<PAGE> 1                                                  EXHIBIT 10.10
                            SECOND AMENDMENT
                                   TO
                            CREDIT AGREEMENT

     THIS SECOND AMENDMENT TO CREDIT  AGREEMENT (this "AMENDMENT"), dated
effective  as  of  August  14, 1997 or, with respect to the amendments to
SECTIONS 10.1, 10.2, 10.3, 10.4  and  10.5  of  the Credit Agreement  (as
hereinafter defined) as referred to in SECTIONS 3.18,  3.19,  3.20,  3.21
and 3.22 of this Amendment, dated effective as of April 1, 1997, or, with
respect  to  the  amendment  to  SCHEDULE 1.1(C) to the Credit Agreement,
dated effective as of the Closing  Date,  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, as amended by that certain  First  Amendment  to  Credit  Agreement
dated (except as otherwise provided therein) as of April 14, 1997  (as so
amended,  the "CREDIT AGREEMENT ") pursuant to which the Lenders extended
to the Borrower  a  reducing  revolving  credit  facility  in the maximum
aggregate  principal amount of $200,000,000 (after giving effect  to  the
First Amendment).

     B.   The parties hereto desire to further amend the Credit Agreement
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

                   REVOLVING CREDIT LOANS COMMITMENTS.

     The parties hereto hereby  agree  that,  as  of the Second Amendment
Date  and  in  accordance  with the terms and provisions  of  the  Credit
Agreement  after giving effect  to the provisions of SECTION 5.13 of this
<PAGE> 2

Amendment, the aggregate principal  amount  of the Revolving Credit Loans
Commitments is$165,406,731.52.

                                ARTICLE 3

                               AMENDMENTS

     Section  3.1  AMENDED  AND  RESTATED  DEFINITIONS.    The  following
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, PLUS (b) any one-time
     shut-down charge relating to  the closure of Paracelsus PHC Regional
     Hospital, Inc. for the fiscal quarter  ended  June  30,  1997, in an
     aggregate  amount  not  to  exceed $3,500,000, PLUS (c) any one-time
     corporate restructuring charge for the fiscal quarter ended June 30,
     1997, in an aggregate amount not to exceed $2,500,000, MINUS (d) 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 (i)  any  determination  of  the amounts set
     forth in CLAUSE (A) or (D) 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 day year (for example,  any
     determination of amounts  for  the period ending June 30, 1997 shall
     be calculated based upon the amounts for the periods 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), (ii)
     with respect to an  acquisition  by  the Borrower or a Subsidiary of
     the Borrower which has not been owned or effective for a full fiscal
     quarter, Adjusted EBITDA (as calculated pursuant to (a) above) shall
     be computed based on the actual period  owned  or  effective and the
     number of months prior thereto necessary to total twelve months and,
     upon  being  owned  or  effective one full fiscal quarter,  Adjusted
     EBITDA will be computed based  on  annualized  results,  (iii)  with
     respect to any divestiture of any entity (corporate, partnership  or
     joint  venture) by the Borrower or a Subsidiary of the Borrower, the
     Borrower  will exclude from Adjusted EBITDA any amounts attributable
     to such entity  in  the  computation  of Adjusted EBITDA pursuant to
     (a) above for the period following the  divestiture,  and  (iv)  any
     determination  of the amounts set forth in CLAUSE (A) preceding made
     during the period  from  January  1, 1997 through June 30, 1998 (and
     only  during such period) shall exclude  one-time  non-cash  charges
     (determined  in  accordance  with  GAAP)  or  non-recurring non-cash
     charges  (collectively,  "NON-CASH CHARGES") in the  current  period
     (determined in accordance with GAAP) that, but for this CLAUSE (IV),
     would otherwise be included  in  the calculation of Adjusted EBITDA,
     provided, further, however, that such  determination  of the amounts
     set   forth  in  CLAUSE  (A)  preceding  shall  be  reduced  in  the
<PAGE> 3     

     appropriate  current  or subsequent period during which such cash is
     expended by cash expenditures related to such charges."

          " 'AGENT'S FEE LETTER' means the letter agreement dated July 9,
     1996 among the Borrower,  the  Agent and the Arranger, as amended by
     the  letter  agreement dated as of  August  14,  1997,  between  the
     Borrower and the Agent."

          " 'APPLICABLE  MARGIN'  means,  for any day, and subject to the
     limitations contained in SECTION 13.11, a fluctuating rate per annum
     for Base Rate Loans or Eurodollar Loans,  as  applicable,  equal  to
     (a)  with  respect  to Base Rate Loans, 2.25% during the period from
     August 14, 1997, through  June  30,  1998, and 2.75% thereafter, and
     (b) with respect to Eurodollar Loans,  3.25%  during the period from
     August 14, 1997, through June 30, 1998, and 3.75% thereafter."

          " 'COLLATERAL' means all Property and interests in Property and
     proceeds  thereof now owned or hereafter acquired  by  the  Borrower
     and/or its  Subsidiaries  in  or  upon which a Lien now or hereafter
     exists  in favor of the Lenders, or  the  Agent  on  behalf  of  the
     Lenders,  whether under this Agreement or under any other agreement,
     document or instrument executed by any such Persons and delivered to
     the Agent,  the  Documentation  Agent  or  any  Lender in connection
     herewith  as  security  for the Obligations or any portion  thereof.
     (For purposes of this definition,  Property  owned  by  a Subsidiary
     shall  not be deemed to be Collateral solely by virtue of  the  fact
     that  the   Capital   Stock   of   such  Subsidiary  is  pledged  as
     Collateral.)"

          " 'FEE LETTERS' means the Agent's  Fee  Letter, the Paribas Fee
     Letter and the Second Amendment Fee Letter."

          " '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, 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  day year (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)."

          "  'INTEREST EXPENSE' means, for any period, the sum of (a) all
     interest  expense  on Debt of the Borrower and its Subsidiaries paid
     or accrued during such  period,  including  the  interest portion of
     payments  under  Capital  Lease Obligations, PLUS (b)  the  interest
<PAGE> 4     
     expense  related  to  the  loss  contract  accrual  attributable  to
     Paracelsus PHC Regional Hospital, Inc."

          " '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 as and when received  in payment of notes, provided
     that  such  notes  and  appropriate endorsements  thereto  shall  be
     promptly delivered to the  Agent and pledged as Collateral to secure
     payment  of  the  Obligations  pursuant   to  agreements  reasonably
     satisfactory  in  form and substance to the Agent),  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,   if   applicable,
     reasonable brokerage  fees  paid to a Person other than an Affiliate
     of  the Borrower and reasonable  expenditures  associated  with  the
     termination  of  the  PHC  Funding  Sale Documents as they relate to
     accounts  sold  in  connection  with an Asset  Disposition  and  the
     amounts of any Medicare recapture)  excluding  any  fees or expenses
     paid to an Affiliate of the Borrower.  'NET PROCEEDS'  with  respect
     to  any  Asset Disposition shall also include (to the extent of  the
     Borrower's  or  any  of its Subsidiary's rights, titles or interests
     therein) 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  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."

          " 'SUBORDINATED DEBT' means (a) the  Debt of the Borrower under
     the Existing Subordinated Notes, the New Subordinated  Notes and the
     Krukemeyer  Subordinated  Note,  (b) Debt incurred to refinance  the
     Subordinated Debt in existence as  of the Closing Date provided that
     (i) the proceeds of such Debt are used  solely to retire, replace or
     refinance the Subordinated Debt (and the  transaction costs relating
     thereto), (ii) such Debt is subordinated to the Obligations on terms
     and  conditions  that are no less favorable to  the  Agent  and  the
     Lenders than the Subordinated  Debt  being refinanced, as reasonably
     determined by the Required Lenders, and (iii) the terms of such Debt
     do not provide for scheduled payments  of any principal of such Debt
     (including scheduled repayments or sinking  fund  payments) prior to
<PAGE> 5
     

     August 31, 2001, and are not more restrictive on the Borrower or any
     of  its Subsidiaries than the terms of the Subordinated  Debt  being
     refinanced,  including, without limitation, with respect to sales of
     assets, incurrence  of Debt, interest rate, change of control or the
     granting of Liens, as reasonably determined by the Required Lenders,
     and (c) any and all other  current or future Debt of the Borrower or
     any Subsidiary of the Borrower  which  is subordinated to all or any
     portion of the Obligations and which is  approved  in writing by the
     Required Lenders."

     Section 3.2  OTHER DEFINITIONS.  SECTION 1.1 of the Credit Agreement
is   hereby   amended   to  (a)  delete  the  term  "Maintenance  Capital
Expenditures" and the definition  thereof,  and  (b) to add the following
new  terms  and  definitions thereof, which terms and  definitions  shall
appear in alphabetical order in such SECTION 1.1:

          " 'LA METRO  HOSPITALS'  means the following hospitals (located
     in  or  near  Los  Angeles,  California):   (a)  Monrovia  Community
     Hospital,  (b)  Bellwood General Hospital, (c)  Hollywood  Community
     Hospital of Hollywood  and Hollywood Community Hospital of Van Nuys,
     (d)  Los  Angeles  Community  Hospital  and  Los  Angeles  Community
     Hospital of Norwalk,  and  (e)  Orange  County Community Hospital of
     Buena Park."

          "  'MESQUITE  HOSPITAL' means the Medical  Center  of  Mesquite
     (located in or near Mesquite, Texas)."

          " 'NON-CASH CHARGES'  means  as  such  term  is  defined in the
     definition of the term 'Adjusted EBITDA'."

          "  'SECOND  AMENDMENT'  means that certain Second Amendment  to
     Credit Agreement dated (except  as otherwise provided therein) as of
     August 14, 1997, executed by the Borrower, the Required Lenders, the
     Agent,  the Documentation Agent, the  Managing  Agent  and  the  Co-
     Agents."

          " 'SECOND  AMENDMENT  FEE  LETTER'  means  the letter agreement
     dated  as  of August 14, 1997, among the Borrower,  the  Agent,  the
     Documentation  Agent  and  NationsBank  of  Texas, N.A., as Managing
     Agent."

          " 'SECOND AMENDMENT DATE' means August 14, 1997."

     Section 3.3 COMMITMENTS; USE OF PROCEEDS.  SUBSECTION (D) of SECTION
2.1 of the Credit Agreement is hereby deleted in its entirety.

