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                                                                   EXHIBIT 10.38



SERVICES AGREEMENT

       AGREEMENT (the "Agreement") made as of this 17th day of July, 1996
between Paracelsus Healthcare Corporation, a California corporation (the
"Company"), and Dr. Manfred George Krukemeyer.

       WHEREAS, the Company desires to benefit from the experience and ability
of Dr. Krukemeyer as a provider of management and strategic advisory services
(the "Services") to the Company following the closing of the proposed merger
transaction among the Company, Champion Healthcare Corporation, a Delaware
corporation ("Champion"), and PC Merger Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of the Company, whereby Champion will become a wholly
owned subsidiary of the Company (the "Merger"); and

       WHEREAS, Dr. Krukemeyer is willing to commit himself to provide the
Services to the Company on the terms and conditions provided herein.

       NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:

 1.  Retention as Service-Provider.  Subject to the closing of the Merger, the
Company shall retain Dr. Krukemeyer and Dr. Krukemeyer shall serve the Company
as an independent service-provider on the terms and conditions set forth
herein.

 2.  Service Period.  The period (the "Service Period") during which Dr.
Krukemeyer shall provide the Services to the Company shall commence on the date
of closing (the "Closing Date") of the Merger and shall end on the date that is
ten (10) years following the Closing Date, or, if earlier, on the date of Dr.
Krukemeyer's death or permanent disability; provided, however, that in the
event the Merger is abandoned or otherwise does not close, the Agreement will
thereupon terminate without further obligation by either party hereto. For
purposes of this Agreement, any determination of permanent disability shall be
made by a physician selected by the Company and reasonably acceptable to Dr.
Krukemeyer, whose approval shall not be unreasonably withheld; provided,
however, that the selection of such physician (i) shall be made in consultation
with Dr. Krukemeyer and (ii) shall not (x) unreasonably require Dr. Krukemeyer
to travel in order to be examined, (y) result in an unreasonable infringement
of Dr. Krukemeyer's privacy, or (z) otherwise result in any unreasonable
hardship to Dr. Krukemeyer.

 3.  Duties.  During the Service Period, Dr. Krukemeyer shall provide such
Services to the Company as may be reasonably requested by the Company and
agreed to by Dr. Krukemeyer.

 4.  Place of Performance.  Dr. Krukemeyer may perform his duties hereunder at
such locations as are acceptable to Dr. Krukemeyer and the Company or by
telephone consultation, written communication and/or by fax or other suitable
means as appropriate. Dr. Krukemeyer shall be permitted flexibility to schedule
the provision of the Services.

 5.  Compensation.  As compensation for the Services to be rendered by Dr.
Krukemeyer, the Company shall pay Dr. Krukemeyer a fee, payable quarterly in
advance, at the rate of U.S. $1 million per year during the Service Period.
Such compensation payments shall continue to be made in full through the end of
the Service Period notwithstanding any condition of temporary
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disability or other event which may render Dr. Krukemeyer temporarily unable to
provide the Services at any time or from time to time during the Service
Period.

 6.  Successors; Binding Agreement.  The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Paragraph 6 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.

 7.  Notice.  Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given upon
(a) transmitter's confirmation of a receipt of a facsimile transmission, (b)
confirmed delivery by a standard overnight carrier or (c) the expiration of
five business days after the day when mailed by certified or registered mail,
postage prepaid, addressed as follows (or at such other address as the parties
hereto shall specify by like notice):

       If to Dr. Krukemeyer:

                 Dr. Manfred George Krukemeyer
                 AM Nastruper Holz 69
                 4500 Osnabruck
                 D-49076 Osnabruck
                 Federal Republic of Germany
                 Telecopier No. (011) 49-541-966-4006

         with a copy to:

                 R.J. Messenger
                 155 North Lake Avenue, Suite 1100
                 Pasadena, CA  91101
                 Telecopier No.: (818) 578-6380

         and to:

                 Dr. Meyer uu Locebick
                 Sozietat Dr. H. Mertens
                 Telecopier No.  (011) 49-541-331-1616
                 Attention:

         If to the Company:

                 Paracelsus Healthcare Corporation
                 515 West Greens Road, Suite 800
                 Houston, TX  77067
                 Attention:       Robert C. Joyner
                                  Vice President and General Counsel
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         with a copy to:

                 Skadden, Arps, Slate, Meagher & Flom
                 300 South Grand Avenue, Suite 3400
                 Los Angeles, California  90071
                 Telecopier No.:  (213) 687-5600
                 Attention: Thomas C. Janson, Jr.

 8.  Withholding.  All amounts payable hereunder shall be subject to such
withholding taxes, if any, as may be required by law. Prior to making the
payments required hereunder, the Company will in good faith discuss with Dr.
Krukemeyer's advisors the appropriate withholding level.

 9.  Modification of Agreement; Governing Law; Venue.  No provisions of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in a writing signed by Dr. Krukemeyer
and such officer of the Company as may be specifically designated by the Board.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of any similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement.  The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without regard to its conflicts of law principles. The
parties hereby irrevocably submit to the jurisdiction of the courts of the
State of New York and the Federal courts of the United States of America
located in the State of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement, and in respect of the
transactions contemplated hereby, and hereby waive, and agree not to assert, as
a defense in any action, suit or proceeding for the interpretation or
enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be
appropriate or that this Agreement or any such document may not be enforced in
or by such courts, and the parties hereto irrevocably agree that all claims
with respect to such action or proceeding shall be heard and determined in such
a New York State or Federal court. The parties hereby consent to and grant any
such court jurisdiction over the person of such parties and over the subject
matter of such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
7 shall be valid and sufficient service thereof.

 10.  Validity.  The validity or enforceability of any provision or provisions
of this Agreement shall not be affected by the invalidity or unenforceability
of any other provision of this Agreement and such valid and enforceable
provisions shall remain in full force and effect.

 11.  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.

 12.  Entire Agreement.  This Agreement sets forth the entire agreement of the
parties hereto with respect to the subject matter contained herein and
supersedes all prior agreements, promises,
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covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party
hereto; and any other prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.

                                    PARACELSUS HEALTHCARE                       
                                                                                
                                    By:      \s\ Ronald J. Messenger            
                                             -----------------------------------
                                    Name:    R. J. Messenger                    
                                    Title:   President & Chief Executive Officer
                                                                                
                                    \s\ Dr. Manfred G. Krukemeyer               
                                    --------------------------------------------
                                    Dr. Manfred George Krukemeyer