<PAGE> 1
                          FIRST AMENDMENT
                                TO
                         CREDIT AGREEMENT

     THIS  FIRST  AMENDMENT  TO  CREDIT AGREEMENT (this "AMENDMENT"), dated
effective  as of April 14, 1997 or,  with  respect  to  the  amendments  to
SECTIONS 10.1,  10.2, 10.3 and 10.4 of the Credit Agreement (as hereinafter
defined) and the  addition  of  SECTION  10.5  to  the  Credit Agreement as
referred to in Sections 2.15, 2.16, 2.17, 2.18 and 2.19 of  this  Amendment
and the amendments to the defined terms and definitions thereof referred to
in such SECTIONS 10.1, 10.2, 10.3, 10.4 and 10.5 as referred to in  SECTION
2.1 of this Amendment, effective as of January 1, 1997, is among PARACELSUS
HEALTHCARE CORPORATION, a California corporation (the "BORROWER"), each  of
the  banks  or  other  lending  institutions which is a party to the Credit
Agreement  (as  hereinafter  defined)   (individually,   a   "LENDER"  and,
collectively, the "LENDERS") and is a signatory to this Amendment,  BANK OF
AMERICA   NATIONAL  TRUST  AND  SAVINGS  ASSOCIATION,  a  national  banking
association, as lead agent for the Lenders (the "AGENT"), BANQUE PARIBAS, a
bank organized  and  existing  under the laws of the Republic of France, as
documentation   agent  for  the  Lenders   (the   "DOCUMENTATION   AGENT"),
NATIONSBANK OF TEXAS,  N.A.,  a  national  banking association, as managing
agent for the Lenders (the "MANAGING AGENT")  and  CREDIT LYONNAIS NEW YORK
BRANCH  and TORONTO-DOMINION (TEXAS), INCORPORATED, as  co-agents  for  the
Lenders (the "CO-AGENTS").

                             RECITALS:

     A.   The  Borrower,  the  Lenders, the Agent, the Documentation Agent,
the  Managing  Agent and the Co-Agents  previously  executed  or  otherwise
became parties to that certain Credit Agreement dated as of August 16, 1996
(the "CREDIT AGREEMENT")  pursuant  to  which  the  Lenders extended to the
Borrower  a  reducing  revolving credit facility in the  maximum  aggregate
principal amount of $400,000,000  (inclusive  of a $40,000,000 sublimit for
letters of credit).

     B.   The parties hereto desire (i) to amend  the  Credit  Agreement to
reduce the Revolving Credit Loans Commitments to $200,000,000 in  aggregate
principal amount and in several other respects and (ii) to provide a waiver
of  certain  provisions  of  the  Credit Agreement, all as provided in this
Amendment.

     NOW,  THEREFORE, in consideration  of  the  premises  and  the  mutual
covenants herein  contained,  the  parties  hereto (which shall include the
Required Lenders) hereby agree as follows:

                             ARTICLE 1

                            DEFINITIONS

     Section 1.1 DEFINITIONS.  All defined terms used in this Amendment but
not defined herein shall have the meanings therefor set forth in the Credit
Agreement as amended by this Amendment.

                             ARTICLE 2

                            AMENDMENTS

     Section   2.1  AMENDED  AND  RESTATED  DEFINITIONS.    The   following
<PAGE> 2

definitions set  forth  in  SECTION  1.1 of the Credit Agreement are hereby
amended and restated to read in their entirety as follows:

          "  'ADJUSTED  EBITDA'  means, on  a  consolidated  basis  without
duplication for the Borrower and its  Subsidiaries,  the  sum of (a) income
before taxes and extraordinary items and cumulative effect  of  a change in
accounting  (inclusive  of  minority  interest  income  and  expense), plus
interest expense, plus depreciation expense, plus amortization  expense, in
each  case  (subject to the proviso below) measured on a twelve (12)  month
basis and calculated as of the last day of the fiscal quarter most recently
ended, minus  (b)  the actual cash losses during such period referred to in
CLAUSE (A) preceding  related  to the capitated contract between Paracelsus
PHC Regional Hospital, Inc. and  FHP,  Inc.  (and  its  successor company);
PROVIDED,  HOWEVER,  that  any determination of the amounts  set  forth  in
CLAUSE (A) or (B) preceding  made  prior  to  December  31,  1997  shall be
calculated on an annualized basis based upon the number of days then  ended
during  1997  and  a  365  or 366 day year, as applicable (for example, any
determination of amounts for  the  period  ending  June  30,  1997 shall be
calculated  based  upon  the  amounts  for the period from January 1,  1997
through  and  including  June  30,  1997, multiplied  by  a  fraction,  the
numerator of which is the number of days  in  1997  and  the denominator of
which is the number of days during such period)."

          "  'APPLICABLE  MARGIN' means, for any date, and subject  to  the
limitations contained in SECTION  13.11,  the  rate per annum for Base Rate
Loans  or  Eurodollar Loans, as applicable, set forth  for  such  date  (by
reference to  the  applicable  period  which  includes  such  date)  in the
following  table; PROVIDED, HOWEVER, THAT, notwithstanding anything to  the
contrary contained  in  this  Agreement,  in  no event shall the Applicable
Margin exceed the maximum rate that would permit  compliance  with  SECTION
13.11  and,  after  taking  into  account the true principal balance of the
Obligations outstanding from time to  time and all amounts which constitute
interest under applicable law, if the Applicable Margin as set forth in the
following table would at any time result  in  the amount of interest on the
Obligations  contracted  for in the Loan Documents  exceeding  the  maximum
amount permitted by law or  would  otherwise  not  permit  compliance  with

SECTION  13.11,  then  the Applicable Margin shall be, IPSO FACTO and under
any and all circumstances, limited and reduced for each Lender to such rate
so that the rate and amount  of  interest on the Obligations contracted for
in  the Loan Documents do not at any  time  exceed  the  Maximum  Rate  and
maximum   amount   permitted   by  law  and  shall  otherwise  comply  with
SECTION 13.11:

<TABLE>
<CAPTION>
Period                                              Applicable Margin
------                                       ----------------------------------
						              EURODOLLAR LOANS    BASE RAGE LOANS
 							         -----------------   ---------------
<S>                                        <C>                  <C>
                                                    
August 16, 1996, through and including
 April 13, 1997                            2.00%                0.75%

April 14, 1997, through and including
 June 30, 1997         		                  2.50%                1.25%
<PAGE> 3

July 1, 1997, through and including
 July 31, 1997                         	   3.00%                1.75%

August 1, 1997, through and including
 August 31, 1997                       	   3.50%                2.25%

September 1,1997,through and including
 September 30, 1997                    	   4.00%                2.75%

October 1, 1997, through and including
 October 31, 1997                      	   4.50%                3.25%

November 1, 1997, through and including
 November 30, 1997                     	   5.00%                3.75%

December 1, 1997, through and including
 December 31, 1997                     	   5.50%                4.25%

January 1, 1998, through and including
 January 31, 1998                      	   6.00%                4.75%

February 1, 1998, through and including
 February 28, 1998                     	   6.50%                5.25%

March 1, 1998, through and including
 March 31, 1998                       		   7.00%                5.75%

April 1, 1998, through and including
 April 30, 1998                				        7.50%                6.25%

May 1, 1998, through and including
 May 31, 1998                  				        8.00%                6.75%

June 1, 1998, through and including
 June 30, 1998                 				        8.50%                7.25%

July 1, 1998, through and including
 July 31, 1998                  			        9.00%                7.75%

August 1, 1998, through and including
 August 31, 1998                    				   9.50%                8.25%

September 1, 1998, and at all times
 thereafter               			             10.00%               8.75%
</TABLE>
The Borrower acknowledges and agrees that the Applicable Margin
for  the period from the Closing  Date  through  and  including
April  13,  1997, as set forth in the table above is consistent
with the Applicable  Margin set forth in the Agreement prior to
giving effect to the First  Amendment  based  upon the restated
financial  statements  of  the  Borrower  and  its consolidated
Subsidiaries.    Notwithstanding   anything   to  the  contrary
contained in SECTION 13.10, this definition may  be  amended to
provide  that the Applicable Margin is not less than the  rates
specified  in the definition of the term 'Applicable Margin' in
the Agreement  as  in  effect  prior  to the First Amendment by

<PAGE> 4

written  agreement  of  only  the  Required   Lenders  and  the
Borrower."

          "  'EBITDA'  means,  on a consolidated basis  without
duplication for any Person and its  consolidated  Subsidiaries,
the  sum  of  (a)  income before taxes and extraordinary  items
(inclusive  of minority  interest  income  and  expense),  plus
interest expense,  plus depreciation expense, plus amortization
expense, in each case  (subject  to the proviso below) measured
on a twelve (12) month basis and calculated  as of the last day
of  the  fiscal  quarter  most  recently ended, plus  (b)  with
respect  to  any  operations  acquired  by  such  Person  or  a
Subsidiary of such Person during  such  period  referred  to in
CLAUSE  (A)  preceding,  the  EBITDA  of  such  operations  (as
calculated  pursuant  to  (a)  above)  for  the portion of such
period  prior  to  the  respective  date  of acquisition,  plus
(c) EBITDA demonstrated and certified by such  Person,  to  the
reasonable  satisfaction of the Agent, as attributable to newly
acquired businesses  during  such  period referred to in CLAUSE
(A) preceding; PROVIDED, HOWEVER, that any determination of the
amounts set forth in CLAUSES (A), (B)  AND  (C)  preceding made
prior to December 31, 1997 shall be calculated on an annualized
basis based upon the number of days then ended during  1997 and
a  365  or  366  day  year,  as  applicable  (for  example, any
determination  of amounts for the period ending June  30,  1997
shall be calculated  based upon the amounts for the period from
January 1, 1997 through and including June 30, 1997, multiplied
by a fraction, the numerator  of which is the number of days in
1997 and the denominator of which  is the number of days during
such period)."

          " 'EXCLUDED SUBSIDIARIES' means as follows:

               (a)  any Subsidiary of  the  Borrower identified
on SCHEDULE 1.1(A) hereto, including, but not  limited  to  any
Subsidiary  which  is  a  partnership  or  owns  a  partnership
interest, if (but only if) at all times (x) the book  value  of
the total Property of such Subsidiary is less than five percent
(5%)  of  the  book value of the total Property of the Borrower
(determined on a consolidated basis for the Borrower and all of
its Subsidiaries)  and such Subsidiary's EBITDA does not exceed
five  percent (5%) of  the  Adjusted  EBITDA  of  the  Borrower
(determined on a consolidated basis for the Borrower and all of
its Subsidiaries),  and  (y)  the  aggregate  book value of the
total Property of all Excluded Subsidiaries of the Borrower and
the  aggregate  EBITDA  for  all Excluded Subsidiaries  of  the
Borrower at no time exceeds five percent (5%) of the book value
of  the  total  Property  of  the  Borrower  (determined  on  a
consolidated   basis  for  the  Borrower   and   all   of   its
Subsidiaries) or  five  percent  (5%) of the Adjusted EBITDA of
the  Borrower  (determined  on  a consolidated  basis  for  the
Borrower and all of its Subsidiaries),  respectively, PROVIDED,
HOWEVER,  that the Subsidiaries of the Borrower  identified  on
SCHEDULE  1.1(A)   hereto  shall,  whether  or  not  the  other
requirements  set  forth  in  this  CLAUSE  (A)  preceding  are
satisfied, constitute Excluded Subsidiaries for the period (and
only  for  the  period)  from  the  Closing  Date  through  and
<PAGE> 5

including June 15, 1997.

               (b)  In  addition,  the  following  are Excluded
Subsidiaries:

(i)   DHHS;

(ii)  Metropolitan Hospital, L.P.;

(iii) Monrovia   Community   Hospital,   a   California
       limited partnership;
 
(iv)  PHC Funding Corp.;

(v)   Hospital   Assurance   Company,   Ltd.,   a  Cayman
       Island corporation;

(vi)  IV Care, L.P.;

(vii) To   be   formed  partnership  of  Psychiatric
        Healthcare Corporation of Louisiana  and  a
        subsidiary of Community Health Services, Inc.; and

(vii) Lincoln  Community  Medical,   L.L.C.   and   Los
        Angeles Community Hospital, L.L.C.

