
    
    
    (146,183
    )Cash flows from financing activitiesPayment of debt and capital lease
obligations
    
    
    (4,402
    )
    
    
    (1,409
    )
    
    
    (1,508
    )
    
    
    
    
    
    
    (7,319
    )Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (2,507
    )
    
    
    
    
    
    
    (2,507
    )Proceeds from sale of partnership
interests
    
    
    
    
    
    
    1,105
    
    
    
    4,622
    
    
    
    
    
    
    
    5,727Change in intercompany balances
with affiliates, net
    
    
    74,664
    
    
    
    7,683
    
    
    
    (55,799
    )
    
    
    (26,548
    )
    
    
    Net cash provided by (used in)
financing activities 
continuing operations
    
    
    70,262
    
    
    
    7,379
    
    
    
    (55,192
    )
    
    
    (26,548
    )
    
    
    (4,099
    )Net cash used in
financing activities 
discontinued operations
    
    
    
    
    
    
    (544
    )
    
    
    
    
    
    
    
    
    
    
    (544
    )Net cash provided by (used in)
financing activities
    
    
    70,262
    
    
    
    6,835
    
    
    
    (55,192
    )
    
    
    (26,548
    )
    
    
    (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
  98




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A(T). Controls and Procedures
 Evaluations of Disclosure Controls and Procedures
  Report of Management on Internal Control over Financial Reporting
    Internal Control  Integrated Framework
   99




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##### Table of Contents



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
    
    61
    
    Chairman of the Board and Chief Executive OfficerSandra K. McRee
    
    52
    
    President and Chief Operating OfficerW. Carl Whitmer
    
    44
    
    Chief Financial OfficerFrank A. Coyle
    
    44
    
    Secretary and General CounselJames Moake
    
    39
    
    Operations Chief Financial OfficerJohn M. Doyle
    
    48
    
    Vice President and Chief Accounting OfficerPaul Jenson
    
    60
    
    Executive Vice President - Western RegionKirk Olsen
    
    58
    
    Executive Vice President - Mountain RegionDorothy Sawyer
    
    58
    
    President, Arizona MarketSteve King
    
    41
    
    Chief Financial Officer, Utah MarketRuby Majhail
    
    41
    
    Chief Financial Officer, Arizona and NevadaJoe Minissale
    
    44
    
    Chief Financial Officer, Texas and Louisiana MarketsBashar Abunaser
    
    40
    
    Chief Financial Officer, Florida MarketPeter Stanos
    
    45
    
    Vice President, Ethics and Business PracticesJohn Cruickshank, DO
    
    51
    
    Chief Quality OfficerCarolyn Rose
    
    59
    
    Chief Executive Officer, Health Choice Arizona, Inc.Jonathan J. Coslet
    
    44
    
    DirectorDavid Dupree
    
    55
    
    DirectorKirk E. Gorman
    
    58
    
    DirectorCurtis S. Lane
    
    51
    
    DirectorTodd B. Sisitsky
    
    37
    
    DirectorPaul S. Levy
    
    61
    
    DirectorJeffrey C. Lightcap
    
    49
    
    DirectorSharad Mansukani
    
    39
    
    Director
  100




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##### Table of Contents



David R. White
 Sandra K. McRee
 W. Carl Whitmer
 Frank A. Coyle
 James Moake
 John M. Doyle
  101




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##### Table of Contents



Paul Jenson
 Kirk Olsen
 Dorothy Sawyer
 Steve King
 Ruby Majhail
 Joe Minissale
 Bashar Abunaser
 Peter Stanos
 John Cruickshank, D.O.
 Carolyn Rose
 Jonathan J. Coslet
 David Dupree
  102




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##### Table of Contents



Kirk E. Gorman
 Curtis S. Lane
 Todd B. Sisitsky
 Paul S. Levy
 Jeffrey C. Lightcap
 Sharad Mansukani
    103




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##### Table of Contents



Audit Committee Financial Expert
  Code of Ethics
  
 Item 11. Executive Compensation
 COMPENSATION DISCUSSION AND ANALYSIS
 Executive Summary
      104




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##### Table of Contents



The Executive Compensation Process
 The Compensation Committee
  
    
    Reviewing and approving our compensation philosophy;
    
    Determining executive compensation levels;
    
    Annually reviewing and assessing performance goals and objectives for all executive
officers, with particular emphasis with respect to the Chief Executive Officer, the
Chief Operating Officer and the Chief Financial Officer; and
    
    Determining short-term and long-term incentive compensation for all executive
officers with particular emphasis with respect to the Chief Executive Officer, the Chief
Operating Officer and the Chief Financial Officer.
    Benchmarking Process
  Pay for Performance
  
    
    Adjusted EBITDA year over year growth;
 
    
    Return on capital;
 
    
    Peer group comparisons including comparisons of net revenue growth, expense margins
and return on capital;
  105




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##### Table of Contents




    
    Individual, company or division performance including certain core performance
measures;
 
    
    Promotion of an effective, company-wide program that fosters a culture of legal
compliance; and
 
