SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, DC  20549


                                FORM 10-Q

           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                 THE SECURITIES AND EXCHANGE ACT OF 1934

              FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999


                    Commission file number 001-12055


                    PARACELSUS HEALTHCARE CORPORATION
         (Exact name of registrant as specified in its charter)



      CALIFORNIA                                       95-3565943
(State or other jurisdiction of                      (IRS Employer
 incorporation or organization)                   Identification No.)


              515 W. GREENS ROAD, SUITE 800, HOUSTON, TEXAS
                (Address of principal executive offices)



          77067                                   (281) 774-5100
        (Zip Code)                    (Registrant's telephone number, including
                                                     area code)

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, NO STATED VALUE                   NEW YORK STOCK EXCHANGE
    (Title of Class)                (Name of each exchange on which registered)

Indicate  by  check mark whether the registrant (1) has filed all reports
required to be  filed  by  Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding  12  months  (or for such shorter period
that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                          Yes[X]       No[   ]

As  of August 13, 1999, there were outstanding 55,118,330 shares  of  the
Registrant's Common Stock, no stated value.







<PAGE> 2

                    PARACELSUS HEALTHCARE CORPORATION
                                FORM 10-Q

                     FOR THE QUARTERLY PERIOD ENDED
                              JUNE 30, 1999

                                  INDEX

                                                                 PAGE REFERENCE
                                                                    FORM 10-Q

FORWARD-LOOKING STATEMENTS                                                3


PART I.              FINANCIAL INFORMATION

       Item 1.       Financial Statements-- (Unaudited)

                     Condensed Consolidated Balance Sheets--
                     June 30, 1999 and December 31, 1998                  4

                     Consolidated Statements of Operations--
                     Three Months and Six Months Ended June 30,           5
                     1999 and 1998

                     Condensed Consolidated Statements of Cash Flows--    6
                     Six Months Ended June 30, 1999 and 1998

                     Notes to Interim Condensed Consolidated              7
                     Financial Statements

       Item 2.       Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                 12

PART II.             OTHER INFORMATION                                   19

SIGNATURE                                                                21































<PAGE> 3

FORWARD-LOOKING STATEMENTS

     Certain   statements   in   this   Form  10-Q  are  "forward-looking
statements" made pursuant to the safe harbor  provisions  of  the Private
Securities  Litigation  Reform  Act  of  1995. Forward-looking statements
involve a number of risks and uncertainties.  Factors which may cause the
Company's  actual results in future periods  to  differ  materially  from
forecast results  include,  but  are not limited to: general economic and
business conditions, both nationally  and  in  the  regions  in which the
Company   operates;  industry  capacity;  demographic  changes;  existing
government  regulations  and  changes  in,  or the failure to comply with
government regulations; legislative proposals  for healthcare reform; the
ability  to enter into managed care provider arrangements  on  acceptable
terms;  changes   in   Medicare   and   Medicaid   reimbursement  levels;
liabilities  and other claims asserted against the Company;  competition;
the loss of any  significant  customer;  changes  in  business  strategy,
divestiture  or  development  plans;  the  ability  to attract and retain
qualified  personnel,  including  physicians;  the impact  of  Year  2000
issues;  fluctuations  in interest rates on the Company's  variable  rate
indebtedness; the continued  listing of the Company's common stock on the
New York Stock Exchange; the Company's ability to divest assets to reduce
indebtedness and to realize its tax assets; the availability and terms of
capital to fund working capital  requirements  and  the  expansion of the
Company's  business;  the  Company's continued compliance with  its  debt
covenants  and  its  ability  to   obtain   waivers   in   the  event  of
noncompliance;  and the final resolution of settlement to litigation  and
the fulfillment of  the  conditions  contained  therein.  The  Company is
generally  not  required to, and does not undertake to, update or  revise
its forward-looking statements.







































<PAGE> 4
PART I.   FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS

                         PARACELSUS HEALTHCARE CORPORATION
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                   ($ in 000's)
<TABLE>
<CAPTION>
                                                    JUNE 30,       DECEMBER 31,
                                                     1999              1998
                                                   ---------       ------------
<S>                                                <C>             <C>
                                                   (Unaudited)     (Note 1)
ASSETS
Current assets:
    Cash and cash equivalents                      $  12,364       $  11,944
    Restricted cash                                    1,111           1,029
    Accounts receivable, net                          60,182          67,332
    Deferred income taxes                             10,757           9,641
    Other current assets                              39,842          38,923
                                                   ---------       ---------
        Total current assets                         124,256         128,869

Property and equipment                               539,615         531,908
Less: Accumulated depreciation and amortization     (179,324)       (168,009)
                                                   ---------       ---------
                                                     360,291         363,899

Goodwill                                             134,751         136,994
Other assets                                          84,444          86,340
                                                   ---------       ---------
        Total assets                               $ 703,742       $ 716,102
                                                   =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                               $  47,124       $  41,301
    Accrued liabilities and other                     52,392          58,758
    Current maturities of long-term debt               4,379           6,284
                                                   ---------       ---------
        Total current liabilities                    103,895         106,343

Long-term debt                                       537,759         533,048
Other long-term liabilities                           36,942          42,370
Stockholders' equity:
    Common stock                                     222,977         222,977
    Additional paid-in capital                           390             390
    Accumulated deficit                             (198,221)       (189,026)
                                                   ---------       ---------
        Total stockholders' equity                    25,146          34,341
                                                   ---------       ---------
Total liabilities and stockholders' equity         $ 703,742       $ 716,102
                                                   =========       =========
</TABLE>

                         See accompanying notes.













<PAGE> 5
                         PARACELSUS HEALTHCARE CORPORATION
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                        ($ in 000's, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                  THREE MONTHS ENDED           SIX MONTHS ENDED
                                        JUNE 30,                    JUNE 30,
                                -----------------------------------------------
                                  1999         1998          1999       1998
                                ---------   ---------    ---------   ---------
<S>                             <C>         <C>          <C>         <C>
Net revenue                     $ 143,267   $ 176,693    $ 294,211   $ 363,575
Costs and expenses:
  Salaries and benefits            58,135      72,775      117,100     147,891
  Other operating expenses         56,939      71,275      115,024     145,982
  Provision for bad debts           9,087       9,363       21,485      19,880
  Interest                         13,079      13,295       26,183      25,674
  Depreciation and amortization     9,970       8,850       19,785      18,126
  Unusual items                     6,545         (22)       7,668         (22)
  Loss (gain) on sale of
    facilities                      2,387      (7,100)       2,387      (7,100)
                                ---------    --------     --------    --------
      Total costs and expenses    156,142     168,436      309,632     350,431
                                ---------    --------     --------    --------
Income (loss) before minority
 interests, income taxes and
 extraordinary charge             (12,875)      8,257      (15,421)     13,144
Minority interests                     58        (701)         121      (3,286)
                                ---------    --------     --------    --------
Income (loss) before income
 taxes and extraordinary charge   (12,817)      7,556      (15,300)      9,858
Provision (benefit) for income
 taxes                             (5,208)      1,858       (6,105)      2,535
                                ---------    --------     --------    --------
Income (loss) before
 extraordinary charge              (7,609)      5,698       (9,195)      7,323
Extraordinary charge on
 extinguishment of debt, net            -           -            -      (1,175)
                                ---------    --------     --------    --------
Net income  (loss)              $  (7,609)  $   5,698    $  (9,195)   $  6,148
                                =========   =========    =========    ========
Income (loss) per share - basic
  and assuming dilution:
     Income (loss) before
       extraordinary charge     $   (0.14)  $    0.10    $   (0.17)   $   0.13
     Extraordinary charge on
       extinguishment of debt           -           -            -       (0.02)
                                ---------   ---------    ---------    ---------
Net income (loss) per share     $   (0.14)  $    0.10    $   (0.17)   $   0.11
                                =========   =========    =========    ========
</TABLE>

                             See accompanying notes.













