<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   (Mark One)

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2001

                                       OR

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

         For the transition period from _____________ to _____________.

                        COMMISSION FILE NUMBER: 333-94521

                          IASIS HEALTHCARE CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

                   DELAWARE                                76-0450619
        (State or Other Jurisdiction of                (I.R.S. Employer
         Incorporation or Organization)               Identification No.)

                         113 SEABOARD LANE, SUITE A-200
                            FRANKLIN, TENNESSEE 37067
                    (Address of Principal Executive Offices)

                                 (615) 844-2747
              (Registrant's Telephone Number, Including Area Code)

                                 NOT APPLICABLE
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)



     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, 2001, 31,932,529 shares of the Registrant's Common Stock
were outstanding.


<PAGE>   2



                                TABLE OF CONTENTS






<TABLE>
<S>                                                                                                                      <C>
PART I.    FINANCIAL INFORMATION......................................................................................... 1

           ITEM 1.  FINANCIAL STATEMENTS:
                    Condensed and Consolidated Balance Sheets at June 30, 2001 (Unaudited) and September 30, 2000........ 1

                    Condensed and Consolidated Statements of Operations (Unaudited) -- Three
                    Months Ended June 30, 2001 and 2000 and Nine Months Ended June 30, 2001 and 2000..................... 2

                    Condensed and Consolidated Statements of Cash Flows (Unaudited) -- Nine
                    Months Ended June 30, 2001 and 2000.................................................................. 3

                    Notes to Unaudited Condensed and Consolidated Financial Statements................................... 4

           ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................12

           ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........................................24

PART II.   OTHER INFORMATION.............................................................................................24

           ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.....................................................................24
</TABLE>









<PAGE>   3
                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                          IASIS HEALTHCARE CORPORATION
                    CONDENSED AND CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                               (UNAUDITED)
                                                                                 JUNE 30,         SEPTEMBER 30,
                                                                                   2001               2000
                                                                                   ----               ----
                              ASSETS
<S>                                                                              <C>               <C>
       Current assets:
           Cash and cash equivalents ....................................        $   4,623         $      --
           Accounts receivable, net of allowance for doubtful
                  accounts of $25,135 and $31,403, respectively .........          151,853           146,744
           Inventories ..................................................           23,240            19,874
           Current deferred tax assets ..................................               --             1,146
           Prepaid expenses and other current assets ....................           17,781            12,574
           Assets held for sale .........................................           24,649               607
                                                                                 ---------         ---------
               Total current assets .....................................          222,146           180,945

       Property and equipment, net ......................................          334,806           361,293
       Goodwill and other intangibles, net ..............................          295,080           302,380
       Deferred debt financing costs, net ...............................           20,703            23,472
       Deferred tax assets ..............................................            2,036             2,036
       Other assets .....................................................            3,034             3,713
                                                                                 ---------         ---------

               Total assets .............................................        $ 877,805         $ 873,839
                                                                                 =========         =========

                    LIABILITIES AND STOCKHOLDERS' EQUITY
       Current liabilities:
           Accounts payable .............................................        $  42,553         $  31,707
           Salaries and benefits payable ................................           19,317            13,040
           Accrued interest payable .....................................           11,374            20,020
           Medical claims payable .......................................           19,009            16,530
           Other accrued expenses and other current liabilities .........           25,194            20,739
           Current portion of accrued loss on discontinued operations ...            1,954             4,008
           Current portion of long-term debt and capital lease
                obligations .............................................           12,850             9,883
                                                                                 ---------         ---------
               Total current liabilities ................................          132,251           115,927

       Long-term debt and capital lease obligations .....................          553,889           547,771
       Other long-term liabilities ......................................           16,535            13,372
       Minority interest ................................................            4,285             2,060
       Mandatorily redeemable Series A preferred stock-- $.01 par
           value, authorized 500,000 shares; no shares issued and
           outstanding at June 30, 2001 and 160,000 shares at
           September 30, 2000 ...........................................               --           183,199
       Mandatorily redeemable Series B preferred stock -- $.01 par value,
           authorized 50,000 shares; no shares issued and
           outstanding at June 30, 2001 and 5,311 shares at
           September 30, 2000 ...........................................               --             6,079
                                                                                 ---------         ---------
               Total liabilities ........................................          706,960           868,408

       Stockholders' equity:
           Preferred stock, $.01 par value, authorized 5,000,000
               shares; no shares issued and outstanding at June 30, 2001
               and September 30, 2000 ...................................               --                --
           Common stock -- $.01 par value, authorized 100,000,000 shares;
               31,961,445 shares issued and 31,932,529 shares outstanding
               at June 30, 2001; 14,404,288 shares issued and
               outstanding at September 30, 2000, respectively ..........              319               144
           Nonvoting common stock--$.01 par value, authorized
               10,000,000 shares; no shares issued and outstanding
               at June 30, 2001 and at September 30, 2000 ...............               --                --
           Additional paid-in capital ...................................          450,496           259,654
           Treasury stock, at cost, 16,306,541 shares at June 30,
               2001 and 16,277,625 shares at September 30, 2000 .........         (155,300)         (155,025)
           Accumulated deficit ..........................................         (124,670)          (99,342)
                                                                                 ---------         ---------
                  Total stockholders' equity ............................          170,845             5,431
                                                                                 ---------         ---------
                  Total liabilities and stockholders' equity ............        $ 877,805         $ 873,839
                                                                                 =========         =========
     </TABLE>



                             See accompanying notes


                                       1


<PAGE>   4


                          IASIS HEALTHCARE CORPORATION
         CONDENSED AND CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                   JUNE 30,                       JUNE 30,
                                                             2001           2000           2001           2000
                                                             ----           ----           ----           ----
<S>                                                       <C>             <C>             <C>             <C>
Net revenue ........................................      $ 216,975       $ 210,879       $ 668,963       $ 609,087