     Section 3.4 ASSET DISPOSITIONS.  In the event that this Amendment is
executed by all Lenders, SECTION 2.7(A) of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:

          "(a)  ASSET  DISPOSITIONS,  ETC.   The Borrower  shall,  unless
     otherwise  agreed  by the Required Lenders  from  time  to  time  in
     connection with any  particular  Asset  Disposition  or  Income  Tax
     Refund,  pay  (if  feasible  in  each  case,  concurrently  with the
     consummation  of  each  such  Asset  Disposition  or,  if such Asset
     Disposition   is   a   lease,   concurrently  with  each  actual  or
<PAGE> 6

     constructive receipt of any Net Proceeds  thereof  and  concurrently
     with  the  actual  or  constructive receipt of each such Income  Tax
     Refund,  or,  if  not  so  feasible   in  each  case,  substantially
     concurrently  therewith and in any event  within  one  Business  Day
     thereafter) to  the  Agent,  for  the  benefit  of the Lenders, as a
     prepayment  (and  a  corresponding reduction of the  Commitments  in
     accordance with SECTION  2.7(C))  of the Revolving Credit Loans (or,
     if  the  Revolving  Credit  Loans are then  paid  in  full  and  all
     Commitments have terminated,  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  other  than  the
     Asset  Dispositions  permitted  by  CLAUSE  (B),  (C), (D) or (E) of
     SECTION  9.12A,  and  (ii)  the  Net  Proceeds  from all Income  Tax
     Refunds; PROVIDED, HOWEVER, that if (but only if),  at  the  time of
     and  after  giving  effect to any such Asset Disposition or any such
     Income Tax Refund (as applicable), other than the Income Tax Refunds
     in the aggregate amount  of  $24,593,268.48 received by the Borrower
     during the last half of July 1997  which  are required to be so paid
     to  the Agent in full, neither a payment Default  nor  an  Event  of
     Default  has  occurred  and  is  continuing,  then  (A) 40%, or such
     greater percentage as may be agreed to by the Required  Lenders,  of
     the  Net Proceeds of Asset Dispositions of the Property specified in
     SCHEDULE  2.7(A)(1) hereto as agreed to between the Borrower and the
     Agent (with  the  consent  of  the  Required Lenders as evidenced by
     their execution of the Second Amendment)  and  40%,  or such greater
     percentage as may be agreed to by the Required Lenders,  of  the Net
     Proceeds  of such Income Tax Refund, shall not be required to be  so
     paid to the  Agent (and shall not reduce the Commitments pursuant to
     SECTION 2.7(C)),  (B) none of the Net Proceeds of that certain Lease
     Agreement dated as  of  July 3, 1997, between the Borrower as lessor
     and New Alternatives, Inc.  as  lessee  (as amended or modified from
     time  to  time) relating to Orange County Community  Hospital   (and
     only such lease  agreement)  shall  be required to be so paid to the
     Agent (and none of such Net Proceeds  shall  reduce  the Commitments
     pursuant to SECTION 2.7(C)), and (C) in the event of the exchange of
     the  hospital  identified  in  item 16 of SCHEDULE 9.12 for  another
     hospital approved by the Required  Lenders,  such exchange shall not
     be deemed to constitute an Asset Disposition for  purposes  of  this
     SECTION  2.7(A),  except  to  the extent of any cash or other liquid
     assets  received pursuant to such  exchange,  if  (but  only  if)  a
     perfected  (upon  appropriate recording or filing thereafter), first
     priority Lien (subject  only  to  Permitted Liens, if any, which are
     permitted  in  accordance  with  this  Agreement)  on  the  Property
     received in such exchange shall have been  granted  to  the Agent as
     security  for  the  Obligations.   In addition, the Borrower  shall,
     unless otherwise agreed by the Required Lenders from time to time in
     connection with any particular Dispute  Resolution, pay (if feasible
     in each case, concurrently with each actual  or constructive receipt
     of  any  such  Net  Proceeds  or, if not so feasible,  substantially
     concurrently therewith and in any  event  within  one  Business  Day
     thereafter)  to  the  Agent,  for  the  benefit of the Lenders, as a
     prepayment  (and  a  corresponding  reduction   of  the  Commitments
     pursuant to SECTION 2.7(C)) of the Revolving Credit  Loans  (or,  if
     the Revolving Credit Loans are then paid in full and all Commitments
     have  terminated,  as  cash collateral for any outstanding Letter of
     Credit Liabilities), an  aggregate  amount  equal to 100% of the Net
     Proceeds  of  each  Dispute  Resolution (after deducting  therefrom,
<PAGE> 7
     
     without  duplication,  all  reasonable   out-of-pocket   costs   and
     expenses,  including claims, paid or incurred by the Borrower or its
     Subsidiaries   relating   to,  and  arising  out  of  the  facts  or
     circumstances involved in, such Dispute Resolution)."

     In the event that this Amendment  is  not  executed  by all Lenders,
SECTION 2.7(A) of the Credit Agreement is hereby amended and  restated to
read in its entirety as follows:

          "(a)  ASSET DISPOSITIONS.  The Borrower shall pay (if  feasible
     in each case,  concurrently with the consummation of each such Asset
     Disposition or,  if  such Asset Disposition is a lease, concurrently
     with each actual or constructive receipt of any Net Proceeds thereof
     and concurrently with  the  actual  or  constructive receipt of each
     such  Income  Tax  Refund,  or,  if not so feasible  in  each  case,
     substantially concurrently therewith  and  in  any  event within one
     Business  Day  thereafter)  to  the  Agent, for the benefit  of  the
     Lenders,  as  a  prepayment (and a corresponding  reduction  of  the
     Commitments in accordance  with  SECTION  2.7(C))  of  the Revolving
     Credit  Loans  (or, if the Revolving Credit Loans are then  paid  in
     full and all Commitments have terminated, 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,  unless otherwise agreed by the
     Required Lenders, from all other Asset  Dispositions  other than the
     Asset  Dispositions  permitted  by  CLAUSE (B), (C), (D) or  (E)  of
     SECTION  9.12A,  and  (ii)  the Net Proceeds  from  all  Income  Tax
     Refunds; PROVIDED, HOWEVER, that  if  (but  only if), at the time of
     and  after  giving effect to any such Asset Disposition,  neither  a
     payment Default  nor  an  Event  of  Default  has  occurred  and  is
     continuing,  then  (A)  70%,  or  such  greater percentage as may be
     agreed  to by the Required Lenders, of the  Net  Proceeds  of  Asset
     Dispositions  of  Property specified in SCHEDULE 2.7(A)(2) hereto as
     agreed to between the  Borrower  and  the Agent (with the consent of
     the Required Lenders as evidenced by their  execution  of the Second
     Amendment) that does not constitute Collateral shall not be required
     to  be  so  paid  to the Agent (and shall not reduce the Commitments
     pursuant to SECTION  2.7(C)) 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 SECTIONS 9.4(B),
     9.4(C) or 9.4(D), (B) 100% of the Net Proceeds of that certain Lease
     Agreement dated  as  of July 3, 1997, between the Borrower as lessor
     and New Alternatives,  Inc.  as  lessee (as amended or modified from
     time to time) relating to Orange County Community Hospital (and only
     such lease agreement) shall not be  required  to  be  so paid to the
     Agent  (and  none  of such Net Proceeds shall reduce the Commitments
     pursuant to with SECTION  2.7(C))  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), and (C) in  the  event  of  the
     exchange of the hospital identified  in item 16 of SCHEDULE 9.12 for
     another  hospital approved by the Required  Lenders,  such  exchange
     shall not  be deemed to constitute an Asset Disposition for purposes
     of this SECTION  2.7(A),  except  to the extent of any cash or other
     liquid assets received pursuant to such exchange, if (but only if) a
     perfected (upon appropriate recording  or  filing thereafter), first
     priority Lien (subject only to Permitted Liens,  if  any,  which are
<PAGE> 8

     permitted  in  accordance  with  this  Agreement)  on  the  Property
     received  in  such exchange shall have been granted to the Agent  as
     security for the  Obligations.   Any prepayment of the Loans made by
     the Borrower with the proceeds of,  or otherwise in connection with,
     any  Asset  Disposition  or Income Tax Refund  shall  be  deemed  to
     constitute  a mandatory prepayment  made  in  accordance  with  this
     SECTION 2.7(A)  unless,  prior  to  or concurrently with the time of
     such prepayment, the Borrower informs the Agent in writing that such
     prepayment is an optional prepayment  and  such  prepayment  is,  in
     accordance with SECTION 2.6 and this SECTION 2.7(A), permitted to be
     an  optional  prepayment.   In  addition, the Borrower shall, unless
     otherwise  agreed by the Required  Lenders  from  time  to  time  in
     connection with  any particular Dispute Resolution, pay (if feasible
     in each case, concurrently  with each actual or constructive receipt
     of  any such Net Proceeds or,  if  not  so  feasible,  substantially
     concurrently  therewith  and  in  any  event within one Business Day
     thereafter)  to the Agent, for the benefit  of  the  Lenders,  as  a
     prepayment (and  a  corresponding  reduction  of  the Commitments in
     accordance with SECTION 2.7(C)) of the Revolving Credit  Loans  (or,
     if  the  Revolving  Credit  Loans  are  then  paid  in  full and all
     Commitments  have terminated, as cash collateral for any outstanding
     Letter of Credit  Liabilities), an aggregate amount equal to 100% of
     the  Net  Proceeds  of  each  Dispute  Resolution  (after  deducting
     therefrom, without duplication,  all  reasonable out-of-pocket costs
     and expenses, including claims, paid or  incurred by the Borrower or
     its  Subsidiaries  relating to, and arising  out  of  the  facts  or
     circumstances involved in, such Dispute Resolution)."

     Section  3.5  USE  OF  PROCEEDS.   SECTION  2.10(A)  of  the  Credit
Agreement is hereby amended to  delete  the  phrase  "(including, without
limitation, SECTION 2.1(D))" immediately following the  word  "Agreement"
in the third line of SECTION 2.10(A).

     Section  3.6  LETTER  OF  CREDIT FEE.  The first sentence of SECTION
2.14(C) of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:

          "(c) The Borrower agrees  to  pay  to the Agent a nonrefundable
     letter of credit fee on the face amount of  each  Letter  of  Credit
     calculated  at  a  rate per annum equal to the Applicable Margin for
     Eurodollar Loans as  set  forth  in  the  definition  of 'Applicable
     Margin'."

     Section  3.7  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)  or  (C)  succeeding, to secure the  full  and  complete
     payment  and  performance   of  all  indebtedness,  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
<PAGE> 9

     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,
     (b) the Borrower will, and/or will  cause  each  of  the  Subsidiary
     Pledgors  to,  as applicable, grant to the Agent for the benefit  of
     the Agent and the  Lenders  the  Liens referred to in SECTION 5.6 on
     the  dates  referred  to in SECTION 5.6,  and  (c)  subject  to  the
     succeeding provisions of  this  SECTION  5.1, the Borrower will, and
     will   cause   each  of  its  Subsidiaries  (other   than   Excluded
     Subsidiaries) to,  at any time and from time to time on or after and
     during the continuation of a payment Default or an Event of Default,
     and thereafter 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 permitted in  accordance  with
     this  Agreement)  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 , in each case whether now owned or hereafter acquired, of
     the   Borrower   and/or   its   Subsidiaries  (other  than  Excluded
     Subsidiaries) as may be so requested  and  selected  by the Agent or
     the Required Lenders, 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  (C) of the immediately preceding
     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  Required  Lenders 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, unless the Required Lenders
     from time to time  agree  to  a  later date or dates, within 60 days
     after  such  request  (or 90 days with  respect  to  appraisals  and
     environmental surveys):

               (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 by a nationally  recognized  title  insurance
          company  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 real 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  by an
          appraiser  reasonably  acceptable  to  the Agent which complies
          with Title XI - Real Estate Appraisal Reform, Amendments to the
<PAGE> 10
    
          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,  the  Borrower's  failure  to  deliver,  or  to cause any  such
     Subsidiary  to  deliver,  (A)  any  of the agreements, documents  or
     instruments referred to in CLAUSE (C)  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
     60 days after request (or 90  days  with  respect  to appraisals and
     environmental  surveys)  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 (2) the Borrower and its Subsidiaries
     (other  than  Excluded  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  3.8  COLLATERAL.   In  the  event that  this  Amendment  is
executed by all Lenders, a new SECTION 5.6  is hereby added to the Credit
Agreement, which SECTION 5.6 shall read as follows:

          "Section   5.6  CERTAIN  COLLATERAL.   In   addition   to   and
     notwithstanding anything  to  the contrary contained in SECTION 5.1,
     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,  to  secure  the  full  and  complete  payment  and
     performance of all indebtedness, liabilities and obligations of each
     Subsidiary  Guarantor  under  its Guarantee of the Obligations), the
     Borrower  will,  or will cause its  appropriate  Subsidiary  to,  as
     applicable, grant  to the Agent for the benefit of the Agent and the
     Lenders, concurrently  with the execution and delivery of the Second
     Amendment  unless  otherwise   specified  in  this  SECTION  5.6,  a
     perfected (upon appropriate recording  or  filing thereafter), first
     priority Lien (subject only to Permitted Liens,  if  any,  which are
     permitted  in  accordance  with this Agreement) on all of its right,
     title  and interest in and to  the  following  real  Properties  and
     related  personal  Property  consisting  of equipment and inventory,
     which  Liens  shall  be  granted  pursuant  to  and   evidenced  and
     accompanied by such agreements, documents or instruments  consistent
<PAGE> 11
     with this Agreement as the Agent and the Documentation Agent  or the
     Required Lenders may reasonably request:

          1.   Davis  Hospital  and  Medical  Center  (located in or near
               Layton, Utah), which the Borrower represents  and warrants
               is owned by Paracelsus Davis Hospital, Inc.;
          2.   Salt Lake Regional Medical Center (located in or near Salt
               Lake  City,  Utah),  which  the  Borrower  represents  and
               warrants is owned by PHC - Salt Lake City, Inc.;

          3.   Jordan  Valley  Hospital (located in or near West  Jordan,
               Utah), which the Borrower represents and warrants is owned
               by PHC - Jordan Valley, Inc.;

          4.   BayCoast Medical  Center  (located  in  or  near  Baytown,
               Texas),  which  the  Borrower  represents and warrants  is
               owned by Baytown Medical Center, Inc.;

          5.   Westwood  Medical  Center (located  in  or  near  Midland,
               Texas),  which the Borrower  represents  and  warrants  is
               owned by PHC - B of Midland, Inc.;

          6.   Fentress County  General  Hospital  (located  in  or  near
               Jamestown,   Tennessee)  (which  Lien  shall  secure  only
               $34,300,000 of the principal amount of the Obligations for
               purposes of applicable mortgage taxes), which the Borrower
               represents and warrants is owned by Paracelsus Real Estate
               Corporation, as  to real Property, and Paracelsus Fentress
               County General Hospital, Inc., as to other assets;

          7.   Metropolitan  Hospital   (located  in  or  near  Richmond,
               Virginia), which the Borrower  represents  and warrants is
               owned by Metropolitan Hospital, L. P.;

          8.   Lancaster   Community   Hospital   (located  in  or   near
               Lancaster, California), which the Borrower  represents and
               warrants  is  owned by Paracelsus Real Estate Corporation,
               as to real Property,  and  Lancaster Hospital Corporation,
               as to other assets;

          9.   the Mesquite Hospital (located in or near Mesquite, Texas)
               and  any hospital (including  real  Property  and  related
               personal Properties consisting of equipment and inventory)
               acquired  by  the  Borrower  or any of its Subsidiaries in
               exchange for the sale or other disposition of the Mesquite
               Hospital , which the Borrower  represents  and warrants is
               owned by Paracelsus Mesquite Hospital, Inc.;

          10.  PHC Regional Hospital and Medical Center (located  in  and
               near  Salt Lake City, Utah), which the Borrower represents
               and warrants  is owned by Paracelsus - PHC Regional County
               Medical Center, Inc.;

          11.  Cumberland River  Hospital  -  North  (located  in or near
               Celina,   Tennessee)   (which   Lien   shall  secure  only
               $16,000,000 of the principal amount of the Obligations for
               purposes of applicable mortgage taxes), which the Borrower
               represents and warrants is owned by Paracelsus  Healthcare
 <PAGE> 12        

               Corporation,  as  to  real  Property, and Paracelsus  Clay
               County Hospital, Inc., as to other assets; and
          12.  each of the LA Metro Hospitals  (located  in  or  near Los
               Angeles,  California),  which the Borrower represents  and
               warrants  is  owned  by  (1)   as  to  Monrovia  Community
               Hospital, Paracelsus Real Estate  Corporation,  as to real
               Property,  and  Monrovia Community Hospital, L.P.,  as  to
               other  assets,  (2)   as  to  Bellwood  General  Hospital,
               Paracelsus Real Estate  Corporation,  as to real Property,
               and   Bellwood   Medical  Corporation,  as  to   fixtures,
               furniture and equipment,  and  Lincoln  Community Medical,
               LLC  as  to  other  assets, (3) as to Hollywood  Community
               Hospital of Hollywood  and Hollywood Community Hospital of
               Van Nuys, Paracelsus Real  Estate  Corporation, as to real
               Property, and Hollywood Community Hospital Medical Center,
               Inc., as to other assets, (4) as to  Los Angeles Community
               Hospital  and Los Angeles Community Hospital  of  Norwalk,
               Paracelsus  Real  Estate Corporation, as to real Property,
               and Paracelsus Los Angeles Community Hospital, Inc., as to
               other  assets,  and (5)  as  to  Orange  County  Community
               Hospital   of   Buena   Park,   Paracelsus   Real   Estate
               Corporation, as to  real  Property,  and Lincoln Community
               Medical   Corporation,  as  to  fixtures,  furniture   and
               equipment,  and Lincoln Community Medical, LLC as to other
               assets;

     PROVIDED, HOWEVER, that  (a)  (i)  the Lien on Metropolitan Hospital
     shall be required to secure only that  certain Promissory Note dated
     August  14,  1997,  in  the  maximum original  principal  amount  of
     $20,000,000 made by Metropolitan Hospital, L.P. payable to the order
     of Paracelsus Healthcare Holdings,  Inc.,  which  note and such Lien
     securing it shall be collaterally assigned by Paracelsus  Healthcare
     Holdings,  Inc.  to  the Agent and possession of such note shall  be
     delivered to the Agent,  together  with  an  endorsement  thereto in
     favor  of  the  Agent,  (ii) the Lien on the equipment and inventory
     related to Monrovia Community  Hospital  shall be required to secure
     only  the  intercompany  indebtedness  owed  by  Monrovia  Community
     Hospital, L.P. to Paracelsus Venture Corporation (to the extent that
     such  Lien  is  permitted by the partnership agreement  of  Monrovia
     Community Hospital,  L.P.  existing  as  of  June  30,  1997), which
     indebtedness shall be evidenced by a negotiable promissory  note and
     which  note and such Lien securing it shall be collaterally assigned
     by Paracelsus  Venture  Corporation  to  the Agent and possession of
     such  note  shall  be  delivered  to  the Agent,  together  with  an
     endorsement thereto in favor of the Agent, and (iii) the Lien on the
     personal Property relating to Bellwood  General  Hospital and Orange
     County Community Hospital of Buena Park shall not  be required to be
     granted  to  the  extent  that  such personal Property is  owned  by
     Lincoln Community Medical, LLC as of June 30, 1997 or, if and to the
     extent acquired in the ordinary course  of  business from other than
     an Affiliate of the Borrower and not indirectly from such Affiliate,
     thereafter,  and  (b)  the Liens affecting any particular  LA  Metro
     Hospital and the related  personal  Property consisting of equipment
     and inventory shall not be required to be granted until on or before
     September 14, 1997, unless the Required  Lenders  agree from time to
     time  to  delay such grant to a subsequent date or dates;  PROVIDED,
     FURTHER, HOWEVER,  that  Liens affecting any and all of the LA Metro
<PAGE> 13
     
     Hospitals and related personal  Property consisting of equipment and
     inventory shall (unless otherwise agreed by the Required Lenders) be
     required to be granted promptly upon  the request (and, in any event
     unless  the  Required  Lenders  otherwise  agree,  within  ten  (10)
     Business  Days  after  such request) of the Agent  or  the  Required
     Lenders at any time after the occurrence and during the continuation
     of an Event of Default.   In  connection  with  the execution of any
     agreement, document or instrument referred to in  this  SECTION 5.6,
     the Borrower will, or will cause its appropriate Subsidiary  to,  as
     applicable,  execute  and/or  deliver or cause to be executed and/or
     delivered to the Agent each of  the  following (if any) which may be
     requested by the Agent or the Required  Lenders  at any time or from
     time to time, each of which will be in form and substance reasonably
     satisfactory to the Agent and all of which shall be delivered to the
     Agent,  unless  the Required Lenders from time to time  agree  to  a
     later date or dates,  within  60  days  (or  90 days with respect to
     appraisals and environmental surveys) after the  date upon which the
     related Lien is required to be granted, in the case  of  CLAUSE  (A)
     succeeding, or within 60 days (or 90 days with respect to appraisals
     and  environmental  surveys)  after  the  date of such request (made
     after  the  Second  Amendment  Date),  in  the case  of  CLAUSE  (B)
     succeeding:

               (a) a commitment for a mortgagee policy of title insurance
          (or, if a commitment for title insurance  is  not  available in
          any  jurisdiction  in  question, a title abstract or report  or
          other  evidence  of title  in  form  and  substance  reasonably
          satisfactory to the  Agent)  issued  by a nationally recognized
          title insurance company to the Agent for  and  on behalf of the
          Lenders, which, in the case of a commitment, offers  to  insure
          that such Lien is valid and enforceable and of a first priority
          subject  only  to Permitted Liens which are permitted to attach
          to the subject Collateral; and

               (b)  such other  agreements,  documents,  instruments  and
          certificates   as   the  Agent  or  the  Required  Lenders  may
          reasonably request in  connection  with the Liens to be granted
          in accordance with this SECTION 5.6;

     PROVIDED, HOWEVER, that the Agent and the  Lenders  do not presently
     intend   to   require  delivery  of  policies  of  title  insurance,
     appraisals  or  environmental   surveys   other  than  environmental
     questionnaires  with  respect  to  any  of the mortgaged  Properties
     referred to in this SECTION 5.6 preceding  and  none  of  such title
     insurance, appraisals or environmental surveys shall be required  to
     be  delivered  at the expense of the Borrower with respect to any of
     such mortgaged Properties  unless either (i) a payment Default or an
     Event of Default has occurred  and  is continuing, (ii) the Required
     Lenders believe, in good faith, that such title insurance, appraisal
     or environmental survey (as applicable)  is necessary to comply with
     prudent  banking practices or any Lender believes,  in  good  faith,
     that such  title  insurance,  appraisal  or environmental survey (as
     applicable) is required by applicable law  or  applicable regulatory
     authorities,   or   (iii)   such   title  insurance,  appraisal   or
     environmental survey (as applicable)  is  required  to  be delivered
     after  July  1, 1998.  In addition, such title insurance, appraisals
     and environmental  surveys  may  be  required to be delivered by the
<PAGE> 14
     
     Borrower on or before the dates specified  above  as the result of a
     request of the Agent or the Required Lenders made at any time if the
     same is to be provided at the expense of the Agent  (subject  to its
     right  of  reimbursement or indemnification from the Lenders) and/or
     the Lenders.   Except  as  referred  to in the immediately preceding
     sentence,  all  such title insurance, appraisals  and  environmental
     surveys shall be provided at the expense of the Borrower."