<PAGE> 6
                          PARACELSUS HEALTHCARE CORPORATION
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   ($ in 000's)
                                    (Unaudited)

<TABLE>
<CAPTION>
                                                           Six Months Ended
                                                               June 30,
                                                       ------------------------
                                                          1999          1998
                                                       ---------     ----------
<S>                                                    <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                      $  (9,195)    $   6,148
Non-cash expenses and changes in operating
 assets and liabilities                                   18,729        (1,929)
                                                       ---------     ---------
Net cash provided by operating activities                  9,534         4,219
                                                       ---------     ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in DHHS                                             -       (64,816)
Proceeds from sale of facilities, net of expenses          1,925        22,998
Additions to property and equipment, net                 (14,644)       (9,198)
Decrease in other assets, net                              1,923         1,763
                                                       ---------     ---------
Net cash used in investing activities                    (10,796)      (49,253)
                                                       ---------     ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock                     -            67
Borrowings under senior revolving credit facility         17,000        64,528
Repayments under senior revolving credit facility        (11,420)      (30,275)
Repayments of debt, net                                   (3,898)       (3,184)
Deferred financing costs                                       -        (3,984)
                                                       ---------     ---------
Net cash provided by financing activities                  1,682        27,152
                                                       ---------     ---------

Increase (decrease) in cash and cash equivalents             420       (17,882)
Cash and cash equivalents at beginning of period          11,944        28,173
                                                       ---------     ---------
Cash and cash equivalents at end of period             $  12,364     $  10,291
                                                       =========     =========
Supplemental Cash Flow Information:
   Interest paid                                       $  26,542     $  24,568
   Income taxes (refunded) paid                        $     (26)    $    (415)
Noncash Investing Activities:
   Notes receivable from sale of hospitals             $   6,169     $       -
   Capital lease obligations                           $   1,124     $       -
</TABLE>


                         See accompanying notes.
















<PAGE> 7
                      PARACELSUS HEALTHCARE CORPORATION
      NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               (Unaudited)

                              June 30, 1999

NOTE 1.    ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION - Paracelsus  Healthcare  Corporation  (the  "Company")  was
incorporated  in  November  1980  for the principal purpose of owning and
operating  acute  care  and  related healthcare  businesses  in  selected
markets.  The Company presently operates 15 hospitals with 1,878 licensed
beds in 9 states, of which 11 are owned and four are leased.

BASIS  OF PRESENTATION - On July  1,  1998,  the  Company  completed  the
purchase  of  Dakota  Medical  Foundation's 50% partnership interest in a
general partnership operating as Dakota Heartland Health Systems ("DHHS")
thereby  giving  the  Company 100%  ownership  of  DHHS.   Prior  to  the
purchase, the Company owned  50% of DHHS and accounted for its investment
under the equity method. The transaction  was  accounted  for  as  a step
purchase  acquisition. As a result of this change in control, the Company
has recast  its  1998 consolidated statement of operations to account for
DHHS  under  the  consolidated   method   of  accounting  as  though  the
transaction had occurred on January 1, 1998.

     The   accompanying   unaudited   condensed  consolidated   financial
statements  have  been  prepared in accordance  with  generally  accepted
accounting principles for  interim  financial  information  and  with the
instructions  to  Form 10-Q. Accordingly, they do not include all of  the
information  and  notes   required   by   generally  accepted  accounting
principles for annual financial statements. In the opinion of management,
all  adjustments,  consisting  of normal recurring  accruals,  considered
necessary for a fair presentation  have  been included. The balance sheet
at  June  30,  1999,  has  been  derived  from  the  unaudited  financial
statements at that date but does not include all  of  the information and
footnotes  required  by  generally accepted accounting principles  for  a
complete set of financial  statements. The Company's business is seasonal
in nature and subject to general  economic  conditions and other factors.
Accordingly, operating results for the three  and  six  months ended June
30,  1999,  are  not  necessarily indicative of the results that  may  be
expected  for  the  year  ending  December  31,  1999.   These  financial
statements should be read in  conjunction  with  the audited consolidated
financial statements and notes thereto for the year  ended  December  31,
1998, included in the Company's 1998 Form 10-K.

     The preparation of financial statements in conformity with generally
accepted  accounting principles requires management to make estimates and
assumptions  that  affect  the reported amounts of assets and liabilities
and disclosure of contingent  assets  and  liabilities at the date of the
financial statements and the reported amounts  of  revenues  and expenses
during  the  reporting  period.   Actual results could differ from  those
estimates.

















<PAGE> 8
EARNINGS PER SHARE - The following  table  sets  forth the computation of
basic  and diluted income (loss) before extraordinary  charge  per  share
(dollars in thousands, except per share amounts).

<TABLE>
<CAPTION>
                                  THREE MONTHS ENDED         SIX MONTHS ENDED
                                       JUNE 30,                  JUNE 30,
                                 ------------------        --------------------
                                   1999        1998          1999        1998
                                 --------    ---------     --------    --------
<S>                              <C>         <C>           <C>         <C>
Numerator (a):
  Income (loss) before
    extraordinary charge         $ (7,609)   $  5,698      $ (9,195)   $  7,323
                                 ========     =======      ========    ========
Denominator:
  Weighted average shares used
    for basic earnings per
    share                          55,118       55,103        55,118     55,098
                                  -------     --------      --------   --------
   Effect of dilutive securities:
     Employee stock options             -        2,445             -      2,446
                                  -------     --------      --------   --------
   Dilutive potential common
     shares                             -        2,445             -      2,446
                                  -------     --------      --------   --------
     Shares used for diluted
       earnings per share          55,118       57,548        55,118     57,544
                                  =======     ========      ========   ========
Income (loss) before extraordinary
charge per share:,
   Basic                         $  (0.14)    $   0.10      $  (0.17)  $   0.13
                                 ========     ========      ========   ========
   Diluted                       $  (0.14)    $   0.10      $  (0.17)  $   0.13
                                 ========     ========      ========   ========
</TABLE>
------------------------------------
(a)   Amount  is  used  for  both  basic  and  diluted earnings per share
computations since there is no earnings effect related  to  the  dilutive
securities.

     Options  to purchase 7,671,402 and 4,988,000 shares of the Company's
common stock at  a weighted average exercise price of $4.98 and $7.37 per
share and warrants  to  purchase  414,906  shares  at  a weighted average
exercise price of $9.00 per share were outstanding during  the  three and
six  months  ended  June  30,  1999  and 1998, respectively, but were not
included in the computation of diluted  EPS because their inclusion would
have an antidilutive effect in the periods presented.

RESTRICTED CASH - The Company had restricted  cash  of  $1.1  million and
$1.0  million  at June 30, 1999 and December 31, 1998, respectively,  for
payments related to the commercial paper financing program.

COMPREHENSIVE INCOME  -  The  Company  had  no other comprehensive income
(loss)  for  the  three  and six months ended June  30,  1999  and  1998.
Comprehensive income (loss)  equaled  net  income  (loss) for each of the
periods   presented  on  the  accompanying  Consolidated  Statements   of
Operations.