Costs and expenses:
    Salaries and benefits ..........................         79,205          75,375         237,520         209,652
    Supplies .......................................         34,810          31,691         100,397          92,592
    Other operating expenses .......................         67,215          61,414         195,363         170,717
    Provision for bad debts ........................         18,578          14,879          55,148          43,928
    Interest, net ..................................         15,726          16,132          49,583          45,577
    Depreciation and amortization ..................         12,372          12,753          40,339          34,248
    Provision for asset revaluation, closure and
      other costs ..................................         16,612              --          16,612              --
    Recapitalization costs .........................             --              --              --           3,478
                                                          ---------       ---------       ---------       ---------
      Total costs and expenses .....................        244,518         212,244         694,962         600,192
                                                          ---------       ---------       ---------       ---------
Earnings (loss) from continuing operations before
      minority interests and income taxes ..........        (27,543)         (1,365)        (25,999)          8,895
Minority interests .................................            156             210             329             252
                                                          ---------       ---------       ---------       ---------
Earnings (loss) from continuing operations
      before income taxes ..........................        (27,699)         (1,575)        (26,328)          8,643
Income tax expense .................................             --              --              --           2,853
                                                          ---------       ---------       ---------       ---------
      Net earnings (loss) from continuing operations        (27,699)         (1,575)        (26,328)          5,790
Discontinued operations:
Reversal of excess loss accrual for discontinued
      physician practice operations ................          1,000              --           1,000              --
Earnings (loss) from operations of discontinued
      physician practice operations ................             --             787              --          (2,115)
                                                          ---------       ---------       ---------       ---------
      Net earnings (loss) ..........................        (26,699)           (788)        (25,328)          3,675
Preferred stock dividends accrued (reversed)
      and accretion ................................             --           6,627         (25,348)         18,775
                                                          ---------       ---------       ---------       ---------
Net earnings (loss) attributable to common
      stockholders .................................      $ (26,699)      $  (7,415)      $      20       $ (15,100)
                                                          =========       =========       =========       =========
</TABLE>


                             See accompanying notes






                                       2
<PAGE>   5


                          IASIS HEALTHCARE CORPORATION
         CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)




<TABLE>
<CAPTION>
                                                                          NINE MONTHS ENDED
                                                                               JUNE 30,
                                                                         2001           2000
                                                                         ----           ----
<S>                                                                  <C>             <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
     Net earnings (loss) ......................................      $ (25,328)      $   3,675
     Adjustments to reconcile net earnings (loss) to net
     cash provided by (used in) operating activities:
       Depreciation and amortization ..........................         40,339          34,248
       Minority interests .....................................            329             252
       Gain on sale of property and equipment .................            (52)             --
       Reversal of excess loss accrual ........................         (1,000)             --
       Provision for asset revaluation and closure costs ......         11,900              --
       Changes in operating assets and liabilities,
         net of the effect of acquisitions and dispositions:
         Accounts receivable ..................................         (5,905)       (117,491)
         Inventories, prepaid expenses and other current assets         (4,068)        (19,710)
         Accounts payable and other accrued liabilities .......          7,841          42,299
         Accrued loss on discontinued operations ..............         (2,772)             --
                                                                     ---------       ---------
       Net cash provided by (used in) operating activities ....         21,284         (56,727)
                                                                     ---------       ---------
 CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment ......................        (29,269)        (36,910)
     Proceeds from sale of property and equipment .............            536              --
     Payments for acquisitions and dispositions, net ..........           (101)       (433,401)
     Change in other assets ...................................              4          (1,339)
                                                                     ---------       ---------
       Net cash used in investing activities ..................        (28,830)       (471,650)
                                                                     ---------       ---------
 CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from credit facility ............................             --         160,000
     Proceeds from issuance of preferred stock ................             --         160,000
     Proceeds from issuance of common stock ...................          1,900              --
     Repurchase of common stock ...............................             --        (155,025)
     Proceeds from senior bank debt borrowings ................        124,000         330,000
     Proceeds from issuance of senior subordinated notes ......             --         230,000
     Payment of debt and capital leases .......................       (115,428)       (164,010)
     Common and preferred stock issuance costs incurred .......             --          (2,625)
     Debt financing costs incurred ............................             --         (26,618)
     Other ....................................................          1,697              --
                                                                     ---------       ---------
       Net cash provided by financing activities ..............         12,169         531,722
                                                                     ---------       ---------
 Increase in cash and cash equivalents ........................          4,623           3,345
 Cash and cash equivalents at beginning of the period .........             --              --
                                                                     ---------       ---------
 Cash and cash equivalents at end of the period ...............      $   4,623       $   3,345
                                                                     =========       =========

 Supplemental disclosure of cash flow information:
     Cash paid for interest ...................................      $  58,080       $  40,085
                                                                     =========       =========
     Cash paid for income taxes, net of refunds ...............      $   2,262       $      --
                                                                     =========       =========
 Supplemental schedule of investing activities:
     Effects of acquisitions and dispositions, net:
       Assets (acquired) disposed of, net of cash .............      $     853       $(481,531)
       Liabilities assumed (paid) .............................           (679)         38,670
       Issuance (repurchase) of preferred and common stock,
           net ................................................           (275)          9,460
                                                                     ---------       ---------

         Payments for acquisitions and dispositions, net ......      $    (101)      $(433,401)
                                                                     =========       =========
 Supplemental schedule of noncash investing and financing
   activities:
     Capital lease obligations incurred to acquire equipment ..      $     667       $     179
                                                                     =========       =========
     Exchange of preferred stock for common stock .............      $ 189,278       $      --
                                                                     =========       =========
</TABLE>


                             See accompanying notes


                                       3
<PAGE>   6


                          IASIS HEALTHCARE CORPORATION
                  NOTES TO UNAUDITED CONDENSED AND CONSOLIDATED
                              FINANCIAL STATEMENTS


1.       BASIS OF PRESENTATION

         The unaudited condensed and consolidated financial statements include
the accounts of IASIS Healthcare Corporation ("IASIS" or "the Company")
(formerly known as Paracelsus Utah Facilities, the Company's predecessor entity)
and its wholly owned subsidiaries and have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial reporting and in accordance with Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
accounting principles generally accepted in the United States for complete
financial statements. The balance sheet at September 30, 2000 has been derived
from the audited financial statements at that date but does not include all of
the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. For further
information, refer to the consolidated and combined financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 2000.

         In the opinion of management, the accompanying unaudited condensed and
consolidated financial statements contain all material adjustments (consisting
of normal recurring items) necessary for a fair presentation of results for the
interim periods presented. The results of operations for any interim period are
not necessarily indicative of results for the full year.