          In the event  that  this  Amendment  is  not  executed  by  all
     Lenders,  a new SECTION 5.6 is hereby added to the Credit Agreement,
     which SECTION 5.6 shall read as follows:

          "Section   5.6   CERTAIN   COLLATERAL.    In  addition  to  and
     notwithstanding anything to the contrary contained  in  SECTION 5.1,
     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,  to  secure the full  and  complete  payment  and
     performance of all indebtedness, liabilities and obligations of each
     Subsidiary Guarantor under  its  Guarantee  of the Obligations), the
     Borrower  will,  or  will cause its appropriate  Subsidiary  to,  as
     applicable, grant to the  Agent for the benefit of the Agent and the
     Lenders, concurrently with  the execution and delivery of the Second
     Amendment  unless  otherwise  specified   in  this  SECTION  5.6,  a
     perfected (upon appropriate recording or filing  thereafter),  first
     priority  Lien  (subject  only to Permitted Liens, if any, which are
     permitted in accordance with  this  Agreement)  on all of its right,
     title  and  interest  in  and  to the following real Properties  and
     related personal Property consisting  of  equipment  and  inventory,
     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:

          1.   Davis Hospital  and  Medical  Center  (located  in or near
               Layton, Utah), which the Borrower represents and  warrants
               is owned by Paracelsus Davis Hospital, Inc.;

          2.   Salt Lake Regional Medical Center (located in or near Salt
               Lake  City,  Utah),  which  the  Borrower  represents  and
               warrants is owned by PHC - Salt Lake City, Inc.;

          3.   Jordan  Valley  Hospital  (located in or near West Jordan,
               Utah), which the Borrower represents and warrants is owned
               by PHC - Jordan Valley, Inc.;

          4.   BayCoast  Medical  Center (located  in  or  near  Baytown,
               Texas),  which the Borrower  represents  and  warrants  is
               owned by Baytown Medical Center, Inc.;

          5.   Westwood Medical  Center  (located  in  or  near  Midland,
               Texas),  which  the  Borrower  represents and warrants  is
               owned by PHC - B of Midland, Inc.;

          6.   Fentress  County  General Hospital  (located  in  or  near
               Jamestown,  Tennessee)   (which  Lien  shall  secure  only
               $34,300,000 of the principal amount of the Obligations for
               purposes of applicable mortgage taxes), which the Borrower
<PAGE> 15
               represents and warrants is owned by Paracelsus Real Estate
               Corporation, as to real Property,  and Paracelsus Fentress
               County General Hospital, Inc., as to other assets;

          7.   Metropolitan  Hospital  (located  in  or   near  Richmond,
               Virginia), which the Borrower represents and  warrants  is
               owned by Metropolitan Hospital, L. P.;

          8.   Lancaster   Community   Hospital   (located   in  or  near
               Lancaster, California), which the Borrower represents  and
               warrants  is  owned by Paracelsus Real Estate Corporation,
               as to real estate,  and Lancaster Hospital Corporation, as
               to other assets;

          9.   the Mesquite Hospital (located in or near Mesquite, Texas)
               and  any hospital (including  real  Property  and  related
               personal Properties consisting of equipment and inventory)
               acquired  by  the  Borrower  or any of its Subsidiaries in
               exchange for the sale or other disposition of the Mesquite
               Hospital, which the Borrower represents  and  warrants  is
               owned by Paracelsus Mesquite Hospital, Inc.;

          10.  PHC  Regional  Hospital  and Medical Center (located in or
               near Salt Lake City, Utah),  which the Borrower represents
               and warrants is owned by Paracelsus  - PHC Regional County
               Medical Center, Inc.;

          11.  Cumberland  River  Hospital - North (located  in  or  near
               Celina,  Tennessee)  (which   Lien   shall   secure   only
               $16,000,000 of the principal amount of the Obligations for
               purposes of applicable mortgage taxes), which the Borrower
               represents  and warrants is owned by Paracelsus Healthcare
               Corporation,  as  to  real  Property,  and Paracelsus Clay
               County Hospital, Inc., as to other assets; and

          12.  each of the LA Metro Hospitals (located  in  or  near  Los
               Angeles,  California),  which  the Borrower represents and
               warrants  is  owned  by   (1)  as  to  Monrovia  Community
               Hospital, Paracelsus Real Estate Corporation,  as  to real
               Property,  and  Monrovia  Community Hospital, L.P., as  to
               other  assets,  (2)  as  to  Bellwood   General  Hospital,
               Paracelsus Real Estate Corporation, as to  real  Property,
               and   Bellwood   Medical   Corporation,  as  to  fixtures,
               furniture and equipment, and  Lincoln  Community  Medical,
               LLC  as  to  other  assets,  (3) as to Hollywood Community
               Hospital of Hollywood and Hollywood  Community Hospital of
               Van Nuys, Paracelsus Real Estate Corporation,  as  to real
               Property, and Hollywood Community Hospital Medical Center,
               Inc.,  as to other assets, (4) as to Los Angeles Community
               Hospital  and  Los  Angeles Community Hospital of Norwalk,
               Paracelsus Real Estate  Corporation,  as to real Property,
               and Paracelsus Los Angeles Community Hospital, Inc., as to
               other  assets,  and  (5)  as  to  Orange County  Community
               Hospital   of   Buena   Park,   Paracelsus   Real   Estate
               Corporation, as to real Property,  and  Lincoln  Community
               Medical   Corporation,   as  to  fixtures,  furniture  and
               equipment, and Lincoln Community  Medical, LLC as to other
               assets;
<PAGE> 16

     PROVIDED,  HOWEVER,  that (a) (i) the Lien on Metropolitan  Hospital
     shall be required to secure  only that certain Promissory Note dated
     August  14,  1997,  in  the maximum  original  principal  amount  of
     $20,000,000 made by Metropolitan Hospital, L.P. payable to the order
     of Paracelsus Healthcare  Holdings,  Inc.,  which note and such Lien
     securing it shall be collaterally assigned by  Paracelsus Healthcare
     Holdings,  Inc. to the Agent and possession of such  note  shall  be
     delivered to  the  Agent,  together  with  an endorsement thereto in
     favor  of  the Agent, (ii) the Lien on the equipment  and  inventory
     related to Monrovia  Community  Hospital shall be required to secure
     only  the  intercompany  indebtedness  owed  by  Monrovia  Community
     Hospital, L.P. to Paracelsus Venture Corporation (to the extent that
     such Lien is permitted by  the  partnership  agreement  of  Monrovia
     Community  Hospital,  L.P.  existing  as  of  June  30, 1997), which
     indebtedness shall be evidenced by a negotiable promissory  note and
     which  note and such Lien securing it shall be collaterally assigned
     by Paracelsus  Venture  Corporation  to  the Agent and possession of
     such  note  shall  be  delivered  to  the Agent,  together  with  an
     endorsement thereto in favor of the Agent, and (iii) the Lien on the
     personal Property relating to Bellwood  General  Hospital and Orange
     County Community Hospital of Buena Park shall not  be required to be
     granted  to  the  extent  that  such personal Property is  owned  by
     Lincoln Community Medical, LLC as of June 30, 1997 or, if and to the
     extent acquired in the ordinary course  of  business from other than
     an Affiliate of the Borrower and not indirectly from such Affiliate,
     thereafter,  and  (b)  the Liens affecting any particular  LA  Metro
     Hospital and the related  personal  Property consisting of equipment
     and inventory shall not be required to  be  granted  if  and  to the
     extent  that  such  hospital is sold on or before December 31, 1997,
     and, if and to the extent not so sold, such Liens affecting any such
     LA  Metro Hospital and  such  related  personal  Property  shall  be
     promptly  granted (and in any event such grant shall occur on a date
     no later than ten (10) Business Days after December 31, 1997) unless
     the Required  Lenders agree from time to time to delay such grant to
     a subsequent date  or  dates; PROVIDED, FURTHER, HOWEVER, that Liens
     affecting any and all of the LA Metro Hospitals and related personal
     Property  consisting  of  equipment   and  inventory  shall  (unless
     otherwise agreed by the Required Lenders)  be required to be granted
     promptly  upon the request (and, in any event  unless  the  Required
     Lenders otherwise  agree,  within  ten (10) Business Days after such
     request) of the Agent or the Required  Lenders at any time after the
     occurrence and during the continuation of  an  Event of Default.  In
     connection  with  the  execution  of  any  agreement,   document  or
     instrument  referred to in this SECTION 5.6, the Borrower  will,  or
     will cause its  appropriate  Subsidiary  to,  as applicable, execute
     and/or deliver or cause to be executed and/or delivered to the Agent
     each of the following (if any) which may be requested  by  the Agent
     or  the  Required Lenders at any time or from time to time, each  of
     which will  be  in form and substance reasonably satisfactory to the
     Agent and all of  which  shall be delivered to the Agent, unless the
     Required Lenders from time  to  time agree to a later date or dates,
     within  60  days  (or  90  days  with  respect   to  appraisals  and
     environmental surveys) after the date upon which the related Lien is
     required  to  be granted, in the case of CLAUSE (A)  succeeding,  or
     within  60  days   (or  90  days  with  respect  to  appraisals  and
     environmental surveys)  after  the  date of such request (made after
     the Second Amendment Date), in the case of CLAUSE (B) succeeding:
<PAGE> 17

               (a) a commitment for a mortgagee policy of title insurance
          (or, if a commitment for title insurance  is  not  available in
          any  jurisdiction  in  question, a title abstract or report  or
          other  evidence  of title  in  form  and  substance  reasonably
          satisfactory to the  Agent)  issued  by a nationally recognized
          title insurance company to the Agent for  and  on behalf of the
          Lenders, which, in the case of a commitment, offers  to  insure
          that such Lien is valid and enforceable and of a first priority
          subject  only  to Permitted Liens which are permitted to attach
          to the subject Collateral; and

               (b)  such other  agreements,  documents,  instruments  and
          certificates   as   the  Agent  or  the  Required  Lenders  may
          reasonably request in  connection  with the Liens to be granted
          in accordance with this SECTION 5.6;

     PROVIDED, HOWEVER, that the Agent and the  Lenders  do not presently
     intend   to   require  delivery  of  policies  of  title  insurance,
     appraisals  or  environmental   surveys   other  than  environmental
     questionnaires  with  respect  to  any  of the mortgaged  Properties
     referred to in this SECTION 5.6 preceding  and  none  of  such title
     insurance, appraisals or environmental surveys shall be required  to
     be  delivered  at the expense of the Borrower with respect to any of
     such mortgaged Properties  unless either (i) a payment Default or an
     Event of Default has occurred  and  is continuing, (ii) the Required
     Lenders believe, in good faith, that such title insurance, appraisal
     or environmental survey (as applicable)  is necessary to comply with
     prudent  banking practices or any Lender believes,  in  good  faith,
     that such  title  insurance,  appraisal  or environmental survey (as
     applicable) is required by applicable law  or  applicable regulatory
     authorities,   or   (iii)   such   title  insurance,  appraisal   or
     environmental survey (as applicable)  is  required  to  be delivered
     after  July  1, 1998.  In addition, such title insurance, appraisals
     and environmental  surveys  may  be  required to be delivered by the
     Borrower on or before the dates specified  above  as the result of a
     request of the Agent or the Required Lenders made at any time if the
     same is to be provided at the expense of the Agent  (subject  to its
     right  of  reimbursement or indemnification from the Lenders) and/or
     the Lenders.   Except  as  referred  to in the immediately preceding
     sentence,  all  such title insurance, appraisals  and  environmental
     surveys shall be provided at the expense of the Borrower."

     Section 3.9 SUBSIDIARIES.  The first sentence of SECTION 7.15 of the
Credit Agreement is hereby  amended  and restated to read in its entirety
as follows:

          "SCHEDULE 7.15 correctly sets forth the name of each Subsidiary
     of the Borrower and a statement of  the  ownership  of  the  Capital
     Stock  or  other  interest  of each such Subsidiary as of the Second
     Amendment Date."

     Section 3.10 REPORTING REQUIREMENTS.   SECTION  8.1  of  the  Credit
Agreement is hereby amended as follows:

          (a)  SECTION  8.1(F)  of the Credit Agreement is hereby amended
     and restated to read in its entirety as follows:

<PAGE> 18 
              "(f) NOTICE OF LITIGATION.   Promptly  and  in  any  event
          within  five  (5) days after the Borrower's obtaining knowledge
          of the threat or  commencement  thereof  or  otherwise becoming
          aware thereof, written notice of all of the following:  (i) any
          action, suit or proceeding before any Governmental Authority or
          arbitrator  affecting  any  Loan  Party  which,  if   adversely
          determined to any such Person, could reasonably be expected  to
          have  a  Material  Adverse  Effect,  (ii)  any  action, suit or
          proceeding  before any Governmental Authority or arbitrator  to
          which the Borrower  or  any  of  its  Subsidiaries  (other than
          Excluded  Subsidiaries)  is  a  defendant  or other potentially
          liable  party  which  alleges  an  amount  in  controversy   of
          $3,000,000  or more and is not covered by insurance or in which
          injunctive or  similar  relief  is  sought,  or (iii) any final
          disposition  by judgment or settlement of any action,  suit  or
          proceeding before  any  Governmental  Authority  or  arbitrator
          against  the  Borrower  or any of its Subsidiaries (other  than
          Excluded Subsidiaries) involving a liability (to the extent not
          paid or covered by insurance)  to  the  Borrower  or any of its
          Subsidiaries  (other than Excluded Subsidiaries) of  $3,000,000
          or more; PROVIDED,  HOWEVER,  that  nothing  in this CLAUSE (F)
          shall require disclosure of matters which could  reasonably  be
          expected to result in a waiver of the attorney-client privilege
          or  work  product  protection  of  the  Borrower  or any of its
          Subsidiaries or a violation of an obligation of the Borrower or
          any  of  its  Subsidiaries  imposed by court order or otherwise
          imposed by law."