          "   'FIXED   CHARGE  COVERAGE  RATIO'  means,  on   a
consolidated basis without duplication for the Borrower and its
Subsidiaries, as of the  end  of any fiscal quarter and in each
case (subject to the proviso below)  measured  on a twelve (12)
month  basis and calculated as of the last day of  such  fiscal
quarter,  the ratio of (a) the sum of (i) Adjusted EBITDA, plus
(ii) operating  lease  payments  (to  the  extent treated as an
expense and deducted from Adjusted EBITDA), minus (iii) federal
and state income taxes paid in cash, minus (iv)  the  lesser of
Maintenance Capital Expenditures or actual Capital Expenditures
(exclusive of Capital Lease Obligations), to (b) the sum of (w)
Interest  Expense,  plus  (x) Operating Lease payments (to  the
extent  treated  as  an  expense  and  deducted  from  Adjusted
EBITDA),  plus (y) all scheduled  payments  of  principal  with
respect to  any Debt; PROVIDED, HOWEVER, that any determination
of the amounts  set forth in CLAUSES (A) and (B) preceding made
prior to December 31, 1997 shall be calculated on an annualized
basis based upon  the number of days then ended during 1997 and
a  365  or  366  day year,  as  applicable  (for  example,  any
determination of amounts  for  the  period ending June 30, 1997
shall be calculated based upon the amounts  for the period from
January 1, 1997 through and including June 30, 1997, multiplied
by a fraction, the numerator of which is the  number of days in
1997 and the denominator of which is the number  of days during
such period)."

          "  'HISTORICAL 10-K FINANCIAL STATEMENTS'  means  the
audited consolidated statements of operations and statements of
cash flow of the Borrower and its consolidated Subsidiaries for


<PAGE> 6

the fiscal year  ended December 31, 1994, 1995 and 1996 and the
audited consolidated  balance  sheets  of  the Borrower and its
consolidated Subsidiaries as of December 31,  1995 and 1996, in
each case as included in the Borrower's Annual  Report  on Form
10-K  filed  with  the  Securities  and  Exchange Commission on
April  15,  1997  for the fiscal year ended December  31,  1996
which, among other things, restate certain financial statements
of the Borrower and its consolidated Subsidiaries."

          " 'MAINTENANCE  CAPITAL EXPENDITURES' means an amount
equal to three percent (3%) of the net revenues of the Borrower
and its Subsidiaries (and,  in  the  case of any partnership or
joint  venture,  3%  of  its  net revenues  multiplied  by  the
Borrower's  or  any  of  its  Subsidiary's   right  to  receive
distributable cash flow) determined in accordance with GAAP for
the  twelve  (12)  months ended on the last day of  the  fiscal
quarter  most  recently  ended;  PROVIDED,  HOWEVER,  that  any
determination of  Maintenance Capital Expenditures for a period
prior to December 31, 1997 shall be calculated on an annualized
basis based upon such  net  revenues  during the number of days
then ended during 1997 and a 365 or 366 day year, as applicable
(for   example,   any  determination  of  Maintenance   Capital
Expenditures for the  period  ending  June  30,  1997  shall be
calculated  based  upon  such  net revenues for the period from
January 1, 1997 through and including June 30, 1997, multiplied
by a fraction, the numerator of  which is the number of days in
1997 and the denominator of which  is the number of days during
such period)."

          " 'NET PROCEEDS' means, with  respect  to  any  Asset
Disposition,  Dispute  Resolution  or  Income  Tax  Refund  (as
applicable)  (a)  the gross proceeds received (whether actually
or constructively)  by  the Borrower or any of its Subsidiaries
from such Asset Disposition,  Dispute  Resolution or Income Tax
Refund  (including, without limitation,  cash  or notes), MINUS
(b)  the  amount, if any, of all taxes paid or payable  by  the
Borrower or  any  of  its  Subsidiaries directly resulting from
such Asset Disposition, Dispute Resolution or Income Tax Refund
(including the amount, if any,  estimated  by  the  Borrower in
good  faith  at  the  time  of  such Asset Disposition, Dispute
Resolution  or  Income  Tax Refund for  taxes  payable  by  the
Borrower  or any of its Subsidiaries  on  or  measured  by  net
income or gain  resulting  from such Asset Disposition, Dispute
Resolution or Income Tax Refund), MINUS (c) the reasonable out-
of-pocket costs and expenses  (or, if not readily determinable,
the Borrower's good faith estimate  thereof)  incurred  by  the
Borrower  or  such  Subsidiary  in  connection  with such Asset
Disposition, Dispute Resolution or Income Tax Refund (including
reasonable  brokerage  fees  paid  to  a Person other  than  an
Affiliate of the Borrower) excluding any  fees or expenses paid
to an Affiliate of the Borrower.  'NET PROCEEDS'  with  respect
to  any  Asset  Disposition  shall also include proceeds (after
deducting any amounts specified  in  CLAUSES (B) and (C) of the
preceding sentence) of insurance with  respect to any actual or
constructive loss of Property, or an agreed or compromised loss
of Property or the taking of any Property  under  the  power of
eminent  domain  and condemnation awards and awards in lieu  of
<PAGE> 7

condemnation for the  taking  of  Property  under  the power of
eminent domain, except such proceeds and awards as are released
to and used by the Borrower in accordance with SECTION 8.5.  In
no  event  shall  any  item  be  included in "Net Proceeds"  in
respect of any joint venture or partnership  to  the  extent it
shall  exceed  the  Borrower's direct or indirect share of  the
earnings from such joint venture or partnership."

          "  'PRO  FORMAS'   means   the   unaudited,   summary
consolidated balance sheet and income statement of the Borrower
and  its  consolidated  Subsidiaries,  adjusted  for  losses at
Paracelsus  PHC Regional Medical Center, Inc., for fiscal  year
1997, which the Borrower delivered to the Agent and the Lenders
on or about April 14, 1997."

          "  'PROJECTIONS'   means  the  Borrower's  forecasted
consolidated balance sheet and  income statement, together with
appropriate supporting details and  a  statement  of underlying
assumptions, for fiscal year 1997, which the Borrower delivered
to the Agent and the Lenders on or about April 14, 1997."

          "  'REVOLVING CREDIT LOANS COMMITMENT' means,  as  to
any Lender, the  obligation  of such Lender to make or continue
Revolving Credit Loans and incur  or  participate  in Letter of
Credit  Liabilities hereunder in an aggregate principal  amount
at any one  time outstanding up to but not exceeding the amount
set forth opposite  the  name of such Lender on SCHEDULE 1.1(E)
hereto under the heading "Revolving  Credit  Loans  Commitment"
or,  if such Lender is a party to an Assignment and Acceptance,
the  amount  set  forth  in  the  most  recent  Assignment  and
Acceptance  of  such  Lender,  as  the  same  may be reduced or
terminated  pursuant  to  SECTIONS  2.7,  2.13  or  11.2,   and
'REVOLVING  CREDIT LOANS COMMITMENTS' means such obligations of
all Lenders; PROVIDED, HOWEVER, that the Revolving Credit Loans
Commitments shall be permanently reduced by $50,000,000 on each
of August 15,  1999  and  August  15,  2000 and such reductions
pursuant  to  this  proviso  shall be applied  ratably  to  the
respective Commitment of each  Lender  in  accordance  with its
respective  Commitment  Percentage.  As of April 14, 1997,  the
aggregate  principal  amount  of  the  Revolving  Credit  Loans
Commitments is $200,000,000.

          "  'REVOLVING   CREDIT  LOANS  MATURITY  DATE'  means
August 1, 2001."

          " 'SENIOR LEVERAGE  RATIO' means, as of any date, the
ratio   of  (a)  Total  Debt,  including   Letter   of   Credit
Liabilities, less Subordinated Debt, to (b) Adjusted EBITDA for
the twelve  (12)  months ending with the last day of the fiscal
quarter  most  recently  ended,  PROVIDED,  HOWEVER,  that  any
determination of  Adjusted  EBITDA  made  prior to December 31,
1997, shall be calculated on an annualized basis based upon the
number  of days then ended during 1997 and a  365  or  366  day
year, as applicable (for example, any determination of Adjusted
EBITDA for  the period ending June 30, 1997 shall be calculated
based upon the  amounts  for  the  period  from January 1, 1997
through and including June 30, 1997, multiplied  by a fraction,
<PAGE> 8

the  numerator of which is the number of days in 1997  and  the
denominator  of  which  is  the  number  of  days  during  such
period)."

     Section  2.2  NEW  DEFINITIONS.  SECTION 1.1 of the Credit
Agreement is hereby amended  by  the  addition of the following
new terms and definitions, which terms  and  definitions  shall
appear in alphabetical order in such SECTION 1.1:

          "   'DISPUTE   RESOLUTION'   means   the  settlement,
determination or other resolution (whether formal  or informal,
or  in  whole or in part) of or with respect to any litigation,
cause of action, claim, controversy or dispute."

          "   'FIRST   AMENDMENT'   means  that  certain  First
Amendment  to  Credit Agreement dated as  of  April  14,  1997,
executed by the  Borrower, the Required Lenders, the Agent, the
Documentation Agent, the Managing Agent and the Co-Agents."

          " 'INCOME  TAX  REFUND'  means  any  refund  or other
amount  paid  to  a payor of any income taxes of any nature  in
respect of income taxes  of  any nature previously paid by such
payor."

     Section 2.3 COMMITMENTS;  USE OF PROCEEDS.  SECTION 2.1 of
the Credit Agreement is hereby amended  to add a new SUBSECTION
(D)  thereto immediately following SUBSECTION  (C),  which  new
SUBSECTION (D) shall read in is entirety as follows:

          "(d) Notwithstanding   anything   to   the   contrary
contained  in  this  Agreement,  the  right  of the Borrower to
borrow  or  reborrow  any  Loans,  and the obligations  of  the
Lenders to make any Loans, shall be  subject  to the conditions
that  (i) the aggregate amount of the Outstanding  Credit  that
has been  used  and,  after  given  effect to the making of the
requested Loan or issuance of the requested  Letter  of  Credit
(as  applicable),  will be used for any purposes other than  to
finance (or otherwise  for)  Permitted  Acquisitions  shall not
exceed,  in  aggregate  amount  at  any  time  outstanding, the
remainder  of  (A) $180,000,000 minus (B) the sum  of  the  Net
Proceeds of Asset  Dispositions and the Net Proceeds of Dispute
Resolutions  received   (actually  or  constructively)  by  the
Borrower or any Subsidiary  of  the  Borrower on or after April
14, 1997, and (ii) the Outstanding Credit  that  has  been used
and, after given effect to the making of the requested  Loan or
issuance  of  the  requested  Letter of Credit (as applicable),
will   be  used  to  finance  (or  otherwise   for)   Permitted
Acquisitions   shall   not  at  any  time  exceed  $20,000,000;
PROVIDED,  HOWEVER,  that,   notwithstanding  anything  to  the
contrary contained in SECTION 13.10, this SECTION 2.1(D) may be
amended  (including,  without  limitation,   to   increase  the
Borrower's right to borrow or reborrow Loans up to  the  amount
of  the  Commitments) by written agreement of only the Required
Lenders and the Borrower."

     Section  2.4  ASSET  DISPOSITIONS.   SECTION 2.7(A) of the
Credit Agreement is hereby amended and restated  to read in its
<PAGE> 9

entirety as follows:
          "(a) ASSET  DISPOSITIONS.   The  Borrower  shall  pay
(concurrently   with   the  consummation  of  each  such  Asset
Disposition) to the Agent, for the benefit of the Lenders, as a
prepayment of the Revolving  Credit Loans (or, if the Revolving
Credit Loans are then paid in  full, as cash collateral for any
outstanding Letter of Credit Liabilities),  an aggregate amount
equal  to  100%  of  (i)  the  Net  Proceeds  from  all   Asset
Dispositions  permitted  by  SECTION  9.12A(A) and (ii) the Net
Proceeds from all Income Tax Refunds, PROVIDED,  HOWEVER,  that
the  Net  Proceeds  of Asset Dispositions of Property that does
not constitute Collateral  shall  not be required to be so paid
to the Agent if and to the extent that  such  proceeds are used
by the Borrower, within one year of  receipt of  such  proceeds
in  cash,  to  make  Investments  permitted  by SECTION 9.4(B),
9.4(C) or 9.4(D)."