NOTE 2.    UNUSUAL ITEMS

     In the  six months ended June 30, 1999, the Company recorded unusual
items  of  $7.7  million,  which  included  a  $2.2  million  net  charge
associated with  the  execution  of  an  executive agreement with certain
current and former officers of the Company, as previously reported, and a
$5.5 million corporate restructuring charge.   The  restructuring  charge
was recorded in June 1999 as a result of the Company's efforts to further
reduce corporate overhead through the consolidation and/or elimination of
various  corporate  functions  and contracts and a reduction of corporate
<PAGE> 9
office space under lease.  Such charge included $2.2 million for employee
termination costs, $1.3 million for the cancellation of certain lease and
maintenance contracts and $2.0 million  for  the  write-down  of  certain
deferred costs, leasehold improvements and redundant equipment.  Employee
termination  and contract cancellation costs totalling $3.5 million  were
included in accrued  expenses  in the accompanying Condensed Consolidated
Balance Sheet as of June 30, 1999.

NOTE 3.    DISPOSITIONS OF HOSPITALS

     Effective June 30, 1999, the  Company  sold substantially all of the
assets   of   four   skilled   nursing   facilities  (collectively,   the
"Convalescent Hospitals").  The facilities  had  232  licensed beds.  The
sales  price  of approximately $6.9 million, which excluded  net  working
capital, was paid  by  a  combination  of $3.0 million in cash and a $3.9
million second lien promissory note.  The  note  matures on June 30, 2004
and is subject to prepayment discounts.  In connection with the sale, the
Company paid $1.0 million to terminate a lease agreement  at  one  of the
facilities and used the remaining cash proceeds of $2.0 million from  the
sale  to  reduce  its outstanding indebtedness under its senior revolving
credit facility.  The  Company  recorded  a  pretax gain of approximately
$1.3 million on the disposition.

     In June 1999, the Company also recorded a loss on sale of facilities
of  $3.7  million  in  connection with the sale of  the  eight  hospitals
located in metropolitan  Los  Angeles ("LA Metro") as previously reported
in the Company's 1998 Form 10-K.   The  charge  resulted  from  the final
settlement  of  working  capital  and  the  recognition  of  a prepayment
discount  on  certain  promissory  notes.  The notes were repaid in  full
during the second quarter of 1999 and  the  proceeds  were used to reduce
the Company's indebtedness under the senior revolving credit facility.

     Effective March 31, 1999, the Company sold the stock  of  Paracelsus
Bledsoe  County  Hospital, Inc. ("Bledsoe"), which operated a 32 licensed
bed  facility  located  in  Pikeville,  Tennessee.  The  sales  price  of
approximately  $2.2  million,  including  working  capital, was paid by a
combination of $100,000 in cash and the issuance by  the  buyer  of  $2.1
million  in  promissory  notes.  The notes are secured by all outstanding
common stock and assets of Bledsoe. The Company recorded no material gain
or loss on the Bledsoe disposition.

     On June 30, 1998, the Company  completed  the  sale of substantially
all of the assets of Chico Community Hospital, Inc., which included a 123
licensed  bed  acute  care hospital and a 60 licensed bed  rehabilitation
hospital, both located  in  Chico,  California, (collectively, the "Chico
Hospitals")  for  $25.0 million in cash  plus  working  capital  and  the
termination of a facility  operating  lease and related letter of credit.
The Company recognized a pretax gain of $7.1 million on the disposition.

     The results of operations of the Convalescent  Hospitals and Bledsoe
for the six months ended June 30, 1999 were not material to the Company's
consolidated  statements of operations, individually and  on  a  combined
basis.  The pro  forma  effect  of  the  dispositions of the Convalescent
Hospitals, Bledsoe, the Chico Hospitals and  LA  Metro  on  the Company's
1998  results  of  operations  was  previously  reported in the Company's
Current Report on Form 8-K dated July 16, 1999.

NOTE 4.    LONG-TERM DEBT

     Effective June 30, 1999, the Company amended  its senior bank credit
agreement (the "Amended Agreement").  The Amended Agreement provides for,
among other things (i) a 0.25% increase in interest  rates  applicable to
the Company's revolving credit facility and Tranche A term loan  facility
(outstanding borrowings of $88.9 million and $41.8 million, respectively,
at June 30,1999), with such rates subject to an additional 0.25% increase,
retroactive to August 13, 1999, in the event certain asset dispositions do
not  occur,  as  defined, by November 15, 1999 (ii)  a  0.50%  increase  in
the interest rate applicable  to  the  Company's Tranche B term loan facility
<PAGE> 10
(outstanding borrowings of $69.5 million at June 30, 1999), with such rates
subject to an additional 0.50% increase, retroactive to August 13, 1999, in the
event certain asset dispositions do not occur,  as  defined, by November 15,
1999 (iii) a change in certain financial covenants for the last three quarters
of  1999,  (iv) a reduction  in  the  revolving  credit loan commitments for
any prepayment made in connection with an asset disposition, as defined, (v) an
increase in permitted letters of credit from  $25.0  million  to $26.0 million
and (vi) approval of certain asset dispositions, as defined.  Pursuant to the
Amended Agreement, the interest rates, as adjusted, in effect on June 30,
1999 were 8.33% under the revolving credit facility and  Tranche  A  term
loan facility and 8.58% under Tranche B term loan facility.

     Effective  July  21,  1999,  the Company received waivers to certain
provisions of the Amended Agreement  to  permit  the global settlement of
the putative class and derivative actions arising  out  of  the Company's
August  1996 merger with Champion Healthcare Corporation ("Champion") and
two  related public offerings.  The  terms  of the global settlement were
described in detail in the Company's Annual Report  on  Form  10-K  filed
on April 13, 1999 (See Note 6).

     At  June  30,  1999,  the  Company was in compliance with  all  debt
covenants  to which it was subject  under  the  Amended  Agreement.   The
Company's continued  compliance  with its debt covenants is predicated on
its ability to maintain certain levels  of  operating  performance and on
its  ability  to  sell  certain non-core assets to reduce debt.   If  the
Company is unable to meet  these  objectives, it will be required to seek
waivers  from  its  lenders  in the future.  However,  there  can  be  no
assurance that the Company will  be  able  to  obtain  such  waivers,  if
needed.

NOTE 5. OPERATING SEGMENTS

     The  Company segregates its hospitals into core and non core markets
("Core Facilities"  and  "Non  Core Facilities", respectively). There has
been  no  material  change  in  the composition  of  Core  and  Non  Core
Facilities or in the accounting policies  of  the  segments as previously
reported in the Company's 1998 Form 10-K, except for the reclassification
of  the Non Core Facilities sold in 1999 to the "All  Other"  segment  in
each  of  the  periods  presented  below.   The Company does not allocate
income taxes, senior bank debt interest, or subordinated note interest to
its reportable segments.  These items, along with overhead costs, and the
operations   of  sold/closed  facilities,  including   the   Convalescent
Hospitals, Bledsoe,  the Chico Hospitals and LA Metro, have been included
in the "All Other" category.   Selected  segment  information for the
three and six months ended June 30, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                   THREE MONTHS  ENDED JUNE 30, 1999
                            ---------------------------------------------------
                             CORE         NON CORE      ALL OTHER     TOTAL
                            ---------    -----------    -----------   ---------
<S>                         <C>          <C>            <C>           <C>
Net revenue                 $ 122,092    $  17,506      $  3,669      $ 143,267
Adjusted EBITDA (a)         $  23,487    $     994      $ (5,317)     $  19,164
</TABLE>
<TABLE>
<CAPTION>

                                    THREE MONTHS ENDED JUNE 30, 1998
                            ---------------------------------------------------
                              CORE         NON CORE      ALL OTHER     TOTAL
                            ---------    -----------    -----------   ---------
<S>                         <C>          <C>            <C>           <C>
Net revenue                 $ 123,458     $  19,263     $ 33,972      $ 176,693
Adjusted EBITDA (a) (b)     $  24,015     $   1,775     $ (3,211)     $  22,579
</TABLE>