    
    Response to unusual or extreme events.
  Internal Pay Equity
  Components of the Executive Compensation Program
 Employment Agreements
  Base Salary
    106




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##### Table of Contents



Short-Term Incentive Compensation
    Annual Incentive Target Award Ranges (as a Percentage of Base Salary) for Fiscal 2008
 Threshold
    
    
    Target
    
    
    MaximumDavid R. White
    
    
    20
    %
    
    
    100
    %
    
    
    200
    %Sandra K. McRee
    
    
    10
    %
    
    
    50
    %
    
    
    100
    %W. Carl Whitmer
    
    
    10
    %
    
    
    50
    %
    
    
    100
    %George K. Olsen
    
    
    50
    %
    
    
    50
    %
    
    
    100
    %Carolyn Rose
    
    
    
    
    
    
    50
    %
    
    
    100
    %
  
    
    Adjusted EBITDA year over year growth;
 
    
    Return on capital;
 
    
    Peer group comparisons including comparisons of net revenue growth, expense margins
and return on capital;
 
    
    Individual, company or division performance including certain core performance
measures;
 
    
    Promotion of an effective, company-wide program that fosters a culture of legal
compliance; and
 
    
    Response to unusual or extreme events.
   107




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##### Table of Contents



Long-Term Incentive Compensation
     Non-qualified Executive Savings Plan
    108




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##### Table of Contents



401(k)
  Severance and Change in Control Agreements
  Perquisites
  Group term life insurance premiums.
  Impact of Tax and Accounting Rules
   109




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##### Table of Contents



Shared-Based Payment
 Accounting for Stock Based Compensation
 Recovery of Certain Awards
  Compensation Committee Conclusion
  Compensation Committee Report
  Compensation Committee:Jonathan J. CosletDavid R. WhiteJeffrey C. Lightcap
  110




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##### Table of Contents



Summary Compensation Table
  Change inPension ValueandNon-Equity
    
    
    NonqualifiedOption
    
    
    Incentive Plan
    
    
    Deferred
    
    
    All OtherSalary
    
    
    Bonus
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    CompensationName and Principal Position
    
    Year
    
    
    ($)
    
    
    ($)(1)
    
    
    ($)(2)
    
    
    ($)(3)
    
    
    Earnings ($)
    
    
    ($) (4)
    
    
    Total ($)David R. White
Chairman of the Board &
Chief Executive Officer
    
    
    2008
    
    
    
    808,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,474
    
    
    
    817,9742007
    
    
    
    786,042
    
    
    
    1,000,000
    
    
    
    
    
    
    
    1,169,063
    
    
    
    
    
    
    
    1,164,462
    
    
    
    4,119,567Sandra K. McRee
President and Chief 
Operating Officer
    
    
    2008
    
    
    
    585,135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,142
    
    
    
    593,2772007
    
    
    
    525,525
    
    
    
    800,000
    
    
    
    
    
    
    
    525,525
    
    
    
    
    
    
    
    853,940
    
    
    
    2,704,990W. Carl Whitmer
Chief Financial Officer
    
    
    2008
    
    
    
    521,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,638
    
    
    
    530,2582007
    
    
    
    468,481
    
    
    
    800,000
    
    
    
    
    
    
    
    468,481
    
    
    
    
    
    
    
    679,394
    
    
    
    2,416,356George K. Olsen
Executive Vice-President 
Mountain Region
    
    
    2008
    
    
    
    425,000
    
    
    
    
    
    
    
    
    
    
    
    212,500
    
    
    
    
    
    
    
    1,935
    
    
    
    639,435Carolyn Rose
Chief Executive Officer 
Health Choice
    
    
    2008
    
    
    
    240,000
    
    
    
    
    
    
    
    
    
    
    
    236,250
    
    
    
    
    
    
    
    9,551
    
    
    
    485,801
 
 1.
    
    In connection with the refinancing and recapitalization transaction, certain executive
officers, including the named executive officers, received, in recognition of their efforts
associated with the increase in equity value of the Company since the Transactions, a special
one-time compensation bonus. The named executive officers respective bonus is represented in
this column.2.
    
    Using the prospective transition method upon adoption of SFAS 123(R), we have implemented the
fair value recognition provisions requiring all share-based payments to employees granted on
or after October 1, 2006, including grants of employee stock options, to be recognized in the
income statement based on their fair values. In accordance with the provisions of SFAS 123(R),
we have elected to use the Black-Scholes-Merton model in determining the fair value of its
share-based payments. The fair value of compensation costs will be amortized on a
straight-line basis over the requisite service periods of the awards, generally equal to the
awards vesting periods. See Note 2 to our consolidated financial statements, Significant
Accounting Policies for additional information.3.
    
    Represents compensation for 2008 to the named executive officers made pursuant to the
Companys short-term incentive bonus plan.4.
    
    All other compensation in the Summary Compensation Table for fiscal 2008 consisted of the following: David R.
    
    
    Sandra K.
    
    
    W. Carl
    
    
    George K.
    