     Section  2.5  USE  OF  PROCEEDS.  SECTION 2.10(A)  of  the
Credit  Agreement  is  hereby  amended   to   add   the  phrase
"(including,  without  limitation, SECTION 2.1(D))" immediately
following the word "Agreement"  in  the  third  line of SECTION
2.10(A).

     Section  2.6  COMMITMENT  FEES.   Section 2.11(A)  of  the
Credit Agreement is hereby amended and restated to read  in its
entirety as follows:

          "(a) The Borrower agrees to pay  to the Agent for the
account of each Lender a commitment fee (the  'COMMITMENT FEE')
on the daily average unused or unfunded amount of such Lender's
Revolving  Credit  Loans  Commitment, for the period  from  and
including  the Closing Date  to  and  including  the  Revolving
Credit Loans Maturity Date, at the rate per annum equal to one-
half of one  percent  (0.50%),  which  accrued  commitment fees
shall be payable in arrears on each Quarterly Date beginning on
September  30, 1996 and on the Revolving Credit Loans  Maturity
Date."

     Section  2.7  DRAWINGS UNDER LETTERS OF CREDIT.  The first
sentence of SECTION  2.14(E)  of the Credit Agreement is hereby
amended   and  restated to read in  its  entirety  as  follows:
"Upon receipt from  the  beneficiary of any Letter of Credit of
any demand for payment or  other  drawing  under such Letter of
Credit,  the Issuing Bank shall promptly notify  the  Borrower,
the Agent  and  each  Lender  as  to the amount to be paid as a
result  of such demand or drawing and  the  respective  payment
date."

     Section   2.8  COLLATERAL.   SECTION  5.1  of  the  Credit
Agreement  is hereby  amended  and  restated  to  read  in  its
entirety as follows:

          "Section  5.1  COLLATERAL.   To  secure  the full and
complete payment and performance of the Obligations  (or,  with
respect  to  any Lien granted by any Subsidiary of the Borrower
in accordance  with  CLAUSE  (B) succeeding, to secure the full
and  complete  payment  and performance  of  all  indebtedness,
<PAGE> 10

liabilities and obligations  of each Subsidiary Guarantor under
its Guarantee of the Obligations),  (a)  the Borrower will, and
will cause each of the Subsidiary Pledgors  to,  grant  to  the
Agent for the benefit of the Agent and the Lenders a perfected,
first  priority Lien on all of its right, title and interest in
and to all  Capital  Stock  of the Subsidiaries of the Borrower
that are corporations (except  for Excluded Subsidiaries) owned
by  the  Borrower  or  any  Subsidiary   (except  for  Excluded
Subsidiaries) of the Borrower, whether now  owned  or hereafter
acquired, pursuant to the Security Documents and (b) subject to
the  succeeding  provisions  of  this SECTION 5.1, the Borrower
will, and will cause each of its Subsidiaries  to,  at any time
and from time to time on or after April 14, 1997, and  promptly
upon  (and,  in  any  event  unless  the Agent and the Required
Lenders otherwise agree, within ten (10)  Business  Days after)
any  written  request  of  the  Agent  or  the Required Lenders
delivered to the Borrower, grant to the Agent  for  the benefit
of  the Agent and the Lenders a perfected, first priority  Lien
(subject  only  to  Permitted  Liens,  if  any,  which  are, in
accordance  with  this  Agreement,  expressly permitted to have
priority  over  such  Liens)  on all of its  right,  title  and
interest in and to any one or more  of  the real Properties (or
interests  therein)  and tangible personal  Properties  located
thereon or used in connection  therewith,  whether now owned or
hereafter acquired, of the Borrower and/or its  Subsidiaries as
may  be  so  requested  and  selected  by  the  Agent  and  the
Documentation  Agent, which Liens shall be granted pursuant  to
and evidenced and  accompanied by such agreements, documents or
instruments consistent with this Agreement as the Agent and the
Documentation Agent  or  the  Required  Lenders  may reasonably
request.   In  connection with the execution of any  agreement,
document or instrument  referred  to  in  CLAUSE   (B)  of  the
immediately  succeeding  sentence  which creates or evidences a
Lien on any real Property or any interest therein, the Borrower
will,  or  will  cause  its  appropriate   Subsidiary   to,  as
applicable, deliver or cause to be delivered to the Agent  each
of  the  following  which  may be requested by the Agent or the
Documentation Agent at any time  or  from time to time, each of
which will be in form and substance reasonably  satisfactory to
the Agent and the Documentation Agent and all of which shall be
delivered to the Agent promptly upon (and, in any event, unless
the Agent otherwise agrees, within sixty (60) days  after) such
request:

               (i)  a  commitment  for  a  mortgagee policy  of
title insurance (or, if such insurance is not  available in the
jurisdiction in question, a title opinion issued  by a law firm
satisfactory to the Agent) issued in the name of the  Agent for
and  on behalf of the Lenders insuring that such Lien is  valid
and enforceable  and  of the required priority, which insurance
shall be in an amount reasonably  acceptable  to the Agent (but
not to exceed the estimated fair market value of  the  Property
affected by such Lien) and, as soon as practical thereafter,  a
mortgagee  policy  of title insurance issued in accordance with
such commitment;

               (ii) an  appraisal  of such real Property issued
<PAGE> 11

by  an  appraiser  reasonably acceptable  to  the  Agent  which
complies  with  Title   XI  -  Real  Estate  Appraisal  Reform,
Amendments to the Financial  Institution  Reform,  Recovery and
Enforcement  Act  of 1989 and all other regulatory requirements
of the Lenders;

               (iii)   a   reasonably   current   environmental
assessment of such real Property;

               (iv) a  reasonably current survey of  such  real
Property;

               (v)  information  relating  to  zoning affecting
such real Property; and

               (vi) with  respect  to  any  such real  Property
which is a leasehold interest, waivers of landlords'  Liens and
other  agreements  of  landlords  and  their lenders as may  be
feasible to obtain and copies of relevant lease agreements.

Notwithstanding  anything  to the contrary  contained  in  this
SECTION 5.1, if, after the receipt  of all required agreements,
documents   and  instruments  (including   without   limitation
mortgagee's policies of title insurance (or title opinions) and
appraisals) referred  to  in  this  SECTION  5.1 preceding, the
Agent  possesses  valid  and  enforceable Liens affecting  real
Properties,  and related tangible  personal  Properties,  which
have a collateral value (based, as to the real Properties, upon
the  appraised  fair  market  value  of   the  real  Properties
affected  thereby)  of  in  excess  of  133%  of  the aggregate
principal  amount of the Commitments, then, promptly  upon  any
written request  of the Borrower made at any time and from time
to time thereafter,  the  Agent  will,  at  the  expense of the
Borrower, execute such agreements, documents and instruments as
the Borrower may reasonably request to release certain  of such
Liens as are selected by the Agent (PROVIDED, HOWEVER, that the
Agent  shall be obligated, subject to the Borrower's compliance
with SECTION  2.7(A), to release its Liens affecting Properties
being  sold  pursuant  to  a  permitted  Asset  Disposition  as
provided in SECTION  9.12B)  and  the  Documentation Agent such
that, after giving effect,  to such release  or  releases, such
Collateral  value  equals  but  does  not  exceed  133% of  the
aggregate principal amount of the Commitments.  Notwithstanding
anything  to  the  contrary contained in this SECTION 5.1,  the
Borrower's failure to  deliver,  or  to cause any Subsidiary to
deliver,  (A) any of the agreements, documents  or  instruments
referred to  in CLAUSE (B) preceding which evidence or create a
Lien on any leasehold  interest  within  ten (10) Business Days
after request as provided in this SECTION  5.1 preceding or (B)
any agreements, documents or instruments referred to in CLAUSES
(I),  (II),  (III),  (IV),  (V)  or  (VI) of this  SECTION  5.1
preceding within sixty (60) days after  request  as provided in
this SECTION 5.1 preceding, shall not constitute a  Default  or
an Event of Default if (but only if) (1) such failure is due to
the  practical  inability (for whatever reason) of the Borrower
or  such Subsidiary  to  so  comply  notwithstanding  the  best
efforts  of the Borrower and its Subsidiaries to so comply, and
<PAGE> 12

(2) the Borrower  and  its  Subsidiaries  continue to use their
best  efforts  to  promptly  deliver  all  of such  agreements,
documents and instruments referred to in this SECTION 5.1."

     Section 2.9 FINANCIAL STATEMENTS.  SECTION  7.2(A)  of the
Credit Agreement is hereby amended and restated to read in  its
entirety as follows:

          "Section 7.2 FINANCIAL STATEMENTS.

          (a)  The   Borrower   has   delivered  to  the  Agent
(i)   audited   consolidated  statements  of   operations   and
statements of cash  flow  of  the  Borrower for the fiscal year
ended December 31, 1994, 1995 and 1996 and audited consolidated
balance  sheets of the Borrower as of  December  31,  1995  and
1996, in each  case as included in the Borrower's Annual Report
on  Form  10-K  as  filed  with  the  Securities  and  Exchange
Commission for the  fiscal  year of the Borrower ended December
31, 1996, (ii) audited consolidated  statements  of  operations
and  statements of cash flow of CHC for the fiscal years  ended
December   31,   1993,   1994  and  1995,  and   (iii)  audited
consolidated balance sheets  of CHC as of December 31, 1994 and
1995.  To the Borrower's knowledge,  such  financial statements
are  true  and correct, have been prepared in  accordance  with
GAAP and fairly  and accurately present the financial condition
of the Borrower and  its  consolidated Subsidiaries and CHC and
its  consolidated  Subsidiaries  as  of  the  respective  dates
indicated  therein  and  the  results  of  operations  for  the
respective periods indicated  therein.  There has not occurred,
as of any date after December 31,  1996,  with  respect  to the
Borrower   and  its  consolidated  Subsidiaries,  any  material
adverse  change   in  the  business,  condition  (financial  or
otherwise), operations, prospects or Properties of the Borrower
and its consolidated  Subsidiaries  since December 31, 1996, as
reflected in the restated, audited financial  statements of the
Borrower and its consolidated Subsidiaries as of  and  for  the
fiscal  year  ended  December  31,  1996  as  included  in  the
Borrower's  Annual  Report  on  Form  10-K  as  filed  with the
Securities  and Exchange Commission for the fiscal year of  the
Borrower ended December 31, 1996."

     Section  2.10  DISCLOSURE.   SECTION  7.14  of  the Credit
Agreement  is  hereby  amended  and  restated  to  read  in its
entirety as follows:

          "Section 7.14 DISCLOSURE.  Except as otherwise agreed
to  in  writing  by  the Required Lenders pursuant to the First
Amendment,   no   written   statement,   information,   report,
representation or warranty  made  to the Agent or any Lender by
any Loan Party in any Loan Document  or  furnished to the Agent
or  any Lender by any Loan Party in connection  with  the  Loan
Documents  or  any  transaction  contemplated hereby or thereby
contains any untrue statement of a  material  fact  or omits to
state any material fact necessary to make the statements herein
or  therein  in  light of the circumstances in which they  were
made not misleading  as  of  the  respective dates thereof.  No
material  adverse  change  has occurred  with  respect  to  the
<PAGE> 13

financial  condition,  business,   operations,  capitalization,
liabilities or prospects of Borrower and its Subsidiaries taken
as a whole since December 31, 1996."

