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FED. R. EVID 408 SETTLEMENT MATERIALS

                             April 11, 1997



Mr. Ron J. Messenger
c/o Bruce S. Mendelsohn, Esquire
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C.  20036

Dear Mr. Messenger:

     This  letter  constitutes  an  agreement  (the  "Letter  Agreement")
between   you   and   Paracelsus  Healthcare  Corporation  ("PHC").   The
Employment Agreement dated  July  17,  1996  between  you  and  PHC  (the
"Employment Agreement") is modified only as specifically provided herein.

     1.   (a)  Effective  immediately,  you  will cease to be an officer,
director and employee of PHC, its affiliates and  any entity in which you
hold such a position at the request of PHC.

          (b)  During  the  Term  (as  defined  herein)  of  this  Letter
Agreement,  PHC  will continue to provide you with  all  of  the  health,
medical, dental, life  and  disability  benefits (insurance or otherwise)
you and your family presently receive from PHC.

          (c)  This Letter Agreement is not  evidence of any assertion by
PHC, or an admission by you, that you engage in  any  action  or inaction
that would constitute Cause (as defined in the Employment Agreement)  for
the  termination of your employment under the Employment Agreement or the
SERP (as  defined  herein).  The Letter Agreement shall not be admissible
in any legal or equitable  proceeding for the purpose of establishing the
appropriateness of any or all  of  your  actions  or  inactions  while an
officer, director or employee of PHC or any of its affiliates.



















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Mr. Ron J. Messenger
April 11, 1997
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     2.   You   and  PHC  will  continue  to  attempt  to  negotiate  the
resolution  of all  issues  between  you  and  PHC  and  its  affiliates,
including,  without   limitations,   your  claims  under  the  Employment
Agreement and the SERP, and all claims  PHC  or any of its affiliates may
have against you.

     3.   Both you and PHC fully reserve and do  not  waive  or  forfeit,
except as specifically stated in this Letter Agreement, any or all  legal
or other rights, benefits, claims or defenses you ro it has or had on  or
before  the  date of this Letter Agreement (the "Rights").  This full and
complete reservation  of  Rights,  includes,  but  is not limited to, the
following:

     (a)  RIGHTS UNDER THE EMPLOYMENT AGREEMENT.  You  reserve  the right
          to assert that your employment was not and cannot be terminated
          for Cause under Section 4(a) or ended
               without you having resigned for Good Reason (as both terms
          are  defined  in the Employment Agreement).  PHC shall have  75
          days following  the  termination  of  the  Term  of this Letter
          Agreement to determine whether Cause under Section 4(a) existed
          for  the  termination  of your employment on the date  of  this
          Letter Agreement.  You waive  any  argument  that  PHC  may not
          terminate  you for Cause under the Employment Agreement because
          it did not make  a  finding  before  your employment ended that
          Cause for your termination existed.

     (b)  RIGHTS UNDER PHC'S RESTATED AND AMENDED  SUPPLEMENTAL EXECUTIVE
          RETIREMENT  PLAN  ("SERP"),  EFFECTIVE  JANUARY   1,  1996,  AS
          AMENDED.  During the Term, you and PHC will discuss whether you
          will  receive  a  payment pursuant to the SERP and, if  so  the
          amount of the payment.   If  this  Letter  Agreement terminates
          without a further agreement between you and  PHC, you will have
          the  right  to  assert,  inter  alia, that your employment  was
          terminated without Cause (as defined in the SERP), and PHC will
          have the right to assert, inter alia,  that your employment was
          terminated for Cause (as defined in the  SERP).  PHC shall have
          75 days following the termination of the Term  of  this  Letter
          Agreement to determine whether Cause under Section 1.46 of  the
          SERP  exists for the termination of your employment on the date
          of this  Letter Agreement.  You waive any argument that PHC may
          not terminate  you  for Cause under the SERP because it did not
          make a finding before your employment ended that Cause for your
          termination existed.

     (c)  RIGHTS UNDER THE INDEMNITY  AND  INSURANCE  COVERAGE AGREEMENT,
          DATED  AUGUST 16, 1996, BETWEEN YOU AND PHC (THE  "IICA"),  ANY
          INSURANCE  POLICY IN WHICH PHC HAS AN INTEREST THAT IN WHOLE OR
          PART MAY BE  FOR  YOUR  BENEFIT,  PHC'S  BY-LAWS  AND  ALL LAWS
          APPLICABLE  TO  THE  ADVANCEMENT  OF  YOUR  EXPENSES  AND  YOUR
          INDEMNIFICATION.  PHC will