    
    CarolynWhite
    
    
    McRee
    
    
    Whitmer
    
    
    Olsen
    
    
    RoseMatching contributions (i)
    
    
    5,910
    
    
    
    6,900
    
    
    
    8,105
    
    
    
    
    
    
    
    8,588Group term life insurance premiums (ii)
    
    
    3,564
    
    
    
    1,242
    
    
    
    533
    
    
    
    1,935
    
    
    
    963Totals
    
    $
    9,474
    
    
    $
    8,142
    
    
    $
    8,638
    
    
    $
    1,935
    
    
    $
    9,551
 (i)
    
    Represents total company contributions to each named executive officers accounts in the IASIS 401(k) plan.(ii)
    
    Represents insurance premiums paid by our company with respect to group term life insurance for the named executive officer.  111




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##### Table of Contents



Grants of Plan-Based Awards in Fiscal Year 2008
 Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)Threshold
    
    
    Target
    
    
    MaximumName of Executive
    
    ($)
    
    
    ($)
    
    
    ($)David R White
    
    
    161,700
    
    
    
    808,500
    
    
    
    1,617,000Sandra K. McRee
    
    
    58,514
    
    
    
    292,568
    
    
    
    585,135W. Carl Whitmer
    
    
    52,162
    
    
    
    260,810
    
    
    
    521,620George K. Olsen
    
    
    212,500
    
    
    
    212,500
    
    
    
    425,000Carolyn Rose
    
    
    
    
    
    
    120,000
    
    
    
    240,000
 1.
    
    Awards made under the 2008 Short Term Incentive Plan Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
 Employment Agreements
    The 2004 Stock Option Plan
   112




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113




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Outstanding Equity Awards at Fiscal 2008 Year-End
  Option AwardsNumber of
    
    
    Number ofSecurities
    
    
    SecuritiesUnderlying
    
    
    UnderlyingUnexercised Options
    
    
    Unexercised Options
    
    
    Option(#)
    
    
    (#)
    
    
    Exercise Price
    
    
    OptionName
    
    Exercisable
    
    
    Unexercisable
    
    
    ($)
    
    
    Expiration Date(a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)David R. White
    
    
    292,000
    
    
    
    
    
    
    
    20.00
    
    
    
    6/23/14145,500
    
    
    
    48,500
    
    
    
    20.00
    
    
    
    3/22/152,200
    
    
    
    3,300
    
    
    
    35.68
    
    
    
    4/1/1630,826
    (1)
    
    
    
    
    
    
    8.75
    
    
    
    4/30/1029,832
    (1)
    
    
    
    
    
    
    8.75
    
    
    
    11/30/10Sandra K. McRee
    
    
    93,440
    
    
    
    23,360
    
    
    
    20.00
    
    
    
    6/23/1451,120
    
    
    
    34,080
    
    
    
    20.00
    
    
    
    3/22/151,300
    
    
    
    1,950
    
    
    
    35.68
    
    
    
    4/1/1644,501
    (1)
    
    
    
    
    
    
    8.75
    
    
    
    5/31/11W. Carl Whitmer
    
    
    93,440
    
    
    
    23,360
    
    
    
    20.00
    
    
    
    6/23/1451,120
    
    
    
    34,080
    
    
    
    20.00
    
    
    
    3/22/151,300
    
    
    
    1,950
    
    
    
    35.68
    
    
    
    4/1/165,073
    (1)
    
    
    
    
    
    
    8.75
    
    
    
    11/30/1030,288
    (1)
    
    
    
    
    
    
    8.75
    
    
    
    10/31/11Carolyn Rose
    
    
    5,600
    
    
    
    1,400
    
    
    
    20.00
    
    
    
    9/9/14560
    
    
    
    840
    
    
    
    35.68
    
    
    
    4/1/16
 1.
    
    Represents fully vested options issued in connection with the Transactions Option Award Vesting Schedule for David R. White
 Grant Date
    
    Vesting Schedule6/23/2004
    
    25% vests each year for four years from date of grant3/22/2005
    
    25% vests each year for four years from date of grant4/1/2006
    
    25% vests each year for four years from date of grant
  114




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##### Table of Contents



Option Award Vesting Schedule
Named Executive Officers except David R. White
 Grant Date
    
    Vesting Schedule6/23/2004
    
    20% vests each year for five years from date of grant9/9/2004
    
    20% vests each year for five years from date of grant3/22/2005
    
    20% vests each year for five years from date of grant4/1/2006
    
    20% vests each year for five years from date of grant
 Pension Benefits
  Nonqualified Deferred Compensation for Fiscal 2008
   401(k)
  Employment Agreements
  Potential Payments Upon Termination or Change in Control
 The Employment Agreements
   115




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Death
          Disability
      116




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##### Table of Contents



Termination by the Company for Cause
  By the Company without Cause
  
       117




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##### Table of Contents



By the Executive for Good Reason
             118




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##### Table of Contents



By the Executive without Good Reason or the Executives Failure to Extend the Employment Term
  Definition of Good Reason
              The Companys Failure to Extend the Employment Term
      119




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Definition of Change of Control
           120




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##### Table of Contents



IAS 2004 Stock Option Plan
 Vesting Date of Options
     Definition of Change of Control
  Definition of Good Reason
     Definition of Cause
        121