         The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the accompanying unaudited condensed and consolidated financial statements and
notes. Actual results could differ from those estimates.

         Certain prior period amounts have been reclassified in order to conform
to current period presentation. Such reclassifications had no material effect on
the financial position and results of operations as previously reported.

         IASIS operates networks of medium-sized hospitals in high-growth urban
and suburban markets. At June 30, 2001, the Company owned or leased 14 hospitals
with a total of 2,152 beds in service. The Company's hospitals are located in
four regions:

         -        Salt Lake City, Utah;
         -        Phoenix, Arizona;
         -        Tampa-St. Petersburg, Florida; and
         -        three cities in the State of Texas, including San Antonio.

         The Company also operates five ambulatory surgery centers and a
Medicaid managed health plan called Health Choice that serves over 44,500
members in Arizona.

2.       RECAPITALIZATION AND ACQUISITION TRANSACTIONS

         IASIS was formed in October 1999 through a series of transactions that
were arranged by Joseph Littlejohn & Levy, Inc. and members of the Company's
management team. Joseph Littlejohn & Levy is the private equity firm that
controls JLL Healthcare, LLC, the Company's largest stockholder.

RECAPITALIZATION

         Effective October 8, 1999, Paracelsus Healthcare Corporation
("Paracelsus") and unrelated third parties recapitalized five acute care
hospitals (Paracelsus Utah Facilities) in the Salt Lake City, Utah market owned
by a subsidiary of Paracelsus valued at $287.0 million, net of a working capital
adjustment of $1.0 million. In connection with the recapitalization, JLL
Healthcare, LLC and some of the Company's stockholders purchased 1,250,000
shares



                                       4
<PAGE>   7
                          IASIS HEALTHCARE CORPORATION
                  NOTES TO UNAUDITED CONDENSED AND CONSOLIDATED
                              FINANCIAL STATEMENTS


of the outstanding common stock of the Paracelsus subsidiary for an aggregate of
$125.0 million. The subsidiary then repurchased $155.0 million of its common
stock from Paracelsus, which is being held as treasury stock at June 30, 2001.
The recapitalization transaction resulted in Paracelsus retaining an
approximately 6% minority interest at an implied value of approximately $8.0
million in the subsidiary. After the recapitalization, the former Paracelsus
subsidiary changed its name to IASIS Healthcare Corporation and changed its
fiscal year end to September 30. The Company's $155.0 million purchase of its
own stock was financed with a $160.0 million credit facility, which was
subsequently repaid concurrent with the Company's issuance of preferred stock,
offering of senior subordinated notes and borrowing under a bank credit
facility. The Company expensed legal, accounting and other related costs of
approximately $3.5 million associated with the recapitalization during the
fiscal year ended September 30, 2000.

THE TENET ACQUISITION

         Effective October 15, 1999, the Company acquired ten acute care
hospitals and other related facilities and assets ("Tenet hospitals") from Tenet
Healthcare Corporation ("Tenet") for approximately $431.8 million in cash and
approximately $41.2 million in assumed liabilities. The Company did not acquire
accounts receivable from Tenet but financed the related growth in working
capital with proceeds from borrowings under its bank credit facilities and other
sources of capital.

MANAGEMENT COMPANY ACQUISITION

         Concurrent with the Tenet transaction, a company formed by members of
the Company's management to acquire and operate hospitals and related businesses
was merged with and into a wholly owned subsidiary of the Company. In the
merger, stockholders of this company received shares of the Company's common
stock and preferred stock with a total value of approximately $9.5 million.

OTHER INFORMATION

         The following table summarizes the allocation of the aggregate purchase
price of the acquisitions (in thousands):

<TABLE>
<CAPTION>
                                                                 MANAGEMENT
                                              TENET HOSPITALS      COMPANY           TOTAL
                                              ---------------    ----------        ---------
<S>                                           <C>                <C>               <C>
Purchase price, including direct costs of
   acquisition ..........................        $ 436,918         $ 9,460         $ 446,378

Identifiable assets acquired ............          220,850             289           221,139
Liabilities assumed .....................          (41,203)           (150)          (41,353)
                                                 ---------         -------         ---------
     Identifiable net assets acquired ...          179,647             139           179,786
                                                 ---------         -------         ---------

Goodwill ................................        $ 257,271         $ 9,321         $ 266,592
                                                 =========         =======         =========
</TABLE>

         Direct costs of acquisitions of approximately $5.1 million were
capitalized as a component of the purchase price and primarily consisted of
legal fees, professional and accounting fees and other costs related to the
transactions.

         The Tenet transaction and merger with a company formed by members of
the Company's management were accounted for using the purchase method of
accounting. The operating results of the acquired companies have been included
in the accompanying unaudited condensed and consolidated statements of
operations from their date of acquisition, October 15, 1999.



                                       5

<PAGE>   8

                          IASIS HEALTHCARE CORPORATION
                  NOTES TO UNAUDITED CONDENSED AND CONSOLIDATED
                              FINANCIAL STATEMENTS


3.       LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                           JUNE 30,      SEPTEMBER 30,
                                             2001            2000
                                             ----            ----
<S>                                        <C>           <C>
          Bank facilities .........        $335,750        $326,668
          Senior subordinated notes         230,000         230,000
          Capital lease obligations             989             986
                                           --------        --------
                                            566,739         557,654
          Less current maturities .          12,850           9,883
                                           --------        --------
                                           $553,889        $547,771
                                           ========        ========
</TABLE>


BANK FACILITIES

         Under a credit facility dated October 15, 1999, a syndicate of lenders
made a total of $455.0 million available to the Company in the form of an $80.0
million tranche A term loan, a $250.0 million tranche B term loan and a $125.0
million revolving credit facility (collectively, the "Bank Facilities").

         At June 30, 2001, amounts outstanding under the tranche A and tranche B
term loans were $75.0 million and $246.3 million, respectively. At June 30,
2001, the Company had drawn $14.5 million under the revolving credit facility
and had issued approximately $34.6 million in letters of credit, resulting in
remaining availability under the revolving credit facility of approximately
$75.9 million. The revolving credit facility includes a $75.0 million sub-limit
for letters of credit that may be issued by the Company. Repayments under the
term loans are due in quarterly installments. In addition, the loans under the
Bank Facilities are subject to mandatory prepayment under specific
circumstances, including from a portion of excess cash flow and the net proceeds
of specified casualty events, asset sales and debt issuances, each subject to
various exceptions. The loans under the Bank Facilities bear interest at
variable rates at specified margins above either Morgan Guaranty Trust Company
of New York's alternate base rate or its reserve-adjusted Eurodollar rate. The
weighted average interest rate on outstanding borrowings under the Bank
Facilities was approximately 10.0% at June 30, 2001. The Company also pays a
commitment fee equal to 0.5% of the average daily amount available under the
revolving credit facility.

