EXECUTION COPY

                                             |__| Employee's Copy
                                             |__| Company's Copy

                    PARACELSUS HEALTHCARE CORPORATION

                          EMPLOYMENT AGREEMENT

To JAMES G. VANDEVENDER

     This Agreement establishes the terms of your continued employment
with Paracelsus Healthcare Corporation, Inc., a California corporation
(the "COMPANY") and reflects your new position as the
Company's interim chief executive officer ("CEO").

EMPLOYMENT AND DUTIES You and the Company agree to your employment as
                    interim CEO.  In such position, you will report
                    directly to the Company's Board of Directors (the
                    "BOARD").  You agree to perform whatever duties the
                    Board may assign you from time to time that are
                    consistent with those of the CEO of a public company.
                    During your employment, you agree to devote your full
                    business time, attention, and energies to performing
                    those duties (except as the Board otherwise agrees
                    from time to time).  On termination of this
                    Agreement, you agree that you resign as an officer
                    and director and from all other officer and director
                    positions at the Company and subsidiaries.

                    You agree that, if the Company hires or promotes a
                    new CEO during the Term but retains your services in
                    some other capacity, your change in position by
                    itself does not constitute termination without CAUSE
                    and does not entitle you to any SEVERANCE, whether
                    under this Agreement or otherwise.  However, the
                    hiring or promotion of a new CEO does not alter the
                    Company's obligations to you under this Agreement,
                    including those obligations described under the
                    SALARY, BENEFITS, BONUS, PAYMENTS ON TERMINATION, and
                    SEVERANCE sections.

TERM OF EMPLOYMENT  Your employment under this Agreement begins as of
                    July 1, 1999 (the "EFFECTIVE DATE") and, unless
                    sooner terminated or extended, ends on December 31,
                    1999.  The period running from the Effective Date to
                    the applicable date in the preceding sentence is the
                    "TERM."

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COMPENSATION

     SALARY         The Company will pay you a salary (the "SALARY") from
                    the Effective Date at the rate of not less than
                    $45,000 per month in accordance with its generally
                    applicable payroll practices.

     BENEFITS       During the Term, you will continue to be eligible to
                    participate in employee benefit and fringe benefit
                    plans and programs generally available to the
                    Company's executive officers and such additional
                    benefits as the Board may from time to time provide.
                    In addition, during the Term, you will continue to be
                    entitled to the following life insurance and
                    disability coverages and fringe benefits:

               LIFE      The Company will maintain for your benefit life
                         insurance
               INSURANCE coverage with a face amount equal to three times
                         the amount of your annual SALARY as in effect
                         from time to time; PROVIDED, HOWEVER, that if
                         the Company cannot obtain the full amount of
                         such life insurance coverage at a reasonable
                         cost, the Company may instead provide you with a
                         lump sum death benefit, payable within 90 days
                         following your death, in such amount as will,
                         when added to any life insurance coverage the
                         Company actually obtains, provide your
                         beneficiary or beneficiaries with a net amount,
                         after payment of any Federal and state income
                         taxes, equal to the net, after-tax amount such
                         beneficiary or beneficiaries would have received
                         had the Company obtained the full amount of life
                         insurance coverage provided for above.  You will
                         have the right to name and to change from time
                         to time the beneficiary or beneficiaries under
                         such life insurance coverage (and death
                         benefits, if any).  Such life insurance coverage
                         (and death benefits, if any) will be in addition
                         to any death benefits that may be payable under
                         any accidental death and dismemberment plan, any
                         separate business travel accident coverage, or
                         any pension plan in which you may participate,
                         and such coverage will also be in addition to
                         any life insurance that you purchase for
                         yourself.

               LONG-TERM If you become disabled (as defined in the long-
                         term
<PAGE>
                         DISABILITY disability plan the Company presently
                         maintains), you are to receive disability
                         benefits in an amount equal to 60% of your then
                         annual Salary.  Any amount payable under any
                         salary continuation plan (including any salary
                         continuation provided under this Agreement) or
                         disability plan maintained by the Company, and
                         any amount payable to you or to your immediate
                         family as a Social Security disability benefit
                         or similar benefit will be counted towards the
                         Company's fulfillment of such obligation.
                         Disability benefits will be payable monthly
                         beginning 30 days following disability and will
                         continue until you are no longer disabled, or if
                         earlier, until you reach age 65.

               VACATIONS You will be entitled to such paid vacation time
                         as you may
               AND       reasonably take in your discretion so long as
                         such vacation
               HOLIDAYS  time does not interfere with the efficient
                         discharge of your duties and responsibilities.
                         You will be entitled to all holidays as listed
                         annually in the Company's official holiday
                         schedule.