          (b) SECTION 8.1(P) of the Credit  Agreement  is  hereby amended
     and restated to read in its entirety as follows:

               "(p)  NOTICES  REGARDING SUBORDINATED DEBT.  (i)  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;  and  (ii)
          immediately prior to or concurrently  with  the  making  of any
          payment  on  or  with  respect  to  any  Subordinated  Debt,  a
          certificate  executed by a Responsible Officer on behalf of the
          Borrower stating  that  no  Default exists or will exist at the
          time of such payment or will result from such payment.";

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

               "(s) MONTHLY NON-CASH CHARGES.   As soon as available, and
          in any event within forty-five (45) days  after the end of each
          month, beginning with the month ended July 31, 1997, and ending
          with  the month ending June 30, 1998, a report  specifying  the
          Non-Cash  Charges  for  such  month  and  the cash expenditures
          incurred  during such month as a result of any  prior  Non-Cash
          Charges (whether  such  prior  Non-Cash  Charges  were incurred
          during such month or any prior month), which report shall be in
<PAGE> 19         
          reasonable  detail  and  shall  be  certified  by a Responsible
          Officer of the Borrower to fairly and accurately  present  such
          Non-Cash Charges as determined in accordance with GAAP."; and

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

               "(t)  CASH  FLOW 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 July 31, 1997, a copy of
          a  financial  report  of  the  Borrower  and  its  consolidated
          Subsidiaries  as  of  the  end of such month, on a consolidated
          basis, setting forth the actual  receipt  and  disbursement  of
          funds  for  such month, all in reasonable detail certified by a
          Responsible Officer  of  the  Borrower to fairly and accurately
          present  the cash position of the  Borrower,  together  with  a
          forecast of  receipts  and  disbursements  for each of the next
          three months."

     Section 3.11  INSURANCE.  SECTION 8.5(A) is hereby amended by adding
the following sentence at the end thereof:

     "The Agent, for the benefit of itself and the other  Lenders,  shall
     be  named  as loss payee with respect to casualty insurance policies
     covering all  or  any  part  of  the Collateral to the extent of the
     interests  of  the  Lenders in the Collateral  (other  than  Capital
     Stock) and shall be named  as additional insured with respect to the
     general  liability  insurance  policies  of  the  Borrower  and  its
     Subsidiaries to the extent  of  the  interests of the Lenders in the
     Collateral (other than Capital Stock)."

     Section  3.12  LIMITATION  ON  DEBT.   SECTION  9.1  of  the  Credit
Agreement is hereby amended as follows:

          (a) the reference to SECTION 9.12A(B)  in SECTION 9.1(J) of the
     Credit Agreement is hereby amended to read "SECTION 9.12A(C)"; and

          (b) the last sentence of SECTION 9.1 of the Credit Agreement is
     hereby  amended  and  restated to read in its entirety  as  follows:
     "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 $20,000,000 in aggregate amount."

     Section 3.13 LIMITATION ON INVESTMENT.  SECTION 9.4  of  the  Credit
Agreement  is  hereby  amended  and  restated  to read in its entirety as
follows:

          "Section 9.4 LIMITATION ON INVESTMENT.   Except  to  the extent
     permitted  by SECTIONS 9.1, 9.6 or 9.10, the Borrower will not,  nor
     will it permit  any of its Subsidiaries to, make or permit to remain
     outstanding any loan, extension of credit or capital contribution to
     or investment in  any  Person,  or purchase or own any stock, bonds,
     notes, debentures or other securities  of  any Person, or acquire or
     purchase the assets or business of any other  Person,  or acquire or
     purchase  securities  or become a joint venturer with or partner  of
<PAGE> 20     

     any   Person   (all   such   transactions    being   herein   called
     "INVESTMENTS"), other than:

               (a)  Cash Equivalents;

               (b) Investments permitted by SECTION 9.5;
               (c) Investments (whether in cash or  property)  in Wholly-
          Owned   Subsidiaries  or  Majority-Owned  Subsidiaries  of  the
          Borrower made consistent with past practices and not prohibited
          by SECTION  9.12A, in either event so long as such Wholly-Owned
          Subsidiaries  or  Majority-Owned  Subsidiaries are not Excluded
          Subsidiaries;

               (d) other Investments (whether  in  cash or property, and,
          in  the  case  of  Investments in Persons other  than  Excluded
          Subsidiaries and if  in  property,  valued  at its then current
          appraised value) made on or after the Second  Amendment Date in
          any  Person, including Excluded Subsidiaries, in  an  aggregate
          amount  (together  with  Debt  permitted  by SECTION 9.1(L) and
          together with Investments in Excluded Subsidiaries  referred to
          in SCHEDULE 9.5, in each case incurred or made on or  after the
          Second  Amendment  Date)  not  to  exceed five percent (5%)  of
          Consolidated  Tangible  Assets; PROVIDED,  HOWEVER,  that  such
          other  Investments  in  any   Persons   other   than   Excluded
          Subsidiaries  permitted  under  this CLAUSE (D) and made on  or
          after the Second Amendment Date shall not exceed $10,000,000;

               (e) other Investments made by  Hospital Assurance Company,
          Ltd.,  a  Wholly-Owned  Subsidiary of Borrower,  in  investment
          grade securities;

               (f) receivables owing  to  it,  if created in the ordinary
          course  of  business  or  dischargeable  in   accordance   with
          customary trade terms;

               (g)   Investments   between   and   among   the   Excluded
          Subsidiaries; and

               (h)  existing  Investments  (other  than  the  Investments
          covered under SUBSECTIONS (A) through (G) above) identified  on
          SCHEDULE 7.15(A) or SCHEDULE 9.4 hereto;

     PROVIDED,  HOWEVER, that, no Investments may be made by the Borrower
     or any of its  Subsidiaries pursuant to CLAUSES (B) or (D) preceding
     if an Event of Default  exists  at  the  time  of such Investment or
     would result therefrom."

     Section 3.14 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 Investments  or  incur or assume any obligations, or
     consent  to  make expenditures or Investments  or  incur  or  assume
     obligations, to  make,  or  otherwise  in  connection with, Business
<PAGE> 21     

     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   or   Investments   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  between the
     Borrower and the Agent (with the consent of the Required Lenders  as
     evidenced  by their execution of the Second Amendment) in connection
     with the Second Amendment, each of which expenditures or Investments
     made and obligations  incurred  or  assumed  shall  not  exceed  the
     aggregate   amount  therefor  specified  in  SCHEDULE  9.5  and  the
     aggregate amount  of  which  expenditures  or  Investments  made and
     obligations  incurred  or assumed shall not exceed $12,850,000,  and
     (b) other expenditures or  Investments made and obligations incurred
     or  assumed  in  connection with  Business  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  3.15  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
 <PAGE> 22        
          Majority-Owned   Subsidiaries  (in  either  event  other   than
          Excluded Subsidiaries) of the Borrower;

               (d)  (i) Subsidiaries  of  the  Borrower  that  are  joint
          ventures or  partnerships  as  of  December  31, 1996, 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, (ii) Lincoln
          Community Medical, L.L.C. may make  Restricted  Payments to its
          owners  in  accordance  with the Operating Agreement  for  such
          entity dated as of March  26,  1997  as previously delivered to
          the Agent, and (iii) Subsidiaries of the  Borrower  referred to
          in  CLAUSES  (I)  and (II) preceding and that are specified  on
          SCHEDULE 9.10 hereto  may  make  Restricted  Payments  to their
          joint  venturers  or partners, in each case in accordance  with
          the joint venture or  partnership  agreements  which shall have
          been  approved  in  writing by the Required Lenders  (or,  with
          respect to the initial  joint  venture or partnership agreement
          relating to Foot and Ankle Institute  of  West Los Angeles, 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
          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 $1,000,000;

               (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); and

               (g)  The Borrower  may  refinance  any  Subordinated  Debt
          (including, without limitation, Debt under the New Subordinated
          Notes) with (and only with) other Subordinated Debt referred to
          in CLAUSE (B) or CLAUSE (C) of the definition of such term;

     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."

     Section 3.16 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 for the
     following which are permitted if and to the  extent  that  the Agent
     receives any and all prepayments (if any) required from the proceeds
     thereof in accordance with SECTION 2.7(A);

               (a)  the  Asset  Dispositions  specified  in SCHEDULE 9.12
          hereto as agreed to among the Borrower and the Agent  (with the
          consent of the Required Lenders as evidenced by their execution
<PAGE> 23
          
          of   the  Second  Amendment)  in  connection  with  the  Second
          Amendment,  PROVIDED,  HOWEVER, that, without the prior written
          consent  of  the  Required  Lenders,  (i)  each  of  the  Asset
          Dispositions specified  in  SCHEDULE  9.12  shall  be  for fair
          consideration  paid  or payable to the transferor as determined
          by the transferor in good  faith,  (ii)  except as permitted by
          SECTION  9.12A(B)  succeeding,  none of the Asset  Dispositions
          specified in SCHEDULE 9.12 may include  Asset  Dispositions  by
          the  Borrower or any of its Subsidiaries to a Subsidiary of the
          Borrower, and (iii) none of the Asset Dispositions specified in
          SCHEDULE 9.12 may include a lease of Property;

               (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; PROVIDED,  HOWEVER,  that  Asset
          Dispositions permitted in accordance with this CLAUSE (B) shall
          not (i) include  any  Asset  Disposition of a hospital or other
          health care facility unless such  Asset Disposition is approved
          by the Required Lenders and (ii) shall  not include any related
          personal Property consisting of equipment  or  inventory unless
          such  Asset  Disposition  of  equipment  or  inventory  (A)  is
          approved  by  the  Required  Lenders,  (B) (1) in the  case  of
          inventory, is owned by Paracelsus PHC Regional  Hospital,  Inc.
          and,  in  the  case  of  equipment,  is owned by Paracelsus PHC
          Regional Hospital, Inc. as of the Second  Amendment Date or (2)
          is transferred to Paracelsus PHC Regional Hospital,  Inc.  and,
          concurrently  with  such  transfer  under  this  CLAUSE (2), is
          subject to a perfected Lien in favor of the Agent  as  security
          for the Obligations, or (C) when combined with all other  Asset
          Dispositions  of  equipment  or  inventory  which have occurred
          under  this CLAUSE (C) subsequent to June 30,  1997,  does  not
          involve  Property  having  an aggregate book value in excess of
          $10,000,000;

               (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, other than dispositions of a
          hospital  or  other  health  care facility, no longer  used  or
          useful in the ordinary course of business; and

               (e) subject to the proviso  contained  in  this CLAUSE (E)
          below,   sales,   leases,   assignments,   transfers  or  other
          dispositions otherwise expressly permitted under this Agreement
          (including,  without limitation, any transfer  of  the  Capital
          Stock or Property  of  an  Excluded  Subsidiary permitted under
          SECTION  9.3  and  any  grant  of  a Lien which  constitutes  a
          Permitted Lien permitted in accordance  with  this  Agreement),
          PROVIDED, HOWEVER, that  sales, leases, assignments,  transfers
          or  other  dispositions  of  a  hospital  or  other health care
          facility  or  any  related  personal  Property  consisting   of
          equipment  or  inventory shall be excluded for purposes of this
          CLAUSE (E) preceding  unless such hospital or other health care
          facility  or  personal  Property   is   owned  by  an  Excluded
<PAGE> 24
          
          Subsidiary;

     PROVIDED, HOWEVER, that, notwithstanding anything  to  the  contrary
     contained in this Agreement, (i) no Asset Disposition may be made by
     the  Borrower  or  any  of  its  Subsidiaries  (other  than Excluded
     Subsidiaries)  pursuant  to  CLAUSE  (A)  preceding  if an Event  of
     Default exists at the time of such Asset Disposition or would result
     therefrom, and (ii) unless otherwise agreed by the Required Lenders,
     none of the hospitals (including real Property and related  personal
     Property) or any Capital Stock of the entities owning such hospitals
     or related Property identified on SCHEDULE 1 to the agreement  dated
     the Second Amendment Date between the Borrower and the Agent may  be
     sold  (A) for other than cash, the assumption of indebtedness by the
     purchaser  or  notes  payable by the purchaser to the seller without
     the prior written consent of the Required Lenders, provided that any
     such notes payable by the purchaser to the seller must be pledged to
     the  Agent  as security for  the  Obligations  unless  the  Required
     Lenders otherwise  agree,  or  (B) for less than the amounts of cash
     (exclusive  of the assumption of  indebtedness,  notes  payable  and
     other non-cash consideration) specified therefor in such SCHEDULE 1.