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##### Table of Contents



Summary of Payments Made Upon Termination or a Change of Control
  Involuntary
    
    
    Involuntary
    
    
    
    
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ChangeTermination
    
    
    Termination
    
    
    
    
    
    
    For Good
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    InWithout
    
    
    For Cause
    
    
    Resignation
    
    
    Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    ControlDavid R. White
    
    Cause ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Cash severance
    
    
    1,617,000
    
    
    
    
    
    
    
    
    
    
    
    1,617,000
    
    
    
    
    
    
    
    808,500
    
    
    
    1,212,750
    
    
    
    1,617,000Health and welfare
continuation
    
    
    14,179
    
    
    
    
    
    
    
    
    
    
    
    14,179
    
    
    
    
    
    
    
    14,179
    
    
    
    14,179
    
    
    
    14,179Total
    
    
    1,631,179
    
    
    
    
    
    
    
    
    
    
    
    1,631,179
    
    
    
    
    
    
    
    822,679
    
    
    
    1,226,929
    
    
    
    1,631,179
 InvoluntaryTermination
    
    
    Involuntary
    
    
    
    
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ChangeWithout
    
    
    Termination
    
    
    
    
    
    
    For Good
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    InSandra K. McRee
    
    Cause
    
    
    For Cause
    
    
    Resignation
    
    
    Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    ControlCash severance
    
    
    1,170,270
    
    
    
    
    
    
    
    
    
    
    
    1,170,270
    
    
    
    
    
    
    
    585,135
    
    
    
    877,703
    
    
    
    1,170,270Health and welfare
continuation
    
    
    19,877
    
    
    
    
    
    
    
    
    
    
    
    19,877
    
    
    
    
    
    
    
    19,877
    
    
    
    19,877
    
    
    
    19,877Total
    
    
    1,190,147
    
    
    
    
    
    
    
    
    
    
    
    1,190,147
    
    
    
    
    
    
    
    605,012
    
    
    
    897,580
    
    
    
    1,190,147
 InvoluntaryTermination
    
    
    Involuntary
    
    
    
    
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ChangeWithout
    
    
    Termination
    
    
    
    
    
    
    For Good
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    InW. Carl Whitmer
    
    Cause
    
    
    For Cause
    
    
    Resignation
    
    
    Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    ControlCash severance
    
    
    1,043,240
    
    
    
    
    
    
    
    
    
    
    
    1,043,240
    
    
    
    
    
    
    
    521,620
    
    
    
    782,430
    
    
    
    1,043,240Health and welfare
continuation
    
    
    19,626
    
    
    
    
    
    
    
    
    
    
    
    19,626
    
    
    
    
    
    
    
    19,626
    
    
    
    19,626
    
    
    
    19,626Total
    
    
    1,062,866
    
    
    
    
    
    
    
    
    
    
    
    1,062,866
    
    
    
    
    
    
    
    541,246
    
    
    
    802,056
    
    
    
    1,062,866
 InvoluntaryTermination
    
    
    Involuntary
    
    
    
    
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ChangeWithout
    
    
    Termination
    
    
    
    
    
    
    For Good
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    InGeorge K. Olsen
    
    Cause
    
    
    For Cause
    
    
    Resignation
    
    
    Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    ControlCash severance
    
    
    495,833
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    920,833Health and welfare
continuation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    495,833
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    920,833
  122




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##### Table of Contents



InvoluntaryTermination
    
    
    Involuntary
    
    
    
    
    
    
    Resignation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ChangeWithout
    
    
    Termination
    
    
    
    
    
    
    For Good
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    InCarolyn Rose
    
    Cause
    
    
    For Cause
    
    
    Resignation
    
    
    Reason
    
    
    Retirement
    
    
    Death
    
    
    Disability
    
    
    ControlCash severance
    
    
    180,000
    
    
    
    
    
    
    
    
    
    
    
    180,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180,000Health and welfare
continuation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    180,000
    
    
    
    
    
    
    
    
    
    
    
    180,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180,000
 Director Compensation for Fiscal 2008
  Fees Earnedor Paid in
    
    
    StockCash
    
    
    Awards
    
    
    Option Awards
    
    
    All Other
    
    
    TotalName
    
    ($)
    
    
    ($)(1)(2)
    
    
    ($)(1)(2)
    
    
    Compensation ($)
    
    
    ($)Jonathan J. Coslet
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    David Dupree
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kirk E. Gorman
    
    
    37,500
    
    
    
    18,750
    
    
    
    4,306
    
    
    
    
    
    
    
    60,556Curtis Lane
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Todd B. Sisitsky
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Paul S. Levy
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jeffrey C. Lightcap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sharad Mansukani
    
    
    37,500
    
    
    
    18,750
    
    
    
    3,197
    
    
    
    
    
    
    
    59,447
 1.
    
    Using the prospective transition method upon adoption of SFAS 123(R), we have implemented the
fair value recognition provisions requiring all share-based payments to employees granted on or
after October 1, 2006, including grants of employee stock options, to be recognized in the income
statement based on their fair values. In accordance with the provisions of SFAS 123(R), we have
elected to use the Black-Scholes-Merton model in determining the fair value of its share-based
payments. The fair value of compensation costs will be amortized on a straight-line basis over the
requisite service periods of the awards, generally equal to the awards vesting periods.2.
    