<PAGE> 11
<TABLE>
<CAPTION>
                                    SIX MONTHS  ENDED JUNE 30, 1999
                            ---------------------------------------------------
                               CORE         NON CORE      ALL OTHER    TOTAL
                            ---------    ------------     ---------   ---------
<S>                         <C>          <C>             <C>          <C>
Net revenue                 $ 248,148    $     36,868    $    9,195   $ 294,211
Adjusted EBITDA (a)         $  48,676    $      2,506    $  (10,459)  $  40,723
</TABLE>
<TABLE>
<CAPTION>

                                    SIX MONTHS ENDED JUNE 30, 1998
                            ---------------------------------------------------
                               CORE        NON CORE      ALL OTHER     TOTAL
                            ---------    ------------    ---------    ---------
<S>                         <C>          <C>             <C>          <C>
Net revenue                 $ 251,504    $    40,658     $   71,413   $ 363,575
Adjusted EBITDA (a) (b)     $  47,492    $     4,747     $   (5,703)  $  46,536
</TABLE>
---------------------------------------------
(a) Earnings before extraordinary charge, interest, taxes, depreciation,
    amortization and unusual charges.
(b) Core Facilities adjusted EBITDA for the three  and  six  months ended
    June  30,  1998  included  minority interest of $1.6 million and  $4.1
    million, respectively, attributable to the Company's former partner in
    DHHS.

NOTE 6.    CONTINGENCIES

SHAREHOLDERS LITIGATION - On July  22,  1999,  the United States District
Court for the Southern District of Texas granted  final  approval  of the
global  settlement  of  the putative class and derivative actions arising
out  of  the  Company's  August  1996  merger  with  Champion and  two
related public offerings.  The terms of the global settlement were described
in  detail  in  the  Company's 1998 Annual  Report on Form 10-K.  The court's
approval is subject  to  appeal for a period  of  thirty  days.  Barring any
appeals, the settlement will take effect ten days after the expiration of the
appeal period.

IMPACT OF YEAR 2000 - The Company  has  a  Year  2000  strategy  for  its
hospitals  and  corporate  office  that  includes  phases  for education,
inventory and assessment of applications and equipment at risk,  analysis
and   planning,  testing,  conversion/remediation/replacement  and  post-
implementation  and  contingency  planning.  The  Company  can provide no
assurances  that  applications and equipment the Company believes  to  be
Year 2000 compliant will not experience difficulties, or that the Company
will not experience  difficulties  obtaining  resources  needed  to  make
modifications  to  correct  or replace the Company's affected systems and
equipment. Failure by the Company  or third parties on which it relies to
resolve Year 2000 issues could have  a  material  adverse  effect  on the
Company's  results  of  operations and its ability to provide health care
services. Consequently, the  Company  can  give no assurances that issues
related  to  Year 2000 will not have a material  adverse  effect  on  the
Company's financial condition or results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for further discussion.

NOTE 7.    SUBSEQUENT EVENT

     In July 1999,  the definitive agreement on the sale of the remaining
two  Tennessee  facilities   and   the  two  facilities  in  Georgia  and
Mississippi, as previously reported, was terminated.

     Effective August 16, 1999, the Company entered into a definitive
agreement to transfer the stock of its subsidiary which will hold substantially
all the assets of the Company's five Utah hospitals with 640 licensed beds,
<PAGE> 12
including PHC Regional Hospital and Medical Center which has been closed
since June 1997, to an unrelated third-party.  The consideration for the
transfer includes a combination of cash and a minority interest in the
transferred subsidiary. When completed, the transaction will eliminate
indebtedness currently outstanding under the senior credit facilities and
reduce borrowings under the commercial paper financing program.  The
transaction is subject to regulatory approvals and the normal due diligence.
The Company expects the transfer to be completed in the fourth quarter of 1999.
However, there can be no assurance on the final outcome of the due diligence
process or that the terms and conditions of the definitive agreement will be
satisfactorily fulfilled.

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     The comparison of operating results  for  1999  with  prior years is
difficult  given  the  acquisitions  and  divestitures  in  the  affected
periods.   "Same  hospitals"  as  used in the following discussion, where
appropriate, consist of acute care hospitals owned throughout the periods
for which comparative operating results are presented. Accordingly, "same
hospitals" exclude facilities sold  in  1998,  the Convalescent Hospitals
and  Bledsoe,  which  were  sold effective June 30 and  March  31,  1999,
respectively,  and  include DHHS  which  was  consolidated  in  1998  and
included  in  the  Company's  results  of  operations  for  both  periods
presented.

     While the most  significant changes in Medicare payments mandated by
the Balanced Budget Act  of  1997  (the  "1997  Budget  Act") and certain
proposed changes to various states' Medicaid programs were  phased  in by
October 1, 1998, these changes continue to have an unfavorable impact  on
the   Company's   revenues  and  earnings  through  1999.   Additionally,
pressures to control  healthcare  costs  and  a  shift  from  traditional
Medicare/Medicaid and traditional indemnity insurers have resulted  in an
increase  in the number of patients whose healthcare coverage is provided
under managed care plans, from which the Company generally receives lower
payments per  patient.  The  Company  anticipates  that  its managed care
business will continue to increase in the future.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1999
COMPARED WITH THREE MONTHS ENDED JUNE 30, 1998

     Net  revenue  for the three months ended June 30, 1999,  was  $143.3
million, a decrease  of  $33.4 million, or 18.9%, from $176.7 million for
the same period in 1998. The decline in net revenue is largely due to the
sale of eight acute care hospitals  in June and September of 1998 and the
sale  of  Bledsoe in March 1999. The remaining  decline  in  net  revenue
occurred at the Company's "same hospitals," as discussed below.

     Net revenue  at "same hospitals" for the three months ended June 30,
1999 was $139.6 million compared to $142.7 million in 1998, a decrease of
$3.1 million, or 2.2%.  Same  hospital  net  revenue  at  Core Facilities
decreased  $1.4 million, or 1.1%, from $123.5 million in 1998  to  $122.1
million in 1999.   Same  hospital  net  revenue  at  Non  Core Facilities
decreased  $1.8  million,  or 9.1%, from $19.3 million in 1998  to  $17.5
million in 1999.  Same hospital net revenue decreased in the three months
ended June 30, 1999 as compared  to the same period in the prior year due
largely to the unfavorable impact  of  certain key provisions of the 1997
Budget Act, which were not implemented until  the second half of 1998 and
resulted  in the closure of certain skilled nursing  facilities  and  the
restructuring  of home health operations in the third and fourth quarters
of  1998.  Additionally,  increased  managed  care  presence  in  certain
markets  and  downward  pressure  on payment levels by managed care plans
unfavorably affected same hospital  net revenue in 1999.  The full impact
of  the  1997 Budget Act and managed care  trend  on  same  hospital  net
revenue  were   partially  mitigated  by  increased  patient  volumes  in
admissions, patient  days  and outpatient visits (excluding home health).
While the restructuring of the  home  health  operations  and  increasing
<PAGE> 13
managed  care  penetration  are  likely  to  continue  in 1999, which may
further reduce net revenue, the Company anticipates that  the 1997 Budget
Act  will not have a significant impact on Company's net revenue  in  the
second half of 1999 as compared to 1998.