         The Bank Facilities require the Company to comply with various
financial ratios and tests and contain covenants limiting the Company's ability
to, among other things, incur debt, engage in acquisitions or mergers, sell
assets, make investments or capital expenditures, make distributions or stock
repurchases and pay dividends. The Bank Facilities are guaranteed by the
Company's subsidiaries and these guaranties are secured by a pledge of
substantially all of the subsidiaries' assets. Substantially all of the
Company's outstanding common stock is pledged for the benefit of the Company's
lenders as security for the Company's obligations under the Bank Facilities.

SENIOR SUBORDINATED NOTES

         On October 13, 1999, the Company issued $230.0 million of 13% senior
subordinated notes due 2009. On May 25, 2000, the Company exchanged all of its
outstanding 13% senior subordinated notes due 2009 for 13% senior subordinated
exchange notes due 2009 that have been registered under the Securities Act of
1933, as amended (the "Notes"). Terms and conditions of the exchange offer were
as set forth in the registration statement on Form S-4 filed with the Securities
and Exchange Commission that became effective on April 17, 2000. The Notes are
unsecured obligations and are subordinated in right of payment to all existing
and future senior indebtedness of the Company. Interest on the Notes is payable
semi-annually.



                                       6
<PAGE>   9
                          IASIS HEALTHCARE CORPORATION
                  NOTES TO UNAUDITED CONDENSED AND CONSOLIDATED
                              FINANCIAL STATEMENTS


         Except with respect to a change of control, the Company is not required
to make mandatory redemption or sinking fund payments with respect to the Notes.
The Notes are guaranteed, jointly and severally, by all of the Company's
subsidiaries ("Subsidiary Guarantors"). The Company is a holding company with no
independent assets or operations apart from its ownership of the Subsidiary
Guarantors. At June 30, 2001, all of the Subsidiary Guarantors were wholly owned
and fully and unconditionally guaranteed the Notes. The indenture for the Notes
contains certain covenants, including but not limited to, restrictions on new
indebtedness, asset sales, capital expenditures, dividends and the Company's
ability to merge or consolidate.

4.       PREFERRED AND COMMON STOCK

         Concurrent with the Tenet transaction, the Company issued 160,000
shares of mandatorily redeemable Series A preferred stock for proceeds, net of
issuance costs, of $158.6 million. In connection with the merger with the
company formed by members of the Company's management, the Company issued 5,311
shares of mandatorily redeemable Series B preferred stock valued at an aggregate
of $5.3 million. On October 26, 2000, all shares of the Company's mandatorily
redeemable Series A and Series B preferred stock were exchanged for shares of
the Company's common stock on the basis of ten common shares for each preferred
share. The preferred stock was exchanged for common stock without benefit to the
preferred stockholders of the accrued dividends, therefore, previously accrued
preferred stock dividends were reversed. The exchange increased the net earnings
available for common stockholders and stockholders' equity by approximately
$25.3 million and $189.3 million, respectively.

         On February 6, 2001, the Company declared a 10.5-for-one stock split of
the outstanding common stock and common stock options effective March 6, 2001.
The financial statements reflect the stock split as a retroactive restatement of
all common stock and common stock options for all periods presented.

         Effective March 6, 2001, the Company amended and restated its
certificate of incorporation to increase the authorized shares of common stock
from 5,000,000 to 100,000,000 shares, increase the authorized shares of
preferred stock from 550,000 to 5,000,000 shares and authorize 10,000,000 shares
of a new class of nonvoting common stock.

5.       ASSET REVALUATION, CLOSURE AND OTHER COSTS

         During the quarter ended June 30, 2001, the Company recorded $11.9
million of charges relating to asset revaluation and closure expenses of Rocky
Mountain Medical Center, $2.5 million of employee severance costs and the
write-off of deferred initial public offering costs totaling $2.2 million.

Asset Revaluation and Closure Costs Related to Rocky Mountain Medical Center

         In the third quarter of fiscal 2001, the Company recorded a pre-tax
asset revaluation charge of approximately $2.8 million related to the closure of
Rocky Mountain Medical Center and revaluation of net assets in conjunction with
their classification as held for sale. At June 30, 2001, Rocky Mountain Medical
Center net assets held for sale consisted of property and equipment and totaled
approximately $24.1 million, net of the asset revaluation allowance.

         The Company adopted and implemented an exit plan and recorded pre-tax
closure charges of approximately $9.1 million in the third quarter of fiscal
2001 with respect to the closure of Rocky Mountain Medical Center. These closure
plans include the involuntary termination of approximately 200 hospital and
business office personnel, which are expected to be completed by September 30,
2001. At June 30, 2001, accrued closure costs totaled approximately $7.9
million. The Company estimates that approximately $5.9 million of the accrued
costs will be paid during the next 12 months. The remaining $2.0 million relates
primarily to long-term facility lease commitments. The following table
summarizes the closure costs accrual and payment activity for the third quarter
of fiscal 2001(in thousands):




                                       7

<PAGE>   10
                          IASIS HEALTHCARE CORPORATION
                  NOTES TO UNAUDITED CONDENSED AND CONSOLIDATED
                              FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
                                               FACILITY AND
                                 SEVERANCE         LEASE         CONTRACT
                                AND RELATED     TERMINATION     TERMINATION      OTHER EXIT
                                   COSTS           COSTS           COSTS            COSTS         TOTAL
                                 ------------------------------------------------------------------------
<S>                             <C>            <C>              <C>              <C>              <C>
Balances at March 31, 2001        $    --         $    --         $    --         $    --         $    --
   Charges ...............          1,475           3,486           2,407           1,693           9,061
   Payments ..............           (691)           (287)           (111)            (51)         (1,140)
                                  -----------------------------------------------------------------------

Balances at June 30, 2001         $   784         $ 3,199         $ 2,296         $ 1,642         $ 7,921
                                  =======================================================================
</TABLE>

         Net revenue and pre-tax losses from Rocky Mountain Medical Center were
$3.2 million and $4.9 million for the three months ended June 30, 2001 and $1.7
million and $3.7 million for the three months ended June 30, 2000. Net revenue
and pre-tax losses from Rocky Mountain Medical Center were $12.9 million and
$14.2 million for the nine months ended June 30, 2001 and $1.7 million and $5.7
million for the nine months ended June 30, 2000.