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Mr. Ron J. Messenger
April 11, 1997
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     continue  to advance reasonable defense costs under the terms of its
          letter to you of November 18, 1996 that are incurred in any and
          all civil,  government  or  other  investigation, proceeding or
          litigation arising from, or related  in  any way to, the August
          1996 merger, PHC's past financial statements, or public filings
          with  the  SEC  or  any  or all of the issues involved  in  the
          internal investigation conducted  by  the  Special Committee of
          the Board of Directors of PHC.  Additionally,  during  the Term
          of  this  Letter  Agreement,  PHC  will  not  make  or seek any
          determination  as to whether you should be indemnified  by  PHC
          under the IICA,  PHC's  by-laws  and/or any law or rule, unless
          specifically requested to do so by you.

     (d)  RIGHTS TO ASSERT CLAIMS OR DEFENSES.   You and PHC each retains
          all  rights to assert Rights, claims or defenses  against  each
          other  in  the event this Letter Agreement terminates without a
          further agreement between you and PHC.

     4    While this Letter  Agreement  is in effect, neither PHC nor you
will institute any legal or equitable action  or  proceeding  against the
other or take any action to prejudice, disadvantage or harm the  position
of  the other, unless required by law or an order of a court of competent
jurisdiction.   PHC and you agree that any statute of limitations, laches
or other defenses  based on delay applicable to any Rights, claims, causes
of actions or defenses,  which  PHC  or  you  may  assert in any lawsuit,
litigation, arbitration or other proceeding shall be tolled commencing on
the date of this Letter Agreement and concluding on the effective date of
its  termination.   Neither  PHC  nor  you  will  assert any  statute  of
limitations, laches or any other defense based on delay  with  respect to
any  time  period  between  the  date  of  this  Letter Agreement and the
effective date of its termination.

     5.   During the Term, you will not exercise the 1,000,000 options to
purchase shares of PHC for $.01 which your possess.

     6.   During the Term, PHC and you will cooperate  with each other an
its and your attorneys in connection with any and all ongoing  and future
or  possible civil, government, or other proceeding or litigation.   This
cooperation includes your promise to make yourself available to meet with
PHC's  attorneys  at reasonable times and upon reasonable advance notice,
and PHC's promise to  make  its  attorneys  available  to  meet with your
attorneys  at  reasonable times and upon reasonable advance notice.   PHC
agrees  to reimburse  you  for  all  reasonable  expenses  you  incur  in
connection  with  any cooperation that you provide at the express request
of PHC.  Nothing in  this  paragraph prevents you or PHC from cooperating
with  others  in  connection  with   any   civil,  government,  or  other
investigation, proceeding or litigation.





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Mr. Ron J. Messenger
April 11, 1997
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     7.   Notwithstanding anything in the Employment  Agreement, you will
not  disclose  to any person other than an authorized director,  officer,
employee  or  agent   of  PHC  any  confidential  business  or  financial
information about PHC unless required by law.

     8.   Either you or  PHC  may  terminate this Letter Agreement at any
time following 120 days after the execution  of  this Letter Agreement by
sending written notice to the other.  Termination  will  take  effect  14
days  after  the  receipt  of  notice.  The term of this Letter Agreement
shall commence on the date of the  execution of this Letter Agreement and
shall conclude 14 days after the receipt  of  notice  of termination (the
"Term").   Notice  to  you  will  be  effective  when  received  by  your
designated counsel, Bruce S. Mendelsohn of Akin, Gump, Strauss,  Hauer  &
Feld,  L.L.P.,  unless  you  designate  otherwise.  Notice to PHC will be
effective when received by PHC's designated counsel, Arthur F. Mathews of
Wilmer, Cutler & Pickering, unless PHC designates otherwise.

     9.   Termination of this Letter Agreement  will not reinstate you as
a director, officer or employee of PHC, or void the  effect of paragraphs
1 and 3 of this Letter Agreement.
































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Mr. Ron J. Messenger
April 11, 1997
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     Your signature below indicates your agreement to  these terms.  Your
signature   and  the  signature  of  Robert  C.  Joyner  as  specifically
designated by  PHC  satisfies  the  amendment  and  waiver  provisions of
Section 13 of the Employment Agreement.

                              PARACELSUS HEALTHCARE CORPORATION



                         BY:   /S/ Robert C. Joyner
                              _____________________________________________
                              Robert C. Joyner
                              Senior Vice President
                              General Counsel and Secretary
                              Paracelsus Healthcare Corporation
                              
                               April 12, 1997
                               _____________________________________________
                               Date


Accepted and agreed:

/s/ Ron J. Messenger
________________________________
Ron J. Messenger

April 14, 1997
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Date