THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
                    AND APPROVAL OF ASSET DISPOSITION



     THIS THIRD AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND
APPROVAL OF ASSET DISPOSITION (THIS "AGREEMENT") is made and entered into
effective as of June 30, 1999 (the "EFFECTIVE DATE") by and among
PARACELSUS HEALTHCARE CORPORATION, a California corporation (the
"BORROWER"), PARIBAS, a bank organized and existing under the laws of the
Republic of France ("PARIBAS"), as Agent, TORONTO DOMINION (TEXAS), INC.,
a Delaware corporation ("TD"), as Documentation Agent, BANK OF MONTREAL,
a Canadian chartered bank ("BMO"), as Administrative Agent, and the
Lenders as defined in the below-referenced Credit Agreement.

                          W I T N E S S E T H:

     WHEREAS, the Borrower, Paribas, as lead agent for the Lenders (in
such capacity, together with its successors in such capacity, the
"AGENT") and as the Issuing Bank, TD, as documentation agent for the
Lenders (in such capacity, the "DOCUMENTATION AGENT") and BMO, as
administrative agent for the Lenders (in such capacity, the
"ADMINISTRATIVE AGENT"), and the Lenders (as defined therein) are parties
to that certain Amended and Restated Credit Agreement, dated as of March
30, 1998, as amended (the "CREDIT AGREEMENT");

     WHEREAS the Borrower and the Required Lenders desire to amend the
Credit Agreement in the manner hereinafter set forth; and

     WHEREAS, the Borrower desires that the Required Lenders approve the
disposition of the Utah Properties (as defined below);

     NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements hereinafter contained, for the
consideration stipulated in Section 9 below and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Required Lenders, each intending to be
legally bound, hereby mutually agree as follows:

     1.   CAPITALIZED TERMS.  All capitalized terms used herein and not
otherwise defined shall have the respective meanings ascribed to such
terms in the Credit Agreement.

     2.   AMENDMENT OF SECTION 1.1:  DEFINITIONS.  Section 1.1 of the
Credit Agreement is hereby amended as follows:

     (a)  ADDITION OF THE DEFINITION OF EXECUTIVE AGREEMENTS.  The
          following definition of Executive Agreements is hereby added to
          Section 1.1 of the Credit Agreement.

               "EXECUTIVE AGREEMENTS" means those certain agreements
          executed on November 25, 1998, as amended, between the Borrower
          and each of Charles R. Miller, James G. VanDevender and Ronald
          R. Patterson, as more fully described in the Borrower's annual
          report on Form 10-K for the fiscal year ended December 31,
          1998.

     (b)  AMENDMENT OF THE DEFINITION OF ADJUSTED EBITDA.    The
          definition of "Adjusted EBITDA" is hereby amended and restated
          in its entirety as follows:

          "ADJUSTED EBITDA" means, on a consolidated basis without
          duplication for the Borrower and its Subsidiaries for any
          period the Net Income (Loss) for such period taken as a single
          accounting period (excluding the cumulative effect of a
          non-cash change in accounting and discontinued operations),
          PLUS (a) the sum of the following amounts for the Borrower and
          its Subsidiaries for such period determined on a consolidated
          basis in conformity with GAAP to the extent included in the
          determination of Net Income (Loss): (i) Interest Expense, (ii)
          depreciation expense, (iii) amortization expense, (iv) non-cash
          impairment charges, (v) income tax expense and (vi)
          extraordinary losses MINUS extraordinary gains, (vii) any debt
          refinancing charges or gains to the extent such charges or
          gains are not included in extraordinary gains or losses, 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) a one-time charge
          of up to $2,600,000 relating to compensation paid pursuant to
          the Executive Agreements, PLUS, (c) a one-time corporate
          restructuring charge of $5,500,000, MINUS (d) gains or losses
          on asset sales determined on a consolidated basis in conformity
          with GAAP, PLUS (e) with respect to the 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 CLAUSE (A) and (D) preceding) 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, MINUS (f) with respect to any divestiture of any
          entity (corporation, partnership, limited liability company 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 CLAUSE (A) and (D) preceding for the twelve-
          month period following the divestiture.