Other Costs

         The Company recorded employee severance costs of $2.5 million during
the quarter ended June 30, 2001 related to management severance and the
termination of employees in one of its markets. As of June 30, 2001, the Company
had paid approximately $550,000 of these costs.

         On January 22, 2001, the Company filed a Registration Statement on Form
S-1 with the Securities and Exchange Commission, which was amended on February
13, 2001 and March 6, 2001, to register the sale of up to 13,350,000 shares of
its common stock, plus up to an additional 2,002,500 shares pursuant to the
underwriters' over-allotment options, through an underwritten public offering.
On March 9, 2001, the Company postponed the initial public offering of its
common stock. However, the Company has expensed offering costs incurred. As of
June 30, 2001, the Company had paid approximately $800,000 of costs incurred in
conjunction with filing the Registration Statement, and expects to pay up to
$1.4 million of additional costs during the remainder of fiscal 2001.

6.       DISCONTINUED OPERATIONS

         During the fourth quarter of fiscal 2000, the Company implemented plans
to sell its physician practice operations and close related practice support
offices during fiscal 2001, resulting in an estimated loss on sale and closure
of $7.4 million in the fiscal year ended September 30, 2000. The operating
results of the physician practice operations are reflected as discontinued
operations in the accompanying unaudited condensed and consolidated statements
of operations. The Company estimated losses of approximately $900,000 from the
physician practice operations from the date the Company committed itself to the
sale and closure through the projected sale and closure dates in fiscal 2001.
The remainder of the estimated loss on sale and closure consisted primarily of
lease termination costs and physician contract termination costs. During the
quarter ended June 30, 2001, $1.0 million of previously recorded loss accruals
were reversed due to discontinuing these operations to date at costs that were
less than previously estimated. At June 30, 2001, the remaining accrual for
estimated losses on sale and closure was $3.4 million. Of this balance,
approximately $1.5 million of costs are expected to be paid subsequent to the
next 12 months and are recorded within other long term liabilities in the
accompanying unaudited condensed and consolidated balance sheets.

         Net revenue for the physician practice operations for the three months
and nine months ended June 30, 2000 was approximately $4.4 million and $9.2
million, respectively.



                                       8
<PAGE>   11

                          IASIS HEALTHCARE CORPORATION
                  NOTES TO UNAUDITED CONDENSED AND CONSOLIDATED
                              FINANCIAL STATEMENTS


7.       SEGMENT AND GEOGRAPHIC INFORMATION

         The Company's acute care hospitals and related health care businesses
are similar in their activities and the economic environments in which they
operate (i.e., urban and suburban markets). Accordingly, the Company's
reportable operating segments consist of (1) acute care hospitals and related
healthcare businesses, collectively, and (2) its Medicaid managed health plan,
Health Choice and a related entity (collectively referred to as Health Choice).
The following is a financial summary by business segment for the periods
indicated:

<TABLE>
<CAPTION>
                                                               THREE MONTHS                     NINE MONTHS
                                                               ENDED JUNE 30,                  ENDED JUNE 30,
                                                         -------------------------       -------------------------
                                                            2001            2000           2001              2000
                                                         ---------       ---------       ---------       ---------
                                                                                 (in thousands)
<S>                                                      <C>             <C>             <C>             <C>
ACUTE CARE SERVICE:
Net patient revenue(1) ............................      $ 190,918       $ 189,292       $ 594,340       $ 548,445
Revenue between segments ..........................         (1,908)         (1,500)         (6,000)         (4,500)
                                                         ---------       ---------       ---------       ---------
  Net revenue .....................................        189,010         187,792         588,340         543,945
Salaries and benefits .............................         78,157          74,205         234,112         206,382
Supplies ..........................................         34,762          31,591         100,112          92,326
Other operating expenses(2) .......................         41,107          40,525         121,563         111,727
Provision for bad debts ...........................         18,578          14,879          55,148          43,928
                                                         ---------       ---------       ---------       ---------
  EBITDA(3) .......................................         16,406          26,592          77,405          89,582
Interest expense, net .............................         15,770          16,027          49,627          45,472
Depreciation and amortization .....................         12,308          12,718          40,156          34,128
                                                         ---------       ---------       ---------       ---------
  Earnings (loss) from continuing operations
    before minority interests and income taxes(2) .        (11,672)         (2,153)        (12,378)          9,982
Provision for asset revaluation,  closure and other
  costs ...........................................         16,612              --          16,612              --
Recapitalization costs ............................             --              --              --           3,478
Minority interests ................................            156             210             329             252
                                                         ---------       ---------       ---------       ---------
Earnings (loss) from continuing operations
  before income taxes .............................      $ (28,440)      $  (2,363)      $ (29,319)      $   6,252
                                                         =========       =========       =========       =========

Segment assets ....................................      $ 868,052       $ 868,317       $ 868,052       $ 868,317
                                                         =========       =========       =========       =========

HEALTH CHOICE:
Capitation premiums and other payments ............      $  27,965       $  23,087       $  80,623       $  65,142
Revenue between segments ..........................             --              --              --              --
                                                         ---------       ---------       ---------       ---------
  Net revenue .....................................         27,965          23,087          80,623          65,142
Salaries and benefits .............................          1,048           1,170           3,408           3,270
Supplies ..........................................             48             100             285             266
Other operating expenses(2) .......................         26,108          20,889          73,800          58,990
Provision for bad debts ...........................             --              --              --              --
                                                         ---------       ---------       ---------       ---------
  EBITDA(3) .......................................            761             928           3,130           2,616
Interest expense (income), net ....................            (44)            105             (44)            105
Depreciation and amortization .....................             64              35             183             120
                                                         ---------       ---------       ---------       ---------
 Earnings from continuing operations before
  minority interests and income taxes(2) ..........            741             788           2,991           2,391
Provision for asset revaluation,  closure and other
  costs ...........................................             --              --              --              --
Recapitalization costs ............................             --              --              --              --
Minority interests ................................             --              --              --              --
                                                         ---------       ---------       ---------       ---------
Earnings from continuing operations before income
  taxes ...........................................      $     741       $     788       $   2,991       $   2,391
                                                         =========       =========       =========       =========

Segment assets ....................................      $   9,535       $   2,827       $   9,535       $   2,827
                                                         =========       =========       =========       =========
</TABLE>

(1) Amount includes $6.35 million in managed care valuation allowances for the
    quarter and nine months ended June 30, 2001.