     The  Company's  "same  hospitals"  experienced  a  1.7%  increase in
inpatient admissions from 14,017 in the three months ended June  30, 1998
to  14,256  in  the  comparable period in 1999.  "Same hospitals" patient
days increased 1.7% from 62,729 in 1998 to 63,768 in 1999. Excluding home
health visits, outpatient  visits in "same hospitals" increased 1.6% from
157,216  in 1998 to 159,757 in  1999.  The  increase  in  admissions  and
outpatient  visits  were  primarily  driven  by  the  Core Facilities and
resulted from (i) favorable demographic changes in certain  markets, (ii)
an  increase in the number of physicians and services at several  of  the
Company's  hospitals  and  (iii)  increased volume generated from certain
hospital benchmarking and service awareness programs implemented in 1998.
Volume at the Non Core Facilities,  as  reported  below, declined due to
the  closure  of  certain  operations  and  increasing competition  in  a
selected market.  Home health visits in "same  hospitals" decreased 35.1%
from 103,560 in 1998 to 67,163 in 1999 primarily  due  to  the closure or
sale of home health operations throughout 1998.

     The  following table presents "same hospitals" operating  statistics
for the Company's Core and Non Core Facilities for the three months ended
June 30, 1999 and 1998.

<TABLE>
<CAPTION>
                                                     "SAME HOSPITALS"
                                           -----------------------------------
                                                THREE MONTHS ENDED JUNE 30,
                                           -----------------------------------
                                               1999         1998     % CHANGE
                                           ----------    ----------  ---------
<S>                                           <C>          <C>         <C>
Core Facilities
---------------
Patient Days                                   54,836       51,985       5.5%
Inpatient Admissions                           12,168       11,717       3.8
Outpatient Visits, excluding Home Health      135,249      128,540       5.2
Home Health Visits                             41,485       62,370     (33.5)

Non Core Facilities
-------------------
Patient Days                                    8,932       10,744     (16.9)%
Inpatient Admissions                            2,088        2,300      (9.2)
Outpatient Visits, excluding Home Health       24,508       28,676     (14.5)
Home Health Visits                             25,678       41,190     (37.7)
</TABLE>

     Operating expenses (salaries and  benefits, other operating expenses
and provision for bad debts), expressed  as  a percentage of net revenue,
remained relatively flat at 86.7% and 86.8% for  the  three  months ended
June 30, 1999 and 1998, respectively.  Operating expenses decreased $29.2
million  from $153.4 million in 1998 to $124.2 million in 1999  primarily
from the Company's strategic disposition of certain facilities or closure
of unprofitable  business  operations,  and  from  cost reduction efforts
implemented in the latter part of 1998.  These initiatives contributed to
the stability of the Company's operating margins, which  were  13.3%  and
13.2% in 1999 and 1998, respectively.

     Operating  expenses at the Company's "same hospitals" increased from
80.8% of net revenue  in  1998  to  82.5%  in 1999, and operating margins
decreased  from  19.2% to 17.5%, respectively.    On  a  "same  hospital"
basis, Core Facility  operating  margins  declined  from 20.8% in 1998 to
19.2%  in  1999.   The  decline reflects, in part, the implementation  of
certain key components of  the  1997  Budget Act in the latter half of
1998, particularly with respect to the  Company's home health operations,
as well as continuing downward pressure on payment levels by managed care
<PAGE> 14
plans.  Operating margins were also negatively  impacted  by  the loss of
higher margin home health volume and higher labor costs resulting  from a
combination  of  increased  patient  volume  and  tight  labor markets at
certain  facilities.   Operating  margins  at  the  Non  Core  Facilities
declined  from  9.2%  in  1998  to  5.7%  in  1999,  due to a significant
reduction  in  the  home  health  operations which led to overall  volume
reductions at these facilities and  an  increase in the provision for bad
debt due to collection issues from a computer  system  conversion  at one
facility.   In  addition to the cost reduction strategies implemented  in
1998, the Company  implemented a plan in 1999 to further reduce corporate
overhead through the consolidation and/or elimination of corporate office
space and various corporate functions and contracts.  Management believes
that the cost savings  associated  with  these  initiatives  will  have a
favorable  impact on the Company's results of operations throughout 1999.
However, there  can  be  no  assurance  that the Company will achieve its
desired cost structure or that any cost reductions  will be sufficient to
offset  present and/or future government initiatives and  the  effect  of
increasing managed care penetration in selected markets.

     Depreciation  and  amortization  expense increased $1.1 million from
$8.9 million in the three months ended June 30, 1998 to $10.0 million for
the same period in 1999 primarily due to  the  Company's  acquisition  of
DHHS on July 1, 1998 and additions to property and equipment.

     Loss  before  income  taxes  was  $12.8 million for the three months
ended June 30, 1999 and included (i) unusual  charges  of  $6.5  million,
which  consisted  of a $5.5 million corporate restructuring charge and  a
$1.0 million charge  associated  with  an executive agreement executed in
November 1998 (see Note 2) and (ii) loss  on  sale  of  hospitals of $2.4
million (see Note 3).  Income before income taxes of $7.6 million for the
three months ended June 30, 1998 included a $7.1 million  gain  from sale
of   the   Chico   Hospitals  and  minority  interests  of  $1.6  million
attributable to DHHS.   The  Company  acquired  its former partner's  50%
interest in DHHS in July 1998.

     The  Company  recorded income tax benefit of $5.2  million  for  the
three months ended June  30,  1999 and income tax expense of $1.9 million
for the same period in 1998.  Income tax benefit in 1999 approximated the
statutory rate due to the offset  of  nondeductible goodwill amortization
and  a non-taxable gain related to the executive  agreement.  Income  tax
expense in 1998 differed from the statutory rate due to a decrease in the
valuation allowance, which was partially offset by nondeductible goodwill
amortization.

     Net  loss for the three months ended June 30, 1999 was $7.6 million,
or $0.14 per  diluted  share,  compared  to net income of $5.7 million or
$0.10 per diluted share, for the same period  of  1998.  Weighted average
common  and common equivalent shares outstanding were  55.1  million  and
57.5 million  in  1999  and 1998, respectively.  The decrease in weighted
average common and common equivalent shares outstanding resulted from the
effect of dilutive securities,  which  were  excluded  due to their anti-
dilutive effect on 1999 net loss.

RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1999
COMPARED WITH SIX MONTHS ENDED JUNE 30, 1998

     Net  revenue  for  the  six months ended June 30, 1999,  was  $294.2
million, a decrease of $69.4 million,  or  19.1%, from $363.6 million for
the same period in 1998. The decline in net revenue is largely due to the
sale  of Bledsoe in March 1999 and eight acute  care  hospitals  sold  in
1998. The  remaining  decline  in  net  revenue occurred at the Company's
"same hospitals," as discussed below.

     Net revenue at "same hospitals" for  the  six  months ended June 30,
1999 was $285.0 million compared to $292.2 million in 1998, a decrease of
$7.2  million,  or  2.4%.  Same hospital net revenue at  Core  Facilities
decreased $3.4 million,  or  1.3%,  from $251.5 million in 1998 to $248.1
million  in  1999.   Same hospital net revenue  at  Non  Core  Facilities
decreased $3.8 million,  or  9.3%,  from  $40.7  million in 1998 to $36.9
<PAGE> 15
million in 1999.  As previously discussed, increased  patient  volumes in
admissions,  patient  days  and outpatient visits (excluding home health)
partially  mitigated  the decline  in  same  hospital  net  revenue  that
resulted from the implementation  of  certain  key provisions of the 1997
Budget Act in the second half of 1998, which led  to the eventual closure
of  certain  skilled  nursing  facilities and the restructuring  of  home
health operations.  The decline in same store net revenue was also due to
the increased penetration of managed care plans at selected markets.