     Section 2.11 REPORTING REQUIREMENTS.   SECTION  8.1 of the
Credit Agreement is hereby amended as follows:

          (a)  SECTION 8.1(B) of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
               "(b) QUARTERLY FINANCIAL STATEMENTS.  As soon as
available,  and in any event within forty-five (45) days  after
the end of each  fiscal  quarter  of  each  fiscal  year of the
Borrower  or,  with respect to the last fiscal quarter,  within
one hundred twenty  (120)  days  after  the  end of such fiscal
quarter,  beginning  with the fiscal quarter ending  March  31,
1997, a copy of an unaudited  financial  report of the Borrower
and its consolidated Subsidiaries as of the  end of such fiscal
quarter and for the fiscal year or the portion  of  the  fiscal
year  then  ended (as applicable) containing, on a consolidated
and  consolidating   (with   respect   to  balance  sheets  and
statements of income and retained earnings only) basis, balance
sheets  and statements of income, retained  earnings  and  cash
flow, in  each  case  (with  respect  to consolidated financial
information only) setting forth in comparative form the figures
for the corresponding period of the preceding  fiscal year, all
in reasonable detail certified by a Responsible  Officer of the
Borrower to have been prepared in accordance with  GAAP  and to
fairly  and  accurately  present  (subject  to  year-end  audit
adjustments)  the financial condition and results of operations
of  the  Borrower  and  its  consolidated  Subsidiaries,  on  a
consolidated  and consolidating basis, at the date, and for the
periods indicated therein;";

          (b)  SECTION 8.1(C) of the Credit Agreement is hereby
amended (i) to  add the phrase "and, with respect to CLAUSE (I)
succeeding, SECTION  8.1(O)"  immediately  following the phrase
"SECTIONS 8.1(A) and 8.1(B)" in the second line  of  CLAUSE (C)
of  SECTION  8.1,  (ii) to delete the word "and" at the end  of
CLAUSE (I) of SECTION  8.1(C)  and  replace  such  word  with a
comma,  and  (iii)  to  add  the  following  phrase immediately
following CLAUSE (II) of SECTION 8.1(C):  "and (iii) showing in
reasonable detail a reconciliation of the actual  losses during
such  fiscal quarter related to the capitated contract  between
Paracelsus  PHC  Regional Hospital, Inc. and FHP, Inc. (and its
successor company)  and  the  reduction  in  the  loss contract
reserve related thereto recorded as a liability of the Borrower
as  of  December  31, 1996, as shown on the Borrower's  balance
sheet as of the end of such fiscal quarter";

          (c)  the  word  "and"  at  the  end  of CLAUSE (M) of
SECTION 8.1 is deleted;

          (d)  the period at the end of CLAUSE (N)  of  SECTION
8.1 is deleted and replaced by a semicolon;

          (e)  a new CLAUSE (O) is hereby added to SECTION  8.1
immediately  succeeding CLAUSE (N) of SECTION 8.1, which CLAUSE
<PAGE> 14

(O) shall read in its entirety as follows:

               "(o) MONTHLY  FINANCIAL  STATEMENTS.  As soon as
available, and in any event within forty-five  (45)  days after
the  end  of each month, beginning with the month ending  March
31, 1997, a  copy  of  (i) an unaudited financial report of the
Borrower and its consolidated  Subsidiaries  as  of  the end of
such  month  and for the portion of the fiscal year then  ended
Containing,  on   a  consolidated  basis,  balance  sheets  and
statements of income, retained earnings and cash flow, and (ii)
a schedule reflecting  the  EBITDA  and  net  revenues  of  the
material  operating Subsidiaries of the Borrower for such month
and the portion  of  the  fiscal  year  then  ended in a format
substantially  identical  to  that previously provided  to  the
Lenders and, in the case of CLAUSE (II) preceding, in each case
setting  forth  in  comparative  form   the   figures  for  the
corresponding  period  of the preceding fiscal year  (PROVIDED,
HOWEVER, that comparative  figures for the corresponding period
of the preceding fiscal year  shall not be required for reports
relating to months ending in 1997) and the figures for the then
current  budget,  all  in  reasonable  detail  certified  by  a
Responsible Officer of the Borrower  to  have  been prepared in
accordance  with  GAAP  and  to  fairly and accurately  present
(subject to year-end audit adjustments) the financial condition
and results of operations of the Borrower  and its consolidated
Subsidiaries, on a consolidated basis, at the date, and for the
periods indicated therein; and,";

          (f)  a new CLAUSE (P) is hereby added  to SECTION 8.1
immediately succeeding CLAUSE (O) of SECTION 8.1,  which CLAUSE
(P) shall read in its entirety as follows:

               "(p) NOTICES    REGARDING   SUBORDINATED   DEBT.
Promptly  upon  the  Borrower's  or  any  Subsidiary's  receipt
thereof, a true and correct copy of any written notice or other
communication    (exclusive    of   immaterial    notices    or
communications of an administerial  nature)  given by or to the
trustee  under  the  New  Indenture  or  any  holder   of   any
Subordinated  Debt  (in  such holder's capacity as such) in any
way  relating  to  any  Subordinated  Debt  or  any  agreement,
document or instrument evidencing or governing any Subordinated
Debt;"

          (g)  a new CLAUSE  (Q) is hereby added to SECTION 8.1
immediately succeeding CLAUSE  (P) of SECTION 8.1, which CLAUSE
(Q) shall read in its entirety as follows:

               "(q) AUDITOR'S MANAGEMENT LETTER.  Promptly upon
the delivery of such management  letter  to the Borrower or its
management, a copy of the auditor's management  letter relating
to  the  audited  financial  statements referred to in  SECTION
8.1(A);" and

          (h)  a new CLAUSE (R)  is hereby added to SECTION 8.1
immediately  succeeding  CLAUSE  (Q)   of  SECTION  8.1,  which
CLAUSE (R) shall read in its entirety as follows:

<PAGE> 15

               "(r)  NOTICES  RELATING  TO   PHC  FUNDING  SALE
DOCUMENTS.  Promptly upon the delivery thereof to the Borrower,
a  copy  of  (i)  each  notice  or  other written communication
regarding the occurrence or existence (or alleged occurrence or
existence)  of any default (no matter  how  used  or  defined),
event  of default  (no  matter  how  used  or  defined),  Early
Amortization  Event  or  Exclusion  Event under the PHC Funding
Sale Documents, (ii) each amendment or  modification of the PHC
Funding Sale Documents and (iii) each waiver  relating  to  the
PHC  Funding  Sale  Documents, and promptly upon the occurrence
thereof, notice regarding  any expiration or termination of the
PHC Funding Sale Documents (whether  in  accordance  with their
contemplated   term   or   otherwise)   or   the   transactions
contemplated thereby."

     Section  2.12  LIMITATION  ON  DEBT.   SECTION 9.1 of  the
Credit Agreement is hereby amended as follows:

          (a)  the  reference  to SECTION 9.12A(D)  in  SECTION
9.01(J)  of the Credit Agreement  is  hereby  amended  to  read
"SECTION 9.12(A)(B)"; and

          (b)  the  following  sentence  is hereby added to the
end  of  SECTION  9.1  (immediately  following  CLAUSE  (N)  of
SECTION  9.1):   "Notwithstanding  anything   to  the  contrary
contained in this SECTION 9.1, the aggregate of the Debt of the
Borrower and its Subsidiaries referred to in CLAUSES  (C), (E),
(F) and (M) of this SECTION 9.1 preceding which may be incurred
on  or after December 31, 1996, shall not exceed $5,000,000  in
aggregate amount."

     Section 2.13 LIMITATION ON BUSINESS ACQUISITIONS.  SECTION
9.5 of  the  Credit Agreement is hereby amended and restated to
read in its entirety as follows:

          "Section  9.5  LIMITATION  ON  BUSINESS ACQUISITIONS.
The  Borrower  will  not,  and  will  not  permit  any  of  its
Subsidiaries (other than DHHS or any other partnership or joint
venture)   to,  make  expenditures  or  incur  or  assume   any
obligations, or consent to make expenditures or incur or assume
obligations, to make, or otherwise in connection with, Business
Acquisitions  (including, without limitation, all Capital Lease
Obligations,   Operating    Lease    obligations    and   other
indebtedness, liabilities and obligations to be assumed  by the
Borrower or any of its Subsidiaries and all payments made or to
be  made  for covenants not to compete), except as follows (the
acquisitions  permitted  under  this  SECTION 9.5 are sometimes
referred   to   herein   as  "PERMITTED  ACQUISITIONS"):    (a)
expenditures  made  and  obligations  incurred  or  assumed  in
connection  with the acquisitions  of  the  Facilities,  health
related businesses  or  related  lines of business specified in
SCHEDULE 9.5 hereto as agreed to among  the Borrower, the Agent
and  the  Required  Lenders  in  connection  with   the   First
Amendment, which expenditures made and obligations incurred  or
assumed   shall  not  exceed  the  aggregate  amounts  therefor
specified in  SCHEDULE 9.5, and (b) other expenditures made and
obligations incurred  or  assumed  in  connection with Business
<PAGE> 16

Acquisitions which are approved in writing by the Agent and the
Required  Lenders  prior  to  the  consummation   thereof.   In
connection with each Permitted Acquisition involving $5,000,000
or  more  in  total consideration paid or payable (in  whatever
form),  the  Borrower  shall  have  submitted  to  the  Lenders
proforma financial statements, based upon projections (based on
good faith estimates  of the Borrower and its senior management
based on assumptions believed  to  be  reasonable  at  the time
made),  demonstrating  compliance  with all financial covenants
and agreements of the Borrower pursuant to this Agreement after
giving effect to such proposed acquisition,  all  in  form  and
substance reasonably satisfactory to the Required Lenders.  Any
acquisition  permitted  under  this SECTION 9.5 shall have been
approved by the appropriate officers,  or,  if required, by the
Board of Directors or other governing body, of  the  company or
business to be acquired or holding the assets to be acquired."

     Section  2.14  RESTRICTED  PAYMENTS.  SECTION 9.10 of  the
Credit Agreement is hereby amended  and restated to read in its
entirety as follows:

          "Section  9.10   RESTRICTED  PAYMENTS.    Except   as
permitted  by  SECTION 9.1, the Borrower will not, and will not
permit   any  of  its   Subsidiaries   (other   than   Excluded
Subsidiaries) to, make any Restricted Payments, except:

               (a)  Subject  to  the  subordination  provisions
relating  thereto,  the Borrower and its Subsidiaries may  make
regularly scheduled payments  of  interest  on the Subordinated
Notes and on any other Subordinated Debt approved in writing by
the Required Lenders;

               (b)  The  Borrower may pay cash  dividends  with
respect to its Capital Stock  previously  agreed,  on  or about
December 1994, to be paid in connection with the acquisition of
AmeriHealth,  Inc.  by CHC in an aggregate amount not to exceed
$250,000;

               (c)  Subsidiaries   of  the  Borrower  may  make
Restricted   Payments   to   the   Borrower   or   Wholly-Owned
Subsidiaries or Majority-Owned Subsidiaries  (in  either  event
other than Excluded Subsidiaries) of the Borrower;

               (d)  Subsidiaries of the Borrower that are joint
ventures  or  partnerships as of December 31, 1996, or that are
specified on SCHEDULE  9.10 hereto may make Restricted Payments
to their joint venturers  or  partners  in  accordance with the
joint venture agreements or partnership agreements as in effect
on December 31, 1996 or, with respect to the  joint ventures or
partnerships specified on SCHEDULE 9.10, in accordance with the
joint venture agreements or partnership agreements  which shall
have been approved in writing by the Agent;

               (e)  The  Borrower or any Subsidiary may  redeem
or  repurchase any Equity Interests  of  the  Borrower  or  any
Subsidiary  held by any officers, directors or employees of the
Borrower (or any of its Subsidiaries) whose employment has been
<PAGE> 17

terminated or  who have died or become disabled, so long as the
aggregate amount  of  payments  for  all  such  redemptions  or
repurchases in any fiscal year do not exceed $1 million; and

               (f)  The  Borrower  may,  prior  to December 31,
1996,  pay  a  one-time dividend to Park Hospital, GmbH  in  an
amount not to exceed  $22,000,000  and  may  make  the payments
referred to in SECTION 2.10(A)(II);

PROVIDED,  HOWEVER,  that  no Restricted Payments may be  made,
except  pursuant  to  CLAUSES  (B),   (C),  (D),  (E)  and  (F)
preceding, if a Default exists at the time  of  such Restricted
Payment  or  would result therefrom, except that the  foregoing
provision will  not  be violated by the payment by the Borrower
of any dividend within  60  days  of  the  date  of declaration
thereof if at such date of declaration such payment  would have
complied with the provisions of this SECTION 9.10."