               TAX RETURN The Company will provide you with the
                         assistance of its
               PREPARATION; regular auditors for the preparation of your
                         Federal and
               FINANCIAL state tax returns without charge to you.  In
                         addition, the
               ADVICE    Company will reimburse you up to $5,000 per year
                         for the costs you incur for financial planning
                         services .

               ANNUAL    The Company will reimburse you 100% of the costs
                         you
               PHYSICAL  incur in obtaining an annual comprehensive
                         physical examination to be conducted by your
                         choice of physician, clinic, or medical group
                         located within a reasonable distance from your
                         place of employment.

                    Reimbursement for business expenses, including travel
                    and entertainment, will be limited to reasonable and
                    necessary expenses you incur on the Company's behalf
                    in connection with performing duties on the Company's
                    behalf and subject to (i) timely submission of a
                    properly executed Company expense report form
                    accompanied by appropriate supporting documentation,
                    and (ii) compliance with Company policies and
                    procedures governing business expense reimbursement
                    and reporting based upon principles and guidelines
                    established from time to time by the Board's Audit
                    Committee, including periodic audits by the Company's
                    Internal Audit Department and/or the Audit Committee.

     BONUS          You will receive one but only one of the bonus
                    payments described below if the related event set
                    forth below (a "BONUS DETERMINATION") is completed
                    before December 31, 1999, with payment on the date of
                    completion:
<PAGE>
                    1.   Upon the sale of the Salt Lake facilities (Pioneer
                         Valley Hospital, Salt Lake City Regional Medical
                         Center, State Street Hospital, Davis Hospital Medical
                         Center, Jordan Valley Hospital, and related operating
                         Utah assets), a bonus of $125,000, plus 1% of the
                         gross sales proceeds in excess of $306 million
                         (excluding any payments for working capital included
                         the gross sales proceeds),

                    2.   Upon the sale of [-----------------------------]*,
                         a bonus of $125,000, plus 1% of the gross proceeds
                         in excess of [----------]* (excluding any payments
                         for working capital included in the gross sales
                         proceeds),

                    3.   Upon the sale of all of the shares or assets of the
                         Company, a bonus of $125,000, plus 1% of the total
                         enterprise value (gross sales proceeds plus assumed
                         funded indebtedness) in excess of [-------------]*,

                    4    Upon a recapitalization and sale of at least $25
                         million of additional common stock in a private
                         transaction (i.e., other than through a public
                         offering), a bonus of $125,000, plus 1% of the
                         total amount received in excess of [-----] per
                         common share sold (with appropriate adjustments
                         for stock splits).
------------------------------------------
* Certain information was omitted pursuant to a request for confidential
  treatment which was filed separately with the Securities and Exchange
  Commission on August 16, 1999.

TERMINATION    Subject to the provisions of this section, you and the
               Company agree that it may terminate your employment, or
               you may resign, except that, if you voluntarily resign,
               you must provide the Company with 30 days' prior written
               notice (unless the Board has previously waived such notice
               in writing or authorized a shorter notice period).

     FOR CAUSE      The Company may terminate your employment for "CAUSE"
                    if you:

                         (i)  commit an act of gross negligence or
                         otherwise act with willful disregard for the
                         Company's best interests;

                         (ii)  fail or refuse to perform any duties
                         delegated to you that are consistent with the
                         duties of similarly-situated executives or are
                         otherwise required under this Agreement;

                         (iii)  seize a corporate opportunity for
                         yourself instead of offering such opportunity to
                         the Company; or
<PAGE>
                         (iv)  are convicted of or plead guilty or no
                         contest to a misdemeanor (other than a traffic
                         violation) or felony, or, with respect to your
                         employment, commit either a material dishonest
                         act or common law fraud or intentionally violate
                         any federal or state securities or tax laws.

                    Your termination for Cause will be effective
                    immediately upon the Company's mailing or
                    transmission of notice of such termination.  Before
                    terminating your employment for Cause under clauses
                    (i) - (iii) above, the Company will specify in
                    writing to you the nature of the act, omission,
                    refusal, or failure that it deems to constitute Cause
                    and, if the Board considers the situation to be
                    correctable, give you 30 days after you receive such
                    notice to correct the situation (and thus avoid
                    termination for Cause), unless the Company agrees to
                    extend the time for correction.  You agree that the
                    Board will have the reasonable discretion to
                    determine whether the situation is correctable and
                    whether your correction is sufficient.