    Each option grant vests one year from date of grant. Similarly, the restrictions with respect to
the stock award are lifted one year from the date of grant. The date of grant for the stock award
and options award for Messrs. Gorman and Mansukani were February 14, 2008 and April 14, 2008,
respectively. The options will vest and the restrictions on the stock
will be lifted for Messrs. Gorman
and Mansukani on February 14, 2009 and April 14, 2009, respectively, provided that the individuals
remain members of the board of directors. Aggregate Options Held
    
    
    Aggregate Stock Awards HeldName
    
    at Fiscal Year End
    
    
    at Fiscal Year EndJonathan J. Coslet
    
    
    
    
    
    
    David Dupree
    
    
    
    
    
    
    Kirk E. Gorman
    
    
    2,781
    
    
    
    2,781Curtis Lane
    
    
    
    
    
    
    Todd B. Sisitsky
    
    
    
    
    
    
    Paul S. Levy
    
    
    
    
    
    
    Jeffrey C. Lightcap
    
    
    
    
    
    
    Sharad Mansukani
    
    
    2,544
    
    
    
    2,544
  123




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##### Table of Contents



Committee Interlocks and Insider Participation
  
 Item 12.

    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
 Equity Compensation Plans
  
    
    the number of securities to be issued upon the exercise of outstanding options;
 
    
    the weighted-average exercise price of the outstanding options; and
 
    
    the number of securities remaining available for future issuance under the plans.
  124




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##### Table of Contents



Remaining Availablefor Future IssuanceNumber of
    
    
    
    
    
    
    Under EquitySecurities to be
    
    
    
    
    
    
    Compensation PlansIssued Upon
    
    
    Weighted-average
    
    
    (excluding securitiesExercise of
    
    
    Exercise Price of
    
    
    reflected in thePlan Category
    
    Outstanding Options
    
    
    Outstanding Options
    
    
    first column)Equity compensation
plans approved by
security holders
common stock(1)
    
    
    1,565,035
    
    
    $
    20.69
    
    
    
    792,765Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,565,035
    
    
    $
    20.69
    
    
    
    792,765
 (1)
    
    Consists of 163,150 shares of common stock to be issued upon exercise of rollover options
issued in connection with the Transactions, with an exercise price of $8.75 per share, and
1,401,885 shares of common stock to be issued upon exercise of options issued under IASs 2004
Stock Option Plan, with exercise prices ranging from $20.00 to $35.68 per share. Of the 2,194,650
shares of common stock currently authorized for issuance under the 2004 Stock Option Plan, 792,765
shares remain available for future issuance. On October 2, 2008,
the Company granted an additional 476,620 in stock options at an
exercise price of $34.75 per share. Beneficial Ownership of Common Stock
     Percentage of
    
    
    Percentage ofPreferred Shares
    
    
    Common Shares
    
    
    Preferred Shares
    
    
    Common SharesBeneficial Owners
    
    Beneficially Owned
    
    
    Beneficially Owned (a)
    
    
    Beneficially Owned
        
    Beneficially OwnedIASIS Investment (b)(c)
    
    
    80,784
    
    
    
    14,600,000
    
    
    
    100.0
    %
    
    
    100.0
    %David R. White
    
    
    
    
    
    
    548,858
    
    
    
    *
    
    
    
    *Sandra K. McRee
    
    
    
    
    
    
    207,401
    
    
    
    *
    
    
    
    *W. Carl Whitmer
    
    
    
    
    
    
    198,261
    
    
    
    *
    
    
    
    *George K. Olsen
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    *
  125




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Percentage of
    
    
    Percentage ofPreferred Shares
    
    
    Common Shares
    
    
    Preferred Shares
    
    
    Common SharesBeneficial Owners
    
    Beneficially Owned
    
    
    Beneficially Owned (a)
    
    
    Beneficially Owned
        
    Beneficially OwnedCarolyn Rose
    
    
    
    
    
    
    6,160
    
    
    
    *
    
    
    
    *Jonathan J. Coslet (c)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    David Dupree
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kirk E. Gorman (c)
    
    
    
    
    
    
    5,022
    (d)
    
    
    *
    
    
    
    *Curtis Lane
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Todd B. Sisitsky (c)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Paul S. Levy (e)
    
    
    15,187
    
    
    
    2,744,800
    
    
    
    18.8
    %
    
    
    18.8
    %Jeffrey C. Lightcap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Sharad Mansukani (c)
    
    
    
    
    
    
    4,548
    (d)
    
    
    *
    
    
    
    *Current directors and
executive officers as
a group (24 persons)
    
    
    80,784
    
    
    
    15,360,825
    
    
    
    100.0
    %
    
    
    100.0
    %
 *
    
    Less than 1%.(a)
    