     Section 2.15 DISPOSITION OF PROPERTY.  SECTION 9.12 of the
Credit Agreement is hereby amended and restated to read  in its
entirety as follows:

          "A.  Except as permitted by SECTION 9.4, the Borrower
will not, and will not permit any of its Subsidiaries to, sell,
lease,  assign,  transfer  or  otherwise  dispose of any of its
Property, except:

               (a)  the   Asset   Dispositions   specified   in
SCHEDULE 9.12 hereto as agreed to among the Borrower, the Agent
and  the  Required  Lenders  in  connection   with   the  First
Amendment;

               (b)  Asset Dispositions by the Borrower  or  its
Subsidiaries  to the Borrower or any Wholly-Owned Subsidiary or
Majority-Owned   Subsidiary  of  the  Borrower  other  than  an
Excluded Subsidiary if no Default exists at the time of or will
result from such Asset Disposition;

               (c)  the  sale  of accounts receivable under the
PHC Funding Sale Documents in an  amount  sufficient  to derive
Net Proceeds of no more than $65,000,000;

               (d)  dispositions of Property no longer  used or
useful in the ordinary course of business; and

               (e)  transfers   otherwise  expressly  permitted
under this Agreement.

          B.   In   connection  with   an   Asset   Disposition
permitted under this  Section  9.12  of  any  Properties  which
constitute  Collateral, the Agent hereby agrees to release (and
shall have the authority to release without the further consent
of  any  Lenders)  such  Collateral  (at  the  expense  of  the
Borrower) as may be required to effectuate such permitted Asset
Disposition,  PROVIDED,  HOWEVER, that all Net Proceeds of such
Asset  Disposition shall be  paid  to  the  Agent  as  required
pursuant to SECTION 2.7(A)."
<PAGE> 18 

    Section  2.16  COMPENSATION  PAID  TO  AFFILIATES.   A new
SECTION  9.17  is  hereby  added to the Credit Agreement, which
SECTION 9.17 shall read as follows:

          "Section 9.17.  COMPENSATION PAID TO AFFILIATES.  The
Borrower will not, and will  not permit any of its Subsidiaries
to,  pay  (or  agree  to pay), on  or  after  March  31,  1997,
compensation for services rendered in whatever form (other than
capital stock of the Borrower)  (a)  to  any  Affiliate  of the
Borrower  which, when aggregated with compensation paid to  all
other  Affiliates   of  such  Affiliate,  exceeds  $250,000  in
aggregate  amount  during   any  fiscal  year  or  (b)  to  all
Affiliates of the Borrower which,  in  the  aggregate,  exceeds
$1,000,000  during  any  fiscal  year;  PROVIDED, HOWEVER, that
customary fees and expenses paid to members  of  the  Board  of
Directors  of  the  Borrower  or  any  of  its Subsidiaries for
services  as  a  director  shall  be excluded for  purposes  of
determining compliance with the aforesaid  maximum  amounts  if
and  to  the extent that such fees do not exceed such fees, and
such expenses  are  of  the type, paid to any other director of
the Borrower or such Subsidiary."

     Section 2.17 PHC FUNDING  SALE  DOCUMENTS.   A new SECTION
9.18  is  hereby  added to the Credit Agreement, which  SECTION
9.18 shall read as follows:

          "Section  9.18.   PHC FUNDING SALE DOCUMENTS.  Except
as  may  result  from the expiration  or  termination  of  such
program in accordance  with  its  terms,  the  Borrower and its
Subsidiaries  will  maintain  in  full  force  and  effect  the
accounts receivables securitization program as contemplated  by
the  PHC  Funding Sale Documents as in effect as of the Closing
Date without  any  material  amendment  or modification thereto
subsequent to the Closing Date which is materially  adverse  to
the  Borrower  and  its Subsidiaries (except as contemplated in
the PHC Funding Sale Documents as of the Closing Date)."

     Section  2.18 SENIOR  LEVERAGE  RATIO.   Effective  as  of
January 31, 1997,  SECTION  10.1  of  the  Credit  Agreement is
hereby amended and restated to read in its entirety as follows:

          "Section  10.1  SENIOR LEVERAGE RATIO.  The  Borrower
will not permit the Senior  Leverage  Ratio  at  the end of any
fiscal  quarter  to exceed, during the following time  periods,
the following respective ratios:

<TABLE>
<CAPTION>
         CALENDAR YEAR QUARTERS ENDING                   MAXIMUM PERMITTED
         DURING THE FOLLOWING PERIODS                  SENIOR LEVERAGE RATIO
<S>                                            <C>
January 1, 1997 through March 31,1997          2.30 to 1.00
April 1, 1997 through June 30, 1997            2.45 to 1.00
July 1, 1997 through September 30, 1997        2.50 to 1.00
October 1, 1997 through December 31, 1997      2.35 to 1.00
January 1, 1998 and at all times thereafter    2.20 to 1.00"
</TABLE>
<PAGE> 19

     Section 2.19  MINIMUM  NET WORTH.  Effective as of January
1, 1997, SECTION 10.2 of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:

          "Section 10.2  MINIMUM NET WORTH.  As of the close of
each fiscal quarter ending on  or  after December 31, 1996, the
Borrower will not permit Net Worth to  be  less than the sum of
(a) $46,000,000 plus (b) for each quarter on a cumulative basis
ending on or after the fiscal quarter ending  December 31, 1996
or  thereafter,  seventy-five  percent (75%) of the  Borrower's
positive  net  income, if any, plus  (c)  seventy-five  percent
(75%) of all net  proceeds  from  any Equity Issuance following
the Closing Date."

     Section  2.20  RATIO  OF TOTAL DEBT  TO  ADJUSTED  EBITDA.
Effective as of January 1, 1997,  SECTION  10.3  of  the Credit
Agreement  is  hereby  amended  and  restated  to  read  in its
entirety as follows:

          "Section  10.3   RATIO  OF  TOTAL  DEBT  TO  ADJUSTED
EBITDA.  The Borrower will not permit the ratio, calculated  as
of  the  end  of  each fiscal quarter ending during the periods
below, of (i) Total Debt to (ii) Adjusted EBITDA for the period
then ended, to exceed the ratio set forth below:
<TABLE>
<CAPTION>
                        PERIOD                   RATIO
<S>                                              <C>
January 1, 1997 through March 31, 1997           6.70 to 1.00
April 1, 1997 through June 30, 1997              6.50 to 1.00
July 1, 1997 through September 30, 1997          6.50 to 1.00
October 1, 1997 through December 31, 1997        6.25 to 1.00
January 1, 1998 through March 31, 1998           6.00 to 1.00
April 1, 1998 and at all times thereafter        4.00 to 1.00"
</TABLE>

     Section 2.21 FIXED CHARGE COVERAGE RATIO.  Effective as of
January 1, 1997, SECTION 10.4 of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:

          "Section  10.4   FIXED  CHARGE  COVERAGE  RATIO.  The
Borrower  will  not  permit  the  Fixed  Charge Coverage Ratio,
calculated as of the end of each fiscal quarter  ending  during
the periods below, to be less than the ratio set forth below:
<TABLE>
<CAPTION>
                        PERIOD                   RATIO
<S>                                              <C>
January 1, 1997 through March 31, 1998           1.00 to 1.00
April 1, 1998 and at all times thereafter        1.50 to 1.00"
</TABLE>

     Section  2.22  MINIMUM  ADJUSTED  EBITDA.  Effective as of
January  1,  1997, a new SECTION 10.5 is hereby  added  to  the
Credit Agreement, which SECTION 10.5 shall read in its entirety
as follows:

<PAGE> 20

          "Section  10.5   MINIMUM  ADJUSTED EBITDA.  As of the
last day of each fiscal quarter ending on or after December 31,
1996,  the Borrower will not permit Adjusted  EBITDA,  in  each
case (subject  to  the proviso below) for the twelve (12) month
period then ended, to  be less than the amount set forth below,
PROVIDED, HOWEVER, that  any  determination  of Adjusted EBITDA
made  prior  to  December  31, 1997 shall be calculated  on  an
annualized basis based upon  the  number  of  days  then  ended
during  1997  and  a  365  or  366 day year, as applicable (for
example, any determination of Adjusted  EBITDA  for  the period
ending June 30, 1997 shall be calculated based upon the amounts
for the period from January 1, 1997 through and including  June
30,  1997,  multiplied by a fraction, the numerator of which is
the number of  days in 1997 and the denominator of which is the
number of days during such period)."

<TABLE>
<CAPTION>
         CALENDAR YEAR QUARTERS ENDING                   MINIMUM PERMITTED
         DURING THE FOLLOWING PERIODS                     ADJUSTED EBITDA
<S>                                            <C>
January 1, 1997 through March 31,1997          $78,700,000
April 1, 1997 through June 30, 1997            $79,900,000
July 1, 1997 through September 30, 1997        $79,900,000
October 1, 1997 through December 31, 1997      $81,400,000
January 1, 1998 through March 31, 1998         $82,900,000
April 1, 1998 and at all times thereafter      $100,000,000"
</TABLE>

     Section 2.23  EVENTS  OF  DEFAULT.   SECTION  11.1  of the
Credit Agreement is hereby amended as follows:

          (a)  CLAUSE   (M)  of  SECTION  11.1  of  the  Credit
Agreement  is  hereby amended  and  restated  to  read  in  its
entirety as follows:

               "(m) If,  at  any  time,  (i)  the subordination
provisions of any of the Subordinated Notes, the  Indentures or
any  other Subordinated Debt Documents shall be invalidated  or
shall  otherwise  cease  to be in full force and effect or (ii)
any  Restricted  Payment, as  defined  in  CLAUSE  (C)  of  the
definition of such  term,  of  principal  shall  be  made  with
respect  to  any  Subordinated  Debt except as may be expressly
permitted by SECTION 9.10;"; and

          (b)  a new CLAUSE (R) is  hereby  added to the end of
SECTION 11.1 immediately succeeding CLAUSE (Q) of SECTION 11.1,
which CLAUSE (R) shall read in its entirety as follows:

               "(r) If the Borrower shall not have delivered to
the  Agent, on or before April 16, 1997, the restated,  audited
financial  statements  of  the  Borrower  and  its consolidated
Subsidiaries as of and for the period ended December  31, 1996,
which financial statements (i) shall have been audited by Ernst
&  Young  LLP  and shall be accompanied by an audit opinion  of
such accountants in form and substance essentially identical to
the draft audit  opinion  previously  delivered to the Agent in
<PAGE> 21

accordance with SECTION 4.1(B) of the First Amendment, and (ii)
shall be essentially identical in form  and  substance  to  the
draft  of such financial statements previously delivered to the
Agent  in   accordance   with   SECTION  4.1(B)  of  the  First
Amendment.".

     Section 2.24 CERTAIN REMEDIES  UPON  THE  OCCURRENCE OF AN
EVENT  OF  DEFAULT.   The  proviso  at the end of SECTION  11.2
(immediately following CLAUSE (E) of  SECTION  11.2)  is hereby
amended and restated to read in its entirety as follows:

"PROVIDED, HOWEVER, that upon (i) the occurrence of an Event of
Default   under   SECTION   11.1(E)  or  SECTION  11.1(F),  the
Commitments   of  all  of  the  Lenders   (including,   without
limitation, the obligation of the Issuing Bank to issue Letters
of Credit) shall  immediately  and automatically terminate, and
the outstanding principal of and accrued and unpaid interest on
the Loans and all other amounts  payable  by the Borrower under
the  Loan  Documents  shall  thereupon  become immediately  and
automatically due and payable, and (ii) upon  and  concurrently
with  the  occurrence  of  an  Event  of  Default under SECTION
11.1(M)  or  CLAUSE  (II) of SECTION 11.1(N),  the  outstanding
principal of and accrued  and  unpaid interest on the Loans and
all  other  amounts  payable by the  Borrower  under  the  Loan
Documents shall thereupon  become immediately and automatically
due and payable, all (with respect  to  each  of CLAUSE (I) and
(II) preceding) without notice, demand, presentment,  notice of
dishonor,   notice   of   acceleration,  notice  of  intent  to
accelerate, protest or other  formalities  of  any kind, all of
which  are  hereby expressly waived by the Borrower;  PROVIDED,
FURTHER, HOWEVER,  that the automatic acceleration of the Loans
and such other amounts  upon  the  occurrence  of  an  Event of
Default  under  SECTION  11.1(M)  as referred to in CLAUSE (II)
preceding shall not be deemed to have  occurred if the Required
Lenders  expressly agree in writing, within  thirty  (30)  days
after any  such  occurrence,  that  such  acceleration  has not
occurred."