          B. Subject  to  the  proviso  contained  in this SECTION 9.12 B
     below, 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 (i) all
     Net Proceeds of such Asset Disposition which are required to be paid
     to  the Agent pursuant to SECTION 2.7(A) shall be  so  paid  to  the
     Agent  (and  the  Commitments  shall  be  reduced by a corresponding
     amount in accordance with SECTION 2.7(C)) as  a  condition  to  such
     release,  (ii)  the  Agent shall not, and shall not be obligated to,
     release any such Collateral in connection with any Asset Disposition
     to the Borrower or any  Subsidiary  of  the  Borrower, and (iii) the
     Agent  shall not, and shall not be obligated to,  release  any  such
     Collateral  in  connection  with any Asset Disposition if such Asset
     Disposition is permitted or approved  subject  to the condition that
     the  Liens thereon securing the Obligations or any  portion  thereof
     shall not be released."

     Section  3.17  CERTAIN  TRANSACTIONS OR AGREEMENTS.  SECTION 9.14 of
the Credit Agreement is hereby  amended  and  restated  to  read  in  its
entirety as follows:

          "Section  9.14  CERTAIN TRANSACTIONS AND AGREEMENTS.  Except as
     may be expressly permitted  or  required  by the Loan Documents, the
     Borrower will not, and will not permit any  of  its Subsidiaries to,
     create or otherwise cause or permit to exist or become effective any
     consensual encumbrance or restriction of any kind  on the ability of
     the Borrower or any Subsidiary (other than Excluded Subsidiaries) to
     (a) pay dividends or make any other distribution to  the Borrower or
     any  of  its  Subsidiaries  in respect of such Subsidiary's  Capital
     Stock or with respect to any  other interest or participation in, or
     measured  by,  the  profits  of  such   Subsidiary,   (b)   pay  any
     indebtedness  owed  to  the  Borrower  or  any  of its Subsidiaries,
     (c)  make  any  loan  or  advance  to  the  Borrower or any  of  its
<PAGE> 25     
     Subsidiaries, or (d) sell, lease or transfer  any of its Property to
     the Borrower or any of its Subsidiaries, or grant any Lien on any of
     its  Properties, except (with respect to this CLAUSE  (D)  only)  an
     encumbrance  or  restriction  (i)  with  respect  to  (A) Properties
     subject  to  Permitted Liens referred to in CLAUSES (A),  (C),  (F),
     (G), (H), (I)  or  (K)  of  the  definition  of  such term which are
     permitted  in accordance with this Agreement if and  to  the  extent
     that the agreements or documents creating such Liens include such an
     encumbrance  or  restriction  and such encumbrance or restriction is
     required by the parties thereto  other  than  the  Borrower  and its
     Subsidiaries,  (B)  accounts  receivable  which  are  subject to any
     accounts receivable securitization facility in effect and  permitted
     in  accordance  with  this  Agreement and (C) Properties subject  to
     purchase  and  sale  agreements   relating   to  Asset  Dispositions
     permitted  by  this  Agreement,  (ii) to the extent  that  any  such
     encumbrance or restriction is contained  in the New Indenture  as in
     existence as of the Closing Date, and (iii)  to  the extent that any
     such  encumbrance  or  restriction  relates  to  accounts   of   any
     Subsidiary  that is a party to the PHC Funding Sale Documents and is
     contained in the PHC Funding Sale Documents."

     Section 3.18  SENIOR LEVERAGE RATIO.  Effective as of April 1, 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>
April 1, 1997 through September 30, 1997                 2.85 to 1.00
October 1, 1997 through December 31, 1997                2.60 to 1.00
January 1, 1998 through March 31, 1998                   2.30 to 1.00
April 1, 1998 through June 30, 1998                      2.15 to 1.00
July 1, 1998 and at all times thereafter                 2.00 to 1.00
</TABLE>

     For purposes of this SECTION 10.1, the term 'Adjusted EBITDA'  shall
     have  the  meaning  of such term in this Agreement as amended by the
     Second Amendment."

     Section 3.19 MINIMUM  NET  WORTH.   Effective  as  of April 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 June 30, 1997,  the  Borrower will
     not permit Net Worth to be less than the sum of (a) the  greater  of
     $44,550,000  or  90%  of Net Worth as of June 30, 1997, plus (b) for
     each quarter on a cumulative  basis  ending  on  or after the fiscal
     quarter  ending  September  30,  1997  or  thereafter,  seventy-five
     percent  (75%)  of the positive net income, if any, of the  Borrower
     and its consolidated  Subsidiaries,  plus  (c)  seventy-five percent
<PAGE> 26     

     (75%)  of  all net proceeds from any Equity Issuance  following  the
     Closing Date;  PROVIDED,  HOWEVER,  that  the  amount  determined in
     accordance with this SECTION 10.2 preceding shall be reduced  by the
     after-tax effect of the aggregate amount of Non-Cash Charges of  the
     Borrower  subsequent  to  June 30, 1997; PROVIDED, FURTHER, HOWEVER,
     that in no event shall the amount determined in accordance with this
     SECTION 10.2 be less than $25,000,000."

     Section 3.20 RATIO OF TOTAL  DEBT  TO ADJUSTED EBITDA.  Effective as
of April 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>
April 1, 1997 through September 30, 1997                   7.60 to 1.00
October 1, 1997 through December 31, 1997                  7.35 to 1.00
January 1, 1998 through March 31, 1998                     6.85 to 1.00
April 1, 1998 through June 30, 1998                        6.30 to 1.00
July 1, 1998 through September 30, 1998                    6.00 to 1.00
October 1, 1998 through December 31, 1998                  5.75 to 1.00
January 1, 1999 through June 30, 1999                      5.50 to 1.00
July 1, 1999 through September 30, 1999                    5.35 to 1.00
October 1, 1999 through December 31, 1999                  5.25 to 1.00
January 1, 2000 through March 31, 2000                     5.00 to 1.00
April 1, 2000 through June 30, 2000                        4.95 to 1.00
July 1, 2000 through September 30, 2000                    4.85 to 1.00
October 1, 2000 through December 31, 2000                  4.75 to 1.00
January 1, 2001 and at all times thereafter                4.50 to 1.00
</TABLE>

     For purposes of this SECTION  10.3, the term 'Adjusted EBITDA' shall
     have the meaning of such term in  this  Agreement  as amended by the
     Second Amendment."

     Section 3.21 FIXED CHARGE COVERAGE RATIO.  Effective  as of April 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:








<PAGE> 27
<TABLE>
<CAPTION>
                     PERIOD                                    RATIO
<S>                                                        <C>
April 1, 1997 through March 31, 1998                       1.15 to 1.00
April 1, 1998 through June 30, 1998                        1.25 to 1.00
July 1, 1998 through September 30, 1998                    1.35 to 1.00
October 1, 1998 through December 31, 1998                  1.45 to 1.00
January 1, 1999 and at all times thereafter                1.50 to 1.00
</TABLE>

     For purposes  of  this  SECTION  10.4,  the terms 'Adjusted EBITDA',
     'Fixed Charge Coverage Ratio' and 'Interest  Expense' shall have the
     meanings of such terms in this Agreement as amended  by  the  Second
     Amendment."

     Section  3.22  MINIMUM  ADJUSTED  EBITDA.   Effective as of April 1,
1997, SECTION 10.5 of the Credit Agreement is hereby amended and restated
in its entirety as follows:

          "Section 10.5  MINIMUM ADJUSTED EBITDA.   As of the last day of
     each fiscal quarter ending on or after December  31, 1996, but prior
     to January 1, 1999, 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
     day year (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>
April 1, 1997 through December 31, 1997             $70,000,000
January 1, 1998 through March 31, 1998              $74,700,000
April 1, 1998 through June 30, 1998                 $80,800,000
July 1, 1998 through September 30, 1998             $84,300,000
October 1, 1998 through December 31, 1998           $87,800,000
January 1, 1999 and at all times thereafter         not applicable
</TABLE>

     ; PROVIDED, FURTHER,  HOWEVER,  that  each  of the minimum permitted
     Adjusted EBITDA amounts set forth in the preceding  table  shall be,
     on  a  cumulative  basis  (a)  increased  by,  in connection with an
     acquisition  by the Borrower or a Subsidiary of the  Borrower  which
     has not been owned  or  effective  for a full fiscal year, EBITDA of
     such acquired entity or attributable to such acquired assets for the
     completed four fiscal quarters immediately  preceding  the  date  of
     such  acquisition  and  (b)  reduced  by,  in  connection  with  any
     divestiture  of  an entity (corporate, partnership or joint venture)
     by the Borrower or  a  Subsidiary  of  the  Borrower, EBITDA of such
<PAGE> 28     

     divested entity attributable to such entity for  the  completed four
     fiscal quarters immediately preceding the date of such  divestiture.
     For purposes of this SECTION 10.5, the term 'Adjusted EBITDA'  shall
     have  the  meaning  of such term in this Agreement as amended by the
     Second Amendment."

     Section 3.23 CAPITAL EXPENDITURES.  Effective as of April 1, 1997, a
new  SECTION  10.6  is  hereby  added  to  the  Credit  Agreement,  which
SECTION 10.6 shall read in its entirety as follows:

          "Section 10.6 CAPITAL  EXPENDITURES.   The Borrower agrees that
     the   aggregate   of   Capital   Expenditures,  exclusive   (without
     duplication) of expenditures or Investments  permitted in accordance
     with CLAUSE (A) of SECTION 9.5 and other expenditures or Investments
     permitted in accordance with CLAUSE (B) of SECTION  9.5, made by the
     Borrower  and  its  consolidated Subsidiaries will not,  during  any
     consecutive  four fiscal  quarter  period  commencing  on  or  after
     January 1, 1997,  (a)  be  less  than  2% of the net revenues of the
     Borrower and its consolidated Subsidiaries  during  such  period and
     (b) be greater than 4% of the net revenues of the Borrower  and  its
     consolidated  Subsidiaries  during  such  period; PROVIDED, HOWEVER,
     that any determination of net revenues made  prior  to June 30, 1998
     shall be calculated on an annualized basis based upon  the number of
     fiscal quarters ended subsequent to June 30, 1997."

     Section  3.24  JUDGMENTS.  CLAUSE (H) of SECTION 11.1 of the  Credit
Agreement is hereby amended and restated  to  read  in  its  entirety  as
follows:

          "(h) Any one or more judgments, settlements or decrees shall be
     entered  against,  or  agreed  to  by,  the  Borrower  or any of its
     Subsidiaries  involving  an  aggregate  liability  in  the aggregate
     amount  at  any time of $5,000,000 or more in excess of any  amounts
     covered by insurance,  and  all  of  such judgments, settlements and
     decrees shall not have been vacated, discharged,  stayed  or  bonded
     pending  appeal,  or  paid  or otherwise discharged, within ten days
     from the date of entry thereof or agreement thereto or, with respect
     to matters subject to appeal,  within the later to occur of such ten
     days or within the time period available for appeal under applicable
     law;".