    The following shares of common stock subject to options currently exercisable or exercisable within 60 days of
December 10, 2008, include rollover options converted by management in connection with the Transactions and
are deemed outstanding for the purpose of computing the percentage
ownership of the person holding such options but are not deemed outstanding for the purpose
of computing the percentage ownership of any other person: Mr. White, 548,858; Ms. McRee,
207,401; Mr. Whitmer, 198,261; Ms. Rose, 6,160; and all current
directors and executive officers as a group (24 persons), 1,089,549.(b)
    
    The membership interests of IASIS Investment are owned as follows: TPG, 74.4%, JLL,
18.8%, and Trimaran, 6.8%. TPG Advisors III, Inc. and TPG Advisors IV, Inc. through their
ownership of TPG, which owns a controlling interest in IASIS Investment, may be deemed to
beneficially own all of the shares of preferred stock and common stock owned by IASIS
Investment.(c)
    
    David Bonderman, James G. Coulter and William S. Price, III are directors, executive
officers and the sole shareholders of TPG Advisors III, Inc. and TPG Advisors IV, Inc. TPG
Advisors III, Inc. and TPG Advisors IV, Inc. through their ownership of TPG, which owns a
controlling interest in IASIS Investment, may be deemed to beneficially own all of the
shares of preferred stock and common stock owned by IASIS Investment. Messrs. Bonderman,
Coulter and Price, by virtue of their positions with TPG Advisors III, Inc. and TPG
Advisors IV, Inc. may be deemed to have investment powers and beneficial ownership with
respect to all of the shares of preferred stock and common stock owned by IASIS Investment.
Each of Messrs. Bonderman, Coulter and Price disclaims beneficial ownership of these shares
of preferred stock and common stock. None of Messrs. Coslet, Sisitsky, Gorman or Mansukani
has investment power over any of the shares of preferred stock and common stock owned by
IASIS Investment.(d)
    
    Represents shares of restricted stock and options currently or exercisable within
60 days of December 10, 2008, granted to Messrs. Gorman and Mansukani pursuant to Director
Compensation and Restricted Stock Award Agreements.(e)
    
    Mr. Levy is a senior managing director of JLL Partners, Inc. which, through its
controlling interest in JLL, which owns 18.8% of IASIS Investment, may be deemed to
beneficially own 18.8% of the shares of preferred stock and common stock owned by IASIS
Investment. Accordingly, Mr. Levy may be deemed to beneficially own 18.8% of the shares of
preferred stock and common stock owned by IASIS Investment.  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
 IASIS Investment Limited Liability Company Operating Agreement
   126




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Investor Rights Agreement
  Management Services Agreement
  Income Tax Allocations
  Policy on Transactions with Related Persons
   127




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
  Fiscal
    
    
    Fiscal2008
    
    
    2007Audit Fees (a)
    
    $
    1,218,000
    
    
    $
    1,511,000Audit-Related Fees (b)
    
    
    29,500
    
    
    
    209,500Tax Fees
    
    
    87,900
    
    
    
    20,100All Other Fees (c)
    
    
    24,500
    
    
    
    
 (a)
    
    Audit Fees represent fees billed for professional services rendered for the audit of
our annual financial statements and review of our quarterly financial statements, and audit
services provided in connection with other statutory or regulatory filings.(b)
    
    Audit-Related Fees represent fees billed for assurance services related to the audit of
our financial statements, as well as certain due diligence projects.(c)
    
    All Other Fees represent fees for services provided to us not otherwise included in the
categories above.  
 PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
    
    
    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)
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS
Healthcare Corporation and W. Carl Whitmer (1)
    
    First Amendment to Employment Agreement, dated January 31, 2008,
by and between IASIS Healthcare Corporation and Sandra K. McRee (11)
    
    Agreement
for Severance Benefits and Restrictive Covenants, dated as of
March 1, 2001, by and between IASIS Management Company and
Carolyn Rose
    
    Employment Agreement, dated
June 11, 2007,
by and between IASIS Healthcare Management Company and Kirk Olsen
    
    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)
  128




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
    
    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
(12)
    
    First Amendment to IASIS Healthcare Corporation 2004 Stock Option Plan (13)
    
    Director Compensation and Restricted Share Award Agreement, dated as of
April 14, 2005, between IASIS Healthcare Corporation and Sharad Mansukani (14)
    
    IASIS Healthcare Non-Qualified Deferred Compensation Program (4)
  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)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
(3)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 (4)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 (4)10.1
    
    
    Lease, dated as of July 29, 1977, by and between Sierra Equities, Inc., as Landlord,
and Mesa General Hospital, Inc., as Tenant (5)10.2
    
    
    Addendum to Lease entered into by and between Sierra Equities, Inc., as Landlord, and
Mesa General Hospital, Inc., as Tenant (5)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 (5)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 (5)
  129




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Exhibit No.
    