     WITHOUT CAUSE  Subject to the provisions below under PAYMENTS ON
                    TERMINATION, the Company may terminate your
                    employment under this Agreement before the end of the
                    Term without CAUSE.  The termination will take effect
                    15 days after the Company gives you written notice.

     PAYMENTS ON    If you resign or the Company terminates your
                    employment with
     TERMINATION    or without CAUSE or because of disability or death or
                    this Agreement expires, the Company will pay you any
                    unpaid portion of your Salary pro-rated through the
                    date of actual termination (and unless your
                    termination is for CAUSE, any bonus payments
                    (i) already determined by such date but not yet paid
                    or (ii) whose Bonus Determination occurs within 30
                    days of your actual termination), reimburse any
                    substantiated but unreimbursed business expenses, pay
                    any accrued and unused vacation time (to the extent
                    consistent with the Company's policies), and provide
                    such other benefits as applicable laws or the terms
                    of the benefits require.  Except to the extent the
                    law requires otherwise or as provided in the
                    SEVERANCE paragraph, neither you nor your beneficiary
                    or estate will have any rights or claims under this
                    Agreement or otherwise to receive severance or any
                    other compensation, or to participate in any other
                    plan, arrangement, or benefit, after such termination
                    or resignation.

<PAGE>
                    SEVERANCE In addition to the foregoing payments, if
                    before the end of the Term, the Company terminates
                    your employment without CAUSE, the Company will pay
                    you severance equal to the Salary due between the
                    date of termination and December 31, 1999, in a
                    single lump sum, on your actual date of termination.
                    The Company will also, to the extent permissible by
                    the terms of its benefit plans, insurance contracts,
                    and applicable law and except as provided in the next
                    sentence, cover you for a period of 36 months under
                    the medical, accident, disability, and life insurance
                    programs of the Company, or, if shorter, until you
                    are provided a substantially equivalent benefit by a
                    new employer.  You acknowledge that such continued
                    coverage may not be possible or practical and agree
                    to accept in lieu of such coverage (i) payment by the
                    Company of the premiums for the period indicated
                    above on individual insurance policies either you or
                    the Company obtain that provide substantially
                    equivalent benefits or (ii) if you are unable to
                    obtain such coverage (because you are uninsurable at
                    commercially reasonable rates or, as with disability,
                    because coverage may be unavailable if you are not
                    working), one or more payments totaling 150% of the
                    combined premium cost the Company paid on your behalf
                    in 1999 (annualized) for any of those coverages under
                    which you cannot participate after employment ends.

                    You are not required to mitigate amounts payable
                    under the SEVERANCE paragraph by seeking other
                    employment or otherwise.  Expiration of this
                    Agreement, whether because of notice of non-renewal
                    or otherwise, does not constitute termination without
                    CAUSE and does not entitle you to Severance.

NONCOMPETITION      You specifically agree that the noncompetition and
                    confidentiality
AND SECRECY         obligations referenced in &&10 and 12 of the
                    Memorandum of Understanding among the Company, you,
                    and certain others dated as of November 25, 1998
                    ("MOU") bar you from competition and disclosure or
                    use of confidential information for the periods
                    stated or incorporated by reference and according to
                    the terms of those paragraphs.  You further
                    specifically agree that, for 36 months after your
                    employment ends, you will not become employed by or a
                    consultant to the Dakota Clinic.  You agree that you
                    were separately and adequately compensated for the
                    noncompetition obligations, that they are ancillary
                    to the MOU and other agreements, and that they
                    reasonably reflect the need for the Company to
                    protect its business interests.

<PAGE>
                    ASSIGNMENT  The Company may assign or otherwise
                    transfer this Agreement and any and all of its
                    rights, duties, obligations, or interests under it to
                    any of the affiliates or subsidiaries of the Company.
                    Upon such assignment or transfer, any such business
                    entity will be deemed to be substituted for the
                    Company for all purposes.  You agree that assignment
                    or transfer does not entitle you to Severance.  This
                    Agreement binds and benefits the Company and its
                    assigns and your heirs and the personal
                    representatives of your estate.  Without the Board's
                    prior written consent, you may not assign or delegate
                    this Agreement or any or all rights, duties,
                    obligations, or interests under it.

SEVERABILITY        If the final determination of an arbitrator or a
                    court of competent jurisdiction declares, after the
                    expiration of the time within which judicial review
                    (if permitted) of such determination may be
                    perfected, that any term or provision of this
                    Agreement is invalid or unenforceable, the remaining
                    terms and provisions will be unimpaired, and the
                    invalid or unenforceable term or provision will be
                    deemed replaced by a term or provision that is valid
                    and enforceable and that comes closest to expressing
                    the intention of the invalid or unenforceable term or
                    provision.