     Section 3.25 EXPENSES.  SECTION  13.1  of  the  Credit  Agreement is
hereby amended and restated to read in its entirety as follows:

          "Section  13.1  EXPENSES.   Whether  or  not  the  transactions
     contemplated hereby are consummated, the Borrower hereby  agrees, on
     demand,  to  pay  or  reimburse  the Agent, the Documentation Agent,
     NationsBank of Texas, N.A. as managing  agent (the "MANAGING AGENT")
     and  each of the Lenders (as applicable) for:   (a)  all  reasonable
     out-of-pocket  costs and expenses of the Agent and the Documentation
     Agent in connection  with  the  preparation, negotiation, execution,
     administration and delivery of this  Agreement  and  the  other Loan
     Documents,  and  any  and  all  amendments, modifications, renewals,
     extensions and supplements thereof  and thereto, and the syndication
     of the Loans, including, without limitation, the reasonable fees and
     expenses of legal counsel and (subject  to  the provisions regarding
     expenses contained in SECTIONS 5.1 and 5.6) other  professionals for
<PAGE> 29
   
     the  Agent  and  the  Documentation  Agent  (and including,  without
     limitation,  in  the  case  of in-house counsel to  the  Agent,  the
     allocated fees and expenses of  such  counsel),  (b) if requested or
     consented to by the Required Lenders (at any time  and  from time to
     time), all reasonable fees and expenses of financial consultants  to
     the  Agent and the Lenders, (c) all out-of-pocket costs and expenses
     of the  Agent  in connection with any Default, any Event of Default,
     the exercise thereafter  of  any right or remedy and the enforcement
     (including, without limitation,  by  way  of collection, bankruptcy,
     insolvency or other enforcement proceedings)  of  this  Agreement or
     any other Loan Document or any term or provision hereof or  thereof,
     including,  without  limitation,  the  fees  and  expenses  of legal
     counsel and  (subject to the provisions regarding expenses contained
     in  SECTIONS  5.1  and  5.6)  other professionals for the Agent (and
     including, without limitation,  in  the  case of in-house counsel to
     the Agent, the allocated fees and expenses of such counsel), (d) all
     out-of-pocket  costs  of  expenses of the Documentation  Agent,  the
     Managing Agent and the Lenders  in  connection  with  any  Event  of
     Default,  the  exercise  thereafter  of  any right or remedy and the
     enforcement (including, without limitation,  by  way  of collection,
     bankruptcy,  insolvency  or other enforcement proceedings)  of  this
     Agreement or any other Loan Document or any term or provision hereof
     or thereof, including, without  limitation, the fees and expenses of
     legal counsel for any such Person  and   (subject  to the provisions
     regarding  expenses  contained  in  SECTIONS  5.1  and  5.6)   other
     professionals  for  the  Documentation  Agent and the Managing Agent
     (and including, without limitation, in the  case of in-house counsel
     to  the  Documentation Agent and the Managing Agent,  the  allocated
     fees and expenses  of such counsel), (e) subject to ARTICLES 3 and 4
     hereof, all out-of-pocket  transfer,  stamp,  documentary  or  other
     similar  taxes,  assessments  or  charges levied by any Governmental
     Authority in respect of this Agreement  or  any  of  the  other Loan
     Documents, (f) all reasonable costs, expenses, assessments and other
     charges  incurred  by  the  Agent  or  the  Documentation  Agent  in
     connection with any filing, registration, recording or perfection of
     any  Lien contemplated by this Agreement or any other Loan Document,
     and (g)  all reasonable out-of-pocket costs and expenses incurred by
     the Agent,  the  Documentation  Agent  and  the  Managing  Agent  in
     connection   with   due   diligence,   computer  services,  copying,
     appraisals,  collateral audits, insurance,  consultants  and  search
     reports.   For   purposes   of   this   SECTION   13.1,   the   term
     "professionals"  means,  collectively,  all  attorneys, accountants,
     consultants,  paraprofessionals,  appraisers, auditors,  inspectors,
     engineers,  title  insurance  companies  and  environmental  experts
     employed,  retained or internally  used  by  any  applicable  Person
     specified in  this  SECTION  13.1 in performing any of its duties or
     obligations or in asserting any of its rights or remedies under this
     Agreement or any other Loan Document."

     Section 3.26 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  SECOND  AMENDMENT  EXHIBIT  A to this
Amendment.

     Section  3.27  SCHEDULE  1.1(A).   SCHEDULE  1.1(A)  to  the  Credit
Agreement  is hereby amended to add Foot and Ankle Institute of West  Los
Angeles thereto  at  such  time as it is formed, thereby designating Foot
<PAGE> 30

and Ankle Institute of West Los Angeles as an Excluded Subsidiary subject
to the requirements of such definition at such time.

     Section 3.28 SCHEDULE 1.1(C).   Effective  as  of  the Closing Date,
SCHEDULE  1.1(C)  to the Credit Agreement is hereby amended  to  add  the
following thereto as  a  Permitted  Lien:  "Liens affecting the accounts,
instruments,  deposit  accounts,  all  cash  deposited  therein  and  all
proceeds  of any of the foregoing of Paracelsus  Convalescent  Hospitals,
Inc. which  are  granted  pursuant  to and all as more fully set forth in
that certain California Facilities Security Agreement dated as of May 15,
1996 between Paracelsus Convalescent  Hospitals, Inc., as debtor, and AHP
of Utah, Inc. as secured party, and Liens affecting the accounts, deposit
accounts,  inventory,  equipment and other  goods,  fixtures,  books  and
records  and  other  personal   property  of  Paracelsus  Pioneer  Valley
Hospital, Inc. ("PIONEER VALLEY")  which  are granted pursuant to and all
as more fully set forth in that certain Security  Agreement  dated  as of
May 15, 1996 between Pioneer Valley, as debtor, and AHP of Utah, Inc., as
secured  party,  together  with any pledge of the proceeds of the sale of
any of the foregoing constituting  net  working  capital  and sold in any
Asset Disposition permitted under this Agreement (including any letter of
credit  issued  for  the  amount  of and secured by such proceeds,  which
letter of credit shall be permitted  under  SECTION  9.1 hereof), in each
case  securing  only  the obligations of Pioneer Valley under  its  Lease
dated as of May 15, 1996,  between  AHP  of  Utah, Inc., as landlord, and
Pioneer Valley, as tenant, and the obligations  of such debtor under such
security  agreement  executed  by it (without any material  amendment  or
modification to such security agreements  or  such  lease  agreement  and
without  any  other  amendment  or  modification thereto which in any way
expands or increases the security or  collateral  thereunder or increases
the  indebtedness  or  monetary  liabilities  or obligations  secured  or
imposed thereunder except as may be approved by the Required Lenders)."

     Section 3.29 SCHEDULES 2.7(A)(1) AND 2.7(A)(2).   In  the event that
this  Amendment  is executed by all Lenders, a new SCHEDULE 2.7(A)(1)  to
the Credit Agreement  is  hereby  added  to  the  Credit Agreement, which
SCHEDULE  2.7(A)(1)  shall  read  as  such  schedule is attached  to  the
agreement dated the Second Amendment Date between  the  Borrower  and the
Agent.   In the event that this Amendment is not executed by all Lenders,
a new SCHEDULE  2.7(A)(2)  to the Credit Agreement is hereby added to the
Credit Agreement, which SCHEDULE 2.7(A)(2) shall read as such schedule is
attached to the agreement dated  the  Second  Amendment  Date between the
Borrower and the Agent.

     Section  3.30 SCHEDULE 7.15.  SCHEDULE 7.15 to the Credit  Agreement
is hereby amended  and  restated to read as set forth as SECOND AMENDMENT
SCHEDULE 1 to this Amendment.

     Section 3.31 SCHEDULE  9.10.   SCHEDULE 9.10 to the Credit Agreement
is hereby amended and restated to read  as  set forth as SECOND AMENDMENT
SCHEDULE 2 to this Amendment.


                                ARTICLE 4

                          CONDITIONS PRECEDENT

     Section 4.1 The effectiveness of this Amendment  is conditioned upon
<PAGE> 31

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 fees required to be paid in accordance with SECTION 5.2
     of  this  Amendment  shall have been paid in full to the Agent,  the
     mortgage taxes payable  in connection with the Security Documents to
     be granted concurrently with  the  Second Amendment Date pursuant to
     SECTION 5.6 of the Credit Agreement  shall  have been made available
     (to the reasonable satisfaction of the Agent) for payment in full by
     the Borrower or the grantor of the Liens created  by  such  Security
     Documents  to  the appropriate Persons and all reasonable costs  and
     expenses  of  the   Agent   in   connection  with  the  preparation,
     negotiation,  execution,  administration   and   delivery   of  this
     Amendment   (including,  without  limitation,  attorney's  fees  and
     expenses)  invoiced   (including  by  reasonable  estimate)  to  the
     Borrower on or before the  execution  and  delivery  of  the  Second
     Amendment by the Agent and the Required Lenders shall have been paid
     in full;

          (b) the Agent shall have received a certificate of the Borrower
     certifying that no Default or Event of Default, and no "Default"  or
     "Event  of  Default" as such terms are defined in the New Indenture,
     exists as of  August  14,  1997,  immediately after giving effect to
     this Amendment;

          (c) 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;

          (d)  the Borrower and/or the appropriate  Subsidiaries  of  the
     Borrower, as applicable, shall have executed and/or delivered to the
     Agent (i) the  Security  Documents required to grant and perfect the
     Liens required to be granted and perfected with respect to items one
     (1)  through eleven (11) pursuant  to  SECTION  5.6  of  the  Credit
     Agreement  and (ii) such other agreements, documents, instruments or
     certificates  as  may  be reasonably required by the Agent regarding
     the power and authority  of  the  Persons  executing  such  Security
     Documents;

          (e) 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  in-house  counsel  of  the
     Borrower  and  Mayor, Day, Caldwell & Keeton,  L.L.P.  in  form  and
     substance satisfactory to the Agent;

          (f) the Agent  shall  have  received a copy of the amendment or
     extension  agreement relating to the  PHC  Funding  Sale  Documents,
     certified by  the Borrower as being a true and correct copy thereof,
     which amendment  or  extension agreement shall, by its terms, extend
     the maturity of the PHC  Funding  Sale  Documents  to April 16, 1998
     subject to all terms and conditions thereof;

<PAGE> 32         

         (g) the Borrower shall have paid to the Agent,  as  a mandatory
     prepayment  of the Revolving Credit Loans, all Net Proceeds  of  the
     Income  Tax  Refunds  in  the  aggregate  amount  of  $24,593,268.48
     received by the Borrower during the last half of July 1997 which are
     required to be  paid  to  the Agent as a mandatory prepayment of the
     Revolving Credit Loans in accordance  with  SECTION  2.7(A)  of  the
     Credit  Agreement  as  amended by this Amendment,  and the aggregate
     principal amount of the Revolving Credit Loan Commitments shall have
     been permanently reduced  by the aggregate amount of such prepayment
     in  accordance with SECTION  2.7(C)  of  the  Credit  Agreement  and
     ARTICLE 2 of this Amendment; and

          (h) each of the Lenders shall have funded to the Agent, and the
     Agent  shall  have  funded to the Borrower, the additional Revolving
     Credit Loans requested  to  be  funded  by the Borrower concurrently
     with the execution and delivery of this Amendment  as referred to in
     SECTION 5.13 of this Amendment.

The Agent will, if and when all of the foregoing conditions precedent are
satisfied, so inform the Borrower in writing.

                                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 ARTICLE 7
     of the Credit Agreement (as amended  by this Amendment) are true and
     correct in all material respects as of  August  14, 1997, as if such
     representations and warranties had been made on and as of August 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 August  14,  1997,
     and after giving effect to 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 August 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;

<PAGE> 33
        
          (e)  as  of  August 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, as
     amended, renewed and extended,  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, as amended, renewed and extended; and

          (f)  as of August 14, 1997, the Borrower is in compliance  with
     SECTIONS 5.2 and 5.3 of the Credit Agreement.