(2) Amounts exclude provision for asset revaluation, closure and other costs and
    recapitalization costs.

(3) EBITDA represents earnings from continuing operations before interest
    expense, minority interests, income taxes, provision for asset revaluation,
    closure and other costs, recapitalization costs and depreciation and
    amortization.



                                       9
<PAGE>   12

                          IASIS HEALTHCARE CORPORATION
                  NOTES TO UNAUDITED CONDENSED AND CONSOLIDATED
                              FINANCIAL STATEMENTS



8.       NEW ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, Business Combinations, and
No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill and intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests in accordance with the Statements. Other
intangible assets will continue to be amortized over their useful lives.

         The new rules on accounting for goodwill and other intangible assets
are required to be adopted by the Company beginning in the first quarter of
fiscal year 2003. However, early adoption beginning in the first quarter of
fiscal year 2002 is permitted. Application of the nonamortization provisions of
the Statement is expected to result in an increase to pre-tax net earnings of
approximately $11.0 million per year. If the Company adopts the Statement
beginning in fiscal year 2003, the Company expects to follow the new
requirements regarding impairment tests of goodwill and indefinite lived
intangible assets as of October 1, 2002. The effect of these tests on the
earnings and financial position of the Company has not yet been determined. If
early adoption of the Statement beginning in fiscal year 2002 is chosen, the new
requirements will be followed as of October 1, 2001.

9.       CONTINGENCIES

NET REVENUE

         Final determination of amounts earned under the Medicare and Medicaid
programs often occurs in subsequent years because of audits by the programs,
rights of appeal and the application of numerous technical provisions. In the
opinion of management, adequate provision has been made for adjustments that may
result from such routine audits and appeals.

PROFESSIONAL, GENERAL AND WORKERS COMPENSATION LIABILITY RISKS

         The Company is subject to claims and legal actions in the ordinary
course of business, including claims relating to patient treatment and personal
injuries. To cover these types of claims, the Company maintains general
liability and professional liability insurance in excess of self-insured
retentions through a commercial insurance carrier in amounts that the Company
believes to be sufficient for its operations, although, potentially, some claims
may exceed the scope of coverage in effect. Plaintiffs in these matters may
request punitive or other damages that may not be covered by insurance. The
Company has expensed the full self-insured retention exposure for general
liability and professional liability claims. The Company is currently not a
party to any such proceedings that, in the Company's opinion, would have a
material adverse effect on the Company's business, financial condition or
results of operations.

         The Company is subject to claims and legal actions in the ordinary
course of business relative to workers compensation and other labor and
employment matters. To cover these types of claims, the Company maintains
workers compensation insurance coverage with a self-insured retention. The
Company accrues costs of workers compensation claims based upon estimates
derived from its claims experience.

HEALTH CHOICE

         Health Choice has entered into a capitated contract whereby the plan
provides healthcare services in exchange for fixed periodic and supplemental
payments from the Arizona Health Care Cost Containment System ("AHCCCS"). These
services are provided regardless of the actual costs incurred to provide these
services. The Company receives reinsurance and other supplemental payments from
AHCCCS to cover certain costs of healthcare services that exceed certain
thresholds. The Company believes the capitated payments, together with
reinsurance and other supplemental payments, are sufficient to pay for the
services Health Choice is obligated to deliver. The Company has provided
performance guaranties in the form of a surety bond in the amount of $9.4
million and a



                                       10

<PAGE>   13

                          IASIS HEALTHCARE CORPORATION
                  NOTES TO UNAUDITED CONDENSED AND CONSOLIDATED
                              FINANCIAL STATEMENTS


letter of credit in the amount of $6.6 million for the benefit of AHCCCS to
support its obligations under the Health Choice contract to provide and pay for
the healthcare services.

TAX SHARING AGREEMENT

         The Company and some of its subsidiaries are included in JLL
Healthcare, LLC's consolidated group for U.S. Federal income tax purposes as
well as in some consolidated, combined or unitary groups which include JLL
Healthcare, LLC for state, local and foreign income tax purposes. The Company
and JLL Healthcare, LLC entered into a tax sharing agreement in connection with
the recapitalization. The tax sharing agreement requires the Company to make
payments to JLL Healthcare, LLC such that, with respect to tax returns for any
taxable period in which the Company or any of its subsidiaries is included in
JLL Healthcare, LLC's consolidated group or any combined group, including JLL
Healthcare, LLC, the amount of taxes to be paid by the Company will be
determined, subject to some adjustments, as if the Company and each of its
subsidiaries included in JLL Healthcare, LLC's consolidated group or a combined
group including JLL Healthcare, LLC filed their own consolidated, combined or
unitary tax return.

         Each member of a consolidated group for U.S. Federal income tax
purposes is jointly and severally liable for the Federal income tax liability of
each other member of the consolidated group. Accordingly, although the tax
sharing agreement allocates tax liabilities between the Company and JLL
Healthcare, LLC, for any period in which the Company is included in JLL
Healthcare, LLC's consolidated group, the Company could be liable in the event
that any Federal tax liability was incurred, but not discharged, by any other
member of JLL Healthcare, LLC's consolidated group.

OTHER

         In connection with the acquisition of the Tenet hospitals, the Company
agreed to use its best efforts to cause Tenet to be released from its
obligations under certain contractual obligations that the Company assumed in
the Tenet acquisition. If the Company is unable to cause Tenet to be released
from its obligations by February 28, 2002, the Company may be required to make a
cash payment to Tenet of up to $4.0 million and increase a letter of credit the
Company has currently provided to Tenet by $5.0 million.