     Section 2.25 EXPENSES.  CLAUSE (B) of  SECTION 13.1 of the
Credit   Agreement   is  hereby  amended  to  delete  the  word
"reasonable" both places when such word appears.

     Section  2.26  SUCCESSORS  AND  ASSIGNS.   CLAUSE  (I)  of
SECTION 13.7(B) of the  Credit  Agreement is hereby amended and
restated to read in its entirety as follows:

"(i)except with respect to a Lender's  assignment to any of its
bank Affiliates or to another Lender, each of the Agent and the
Issuing Bank and the Borrower has consented to such assignment,
which consents shall not be unreasonably withheld,".

     Section 2.27 SCHEDULE 1.1(E).  A new  SCHEDULE  1.1(E)  is
hereby  added  to  the  Credit Agreement, which SCHEDULE 1.1(E)
shall read as set forth as  FIRST  AMENDMENT SCHEDULE 1 to this
Amendment.

     Section 2.28 SCHEDULE 9.10.  A new SCHEDULE 9.10 is hereby
<PAGE> 22

added to the Credit Agreement, which  SCHEDULE  9.10 shall read
as set forth as FIRST AMENDMENT SCHEDULE 2 to this Amendment.

     Section 2.29 EXHIBIT B.  EXHIBIT B to the Credit Agreement
(the  form  of  the  Krukemeyer  Subordinated  Note) is  hereby
amended  to  add thereto the letter agreement as set  forth  as
FIRST AMENDMENT EXHIBIT A to this Amendment.

     Section 2.30  EXHIBIT  G.  The form of Notice of Borrowing
attached as a part of EXHIBIT  G  to  the  Credit  Agreement is
hereby  amended  and  restated  to  read as set forth as  FIRST
AMENDMENT EXHIBIT B to this Amendment.

                             ARTICLE 3

                    WAIVERS AND RELATED MATTERS

     Section 3.1 LIMITED WAIVERS AND  AGREEMENTS AND CONDITIONS
THERETO.  The waivers and other agreements  contained  in  this
ARTICLE  3  shall  be limited strictly as written and shall not
constitute a waiver  of  or other agreement with respect to, or
any consent to noncompliance with, any term or provision of the
Credit Agreement or any other Loan Document except as expressly
set forth in this ARTICLE 3.

     Section  3.2  CERTAIN  FINANCIAL  COVENANTS.   Subject  to
SECTION 3.1 of this Amendment,   the  Required  Lenders  hereby
waive   the   Borrower's   non-compliance  with  the  financial
covenants set forth in SECTIONS  10.2,  10.3  and  10.4  of the
Credit  Agreement  for  the  fiscal  quarters (and only for the
fiscal  quarters)  ended September 30, 1996  and  December  31,
1996.

     Section 3.3 CERTAIN  PAST  DUE  INTEREST, ETC.  Subject to
SECTION  3.1  of  this Amendment, the Required  Lenders  hereby
waive (a) any noncompliance by the Borrower with SECTION 8.1(D)
or 8.1(G) of the Credit  Agreement and (b) any Default or Event
of Default under SECTION 11.1(A),  11.1(B)  or  11.1(C)  of the
Credit Agreement, in each case (i.e., as to each of CLAUSES (A)
and (B) preceding) to the extent (but only to the extent)  that
such  noncompliance  or  Default  or  Event of Default directly
relates to the Borrower's failure, prior  to April 14, 1997, to
pay the accrued and unpaid interest on the  Loans,  the accrued
and unpaid Commitment fees and the accrued and unpaid letter of
credit   fees  required  to  be  paid  concurrently  with  this
Amendment in accordance with SECTION 4.1(D) of this Amendment.

     SECTION  3.4.  ADDITIONAL WAIVERS.  Subject to SECTION 3.1
of this Amendment,  the  Required  Lenders hereby waive each of
the following Sections of the Credit  Agreement,  the  Security
Agreement or the Subsidiary Security Agreements, as applicable,
DURING   (BUT  ONLY  DURING)  THE  PERIOD  APPLICABLE  TO  SUCH
PARTICULAR  WAIVER  AS SPECIFIED BELOW (and, in the case of any
breach of any representation  or  warranty as to which a waiver
is provided as specified below, such  waiver  of  the  Required
Lenders  shall  extend to any breach of any such representation
or warranty made  or deemed during such period in any notice or
<PAGE> 23

certificate  delivered  to  the  Agent  or  any  Lender  or  in
connection with any extension of credit):

          (a)  (i)   any   breach   by   the  Borrower  of  any
representation or warranty under SECTION 6.2,  7.2,  7.4, 7.14,
7.17,  7.23  or (as to each of Paracelsus PHC Regional Hospital
Medical Center,  Inc., Paracelsus Senatobia Community Hospital,
Inc. and CareServices of America, Inc. only) 7.26 of the Credit
Agreement,  (ii)  any   noncompliance   by  the  Borrower  with
SECTION 1.3, 5.1, 5.2, 8.1(A), 8.1(B), 8.1(C),  8.1(D), 8.1(E),
8.1(F),  8.1(G), 8.1(J), 8.7, 8.8 or (as to each of  Paracelsus
PHC  Regional   Hospital   Medical   Center,  Inc.,  Paracelsus
Senatobia Community Hospital, Inc. and CareServices of America,
Inc. only) 8.12 of the Credit Agreement,  and (iii) any Default
or  Event of Default under SECTION 11.1(A),  11.1(B),  11.1(C),
11.1(O)  or  11.1(Q) of the Credit Agreement resulting from any
such breach or  noncompliance referred to in CLAUSE (I) or (II)
preceding or (as to SECTION 11.1(O) and 11.1(Q) only) otherwise
resulting or existing,  in  each  case  (i.e.,  as  to  each of
CLAUSES (I), (II) and (III) preceding) to the extent (but  only
to the extent) that such breach or noncompliance or Default  or
Event  of  Default  (A)  occurred  prior to April 14, 1997, and
(B)   related  directly  to  the  Restatement   of   Financials
(including,  without  limitation,  the matters relating thereto
disclosed under the heading "Restatement"  of Item 7 and Note 2
- "Restatement of Financial Statements" of Note  2 of the Notes
to Consolidated Financial Statements in Item 8 of  the draft of
the Form 10-K dated April 14, 1997 heretofore furnished  to the
Agent  and the Lenders and all changes in financial information
from former  projections,  pro  formas and financial statements
reflected  therein,  all changes in  the  financial  condition,
business, operations,  capitalization, liabilities or prospects
of  the Borrower and its  Subsidiaries  relating  to  any  such
changes  in  financial information from former projections, pro
formas and financial  statements  reflected  therein,  and  any
failure  of  previous  financial  statements  or pro formas and
projections maintained, prepared, furnished or  required  to be
furnished  under  the  Credit  Agreement  to correspond to such
Restatement of Financials);

          (b)  (i)   any   breach  by  the  Borrower   of   any
representation or warranty under  SECTION 6.2, 7.2, 7.14, 7.17,
7.22, 7.23 or (as to each of Paracelsus  PHC  Regional Hospital
Medical Center, Inc., Paracelsus Senatobia Community  Hospital,
Inc. and CareServices of America, Inc. only) 7.26 of the Credit
Agreement,   (ii)   any  noncompliance  by  the  Borrower  with
SECTION 8.1(A), 8.1(B),  8.1(C),  8.1(D),  8.1(G), 8.1(J), 8.7,
8.8,  8.9  or  (as to each of Paracelsus PHC Regional  Hospital
Medical Center,  Inc., Paracelsus Senatobia Community Hospital,
Inc. and CareServices of America, Inc. only) 8.12 of the Credit
Agreement, and (iii)  any  Default  or  Event  of Default under
SECTION  11.1(B),  11.1(C)  or 11.1(Q) of the Credit  Agreement
resulting from any such breach  or noncompliance referred to in
CLAUSE (I) or (II) preceding or (as  to  SECTION  11.1(Q) only)
otherwise resulting or existing, in each case (i.e., as to each
of  CLAUSES  (I), (II) and (III) preceding) to the extent  (but
only  to the extent)  that  such  breach  or  noncompliance  or
<PAGE> 24

Default  or  Event  of  Default (A) occurred prior to April 14,
1997 (except as otherwise  expressly  stated  in the proviso in
this  CLAUSE  (B)  below)  and  (B)  related  directly  to  the
condition   (financial  or  otherwise),  business,  operations,
capitalization,  liabilities  or  prospects of the Borrower and
its  Subsidiaries  relating  to the PHC  Regional  Hospital  as
disclosed under the headings (1)  "PHC  Regional  Hospital" and
"Operations - Salt Lake City, Utah" under Item 7, (2)  Note 3 -
"Impairment  and  Unusual Changes" of the Notes to Consolidated
Financial Statements  in Item 8, and (3) Note 6 - "Acquisitions
and  Dispositions"  of  the  Notes  to  Consolidated  Financial
Statements in Item 8, in each case of the draft of the Form 10-
K, dated April 14, 1997,  heretofore furnished to the Agent and
the Lenders; PROVIDED, HOWEVER,  that  the  waiver contained in
this CLAUSE (B) with respect to each of Paracelsus PHC Regional
Hospital  Medical Center, Inc., Paracelsus Senatobia  Community
Hospital, Inc.  and  CareServices of America, Inc. and relating
to SECTIONS 7.26 and 8.12  (and  only  such  Sections)  of  the
Credit Agreement shall be a continuing waiver;

          (c)  (i)   any   breach   by   the  Borrower  of  any
representation or warranty under SECTION 6.2,  7.2, 7.14, 7.17,
7.23 or (as to each of Paracelsus PHC Regional Hospital Medical
Center, Inc., Paracelsus Senatobia Community Hospital, Inc. and
CareServices  of  America,  Inc.  only)  7.26  of  the   Credit
Agreement,   (ii)   any  noncompliance  by  the  Borrower  with
SECTION 1.3, 5.1, 5.2,  8.1(A), 8.1(B), 8.1(C), 8.1(D), 8.1(E),
8.1(F), 8.1(G), 8.1(J), 8.7,  8.8  or (as to each of Paracelsus
PHC   Regional  Hospital  Medical  Center,   Inc.,   Paracelsus
Senatobia Community Hospital, Inc. and CareServices of America,
Inc. only)  8.12 of the Credit Agreement, and (iii) any Default
or Event  of  Default under SECTION 11.1(B), 11.1(C) or 11.1(Q)
of the Credit Agreement  resulting  from  any  such  breach  or
noncompliance  referred  to  in CLAUSE (I) or (II) preceding or
(as to SECTION 11.1(Q) only) otherwise  resulting  or existing,
in each case (i.e., as to each of CLAUSES (I), (II)  and  (III)
preceding)  to  the  extent  (but only to the extent) that such
breach of noncompliance or Default  or  Event  of  Default  (A)
occurred  prior  to  April 14, 1997 and related directly to the
Pending Litigation or (B) exists or will exist now or hereafter
and relates directly to  (1)  the Pending Litigation or (2) any
other claims, causes of action  or  other  proceedings that may
reasonably be expected (as of April 14, 1997)  to  be hereafter
asserted,  pending  or threatened, directly arising out  of  or
relating to any of the  1996 Transactions and based in whole or
part on the claims disclosed  under  Item  3, under the heading
"Pending  Litigation"  under  Item  7,   and  in  Note   16   -
"Commitments  and  Contingencies - Stockholders' Litigation" of
the Notes to Consolidated  Financial  Statements  in Item 8, in
each case of the draft of the Form 10-K, dated April  14, 1997,
heretofore furnished to the Agent and the Lenders, or based  in
whole  or in part on the Restatement of Financials disclosed in
such draft,  or  (3)  any  shareholder or other security holder
claims,  causes  of  action  or   other  proceedings  that  may
reasonably be expected (as of April  14,  1997) to be hereafter
asserted,  pending or threatened, directly arising  out  of  or
relating to  any  of  the  matters  relating  to  the condition
<PAGE> 25