     (c)  AMENDMENT TO THE DEFINITION OF APPLICABLE BASE RATE MARGIN.
          The definition of "Applicable Base Rate Margin" is hereby
          amended by replacing the table at the end of such definition
          with the following:
<TABLE>
<CAPTION>
                                                               Applicable
                 SENIOR LEVERAGE RATIO                      BASE RATE MARGIN
<S>                                                    <C>
Less than 1.00:1.00                                          0.25% per annum
Greater than or equal to 1.00:1.00 and less than             0.50% per annum
1.50:1.00
Greater than or equal to 1.50:1.00 and less than             1.00% per annum
2.00:1.00
Greater than or equal to 2.00:1.00 and less than             1.25% per annum
2.50:1.00
Greater than or equal to 2.50:1.00                           1.50% per annum
</TABLE>
          PROVIDED, HOWEVER, that if the Company does not receive all
          proceeds payable to the Company in connection with the
          disposition of the Utah Assets (as defined below) on or before
          November 15, 1999, each of the above-listed percentages shall
          be increased by 0.25% which change shall be effective as of the
          Payment Date (as defined below).

     (d)  AMENDMENT TO THE DEFINITION OF APPLICABLE EURODOLLAR MARGIN.
          The definition of "Applicable Eurodollar Margin" is hereby
          amended by replacing the table at the end of such definition
          with the following:
<TABLE>
<CAPTION>
                    SENIOR LEVERAGE RATIO                      Applicable
                                                            EURODOLLAR MARGIN
<S>                                                    <C>
Less than 1.00:1.00                                          1.50% per annum
Greater than or equal to 1.00:1.00 and less than             2.00% per annum
1.50:1.00
<PAGE>
Greater than or equal to 1.50:1.00 and less than             2.50% per annum
2.00:1.00
<PAGE>
Greater than or equal to 2.00:1.00 and less than             2.75% per annum
2.50:1.00
Greater than or equal to 2.50:1.00                           3.00% per annum
</TABLE>

          PROVIDED, HOWEVER, that if the Company does not receive all
          proceeds payable to the Company in connection with the
          disposition of the Utah Assets (as defined below) on or before
          November 15, 1999, each of the above-listed percentages shall
          be increased by 0.25% which change shall be effective as of the
          Payment Date (as defined below).

     (e)  AMENDMENT TO THE DEFINITION OF APPLICABLE TRANCHE B MARGIN.
          The definition of Applicable Tranche B Margin is hereby amended
          and restated in its entirety as follows:

               "`APPLICABLE TRANCHE B MARGIN' means, for any day, a
          percentage per annum equal to 3.25% for Tranche B Loans that
          are Eurodollar Loans and 1.75% for Tranche B Loans that are
          Base Rate Loans."

          PROVIDED, HOWEVER, that if the Company does not receive all
          proceeds payable to the Company in connection with the
          disposition of the Utah Assets (as defined below) on or before
          November 15, 1999, each of the percentages in the above-listed
          definition shall be increased by 0.50% which change shall be
          effective as of the Payment Date (as defined below).

     3.   AMENDMENT TO SECTION 2.7:  MANDATORY PREPAYMENTS.  Section
2.7(g) of the Credit Agreement is hereby amended and restated in its
entirety as follows:

          "Notwithstanding any other provision of this Agreement, on
          August 11, 1999 and thereafter, any prepayment made in
          connection with an Asset Disposition pursuant to this Section
          2.7 shall reduce pro rata each Revolving Credit Loans
          Commitment of each Lender."

     4.   AMENDMENT TO SECTION 2.14:  LETTERS OF CREDIT.  Section 2.14 of
the Credit Agreement is hereby amended by replacing the number
$25,000,000 where it appears in clause (i) of the sixth line of
subparagraph (a) with the number $26,000,000.

     5.   AMENDMENT TO SECTION 10.1:  SENIOR LEVERAGE RATIO.  Section
10.1 of the Credit Agreement is hereby amended by replacing the table
therein with the following:
<TABLE>
<CAPTION>
         Calendar Year Quarters Ending                   Maximum Permitted
         DURING THE FOLLOWING PERIODS                  SENIOR LEVERAGE RATIO
<S>                                             <C>
April 1, 1999 through June 30, 1999                          2.55:1.00
July 1, 1999 through December 31, 1999                       2.60:1.00
January 1, 2000 and at all times thereafter                  2.00:1.00
</TABLE>


     6.   AMENDMENT TO SECTION 10.2:  MINIMUM NET WORTH.    Section 10.2
of the Credit Agreement is hereby amended and restated in its entirety as
follows:

               "As of the close of each fiscal quarter ending on or
          before December 31, 1999, the Borrower will not permit Net
          Worth to be less than $30,000,000.  As of the close of each
          fiscal quarter ending on or after March 31, 2000, the Borrower
          will not permit the Net Worth to be less than the sum of (a)
          $30,000,000, PLUS (b) for each quarter on a cumulative basis
          ending on or after the fiscal quarter after the fiscal quarter
          ending December 31, 1999 or thereafter, seventy-five percent
          (75%) of the positive Net Income, if any of the Borrower, PLUS
          (c) ninety percent (90%) of all Net Proceeds from any Equity
          Issuance following the Closing Date."