                                       11
<PAGE>   14


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

         The following discussion and analysis of financial condition and
results of operations should be read in conjunction with our unaudited condensed
and consolidated financial statements, the notes to our unaudited condensed and
consolidated financial statements and the other financial information appearing
elsewhere in this report. Data for the three months and nine months ended June
30, 2001 and 2000 has been derived from our unaudited condensed and consolidated
financial statements.

FORWARD LOOKING STATEMENTS

         This Form 10-Q contains forward-looking statements within the meaning
of the Federal securities laws, which are intended to be covered by the safe
harbors created thereby. Those forward-looking statements include all statements
that are not historical statements of fact and those regarding our intent,
belief or expectations including, but not limited to, the discussions of our
operating and growth strategy (including possible acquisitions or dispositions),
financing needs, projections of revenue, income or loss and future operations.
Forward-looking statements involve risks and uncertainties including, without
limitation, those associated with our ability to enter into favorable contracts
with managed care payors; the highly competitive nature of the healthcare
industry; possible changes in Medicare and Medicaid reimbursement levels and
other Federal or state healthcare reforms; future cost containment initiatives
undertaken by purchasers of healthcare services; our ability to attract and
retain qualified management and personnel, including physicians and nurses; our
ability to service our significant indebtedness; the effect of existing and
future governmental regulations, including the Balanced Budget Act of 1997, the
Balanced Budget Refinement Act of 1999 and the Benefits Improvement Protection
Act of 2000; the impact of possible governmental investigations; our ability to
successfully implement and integrate our management information systems at our
hospitals; our limited operating history; our ability to successfully manage the
risks of our Medicaid managed care plan, Health Choice; our ability to
successfully complete and integrate acquisitions of other companies or
facilities; general economic and business conditions; and those risks,
uncertainties and other matters detailed under the caption "Risk Factors" in the
our Annual Report on Form 10-K for the fiscal year ended September 30, 2000 and
from time to time in our filings with the Securities and Exchange Commission.

         Although we believe that the assumptions underlying the forward-looking
statements contained in this report are reasonable, any of these assumptions
could prove to be inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this report will prove to be accurate. In
light of the significant uncertainties inherent in the forward-looking
statements included in this report, you should not regard the inclusion of such
information as a representation by us or any other person that our objectives
and plans will be achieved. We undertake no obligation to publicly release any
revisions to any forward-looking statements contained in this report to reflect
events and circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events.

GENERAL

         We are a leading owner and operator of acute care hospitals that
develops and operates networks of medium-sized hospitals in high-growth urban
and suburban markets. We operate our hospitals with a strong community focus by
offering and developing healthcare services to meet the needs of the markets we
serve, promoting strong relationships with physicians, working with local
managed care plans and recruiting experienced management. At June 30, 2001, we
owned or leased 14 hospitals with a total of 2,152 beds in service. Our
hospitals are located in four regions:

         -        Salt Lake City, Utah;
         -        Phoenix, Arizona;
         -        Tampa-St. Petersburg, Florida; and
         -        three cities in the State of Texas, including San Antonio.

We also operate five ambulatory surgery centers and a Medicaid managed health
plan called Health Choice that serves over 44,500 members in Arizona.



                                       12
<PAGE>   15

         Net revenue is comprised of net patient service revenue and other
revenue. Net patient service revenue is reported net of contractual adjustments.
The adjustments principally result from differences between the hospitals'
established charges and payment rates under Medicare, Medicaid and the various
managed care organizations. Established hospital charges generally have
increased at a faster rate than the rate of increase for Medicare and Medicaid
payments. We record net patient service revenue at the estimated net realizable
amounts for services rendered to Medicare and Medicaid patients, including
estimated retroactive adjustments under reimbursement agreements with the
payors. Retroactive adjustments are accrued on an estimated basis in the period
the related services are rendered and are adjusted in future periods, if
necessary, when final settlements are determined. Other revenue includes revenue
from Health Choice, medical office building rental income and other
miscellaneous revenue. Operating expenses consist of salaries and benefits,
supplies, other operating expenses and provision for bad debts.

         Our hospitals' net revenue continues to be affected by an increasing
proportion of revenue being derived from fixed payment, higher discount sources
including Medicare, Medicaid, managed care organizations and others. Fixed
payment amounts are often based upon a diagnosis regardless of the cost incurred
or the level of services provided. Our net revenue, cash flows and earnings have
been reduced by this reimbursement methodology. We expect patient volumes from
Medicare and Medicaid to continue to increase due to the general aging of the
population and expansion of state Medicaid programs. Under the Balanced Budget
Act of 1997, reimbursement from Medicare and Medicaid was reduced during 1998,
1999 and 2000, and continued to be reduced as certain changes were phased in
during 2001. Certain of the rate reductions resulting from the Balanced Budget
Act of 1997 are being mitigated by the Balanced Budget Refinement Act of 1999
and will be further mitigated by the Benefits Improvement Protection Act of
2000. It is estimated that the Benefits Improvement Protection Act of 2000 will
provide approximately $35 billion in funding restorations to Medicare healthcare
providers over a period of five years, approximately one-third of which will go
to hospitals. Exclusive of Health Choice, the percentage of our net revenue
related to Medicare and Medicaid was approximately 35.1% for the nine months
ended June 30, 2001.

         Our net revenue also is affected by the trend toward performing more
services on an outpatient basis due to advances in medical technology and
pharmacology as well as cost containment pressures from Medicare, Medicaid,
managed care organizations and other sources of revenue. Approximately 35.7% of
our gross patient revenue during the nine months ended June 30, 2001 was
generated from outpatient procedures.

RECAPITALIZATION AND ACQUISITION TRANSACTIONS

         IASIS was formed in October 1999 through a series of transactions that
were arranged by Joseph Littlejohn & Levy, Inc. and members of our management
team. Joseph Littlejohn & Levy is the private equity firm that controls JLL
Healthcare, LLC, our largest stockholder. The first transaction was effective
October 8, 1999, when Paracelsus Healthcare Corporation and unrelated third
parties recapitalized five acute care hospitals in the Salt Lake City, Utah
market owned by a subsidiary of Paracelsus, valued at $287.0 million, net of a
working capital adjustment of $1.0 million.