(financial or otherwise), business, operations, capitalization,
liabilities  or  prospects of the Borrower and its Subsidiaries
relating to PHC Regional  Hospital  referred  to  in CLAUSE (B)
above  and as so disclosed in such draft of the Form  10-K,  in
each case  (i.e.,  as  to  each  of  CLAUSES  (A),  (B) and (C)
preceding)  to  the  extent (but only to the extent) that  such
matters referred to in  CLAUSES  (A), (B) and (C) preceding are
based upon facts or occurrences that  existed or occurred on or
before April 15, 1997;

          (d)  (i)   any   breach  by  the  Borrower   of   any
representation or warranty under  SECTION  6.2, 7.2, 7.14, 7.17
or 7.23 of the Credit Agreement, (ii) any noncompliance  by the
Borrower  with SECTIONS 8.1(C), 8.1(D), 8.1(F), 8.1(G), 8.1(J),
8.7 or 8.8  of  the  Credit Agreement, and (iii) any Default or
Event of Default under  SECTION  11.1(B), 11.1(C) or 11.1(Q) of
the  Credit  Agreement  resulting  from   any  such  breach  or
noncompliance referred to in CLAUSE (I) or  (II)  preceding  or
(as  to  SECTION 11.1(Q) only) otherwise resulting or existing,
in each case  (i.e.,  as to each of CLAUSES (I), (II) and (III)
preceding) to the extent  (but  only  to  the extent) that such
breach  or  noncompliance or Default or Event  of  Default  (A)
occurred prior  to  April  14, 1997 and (B) directly related to
any failure of the Borrower  to  comply  with  any Governmental
Requirement   relating   to   the   reporting   or   disclosure
requirements under federal or state securities laws and  either
relating to the 1996 Transactions or arising in connection with
or  relating in whole or in part to the facts forming the basis
for the  Pending  Litigation  or  to the matters referred to in
CLAUSES (A), (B) and (C) above;

          (e)  (i)   any  breach  by  the   Borrower   of   any
representation or warranty  under  SECTION 6.2, 7.2, 7.14, 7.16
or 7.22 of the Credit Agreement, (ii)  any noncompliance by the
Borrower with SECTION 5.1, 8.1(C), 8.1(D),  8.1(G),  8.1(J)  or
8.9  of the Credit Agreement, and (iii) any Default or Event of
Default under SECTION 11.1(B), 11.1(C) or 11.1(Q) of the Credit
Agreement  resulting  from  any  such  breach  or noncompliance
referred to in CLAUSE (I) or (II) preceding or (as  to  SECTION
11.1(Q)  only)  otherwise  resulting  or existing, in each case
(i.e., as to each of CLAUSES (I), (II)  and (III) preceding) to
the  extent  (but  only  to  the extent) that  such  breach  or
noncompliance or Default or Event of Default (A) occurred prior
to  April  14, 1997 and (B) directly  related  to  any  of  the
following matters  under  the  PHC  Funding Sale Documents that
have been cured or waived as of April  14,  1997:  any default,
event of default, Early Amortization Event, Exclusion  Event or
right  of set off under (and as used or defined in) any of  the
PHC Funding Sale Documents;

          (f)  (i)   any   breach   by   the  Borrower  of  any
representation or warranty under SECTION 6.2,  7.14  or 7.15 of
the  Credit  Agreement,  (ii) any noncompliance by the Borrower
with SECTION 5.1, 5.2, 5.3, 8.1(C), 8.1(D), 8.1(G), 9.1, 9.4 or
9.11 of the Credit Agreement  and (iii) any Default or Event of
Default under SECTION 11.1(B), 11.1(C) or 11.1(O) of the Credit
Agreement resulting from such breach  or noncompliance referred
<PAGE> 26

to in CLAUSE (I) or (II) preceding or (as  to  SECTION  11.1(O)
only)  otherwise resulting or existing, in each case (i.e.,  as
to each of CLAUSES (I), (II) and (III) preceding) to the extent
(but only  to  the  extent)  that  such breach or compliance or
Default or Event of Default (A) occurred or occurs on or before
May 15, 1997 and (B) directly related or relates to the failure
of  the  Borrower  to disclose that certain  of  the  following
entities were Subsidiaries  of  the  Borrower as of the Closing
Date,  the  failure of the Borrower to grant  or  cause  to  be
granted any Lien  on  the Capital Stock of any of the following
entities,  the  failure  by  such  entities  to  guarantee  the
Obligations pursuant to the  Master  Guaranty or the failure to
deliver  to  the  Agent  certificates  evidencing   outstanding
certificated  Capital Stock of such entities, in each  case  to
the extent required by the Loan Documents: Paracelsus Dickenson
County Medical  Center, Inc. of Virginia, PHC Utah, Inc., Three
Rivers of Houston  County,  Inc.,  CliniCare  of Utah, Inc. and
Premier Care Group, Inc.;

          (g)  (i)   any   breach   by  the  Borrower  of   any
representation or warranty under SECTION  6.2,  7.14 or 7.15 of
the  Credit  Agreement, (ii) any noncompliance by the  Borrower
with SECTION 5.1, 5.2, 5.3, 8.1(C), 8.1(D), 8.1(G), 9.1, 9.4 or
9.11 of the Credit Agreement, and (iii) any Default or Event of
Default under SECTION 11.1(B), 11.1(C) or 11.1(O) of the Credit
Agreement resulting  from  any  such  breach  or  noncompliance
referred to in CLAUSE (I) or (II) preceding or (as  to  SECTION
11.1(O)  only)  otherwise  resulting  or existing, in each case
(i.e., as to each of CLAUSES (I), (II)  and (III) preceding) to
the  extent  (but  only  to  the extent) that  such  breach  or
noncompliance or Default or Event  of  Default  (A) occurred or
occurs on or before June 15, 1997 and (B) directly  related  or
relates  to the failure of the Borrower to redesignate Excluded
Subsidiaries  after  the  Closing  Date  in accordance with the
requirements (the "EXCLUDED SUBSIDIARY REQUIREMENTS") set forth
in  CLAUSE  (A)  of  the definition of "Excluded  Subsidiaries"
(which redesignation is  now  required  under this Amendment to
occur  by  June  15,  1997) and any resulting  failure  of  the
Borrower to grant or cause  to  be  granted  any  Lien  on  the
Capital  Stock  of  any  entity  no  longer  conforming  to the
Excluded  Subsidiary Requirements, the failure by such entities
no longer so  conforming  to guarantee the Obligations pursuant
to the Master Guaranty or the  failure  to deliver to the Agent
certificates evidencing outstanding certificated  Capital Stock
of such entities; and

          (h)  (i) any breach by the Borrower or any Subsidiary
Pledgor  of  the representation and warranty contained  in  the
third sentence of SECTION 3.2 of the Security Agreement and the
Subsidiary Security Agreements executed by the Borrower and the
Subsidiary Pledgors,  respectively,  and  (ii)  any  Default or
Event  of Default under SECTION 11.1(B) of the Credit Agreement
resulting from such breach referred to in CLAUSE (I) preceding,
in each  case  (i.e.,  as  to  each  of  CLAUSES  (I)  and (II)
preceding)  to  the  extent  (but only to the extent) that such
breach or Default or Event of  Default  (A)  occurred  prior to
April  14,  1997,  and  (B)  directly  relates  to any (if any)
<PAGE> 27

noncompliance with the PHC Funding Sale Documents if and to the
extent  that  such  PHC  Funding  Sale  Documents restrict  the
ability of the Borrower and the Subsidiary  Pledgors  to pledge
Capital  Stock  of  the  Subsidiaries  which is required to  be
pledged   in  accordance  with  the  Credit  Agreement,   which
noncompliance has been waived on or before April 14, 1997;

PROVIDED,  HOWEVER,   that,  notwithstanding  anything  to  the
contrary  contained  in this  SECTION  3.4  preceding,  nothing
contained in this SECTION  3.4 is intended to or does waive any
breach or noncompliance or Default  or  Event  of Default of or
with respect to (1) any Section of the Credit Agreement  or any
other  Loan  Document  except  as  is  expressly stated in this
SECTION  3.4,  (2)  without  limiting  the  generality  of  the
foregoing,  any  representation or warranty in  SECTION  7.2(A)
(except to the extent  that the last sentence thereof refers to
any material adverse change  waived  under  CLAUSE  (B) of this
SECTION 3.4), 7.2(B) or 7.2(O) as such Sections are amended  by
this  Amendment  or  any  covenant referred to in SECTION 10.1,
10.2, 10.3, 10.4 or 10.5 of the Credit Agreement or (3) without
limiting the generality of  the foregoing, any Event of Default
referred  to in SECTIONS 11.1(D),  11.1(E),  11.1(F),  11.1(G),
11.1(H), 11.1(I),  11.1(J), 11.1(K), 11.1(L), 11.1(M), 11.1(N),
11.1(P) or 11.1(R) of the Credit Agreement.

As used in this SECTION 3.4, the following terms shall have the
following meanings:

     "FORM 10-K" means the Borrower's Annual Report on Form 10-
K filed with the Securities  and  Exchange  Commission on April
15, 1997 for the fiscal year ended December 31, 1996.

     "PENDING  LITIGATION"  means  the  shareholder  and  other
security holder litigation described under  Item 3 of the draft
of the Form 10-K dated April 14, 1997, heretofore  furnished to
the Agent and the Lenders.

     "RESTATEMENT   OF   FINANCIALS"   means   the   Borrower's
restatement of the financial statements of the Borrower and its
Subsidiaries  for  each of the following:  (a) the consolidated
statements of operations  and  cash  flows  for (i) each of the
fiscal  years  ended  December  31,  1992, December  31,  1993,
December 31, 1994 and December 31, 1995,  and  (ii) for each of
the  fiscal  quarters  in  the fiscal years ended December  31,
1992, December 31, 1993, December  31,  1994  and  December 31,
1995,  and  (iii)  for each of the fiscal quarters in the  nine
months ended September  30,  1996;  and  (b)  the  consolidated
balance  sheets  (i) as of each of December 31, 1992,  December
31, 1993, December  31, 1994 and December 31, 1995, and (ii) as
of each of March 31,  June  30  and September 30 in each of the
fiscal years December 31, 1992, December 31, 1993, December 31,
1994, December 31, 1995 and December 31, 1996.

     "1996 TRANSACTIONS" means all  transactions  and  the sale
and  issuance of stock, notes or securities in connection  with
the Merger,  including  without limitation (i) the Merger, (ii)
the Related Transactions  as  defined  in the Credit Agreement,
<PAGE> 28

together with the execution and delivery  of  the documents and
instruments in connection therewith, and (iii) the issuance and
funding of the Common Stock of the Borrower on  August 16, 1996
and the execution and delivery of the documents and instruments
in connection therewith.