     7.   AMENDMENT TO SECTION 10.3:  RATIO OF TOTAL DEBT TO ADJUSTED
EBITDA.  Section 10.3 of the Credit Agreement is hereby amended by
replacing the table therein with the following:
<TABLE>
<CAPTION>
                    PERIOD                                     RATIO
<S>                                             <C>
April 1, 1999 through June 30, 1999                          6.30:1.00
July 1, 1999 through September 30, 1999                      6.10:1.00
October 1, 1999 through December 31, 1999                    6.50:1.00
January 1, 2000 through March 31, 2000                       5.40:1.00
April 1, 2000 through September 30, 2000                     5.20:1.00
October 1, 2000 through March 31, 2001                       4.75:1.00
April 1, 2001 and at all times thereafter                    4.50:1.00
</TABLE>
8.        APPROVAL OF THE SALE OF THE UTAH ASSETS.

     (a)  By execution of this Agreement, each Lender that is a party
          hereto approves, pursuant to Section 9.12 of the Credit
          Agreement, the transfer and sale, whether by sale of stock or
          assets, merger, consolidation, reorganization, recapitalization
          or otherwise, of the health-care related operations and
          business of the Borrower and its Subsidiaries in the Salt Lake
          City Utah area (the "UTAH ASSETS"), including substantially all
          of the Properties owned, leased or used in connection with the
          acute care hospitals and other health care facilities and
          related and other entities set forth on Exhibit A hereto;
          PROVIDED, HOWEVER, that in connection with such disposition and
          as a result thereof the Company receives in immediately
          available funds consideration equal to not less than the
          aggregate Commitments outstanding as of the Effective Date.

     (b)  The Borrower hereby agrees to pay, on August 16, 1999, to each
          Lender that executes this Agreement on or prior to 5:00 p.m.
          (Central Standard Time), August 13, 1999 (such time and date
          hereinafter referred to as the "PAYMENT DATE") an amount equal
          to .125% of such Lender's aggregate Commitments under the
          Credit Agreement as of the Payment Date; PROVIDED, HOWEVER,
          that if a valid and binding agreement with respect to the sale
          of the Utah Assets is not executed on or before August 30,
          1999, on such date the Borrower shall pay to each Lender that
          has executed this Agreement on or prior to the Payment Date an
          additional amount equal to .125% of such Lender's aggregate
          Commitments under the Credit Agreement as of the Payment Date,
          PROVIDED, FURTHER, that if the Company does not receive all
          proceeds payable to the Company in connection with the
          disposition of such assets on or before November 15, 1999, on
          such date the Borrower shall pay to each Lender that has
          executed this Agreement on or prior to the Payment Date an
          additional amount equal to .125% of such Lender's aggregate
          Commitments under the Credit Agreement as of the Payment Date.
          Any payments made pursuant to this Section 8 shall be made by
          wire transfer in immediately available funds to the Agent for
          the account of each such Lender.

     9.   FURTHER REPRESENTATIONS OF THE BORROWER.

     (a)  The execution, delivery and performance by the Borrower of this
          Agreement and the consummation of the transactions contemplated
          hereby have been duly authorized by all requisite corporate or
          other entity action on the part of the Borrower and do not and
          will not (i) violate or conflict with, or result in a breach
          of, or require any consent, except as may have been obtained
          under (x) the Borrower's articles of incorporation or bylaws,
          the violation of, conflict with, or breach of, which could
          reasonably be expected to have a Material Adverse Effect,
          (y) any Governmental Requirement or any order, writ, injunction
          or decree of any arbitrator the violation of, conflict with, or
          breach of, which could reasonably be expected to have a
          Material Adverse Effect, or (z) any material agreement,
          document or instrument to which the Borrower is a party or by
          which the Borrower or any of its Property is bound or subject,
          the violation of, conflict with, or breach of, which could
          reasonably be expected to have a Material Adverse Effect, or
          (ii) constitute a default under any such material agreement,
          document or instrument which default could reasonably be
          expected to have a Material Adverse Effect, or result in the
          creation or imposition of any Lien (except for those in favor
          of Agent pursuant to the Security Documents as provided in
          ARTICLE 5 of the Credit Agreement and except for Permitted
          Liens as defined after giving effect hereto) upon any of the
          revenues or Property of the Borrower.