     Section 5.2  FEES.   The  Borrower shall, substantially concurrently
with the execution of this Amendment  by the Required Lenders, pay to the
Agent, for and on behalf of each Lender who executes this Amendment on or
before August 14, 1997, an amendment fee in the aggregate amount equal to
the sum of the amounts set forth opposite  the names of such Lenders (who
so  execute  this Amendment) on SCHEDULE 2 to  the  agreement  dated  the
Second Amendment Date between the Borrower and the Agent, which fee shall
be promptly paid by the Agent to those Lenders who execute this Amendment
on or before August  14,  1997  and shall be allocated to such Lenders in
the amounts specified on such SCHEDULE  2.   In  addition,  the  Borrower
shall, on or before the Second Amendment Date, (a) execute and deliver to
the  Agent  the  amendment  to  the Agent's Fee Letter referred to in the
definition of such term and the Second  Amendment  Fee Letter and (b) pay
all  of  the fees required to be paid on or before the  Second  Amendment
pursuant thereto.

     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  (including  without limitation in the
case of in-house counsel to the Agent, the allocated fees and expenses of
such counsel) 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.

<PAGE> 34     

     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 RELEASES.  As a material inducement to the Agent and the
Required Lenders to  enter  into  this  Amendment,  the  Borrower  hereby
represents  and warrants that there are no claims or offsets against,  or
defenses or counterclaims  to,  the terms and provisions of and the other
indebtedness, liabilities and obligations  created  or  evidenced  by the
Credit  Agreement  or  the  other  Loan  Documents.   The Borrower hereby
releases,  acquits  and  forever discharges the Agent, the  Documentation
Agent,  the  Managing  Agent,   the  Co-Agents  and  the  Lenders,  their
successors  and  permitted  assigns,   their  parents,  subsidiaries  and
affiliated  organizations,  and the officers,  employees,  attorneys  and
agents of each of the foregoing  (all  of  whom  are  herein  jointly and
severally  referred  to  as  the  "RELEASED  PARTIES")  from  any and all
liability, damages, losses, obligations, costs, expenses, suits,  claims,
demands, causes of action for damages or any other relief, whether or not
now  known  or suspected, of any kind, nature or character, at law or  in
equity, which  the  Borrower now has (as of the Second Amendment Date) or
may have ever had against  any one or more of the Released Parties in any
way arising out of or relating  to the Credit Agreement or the other Loan
Documents or the financing transactions  made  available  by  the Lenders
contemplated  thereby,  including, but not limited to, those relating  to
(a)  usury or penalties or  damages  therefor,  (b)  allegations  that  a
partnership  existed  between  the  Borrower  and any Released Party, (c)
allegations of unconscionable acts, deceptive trade  practices,  lack  of
good  faith or fair dealing, lack of commercial reasonableness or special
relationships,  such  as  fiduciary, trust or confidential relationships,
(d) allegations of dominion,  control, alter ego, instrumentality, fraud,
misrepresentation, duress, coercion,  undue  influence,  interference  or
negligence,  (e)  allegations  of  tortious  interference with present or
prospective business relationships or of antitrust, or (f) slander, libel
or damage to reputation (hereinafter being collectively  referred  to  as
the  "CLAIMS"), all of which Claims are hereby waived; PROVIDED, HOWEVER,
that nothing  in  this SECTION 5.7 shall release, acquit or discharge the
Agent, the Documentation  Agent,  the  Managing Agent or the Co-Agents or
any of the Lenders or any other Person from  their respective obligations
under SECTION 13.18 of the Credit Agreement.

     Section 5.8 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 5.9 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 5.10 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
<PAGE> 35

BETWEEN OR AMONG THE PARTIES.

     Section 5.11  SEVERABILITY.  Any provision of this Amendment held by
a court of competent jurisdiction to be invalid, illegal or unenforceable
(for whatever reason,  including,  without  limitation,  for  lack of the
approval of certain Lenders) shall not impair or invalidate the remainder
of  this  Amendment  and  the  effect  thereof  shall  be confined to the
provision held to be invalid, illegal or unenforceable.   Notwithstanding
anything to the contrary contained in this Amendment, in the  event  that
SECTION  3.8  of  this Amendment is not valid or enforceable for whatever
reason, then the Liens referred to in such SECTION 3.8 shall be deemed to
have been granted at  the  written  request of the Agent and the Required
Lenders delivered to the Borrower in  accordance  with SECTION 5.1 of the
Credit Agreement as amended by the First Amendment.

     Section 5.12 SCHEDULES 9.5 AND 9.12.  The Agent will deliver each of
the  following to the Lenders prior to their execution  and  delivery  of
this Amendment  (although  any  failure  of  the Agent to do so shall not
affect the validity or enforceability of this  Amendment):  (a) a copy of
SCHEDULES  9.5  and  9.12  to  the Credit Agreement as  amended  by  this
Amendment;  and  (b)  a  copy of the  letter  agreement  referred  to  in
CLAUSE (III) of SECTION 9.12A  of the Credit Agreement as amended by this
Amendment and referred to in SECTION 5.2 of this Amendment.

     Section  5.13  PREPAYMENT  OF  INCOME  TAX  REFUNDS  AND  CONCURRENT
REBORROWING.    The  Borrower  agrees   that,   concurrently   with   the
effectiveness of  this  Amendment,  the  Net  Proceeds  of the Income Tax
Refunds  in  the  aggregate  amount  of $24,593,268.48  received  by  the
Borrower during the last half of July  1997  (the  "JULY  1997 INCOME TAX
REFUNDS"),  all  of  which  are  required  to be paid to the Agent  as  a
mandatory prepayment of the Revolving Credit  Loans  in  accordance  with
SECTION  2.7(A)  of  the  Credit  Agreement as amended by this Amendment,
shall  be  so  paid  in  full.   The  Lenders  agree  that  such  payment
concurrently with the effectiveness of  this  Amendment  will satisfy the
Borrower's  obligations under SECTION 2.7(A) of the Credit  Agreement  as
amended by this Amendment in respect of the July 1997 Income Tax Refunds.
Each of the Lenders  agrees  that,  concurrently  with  the execution and
delivery  of  this Amendment by all parties hereto, it will  advance  its
pro rata share  (based upon its Revolving Credit Loans Commitment) of the
additional Revolving  Credit  Loans  requested  by  the  Borrower  to  be
advanced  concurrently  with  the  effectiveness of this Amendment in the
Borrower's notice of  borrowing delivered to the Agent in accordance with
SECTION  2.9  of  the  Credit  Agreement;  PROVIDED,  HOWEVER,  that  the
aggregate amount of such Revolving  Credit Loans to be advanced shall not
exceed the aggregate amount of the unused  or  unfunded  Revolving Credit
Loans Commitments and, notwithstanding anything to the contrary contained
in this Amendment, in no event shall any Lender be obligated  to  advance
its  pro  rata  share  of  such  Revolving  Credit Loans unless all other
Lenders advance their pro rata shares of such Revolving Credit Loans.

     Section 5.14 THIRD AMENDMENT.  The Borrower  hereby  agrees that the
definition  of  the  term  "Required Lenders" in the Credit Agreement  is
hereby amended and restated  in  its  entirety  to read as follows if all
Lenders  execute  and  deliver  the  proposed Third Amendment  to  Credit
Agreement dated effective as of August  14,  1997  which so provides, and
the  Borrower  hereby  agrees to execute such Third Amendment  to  Credit
Agreement:
<PAGE> 36


          " 'REQUIRED LENDERS'  means,  at  any  date  of  determination,
     Lenders  having in the aggregate at least 66-2/3% (in dollar  amount
     as to any  one or more of the following) of the sum of the aggregate
     outstanding   Revolving   Credit  Loans  Commitments  (or,  if  such
     Commitments have terminated  or  expired,  the aggregate outstanding
     principal  amount of the Revolving Credit Loans  and  the  aggregate
     Letter of Credit Liabilities)."

The Agent agrees  that  it will notify the Borrower in the event that all
Lenders  execute and deliver  the  proposed  Third  Amendment  to  Credit
Agreement  and that it will deliver an executed counterpart of such Third
Amendment to Credit Agreement to the Borrower.

     Section  5.15  SUBSEQUENT  LEGAL  OPINIONS.   The Borrower agrees to
deliver or cause to be delivered to the Agent, on or before September 14,
1997,  legal opinions rendered by in-house counsel to  the  Borrower,  in
form and  substance  reasonably  satisfactory  to  the  Agent,  as to the
Subsidiary  Guarantors  and  their  ratification and confirmation of  the
Master Guaranty.

     Section 5.16 COMMITMENTS FOR MORTGAGEE  POLICIES OF TITLE INSURANCE.
In accordance with SECTION 5.6 of the Credit Agreement as amended by this
Amendment,  the  Agent  hereby  requests that the  Borrower  deliver  the
commitments for mortgagee policies of title insurance relating to each of
the real Properties (or interests  therein)  in  which the Agent has been
granted a Lien in accordance with SECTION 5.6 of the Credit Agreement.

     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


                              By:/s/ Deborah H. Frankovich
                              Name: Deborah H. Frankovich
                              Title: Senior Vice President & Treasurer



                              THE AGENTS AND THE LENDERS:

                              BANK OF AMERICA NATIONAL TRUST AND
                                   SAVINGS ASSOCIATION, as Agent


                              By: /s/ David Price
                              Name: David Price
                              Title: Vice President






<PAGE> 37
                              BANK OF AMERICA NATIONAL TRUST AND
                                 SAVINGS ASSOCIATION, as a Lender
                                 and as Issuing Bank


                              By: /s/ Edward S. Han
                              Name: Edward S. Han
                              Title: Vice President


                              By: /s/ Edward S. Han
                              Name: Edward S. Han
                              Title: Vice President



                              BANQUE PARIBAS,
                                 as Documentation Agent and as a Lender


                              By:/s/ Glenn E. Mealey
                              Name: Glenn E. Mealey
                              Title: Vice President



                              By:/s/ Timothy A. Donnon
                              Name: Timothy A. Donnon
                              Title: Regional General Manager



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


                              By: /s/ Brad W. DeSpain
                              Name: Brad W. DeSpain
                              Title: Senior Vice President



                              AMSOUTH OF ALABAMA


                              By: /s/ David L. Blackstone
                              Name: David L. Blackstone
                              Title: Senior Vice President


                              BANK OF NEW YORK


                              By: /s/ Lisa Y. Brown
                              Name: Lisa Y. Brown
                              Title: Vice President


<PAGE> 38
                              THE BANK OF NOVA SCOTIA


                              By: /s/ A.T.D. Clarke
                              Name: A.T. D. Clarke
                              Title: Senior Manager








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


                              By: /s/ Farbough Tavangar
                              Name: Farbough Tavangar
                              Title: First Vice President




                              CORESTATES BANK, N.A.


                              By:/s/ Anne D. Brehony
                              Name: Anne D. Brehony
                              Title: Vice President




                              FUJI BANK LIMITED


                              By:/s/ Philip C. Lauinger III
                              Name: Philip C. Lauinger III
                              Title: Vice President & Manager



                              FLEET NATIONAL BANK


                              By: /s/ Ginger Stolzenthaler
                              Name: Ginger Stolzenthaler
                              Title: Senior Vice President








<PAGE> 39
                              KEY BANK OF UTAH


                              By: /s/ Craig L. Haverlock
                              Name: Craig L. Haverlock
                              Title: Vice President



                              THE LONG-TERM CREDIT BANK
                                 OF JAPAN, LTD.


                              By:/s/ Koh Takemoto
                              Name: Koh Takemoto
                              Title: General Manager




                              MELLON BANK, N.A.


                              By: /s/ Ryan Busch
                              Name: Ryan Busch
                              Title: Assistant Vice President



                              PNC BANK, N.A.


                              By: /s/ Thomas J. McCool
                              Name: Thomas J. McCool
                              Title: Senior Vice President



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


                              By:/s/ Neva Nesbitt
                              Name: Neva Nesbitt
                              Title: Vice President




                              UNION BANK OF CALIFORNIA, N.A.



                              By:/s/ Lynn E.Vine
                              Name: Lynn E. Vine
                              Title: Vice President