                             ARTICLE 4

                       CONDITIONS PRECEDENT

     Section   4.1   The   effectiveness   of  this  Amendment,
including, without limitation, the waivers and other agreements
contained in ARTICLE 3 hereof, is conditioned upon satisfaction
of each of the following conditions precedent,  each  of  which
must have occurred or have been complied with to the reasonable
satisfaction of the Agent:

          (a)  the amendment and waiver fee required to be paid
in  accordance  with  SECTION  5.2 of this Amendment shall have
been paid in full to the Agent;

          (b)  the Borrower shall  have  delivered to the Agent
(which  is  contemplated to occur substantially  simultaneously
with the delivery of this Amendment) a draft (current as of the
date of delivery  of  this  Amendment) of the restated, audited
financial  statements  of  the Borrower  and  its  consolidated
Subsidiaries as of and for the  period ended December 31, 1996,
and a draft of the audit opinion  of  Ernst  &  Young LLP to be
delivered   in  connection  therewith,  which  draft  financial
statements shall  not  differ materially (within the meaning of
GAAP) from the draft of such audited financial statements dated
April 14, 1997, previously  delivered  to  the  Agent  and  the
Lenders,  and  which  draft  opinion shall be acceptable to the
Agent in form and substance;

          (c)  the letter agreement  in  the  form set forth as
FIRST  AMENDMENT  EXHIBIT A to this Amendment shall  have  been
executed by the holder  of the Krukemeyer Subordinated Note and
the Borrower, and the Borrower  shall  have  delivered  a fully
executed counterpart of such letter agreement to the Agent;

          (d)  (i)   all  interest  accrued  on  the  Loans  in
accordance  with  SECTION   2.4(A)  of  the  Credit  Agreement,
(ii)  all  Commitments  Fees  accrued   with   respect  to  the
Commitments  in accordance with SECTION 2.11(A) of  the  Credit
Agreement and  (iii)  all  letter  of  credit  fees  payable in
accordance  with  SECTION  2.14(C) of the Credit Agreement,  in
each  case  for  the  period  from  August  16,  1996,  through
April 13, 1997, which (in accordance  with the Credit Agreement
as  in  effect prior to this Amendment) were  (based  upon  the
restated  financial  statements of the Borrower) payable by the
Borrower at any time during such period but have not previously
been paid by the Borrower shall have been paid by the  Borrower
to the Agent, for the  account  of  the  Lenders, in accordance
with  the Credit Agreement; and the Borrower  agrees  that  the
amounts  referred to in CLAUSES (I), (II) and (III) immediately
preceding   are   $295,878.82,   $193,603.48   and  $25,258.63,
<PAGE> 29

respectively;

          (e)  no Default or Event of Default shall exist as of
April  14,  1997,  immediately  after  giving  effect  to  this
Amendment;

          (f)  each of the Subsidiary Guarantors and Subsidiary
Pledgors  shall have consented to this Amendment  and  ratified
and  confirmed   all   of  its  indebtedness,  liabilities  and
obligations under, and all  of its Liens granted pursuant to or
evidenced by, each of the Security  Documents  and  other  Loan
Documents  to  which  it  is  a  party  pursuant  to agreements
satisfactory   in   form   and  substance  to  the  Agent,  the
Documentation Agent and the Managing Agent;

          (g)  the Borrower shall have delivered to the Agent a
true,   correct  and  complete  copy   of   the   Articles   of
Incorporation  of the Borrower as certified by the Secretary of
State of California and the Bylaws of the Borrower as certified
by the Secretary of the Borrower;

          (h)  the  Agent  shall  have received legal opinions,
addressed to the Agent, the Documentation  Agent,  the Managing
Agent,  the Co-Agents and the Lenders, rendered by the  General
Counsel of  the  Borrower  and  Mayor,  Day, Caldwell & Keeton,
L.L.P. in form and substance satisfactory to the Agent;

          (i)  the Borrower shall have delivered the Pro Formas
and the Projections to the Agent;

          (j)  this  Amendment  and  the other  Loan  Documents
executed in connection herewith shall  be valid and enforceable
(except as limited by bankruptcy, insolvency  or  other laws of
general  application relating to the enforcement of  creditors'
rights and  general  principles  of equity) with respect to and
against, respectively, the Borrower  and  its  Subsidiaries who
are parties thereto; and

          (k)  each  of SCHEDULES 9.5 and 9.12 referred  to  in
SECTIONS 2.13 and 2.15,  respectively,  of this Amendment shall
have been delivered to the Lenders and shall  have  been agreed
to  in writing by the Borrower and the Agent (and the  Required
Lenders by virtue of their execution of this Amendment).

                             ARTICLE 5

                           MISCELLANEOUS

     Section  5.1 REPRESENTATIONS AND WARRANTIES.  The Borrower
hereby represents  and warrants to the Agent, the Documentation
Agent, the Managing  Agent,  the  Co-Agents  and the Lenders as
follows:

          (a)  no  Default  or  Event  of  Default  will  exist
immediately after giving effect to this Amendment;

          (b)  all representations and warranties  contained in
<PAGE> 30

ARTICLE  7 of the Agreement (as amended by this Amendment)  are
true and correct in all material respects as of April 14, 1997,
as if such  representations and warranties had been made on and
as  of  April  14,   1997  (except  to  the  extent  that  such
representations and warranties  are expressly made only as of a
specific date or dates);

          (c)  to the knowledge of  the  Borrower,  as of April
14,  1997,  and  after giving effect to this Amendment and  the
waiver with respect  to  the  Krukemeyer  Subordinated  Note as
referred  to  in  this  Amendment,  no  "Default"  or "Event of
Default",  as  such terms are defined in the New Indenture  and
the Krukemeyer Subordinated Note, has occurred or is continuing
and  no  other  event   or  circumstance  has  occurred  or  is
continuing which, with the  giving  of  notice  or the lapse of
time or both, would require or permit the acceleration  of  the
maturity   of  any  Subordinated  Debt  or  the  prepayment  or
redemption of  any  Subordinated Debt prior to August 15, 2006,
PROVIDED, HOWEVER, that the New Subordinated Debt is subject to
redemption on or after  August  15,  2001  in  accordance  with
Article Eleven of the New Indenture;

          (d)  as of April 14, 1997, no payments have been made
on  or  with  respect  to  any  Subordinated  Debt  except  for
regularly  scheduled  payments  of  interest accrued thereon in
accordance with the terms thereof;

          (e)  as of April 14, 1997,  the  only Subsidiaries of
the Borrower are (i) those specified on SCHEDULE  7.15  to  the
Credit   Agreement   and   (ii)   the  following  Subsidiaries:
Paracelsus Dickenson County Medical  Center,  Inc. of Virginia,
PHC Utah, Inc., Three Rivers of Houston County, Inc., CliniCare
of Utah, Inc. and Premier Care Group, Inc.; and

          (f)  as  of  April  14,  1997, (i) to the  Borrower's
knowledge  after  due inquiry (including,  without  limitation,
inquiry  with Sheffield  Receivables  Corporation  and  Bankers
Trust Company)  and  after giving effect to any and all waivers
which have been granted,  no event or circumstance has occurred
or exists and is continuing which, with the giving of notice or
the passage of time, or both,  would  constitute  a default (no
matter how used or defined), an event of default (no matter how
used  or defined), an Early Amortization Event or an  Exclusion
Event under  that  certain  Pooling Agreement among PFC Funding
Corp.,  Sheffield Receivables  Corporation  and  Bankers  Trust
Company,  as  Trustee,  dated  as  of  April  16,  1993,  which
established  the  PFC  Funding  Corp. II Healthcare Receivables
Trust  securitization  program (the  "SECURITIZATION  PROGRAM")
evidenced  by the PHC Funding  Sale  Documents;  and  (ii)  the
Borrower has  not  received  any  demand  for,  or other notice
involving,  the  payment  of  any  amount  under  that  certain
Guarantee  executed  by  the  Borrower  in favor of PFC Funding
Corp. dated as of April 16, 1993.

     Section 5.2 AMENDMENT AND WAIVER FEE.  The Borrower shall,
concurrently  with  the  execution  of  this Amendment  by  the
Required Lenders, pay to the Agent an amendment  and waiver fee
<PAGE> 31

in the amount of $500,000, which fee shall be promptly  paid by
the  Agent  to  those Lenders who execute this Amendment on  or
before April 15,  1997  and  shall be allocated to such Lenders
pro rata based upon their Commitments.

     Section 5.3 RATIFICATION  AND  CONFIRMATION OF LIENS.  The
Borrower hereby ratifies and confirms  all of its indebtedness,
liabilities and obligations under, and all of its Liens granted
pursuant to or evidenced by, each of the Security Documents and
other Loan Documents to which it is a party.

     Section 5.4 COSTS.  The Borrower shall  pay all reasonable
fees,  costs  and  expenses  incurred  by  the  Agent  and  the
Documentation   Agent   in  connection  with  the  negotiation,
preparation, execution  and  consummation of this Amendment and
the other Loan Documents and transactions  contemplated hereby,
including without limitation the reasonable  fees  and expenses
of counsel to the Agent and the Documentation Agent.

     Section   5.5   HEADINGS.    The  headings,  captions  and
arrangements used in this Amendment  are  for  convenience only
and shall not affect the interpretation of this Amendment.

     Section   5.6  EFFECT  OF  THIS  AMENDMENT.   The   Credit
Agreement, as amended  by  this Amendment, shall remain in full
force and effect except that  any  reference therein, or in any
other Loan Document, to the Credit Agreement shall be deemed to
mean  and  refer to the Credit Agreement  as  amended  by  this
Amendment.

     Section  5.7 COUNTERPARTS.  This Amendment may be executed
in  one  or  more   counterparts,  by  means  of  facsimile  or
otherwise, each of which  shall  be deemed an original, but all
of which together shall constitute one and the same Amendment.

     SECTION  5.8  GOVERNING  LAW.   THIS  AMENDMENT  SHALL  BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH, THE LAWS OF THE
STATE OF TEXAS (WITHOUT REGARD TO CONFLICTS  OF LAW PRINCIPLES)
AND APPLICABLE LAWS OF THE UNITED STATES.

     SECTION 5.9 NO ORAL AGREEMENTS.  THE CREDIT  AGREEMENT, AS
AMENDED  BY  THIS  AMENDMENT,  TOGETHER  WITH  THE  OTHER  LOAN
DOCUMENTS, REPRESENT THE ENTIRE AGREEMENT BETWEEN AND AMONG THE
PARTIES,  AND  MAY  NOT  BE  CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT  ORAL  AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS  BETWEEN  OR  AMONG  THE
PARTIES.

     IN  WITNESS  WHEREOF,  the undersigned parties hereto have
duly executed this Amendment  effective  as  of the dates first
above written.

                              THE BORROWER:

                              PARACELSUS HEALTHCARE CORPORATION


<PAGE> 32
                              By:

                              Name:

                              Title:

                              THE AGENTS AND THE LENDERS:

                         BANK  OF  AMERICA  NATIONAL  TRUST AND
                             SAVINGS ASSOCIATION, as Agent


                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 1


                         BANK  OF  AMERICA  NATIONAL  TRUST AND
                     SAVINGS ASSOCIATION, as a Lender and as Issuing Bank


                              By:

                              Name:

                              Title:



                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 2


                              BANQUE  PARIBAS, as Documentation Agent
                                  and as a Lender

                              By:

                              Name:

                              Title:



                              By:


<PAGE> 33

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 3


                              NATIONSBANK  OF  TEXAS,  N.A., as Managing
                                 Agent and as a Lender


                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 4


                              AMSOUTH OF ALABAMA



                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 5


                              BANK OF NEW YORK



                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 6


                              THE BANK OF NOVA SCOTIA



                              By:


<PAGE> 34

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 7


                              CREDIT LYONNAIS NEW YORK BRANCH,
                             as Co-Agent and as a Lender



                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 8


                              CORESTATES BANK, N.A.



                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 9


                              FUJI BANK LIMITED



                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 10


                              FLEET NATIONAL BANK



                              By:

<PAGE> 35

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 11


                              KEY BANK OF UTAH



                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 12


                              THE LONG-TERM CREDIT
                             BANK OF JAPAN, LTD.



                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 13


                              MELLON BANK, N.A.



                              By:

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 14


                              PNC BANK, N.A.



                              By:

<PAGE> 36

                              Name:

                              Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 15


                         TORONTO-DOMINION (TEXAS), INCORPORATED,
                             as Co-Agent and as a Lender



                         By:

                         Name:

                         Title:


FIRST AMENDMENT TO CREDIT AGREEMENT - Page 16


                              UNION BANK OF CALIFORNIA, N.A.



                              By:

                              Name:

                              Title:



FIRST AMENDMENT TO CREDIT AGREEMENT - Page 17