     The  Company's  "same hospitals"  experienced  a  2.1%  increase  in
inpatient admissions from 28,950 in the six months ended June 30, 1998 to
29,561 in the comparable  period  in  1999.   Same  hospital patient days
increased  2.6% from 132,347 in 1998 to 135,756 in 1999.  Excluding  home
health visits,  outpatient visits in "same hospitals" increased 3.9% from
313,098 in 1998 to  325,292  in  1999.  The  increase  in  admissions and
outpatient visits resulted from (i) a delayed flu season in  some markets
in  the  current  year,   (ii)  favorable  demographic changes in certain
markets, (iii) an increase in the number of  physicians  and  services at
several  of  the  Company's hospitals and (iv) increased volume generated
from  certain  hospital   benchmarking  and  service  awareness  programs
implemented in 1998.  Home  health  visits  in "same hospitals" decreased
37.4% from 226,177 in 1998 to 141,515 in 1999  primarily  due to the 1998
closure or sale of home health operations in response to the  1997 Budget
Act.

     The  following  table presents "same hospitals" operating statistics
for the Company's Core  and  Non Core Facilities for the six months ended
June 30, 1999 and 1998.

<TABLE>
<CAPTION>
                                                  "SAME HOSPITALS"
                                         -----------------------------------
                                              SIX MONTHS ENDED JUNE 30,
                                         -----------------------------------
                                            1999          1998     % CHANGE
                                         ----------    ----------  ---------
<S>                                        <C>           <C>         <C>
Core Facilities
---------------
Patient Days                               114,514       109,215       4.9%
Inpatient Admissions                        24,645        23,987       2.7
Outpatient Visits, excluding Home Health   274,648       255,575       7.5
Home Health Visits                          87,909       136,833     (35.8)

Non Core Facilities
-------------------
Patient Days                                21,242        23,132      (8.2)%
Inpatient Admissions                         4,916         4,963      (0.9)
Outpatient Visits, excluding Home Health    50,644        57,523     (12.0)
Home Health Visits                          53,606        89,344     (40.0)
</TABLE>

     Operating expenses (salaries and  benefits, other operating expenses
and provision for bad debts), expressed  as  a percentage of net revenue,
remained relatively flat at 86.2% and 86.3%, respectively,  for  the  six
months  ended  June  30, 1999 and 1998, respectively.  Operating expenses
decreased $60.1 million  from $313.7 million in the six months ended June
30,  1998 to $253.6 million  in  1999  largely  due  to  reductions  from
closed/sold  facilities and cost reduction initiatives implemented in the
second half of  1998.  Operating margins were 13.8% and 13.7% in 1999 and
1998, respectively.

     Operating expenses  at the Company's "same hospitals" increased from
80.7% of net revenue in 1998  to  82.1%  in  1999,  and operating margins
decreased  from  19.3%  to 17.9%, respectively.  Core Facility  operating
margins declined from 20.6%  in  1998  to  19.6%  in  1999,  and Non Core
Facility operating margins decreased from 11.7% to 6.8%, respectively. As
discussed  above,  the  decline  in  operating  margins reflects (i)  the
<PAGE> 16
implementation of certain key components of the 1997  Budget  Act  in the
latter  half of 1998, particularly with respect to the Company's home
health operations, (ii) continuing downward pressure on payment levels by
managed care plans, (ii) the loss of higher margin home health volume and
(iii) higher  labor  costs  resulting  from  a  combination  of increased
patient   volume   and   tight   labor  markets  at  certain  facilities.
Additionally, operating margins were  further  reduced  by an increase in
the first quarter 1999 bad debt expense due to collection  issues arising
from  information systems conversions and personnel turnover  at  several
facilities.   These  issues  have  largely  been  resolved and management
expects that bad debt expense should be in line with  historical  results
for  the  remainder  of  1999.   Management  also  believes that the cost
savings associated with the initiatives implemented in 1998 and 1999 will
have a favorable impact on the Company's results of operations throughout
1999.  However, there can be no assurance that the Company  will  achieve
its desired cost structure or that any cost reductions will be sufficient
to offset present and/or future government initiatives and the effect  of
increasing managed care penetration.

     Interest  expense  increased  $509,000 from $25.7 million in the six
months ended June 30, 1998 to $26.2  million in 1999, primarily due to an
net increase in borrowings under the senior  credit facilities (primarily
to fund the acquisition of DHHS in July 1998 and working capital) and the
commercial paper program, which was partially  offset  by  a  decrease in
interest rates under the credit facilities.

     Depreciation  and  amortization expense increased $1.7 million  from
$18.1 million in the six  months ended June 30, 1998 to $19.8 million for
the same period in 1999 primarily  due to the acquisition of DHHS on July
1, 1998 and additions to property and equipment.

     Loss before income taxes and extraordinary  charge was $15.3 million
for the six months ended June 30, 1999 and included  (i)  unusual charges
of   $7.7   million,   which   consisted  of  a  $5.5  million  corporate
restructuring  charge  and a $2.2  million  charge  associated  with  the
executive agreement executed  in  November  1998  (see Note 2) and (ii) a
loss on sale of facilities of $2.4 million (see Note  3).   Income before
income taxes and extraordinary charge was $9.9 million for the six months
ended June 30, 1998 and included a gain on sale of the Chico Hospitals of
$7.1 million and minority interests of $4.1 million attributable to DHHS.

     The Company recorded income tax benefit of $6.1 million  in  the six
months ended June 30, 1999 and income tax expense of $2.5 million for the
same  period  in  1998.   Income  tax  benefit  in  1999 approximated the
statutory  rate due to the offset of nondeductible goodwill  amortization
and a non-taxable  gain  related  to  the executive agreement. Income tax
expense in 1998 differed from the statutory rate due to a decrease in the
valuation allowance, which was partially offset by nondeductible goodwill
amortization.

     Net loss for the six months ended June 30, 1999 was $9.2 million, or
$0.17 per diluted share, compared to net income of $6.1 million, or $0.11
per  diluted share, for the same period  of  1998.  Net  income  in  1998
included an extraordinary charge for the write-off of deferred loan costs
of $1.2  million  (net  of tax benefits of $816,000), or $0.02 per share,
relating to the credit facility  in  existence  prior  to March 30, 1998.
Weighted  average  common  and common equivalent shares outstanding  were
55.1  million  and 57.5 million  in  1999  and  1998,  respectively.  The
decrease  in  weighted   average  common  and  common  equivalent  shares
outstanding resulted from  the  effect of dilutive securities, which were
excluded due to their anti-dilutive effect on 1999 net loss.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had net working  capital  of  $20.4  million at June 30,
1999, a decrease of $2.1 million from $22.5 million at December 31, 1998.
The decrease in net working capital resulted primarily  from  an increase
in accrued expenses for corporate restructuring charges recorded  in June
1999,  which  was  partially offset by a reduction in accounts receivable.
<PAGE> 17
The Company's   long-term  debt  as  a  percentage  of  total  capitalization
increased to  95.5%  at  June 30, 1999, compared to 93.9% at December 31,
1998, as the result of the 1999 year-to-date net loss and from additional
net borrowings under the senior credit facilities.