    Description10.5
    
    
    Amendment to Lease, dated April 30, 2003, by and between Sierra Equities, Inc. and Mesa
General Hospital, L.P. (6)10.6
    
    
    Letter Agreement effective May 6, 2005, amending Lease by and between Sierra Equities
Inc. and Mesa General Hospital, L.P. (7)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. (8)10.8
    
    
    Lease Agreement, dated as of October 6, 2003, between The Dover Centre, LLC and IASIS
Healthcare Corporation (9)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, 200810.11
    
    
    Information System Agreement, dated February 23, 2000, between McKesson Information
Solutions LLC and IASIS Healthcare Corporation, as amended (1)**10.12
    
    
    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)10.13
    
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS Healthcare
Corporation and David R. White (1)10.14
    
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS Healthcare
Corporation and Sandra K. McRee (1)10.15
    
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS Healthcare
Corporation and W. Carl Whitmer (1)10.16
    
    
    First Amendment to Employment Agreement, dated January 31, 2008,
by and between IASIS Healthcare Corporation and Sandra K. McRee (11)10.17
    
    
    Agreement
for Severance Benefits and Restrictive Covenants, dated as of
March 1, 2001, by and between IASIS Management Company and
Carolyn Rose10.18
    
    

Employment
Agreement, dated June 11, 2007,
by and between IASIS Healthcare Management Company and Kirk Olsen10.19
    
    
    Form of Roll-over Option Letter Agreement (1)10.20
    
    
    IASIS Healthcare Corporation 2004 Stock Option Plan (1)10.21
    
    
    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)10.22
    
    
    Investor Rights Agreement dated as of June 22, 2004, by and between IASIS Investment
LLC and IASIS Healthcare Corporation (1)10.23
    
    
    Form of Management Stockholders Agreement between IAS and each of David R. White,
Sandra K. McRee and W. Carl Whitmer (1)10.24
    
    
    Form of Management Stockholders Agreement under IASIS Healthcare Corporation 2004 Stock
Option Plan (1)10.25
    
    
    Form of Stock Option Grant Agreement under IASIS Healthcare Corporation 2004 Stock
Option Plan (1)10.26
    
    
    Form of Management Stockholders Agreement for Rollover Options (1)10.27
    
    
    IASIS Corporate Incentive Plan (1)10.28
    
    
    IASIS Market Executive Incentive Program (1)10.29
    
    
    Director Compensation and Restricted Share Award Agreement, dated as of February 14,
2005, between IASIS Healthcare Corporation and Kirk Gorman (12)10.30
    
    
    First Amendment to IASIS Healthcare Corporation 2004 Stock Option Plan (13)
  130




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Exhibit No.
    
    Description10.31
    
    
    Director Compensation and Restricted Share Award Agreement, dated as of April 14, 2005,
between IASIS Healthcare Corporation and Sharad Mansukani (14)10.32
    
    
    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 (15)10.33
    
    
    IASIS Healthcare Non-Qualified Deferred Compensation Program (4)10.34
    
    
    Contribution Agreement, dated as of May 9, 2007, by and among Odessa Regional Hospital,
LP, Alliance Hospital, Ltd. and Sri-Sai Enterprises, Inc. (16)14
    
    
    Code of Ethics (9)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 the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2006.(4)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2006.(5)
    
    Incorporated by reference to IASIS Healthcare Corporations Annual Report on Form 10-K for
the fiscal year ended September 30, 2000.(6)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2003.(7)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 12, 2005.(8)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2002.(9)
    
    Incorporated by reference to IASIS Healthcare Corporations Annual Report on Form 10-K for
the fiscal year ended September 30, 2003.(10)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 2, 2007.(11)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on February 5, 2008.(12)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on February 18,
2005.(13)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on March 22,
2005.(14)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on April 20,
2005.(15)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on July 24, 2006.(16)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 10, 2007.  131




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##### Table of Contents



SIGNATURES
  IASIS HEALTHCARE LLCDate: December 12, 2008
    
    By:
    
    /s/ David R. WhiteDavid R. WhiteChairman of the Board and Chief Executive Officer
  Signature
    
    Title
    
    Date/s/ David R. White
    
    Chairman of the Board and Chief
    
    December 12, 2008David R. White
    
    Executive
Officer(Principal Executive Officer)/s/ W. Carl Whitmer
    
    Chief Financial Officer
    
    December 12, 2008W. Carl Whitmer
    
    (Principal
Financial Officer)/s/ John M. Doyle
    
    Chief Accounting Officer
    
    December 12, 2008John M. Doyle
    
    (Principal
Accounting Officer)Director of IASIS HealthcareJonathan J. Coslet
    
    Corporation
(sole member of IASIS
Healthcare LLC)/s/
David Dupree
    
    Director of IASIS Healthcare
    
    December 12, 2008David Dupree
    
    Corporation
(sole member of IASIS 
Healthcare LLC)/s/ Kirk E. Gorman
    
    Director of IASIS Healthcare
    
    December 12, 2008Kirk E. Gorman
    
    Corporation
(sole member of IASIS
Healthcare LLC)/s/ Curtis Lane
    
    Director of IASIS Healthcare
    
    December 12, 2008Curtis Lane
    
    Corporation
(sole member of IASIS 
Healthcare LLC)/s/ Todd B. Sisitsky
    
    Director of IASIS Healthcare
    
    December 12, 2008Todd B. Sisitsky
    
    Corporation
(sole member of IASIS
Healthcare LLC)/s/ Paul S. Levy
    
    Director of IASIS Healthcare
    
    December 12, 2008Paul S. Levy
    
    Corporation
(sole member of IASIS 
Healthcare LLC)/s/ Jeffrey C. Lightcap
    
    Director of IASIS Healthcare
    
    December 12, 2008Jeffrey C. Lightcap
    
    Corporation
(sole member of IASIS
Healthcare LLC)/s/ Sharad Mansukani
    
    Director of IASIS Healthcare
    
    December 12, 2008Sharad Mansukani
    
    Corporation
(sole member of IASIS
Healthcare LLC)
  132




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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
   133