AMENDMENT; WAIVER   Neither you nor the Company may modify, amend, or
                    waive the terms of this Agreement other than by a
                    written instrument signed by you and a director of
                    the Company duly authorized by the Board.  Either
                    party's waiver of the other party's compliance with
                    any provision of this Agreement is not a waiver of
                    any other provision of this Agreement or of any
                    subsequent breach by such party of a provision of
                    this Agreement.

WITHHOLDING         The Company will reduce its compensatory payments to
                    you for withholding and FICA taxes and any other
                    withholdings and contributions required by law.

GOVERNING LAW       The laws of the State of Texas (other than its
                    conflict of laws provisions) govern this Agreement.

<PAGE>
                    NOTICES Notices must be given in writing by personal
                    delivery, by certified mail, return receipt
                    requested, by telecopy, or by overnight delivery. You
                    must send or deliver your notices to the Company's
                    corporate headquarters.  The Company will send or
                    deliver any notice given to you at your address as
                    reflected on the Company's personnel records.  You
                    and the Company may change the address for notice by
                    like notice to the others.  You and the Company agree
                    that notice is received on the date it is personally
                    delivered, the date it is received by certified mail,
                    the date of guaranteed delivery by the overnight
                    service, or the date the fax machine confirms
                    effective transmission.

SUPERSEDING EFFECT  Except as set forth below, this Agreement supersedes
                    any prior oral or written employment, severance, or
                    fringe benefit agreements between you and the
                    Company, other than with respect to your eligibility
                    for generally applicable employee benefit plans and
                    supersedes any other prior or contemporaneous
                    negotiations, commitments, agreements, and writings,
                    with respect to this Agreement, relating to the
                    subject matter of this Agreement, except as specified
                    in this Agreement.  All such other negotiations,
                    commitments, agreements, and writings, with respect
                    to this Agreement, will have no further force or
                    effect; and the parties to any such other
                    negotiation, commitment, agreement, or writing will
                    have no further rights or obligations thereunder.

<PAGE>
                    Notwithstanding the previous paragraph, this
                    Agreement does not supersede or render invalid the
                    following agreements into which you previously
                    entered:  (1) the MOU, as amended by the Derivative
                    Settlement Agreement dated March 17, 1999, should
                    that agreement become effective, except to the extent
                    a matter specifically addressed in this Agreement
                    conflicts with the MOU, in which event, this
                    Agreement will control; (2) the Derivative Settlement
                    Agreement dated March 17, 1999, except with respect
                    to those conflicts referenced in subparagraph (1) of
                    this paragraph; (3) the Class Action Memorandum of
                    Understanding dated March 24, 1999; (4) the
                    Stipulation of Settlement dated May 11, 1999; (5) the
                    Settlement Agreement referencing the Great American
                    Insurance Company Policy bearing policy number
                    DFX0009397; and (6) the VanDevender to Paracelsus
                    Release of  SERP Benefits dated as of December 3,
                    1998.  This Agreement must not be construed to
                    deprive you of any of your rights created or
                    preserved in any agreement or order entered into
                    after the Effective Date and relating to the
                    settlement of the IN RE: PARACELSUS SECURITIES CORP.,
                    the Caven, or the Orovitz litigation, unless such
                    agreement or order specifically provides that this
                    Agreement will control.  This Agreement must not be
                    construed to abrogate or render invalid any
                    obligation or right of indemnification or advancement
                    of costs or expenses that may be owed to you under
                    any contract, the Company's Articles of Incorporation
                    or Bylaws, California law, or Texas law or to alter
                    any right created or preserved as part of the pending
                    settlement of the IN RE: PARACELSUS SECURITIES CORP.,
                    the Caven, or the Orovitz litigation, unless such
                    right is specifically altered by this Agreement.
                    This Agreement does not impair the effectiveness of
                    the release between the parties to this Agreement
                    delivered to you on April 14, 1999, by Bank One as
                    escrow agent.


If you accept the terms of this Agreement, please sign in the space
indicated below.    We encourage you to consult with any advisors you
choose.


                         PARACELSUS HEALTHCARE CORPORATION

                         By:  __________________________________

                                   Name:  ______________________

                                   Title: ______________________



I accept and agree to the terms of employment set
forth in this Agreement:

___________________________
      James G. VanDevender

Dated:_____________________