     (b)  This Agreement has been duly and validly executed and delivered
          by the Borrower and constitutes the legal, valid and binding
          obligation of the Borrower, enforceable against the Borrower in
          accordance with its terms, except as limited by bankruptcy,
          insolvency or other laws of general application relating to the
          enforcement of creditors' rights and general principles of
          equity.

     (c)  No authorization, approval or consent of, and no filing or
          registration with or notice to, any Governmental Authority is
          or will be necessary for the execution, delivery or performance
          by the Borrower of this Agreement or for the validity or
          enforceability thereof in respect of the Borrower, except for
          such consents, approvals and filings as have been validly
          obtained or made and are in full force and effect.  The
          Borrower has not failed to obtain any governmental consent,
          Permit or franchise necessary for the ownership of any of its
          Properties or the conduct of its business except where the
          failure to do so could not reasonably be expected to have a
          Material Adverse Effect.

     (d)  The Borrower further represents and warrants that (i) all of
          the representations and warranties made by the Borrower in
          ARTICLE VII of the Credit Agreement, and in each other Loan
          Document, are true and correct on and as of the date hereof, as
          though made on the date hereof except for any such
          representations and warranties as are expressly stated to be
          made as of a particular date; and (ii) no Default or Event of
          Default shall have occurred and be continuing as of the
          Effective Date.

     10.  CONDITIONS.  The obligations of the Borrower and the Lenders
under this Agreement are subject to the condition precedent that this
Agreement shall have been duly executed by the Borrower and delivered to
the Agent, and each of the Required Lenders shall have executed and
delivered a counterpart hereof.

     11.  RATIFICATION OF CREDIT AGREEMENT.  All terms and provisions of
the Credit Agreement not expressly amended hereby are hereby ratified and
reaffirmed and shall remain in full force and effect without
interruption, change, or impairment of any kind.

     12.  GENERAL.

     (a)  APPLICABLE LAW.  This Agreement has been delivered and accepted
          in, and shall be a contract made under and governed by and
          enforced in accordance with the laws of the State of New York.

     (b)  BINDING EFFECT.  This Agreement shall be binding upon and inure
          to the benefit of the Borrower and the Lenders and their
          respective successors and assigns.

     (c)  HEADINGS.  The Section and subsection headings of this
          Agreement are for convenience and shall not affect, limit or
          expand any term or provision hereof.

     (d)  COUNTERPARTS.  This Agreement may be executed in as many
          counterparts as may be deemed necessary or convenient, and each
          counterpart shall be deemed an original.  No one counterpart
          need be signed by all parties hereto, but all such counterparts
          shall constitute but one and the same instrument.

<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to Amended and Restated Credit Agreement and Approval of Asset
Disposition to be executed and delivered by their duly authorized
officers, to be deemed effective as of the Effective Date.


BORROWER:______________________________

PARACELSUS HEALTHCARE CORPORATION


By:____________________________________
   Deborah H. Frankovich
   Senior Vice President and Treasurer



Approval Granted as of the Date First Written Above:

PARIBAS, as the Agent, as the Issuing Bank and as a Lender

By:____________________________________
     Glenn E. Mealey
     Managing Director


By:____________________________________
     Name:_____________________________
     Title:____________________________



TORONTO DOMINION (TEXAS), INC., as Documentation Agent
and as a Lender

By:____________________________________
     Name:_____________________________
     Title:____________________________



BANK OF MONTREAL, as Administrative Agent and
as a Lender

By:____________________________________
     Name:_____________________________
     Title:____________________________



COMERICA BANK

By:____________________________________
     Name:_____________________________
     Title:____________________________



FLEET CAPITAL CORPORATION

By:____________________________________
     Name:_____________________________
     Title:____________________________



THE LONG-TERM CREDIT BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY

By:____________________________________
     Name:_____________________________
     Title:____________________________



MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST

By:____________________________________
     Name:_____________________________
     Title:____________________________