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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)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
(3)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 (4)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 (4)10.1
    
    
    Lease, dated as of July 29, 1977, by and between Sierra Equities, Inc., as Landlord, and
Mesa General Hospital, Inc., as Tenant (5)10.2
    
    
    Addendum to Lease entered into by and between Sierra Equities, Inc., as Landlord, and
Mesa General Hospital, Inc., as Tenant (5)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 (5)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 (5)10.5
    
    
    Amendment to Lease, dated April 30, 2003, by and between Sierra Equities, Inc. and Mesa
General Hospital, L.P. (6)10.6
    
    
    Letter Agreement effective May 6, 2005, amending Lease by and between Sierra Equities
Inc. and Mesa General Hospital, L.P. (7)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. (8)10.8
    
    
    Lease Agreement, dated as of October 6, 2003, between The Dover Centre, LLC and IASIS
Healthcare Corporation (9)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, 200810.11
    
    
    Information System Agreement, dated February 23, 2000, between McKesson Information
Solutions LLC and IASIS Healthcare Corporation, as amended (1)**
  134




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##### Table of Contents



Exhibit No.
    
    Description10.12
    
    
    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 (10)10.13
    
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS Healthcare
Corporation and David R. White (1)10.14
    
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS Healthcare
Corporation and Sandra K. McRee (1)10.15
    
    
    Employment Agreement, dated as of May 4, 2004, by and between IASIS Healthcare
Corporation and W. Carl Whitmer (1)10.16
    
    
    First Amendment to Employment Agreement, dated January 31, 2008,
by and between IASIS Healthcare Corporation and Sandra K. McRee (11)10.17
    
    

Agreement
for Severance Benefits and Restrictive Covenants, dated as of
March 1, 2001, by and between IASIS Management Company and
Carolyn Rose10.18
    
    
    Employment
Agreement, dated June 11, 2007,
by and between IASIS Healthcare Management Company and Kirk Olsen10.19
    
    
    Form of Roll-over Option Letter Agreement (1)10.20
    
    
    IASIS Healthcare Corporation 2004 Stock Option Plan (1)10.21
    
    
    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)10.22
    
    
    Investor Rights Agreement dated as of June 22, 2004, by and between IASIS Investment LLC
and IASIS Healthcare Corporation (1)10.23
    
    
    Form of Management Stockholders Agreement between IAS and each of David R. White, Sandra
K. McRee and W. Carl Whitmer (1)10.24
    
    
    Form of Management Stockholders Agreement under IASIS Healthcare Corporation 2004 Stock
Option Plan (1)10.25
    
    
    Form of Stock Option Grant Agreement under IASIS Healthcare Corporation 2004 Stock Option
Plan (1)10.26
    
    
    Form of Management Stockholders Agreement for Rollover Options (1)10.27
    
    
    IASIS Corporate Incentive Plan (1)10.28
    
    
    IASIS Market Executive Incentive Program (1)10.29
    
    
    Director Compensation and Restricted Share Award Agreement, dated as of February 14,
2005, between IASIS Healthcare Corporation and Kirk Gorman (12)10.30
    
    
    First Amendment to IASIS Healthcare Corporation 2004 Stock Option Plan (13)10.31
    
    
    Director Compensation and Restricted Share Award Agreement, dated as of April 14, 2005,
between IASIS Healthcare Corporation and Sharad Mansukani (14)10.32
    
    
    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 (15)10.33
    
    
    IASIS Healthcare Non-Qualified Deferred Compensation Program (4)10.34
    
    
    Contribution Agreement, dated as of May 9, 2007, by and among Odessa Regional Hospital,
LP, Alliance Hospital, Ltd. and Sri-Sai Enterprises, Inc. (16)14
    
    
    Code of Ethics (9)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).  135




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##### Table of Contents



(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 the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2006.(4)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K for the fiscal year
ended September 30, 2006.(5)
    
    Incorporated by reference to IASIS Healthcare Corporations Annual Report on Form 10-K for
the fiscal year ended September 30, 2000.(6)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2003.(7)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 12, 2005.(8)
    
    Incorporated by reference to IASIS Healthcare Corporations Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2002.(9)
    
    Incorporated by reference to IASIS Healthcare Corporations Annual Report on Form 10-K for
the fiscal year ended September 30, 2003.(10)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 2, 2007.(11)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on February 5,
2008.(12)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on February 18,
2005.(13)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on March 22,
2005.(14)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on April 20,
2005.(15)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on July 24, 2006.(16)
    
    Incorporated by reference to the Companys Current Report on Form 8-K filed on May 10, 2007.  136