     The acquisition of the  remaining  50% interest in DHHS in July 1998
and increased efficiency in the utilization  of  the  Company's operating
assets and liabilities contributed to a $5.3 million increase in net cash
provided  by  operating  activities, which was $9.5 million  in  the  six
months ended June 30, 1999  as  compared  to  $4.2  million  for the same
period  in  1998.  Net cash used in investing activities decreased  $38.5
million from  $49.3  million  in 1998 to $10.8 million in 1999 due to (i)
the acquisition of DHHS for $64.8  million  in  1998  partially offset by
(ii) a decrease in proceeds from sale of facilities of  $21.1 million and
(iii)  an  increase  in  property and equipment additions primarily  from
facility  expansions  at  selected   facilities   and  increased  capital
expenditures  in  1999  associated  with  Year 2000 and  computer  system
conversions.  Net cash provided by financing  activities  during 1999 was
$1.7 million as compared to $27.2 million during 1998.  The $25.5 million
decrease  resulted  primarily  from  a  decrease  in acquisition  related
borrowings in 1999 relative to 1998, partially offset  by  a  decrease in
repayments under the revolver portion of the senior credit facilities and
the  payment  of deferred financing costs associated with the refinancing
of the senior credit facility in March 1998.

     Effective June 30, 1999, the Company amended  its senior bank credit
agreement (the "Amended Agreement").  The Amended Agreement provides for,
among other things (i) a 0.25% increase in interest  rates  applicable to
the Company's revolving credit facility and Tranche A term loan  facility
(outstanding borrowings of $88.9 million and $41.8 million, respectively,
at June 30,1999), with such rates subject to an additional 0.25% increase,
retroactive to August 13, 1999, in the event certain asset dispositions do
not  occur,  as  defined, by November 15, 1999 (ii)  a  0.50%  increase  in
the interest rate applicable  to  the  Company's Tranche B term loan facility
(outstanding borrowings of $69.5 million at June 30, 1999), with such rates
subject to an additional 0.50% increase, retroactive to August 13, 1999, in the
event certain asset dispositions do not occur,  as  defined, by November 15,
1999 (iii) a change in certain financial covenants for the last three quarters
of  1999,  (iv) a reduction  in  the  revolving  credit loan commitments for
any prepayment made in connection with an asset disposition, as defined, (v) an
increase in permitted letters of credit from  $25.0  million  to $26.0 million
and (vi) approval of certain asset dispositions, as defined.  Pursuant to the
Amended Agreement, the interest rates, as adjusted, in effect on June 30,
1999 were 8.33% under the revolving credit facility and  Tranche  A  term
loan facility and 8.58% under Tranche B term loan facility.

     At  June  30, 1999, the Company was  in  compliance  with  all  debt
covenants to which  it  was  subject  under  the  Amended Agreement.  The
Company's continued compliance with its debt covenants  is  predicated on
its  ability to maintain certain levels of operating performance  and  on
its ability  to  sell  certain  assets to reduce debt.  If the Company is
unable to meet these objectives, it will be required to seek waivers from
its lenders in the future.  However,  there  can be no assurance that the
Company will be able to obtain such waivers, if needed.

     In  June 1999, the Company recorded a corporate restructuring charge
of $5.5 million in connection with its effort to further reduce corporate
overhead  through  the  consolidation  and/or  elimination  of  corporate
functions and  contracts  and a reduction of corporate office space under
lease.  Such charge included $2.2 million for employee termination costs,
$1.3  million for the cancellation  of  various  leases  and  maintenance
contracts  and $2.0 million for the write-down of certain deferred costs,
leasehold improvements  and redundant equipment.  Management expects that
approximately $3.5 million,  which  represented  the  cash portion of the
restructuring charge, will be paid in the second half of this year.

     Effective  July 21, 1999, the Company received  waivers  to  certain
provisions of the  Amended  Agreement  to permit the global settlement of
the putative class and derivative actions  arising  out  of the Company's
<PAGE> 18
August 1996 merger with Champion and  two  related public  offerings.  The
terms of the global settlement were described  in detail in the Company's
Annual  Report  on  Form 10-K filed on April 13, 1999.

     As of August 16, 1999, the Company had $22.5  million  available for
borrowings  under  the  revolver portion of its senior credit facilities,
subject  to  the terms thereof,  to  fund  future  capital  expenditures,
working capital  requirements  and  the  issuance  of  letters of credit.
Additionally,   approximately   $14.6  million  remained  available   for
borrowings  under  the  commercial  paper   program,   subject   to   the
availability of the eligible accounts receivable.

     Effective August 16, 1999, the Company entered into a definitive
agreement to transfer the stock of its subsidiary which will hold substantially
all the assets of the Company's five Utah hospitals with 640 licensed beds,
including PHC Regional Hospital and Medical Center which has been closed
since June 1997, to an unrelated third-party.  The consideration for the
transfer includes a combination of cash and a minority interest in the
transferred subsidiary.  When completed, the transaction will eliminate
indebtedness currently outstanding under the senior credit facilities, reduce
borrowings under the commercial paper financing program and provide additional
capital for working capital needs and investment in existing markets.  The
transaction is subject to regulatory approvals and the normal due diligence.
The Company expects the transfer to be completed in the fourth quarter of 1999.
However, there can be no assurance on the final outcome of the due diligence
process or that the terms and conditions of the definitive agreement will be
satisfactorily fulfilled.

     The  Company  anticipates  that  internally  generated   cash  flows  from
earnings, existing cash balances, borrowings under the senior credit facilities
and the commercial paper program, proceeds from the sale of facilities,  income
tax refunds and permitted equipment leasing arrangements will be sufficient  to
fund  future  capital  and  Year  2000 expenditures (see "Year 2000" discussion
below)  and  working  capital requirements  through  1999.   There  can  be  no
assurance that the above sources will sufficiently fund the Company's liquidity
needs or that future developments  in the hospital industry or general economic
trends will not adversely affect the Company's operations or its liquidity.

LITIGATION

     On July 22, 1999, the United States  District Court for the Southern
District of Texas granted final approval of  the global settlement of the
putative class and derivative actions arising out of the Company's August
1996 merger with Champion and two related public offerings.  The terms of
the  global settlement were described in detail  in  the  Company's  1998
Annual  Report  on  Form 10-K.  The court's approval is subject to appeal
for a period of thirty  days.   Barring  any appeals, the settlement will
take effect ten days after the expiration of the appeal period.

     The Company is subject to claims and  legal  actions by patients and
others in the ordinary course of business.  The Company believes that all
such  claims and actions are either adequately covered  by  insurance  or
will not  have  a  material  adverse  effect  on  the Company's financial
condition, results of operations or liquidity.

YEAR 2000

     The following discussion updates a more complete  disclosure  of the
Company's Year 2000 project plan previously reported in the 1998 Form 10-
K.   The Company is on track with its Year 2000 seven-phase project plan.
As previously reported, the Company completed the first two phases of the
project  plan.  Phases  three and four involving vendor certification and
developing  test plans and  compliance  criteria  for  all  patient  care
critical and  operations  critical  items are completed. The fifth phase,
which includes testing all patient care  critical  or operations critical
systems and identifying/replacing non-compliant items,  is  substantially
completed  and  documented  in  the  Company's Year 2000 data repository.
Non-compliant patient care or operation critical systems have either been
replaced  or  the  Company  is  in  the process  of  approving/  ordering
<PAGE> 19
replacement systems. The Company has  also  received vendor certification
from  a  majority of the critical suppliers and  third  parties  such  as
fiscal intermediaries,  insurance  companies,  banks  and local community
service providers.