KZH ING-2 LLC

By:____________________________________
     Name:_____________________________
     Title:____________________________



KZH HIGHLAND-2 LLC

By:____________________________________
     Name:_____________________________
     Title:____________________________



PILGRIM PRIME RATE TRUST

By:  Pilgrim Investments, Inc.,
     as its Investment Manager

By:____________________________________
     Name:_____________________________
     Title:____________________________



MERRILL LYNCH DEBT STRATEGIES PORTFOLIO

By:  Merrill Lynch Asset Management, L.P.,
     as investment advisor

By:____________________________________
     Name:_____________________________
     Title:____________________________



MERRILL LYNCH GLOBAL INVESTMENT SERIES:
INCOME STRATEGIES PORTFOLIO

By:  Merrill Lynch Asset Management, L.P.,
     as investment advisor

By:____________________________________
     Name:_____________________________
     Title:____________________________



MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.

By:____________________________________
     Name:_____________________________
     Title:____________________________



MERRILL LYNCH PRIME RATE PORTFOLIO

By:  Merrill Lynch Asset Management, L.P.,
          as investment advisor

By:____________________________________
     Name:_____________________________
     Title:____________________________



SENIOR HIGH INCOME PORTFOLIO, INC.

By:____________________________________
     Name:_____________________________
     Title:____________________________



DEBT STRATEGIES FUND, INC.

By:____________________________________
     Name:_____________________________
     Title:____________________________

FRANKLIN FLOATING RATE TRUST

By:____________________________________
     Name:_____________________________
     Title:____________________________



Alliance Capital Management, L.P.,
as Manager on behalf of ALLIANCE CAPITAL FUNDING, L.L.C.

By:  ALLIANCE CAPITAL MANAGEMENT CORPORATION,
          General Partner of Alliance Capital Management L.P.

By:____________________________________
     Name:_____________________________
     Title:____________________________



<PAGE>
                                EXHIBIT A

1.   Stock  and/or  assets  of  PHC-Salt  Lake City, Inc. d/b/a Salt Lake
     Regional Medical Center
2.   Stock  and/or assets (including lease with  AHP  of  Utah,  Inc.  or
     successor) of Paracelsus Pioneer Valley Hospital, Inc. d/b/a/ Pioneer
     Valley Hospital
3.   Stock and/or assets of Pioneer Valley Health Plan
4.   Stock  and/or assets of PHC-Jordan Valley, Inc. d/b/a Jordan  Valley
     Hospital
5.   Stock and/or  assets  of Paracelsus Davis Hospital, Inc. d/b/a Davis
     Hospital and Medical Center
6.   Stock and/or Assets of Paracelsus  PHC Regional Medical Center, Inc.
     d/b/a PHC Regional Medical Center
7.   Stock and/or Assets of PHC Utah, Inc.
8.   Stock and/or Assets of Clinicare of Utah, Inc.
9.   Stock and/or assets of PHC/Psychiatric  Healthcare  Corporation  but
     excluding   the   shell   subsidiary   corporations  of  Psychiatric
     Healthcare   Corporation   of   Louisiana,  Psychiatric   Healthcare
     Corporation  of  Missouri,  Psychiatric  Healthcare  Corporation  of
     Texas. All these entities are Excluded Subsidiaries under the Credit
     Agreement.*
11.  Partnership  interests of Paracelsus  and/or  its  subsidiaries   in
     South Ridge MOB (11%); Davis Surgical Center, LLC (30%), and Sandy City,
     ASC, LLC (50%)
12.  Stock or assets  of  Select  Health Systems, Inc., Select Home Care,
     Inc., and Select Home Health &  Services,  Inc. (Currently these are
     all Excluded Subsidiaries under the Credit Facility  and  since  the
     Salt  Lake  home health operations were sold in 1998, these entities
     have minimal assets.)**

*This entity is being  used  for  recapitalization accounting purposes by
one of the potential Buyers for transfer  of  substantially all Salt Lake
market   assets  into  prior  to  closing.   If  the  transfer   is   not
substantially simultaneously, Paracelsus will grant a stock pledge of and
grant an upstream guaranty from PHC/Psychiatric Healthcare Corporation to
the bank group.

**One of the  potential Buyers has excluded the Select entities; however,
we include in the  event  the  other  prospective  Buyer  includes  these
assets,  although substantially all of the home health care assets  in
the Salt Lake market owned by the Select entities were sold in 1998.