     The sixth phase, which involves developing contingency plans, is in
process and  is  scheduled  for  completion  in the third quarter of  1999. The
Company  has  established  and communicated  a  master  contingency  plan
guideline to all facilities  and  the  corporate  office  requiring  each
functional  department  to  develop  and  document  alternative  means to
address all identifiable types of Year 2000 disruptions.  The contingency
plan,  by  functional department, will include the identification of  (i)
core functions  and  related  supporting  mission-critical  systems, (ii)
procedures to detect data corruption and manual/replacement procedures to
execute  in  the  event  of  system  malfunction,  (iii)  loss impact  of
potential  failures  on  departmental  core functions and procedures  for
restoring data loss, (iv) a supply chain  readiness  assessment  for  all
critical suppliers, (v) a staffing plan during the weekend of the century
change  and  the scheduling of Year 2000 critical personnel to assist and
coordinate activities  in the event of system malfunctions (vi) emergency
notification procedures with the Corporate command center and with points
of contact, including vendors,  customers  and/or  legal  counsel,  (vii)
backup  procedures  for  all  critical  physical  facility  equipment and
systems  including  heating,  water  supply, electrical power, elevators,
fire detection and security, and increased  fuel  resources  for extended
usage of emergency power, and (viii) validation plan to ensure  that  the
contingency  plan  is  realistic  and  executable.  The seventh and final
phase  which  focuses  on  identifying and correcting  any  unpredictable
malfunction in the systems and equipment will be conducted throughout the
second half of the year, as planned.

     Based  on  existing  information,  the  Company  believes  that  its
estimate of Year 2000 total  costs  in the range of $8.0 million to $10.0
million,  as  previously  reported  in  the   1998   Form  10-K,  remains
appropriate.   To  date,  the  Company  has  incurred approximately  $5.5
million  in  capital  expenditures  on replacement  systems  and  capital
projects that would have been undertaken  notwithstanding  the  Year 2000
compliance program, but the timing of which was accelerated.  The Company
has  also  incurred  approximately  $1.0  million  in  expenses  to date,
including  approximately  $400,000 associated with the write-off of  non-
compliant systems, which were or will be replaced. The Company expects to
incur the remainder of the  projected  cost, estimated at $1.5 million to
$3.5  million,  in the latter half of 1999.   The  Company  continues  to
review its Year 2000 total cost estimate as appropriate.  There can be no
assurance that the total projected Year 2000 costs, as reported, will not
differ materially from the actual costs incurred by the Company.

     The foregoing assessment is based on information currently available
to the Company. The  Company  can provide no assurances that applications
and equipment the Company believes  to  be  Year  2000 compliant will not
experience   difficulties  or  that  the  Company  will  not   experience
difficulties obtaining  resources  needed  to  make  modifications  to or
replace  the  Company's  affected  systems and equipment.  Failure by the
Company or third parties on which it  relies  to resolve Year 2000 issues
could  have  a  material  adverse  effect  on  the Company's  results  of
operations and its ability to provide health care services. Consequently,
the Company can give no assurances that issues related  to Year 2000 will
not  have a material adverse effect on the Company's financial  condition
or results of operations.

REGULATORY MATTERS

     Because  of  national,  state and private industry efforts to reform
healthcare delivery and payment  systems,  the  healthcare  industry as a
whole  faces  increased  uncertainty.  The  Company  is unable to predict
whether  any  other  healthcare legislation at the federal  and/or  state
level will be passed in  the  future  and  what  action  it  may  take in
response  to  such  legislation, but it continues to monitor all proposed
legislation and analyze  its  potential  impact in order to formulate its
<PAGE> 20
future business strategies.


PART II.     OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

     On July 22, 1999, the United States District  Court for the Southern
District of Texas granted final approval of the global  settlement of the
putative class and derivative actions arising out of the Company's August
1996 merger with Champion and two related public offerings.  The terms of
the  global  settlement  were  described in detail in the Company's  1998
Annual Report on Form 10-K.  The  court's  approval  is subject to appeal
for  a period of thirty days.  Barring any appeals, the  settlement  will
take effect ten days after the expiration of the appeal period.

     The  Company  is subject to claims and legal actions by patients and
others in the ordinary course of business.  The Company believes that all
such claims and actions  are  either  adequately  covered by insurance or
will  not  have  a  material  adverse  effect on the Company's  financial
condition, results of operations or liquidity.
ITEM 2.       CHANGE IN SECURITIES

None.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.       OTHER INFORMATION

None.

ITEM 6.        EXHIBITS AND REPORT ON FORM 8-K

(c) Exhibits

3.1   Amended  and  Restated Bylaws of Paracelsus  Healthcare  Corporation
      dated March 24, 1999.

10.76 Employment agreement effective July 1, 1999 between James G.
      VanDevender and Paracelsus Healthcare Corporation.*

10.77 Third Amendment to Amended and Restated Credit Agreement and
      Approval of Asset Dispositions effective June 30, 1999.

10.78 Shareholder Agreement  dated  March 19, 1999, between Park-Hospital
      GmbH and Paracelsus Healthcare Corporation.

10.79 Settlement Agreement dated March  24, 1999, by and among the former
      shareholders of Champion Healthcare Corporation, Park-Hospital GmbH,
      Dr. Manfred Georg Krukemeyer, and Paracelsus Healthcare Corporation.

10.80 Stipulation of Settlement dated May 11, 1999, by and  among  plaintiffs,
      individually and  as representatives of the Class, as defined, Paracelsus
     Healthcare Corporation,  Manfred  G.  Krukemeyer, R.J. Messenger, James T.
     Rush, Charles R. Miller, James G. VanDevender,  the Champion Shareholders,
     as  defined, Park-Hospital GmbH, Donaldson Lufkin  &  Jenrette  Securities
     Corporation,  Bear  Stearns  & Co., Inc., Smith Barney, Inc., and ABN AMRO
     Chicago Corporation in connection  with  the  litigation  captioned  IN RE
     PARACELSUS  CORP.  SECURITIES  LITIGATION,  Master File No. H-96-3464 (EW)
     filed with the United States District Court for  the  Southern District of
     Texas.

10.81 Settlement Agreement dated March 17, 1999, by and between  James G.
     Caven  and  Robert  Orovitz,  derivatively  on  behalf  of  Champion
     Healthcare   Corporation   and  double  derivatively  on  behalf  of
     Paracelsus    Healthcare    Corporation;    Paracelsus    Healthcare
     Corporation;  the  former  shareholders   of   Champion   Healthcare
     Corporation;   Park-Hospital   GmbH;  Donaldson  Lufkin  &  Jenrette
     Securities Corporation; Bears Stearns & Co.; Smith Barney, Inc.; and
     ABN AMRO Chicago Corporation; Manfred  Georg  Krukemeyer; Charles R.
     Miller; James G. VanDevender; Ronald R. Patterson;  R.J.  Messenger;
     James  T.  Rush; Robert C. Joyner; Michael D. Hofmann; Christian  A.
     Lange; and Scott K. Barton.

27        Financial Data Schedule.

---------------------------------------------------
*   Portions  of  the indicated exhibit have been omitted pursuant to a
    request for confidentiality  treatment  which was filed separately
    with the Securities and Exchange Commission on August 16, 1999.




(b)  Report on Form 8-K

     The Company  filed  on  July 16, 1999, a Current Report on Form 8-K,
dated  July  2,  1999,  reporting   pursuant  to  Item  2,  the  sale  of
substantially  all  of  the  assets of four  skilled  nursing  facilities
located in California effective June 30, 1999.

<PAGE> 21
                            SIGNATURE

Pursuant to the requirements of  the Securities Exchange Act of 1934, the
Registrant has duly caused this report  to be signed on its behalf by the
undersigned thereunto duly authorized.


                                        Paracelsus Healthcare Corporation
                                                  (Registrant)



Dated: August 16, 1999                 By: /S/ JAMES G. VANDEVENDER
                                       ----------------------------
                                           James G. VanDevender
                                          Chief Executive Officer
                                               & Director