         In connection with the recapitalization, JLL Healthcare, LLC and some
of our stockholders purchased an aggregate of $125.0 million of the outstanding
common stock of a subsidiary of Paracelsus. The subsidiary then repurchased
$155.0 million of its common stock from Paracelsus. The recapitalization
transaction resulted in Paracelsus retaining an approximately 6% minority
interest at an implied value of approximately $8.0 million in the preexisting
Paracelsus subsidiary that owned the Paracelsus Utah Facilities. After the
recapitalization, the former Paracelsus subsidiary changed its name to IASIS
Healthcare Corporation and changed its fiscal year end to September 30.

         The second transaction was effective October 15, 1999, when we acquired
ten acute care hospitals and other related facilities and assets from Tenet
Healthcare Corporation for approximately $431.8 million in cash and
approximately $41.2 million in assumed liabilities. We have reached an agreement
with Tenet on net working capital acquired in the transaction with the exception
of adjustments relating to certain matters. The effect of the adjustment for
these remaining matters, if any, is not expected to be material and would result
in a reduction in goodwill recognized in the Tenet transaction.



                                       13
<PAGE>   16

         Concurrent with the Tenet transaction, a company formed by members of
our management to acquire and operate hospitals and related businesses was
merged with and into a wholly owned subsidiary of our company. In the merger,
stockholders of this company received shares of our common stock and preferred
stock with a total value of approximately $9.5 million.

         The Tenet transaction and merger with a company formed by members of
our management were accounted for using the purchase method of accounting. The
operating results of these acquired companies have been included in our
accompanying unaudited condensed and consolidated statements of operations from
the October 15, 1999 date of acquisition.

DISCONTINUED OPERATIONS

         Our financial results from continuing operations do not include the
results of operations of Clinicare, our physician practice operations consisting
of 31 physicians in 13 offices. We are exiting this business and are in the
process of selling the assets of our physician practices and closing our
practice support offices. Net revenue and expenses associated with these
operations have been reclassified to discontinued operations. During the three
months and nine months ended June 30, 2000, we incurred earnings of $800,000 and
losses of $2.1 million, respectively, from our discontinued physician practice
operations. During the three months ended June 30, 2001, $1.0 million of
previously recorded loss accruals were reversed due to discontinuing these
operations to date at costs that were less than previously estimated.

SELECTED OPERATING DATA

         The following table sets forth selected operating data for each of the
periods presented. The operating data include the Tenet hospitals from October
15, 1999, their date of acquisition.

<TABLE>
<CAPTION>
                                                                     (UNAUDITED)                     (UNAUDITED)
                                                                    THREE MONTHS                     NINE MONTHS
                                                                   ENDED JUNE 30,                   ENDED JUNE 30,
                                                               2001            2000               2001           2000
                                                               ----            ----               ----           ----
<S>                                                           <C>             <C>               <C>              <C>
        Number of hospitals at end of period .........             14              15                14              15
        Licensed beds at end of period ...............          2,588           2,684(a)          2,588           2,684(a)
        Beds in service at end of period .............          2,152           2,194(a)          2,152           2,194(a)
        Average length of stay (days) (b) ............           4.24            4.43              4.35            4.48
        Occupancy rates (average beds in service)(c) .           42.6%           42.6%             45.3%           43.9%
        Admissions (d) ...............................         19,854          18,725            61,447          55,056
        Adjusted admissions (e) ......................         32,679          31,584            98,834          90,163
        Patient days (f) .............................         84,083          82,863           267,269         246,686
        Adjusted patient days (e) ....................        134,296         134,879           416,573         391,916
</TABLE>

-----------------------------

(a)      Includes 118 licensed beds and 71 beds in service at Rocky Mountain
         Medical Center, opened on April 10, 2000 and closed on June 2, 2001.

(b)      Represents the average number of days that a patient stayed in our
         hospitals.

(c)      Excludes 71 beds in service at Rocky Mountain Medical Center.  If these
         beds were included, the occupancy rate would have been 42.1% and 41.7%
         for the three months ended June 30, 2001 and 2000, respectively, and
         44.5% and 43.5% for the nine months ended June 30, 2001 and 2000,
         respectively.

(d)      Represents the total number of patients admitted to our hospitals for
         stays in excess of 23 hours. Management and investors use this number
         as a general measure of inpatient volume.

(e)      Adjusted admissions and adjusted patient days are general measures of
         combined inpatient and outpatient volume. We compute adjusted
         admissions/patient days by multiplying admissions/patient days by gross
         patient revenue and then dividing that number by gross inpatient
         revenue.

(f)      Represents the number of days our beds were occupied over the period.



                                       14
<PAGE>   17

RESULTS OF OPERATIONS

         The following table presents, for the periods indicated, information
expressed as a percentage of net revenue. Such information has been derived from
our unaudited condensed and consolidated statements of operations. The results
of operations for the periods presented include the Tenet hospitals and the
company formed by members of our management from October 15, 1999, their
acquisition date.

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED JUNE 30,     NINE MONTHS ENDED JUNE 30,
                                                ---------------------------     --------------------------
                                                    2001            2000          2001            2000
                                                    ----            ----          ----            ----
<S>                                                 <C>            <C>            <C>            <C>
        Net revenue ......................          100.0%         100.0%         100.0%         100.0%

        Salaries and benefits ............           36.5           35.7           35.5           34.4
        Supplies .........................           16.0           15.0           15.0           15.2
        Other operating expenses .........           31.0           29.1           29.2           28.1
        Provision for bad debts ..........            8.6            7.1            8.3            7.2
                                                ----------------------------------------------------------
        Total operating expenses .........           92.1           86.9           88.0           84.9
                                                ----------------------------------------------------------
            EBITDA(a) ....................            7.9           13.1           12.0           15.1
        Depreciation and amortization ....            5.7            6.1            6.0            5.6
        Interest, net ....................            7.3            7.7            7.4            7.5
        Minority interests ...............            0.1            0.1             --             --
        Provision for asset revaluation,
            closure and other costs ......            7.6             --            2.5             --
        Recapitalization costs ...........             --             --             --            0.6
                                                ----------------------------------------------------------
        Earnings (loss) from continuing
            operations before income taxes          (12.8)          (0.8)          (3.9)           1.4
        Income tax expense ...............             --             --             --            0.5
                                                ----------------------------------------------------------
        Earnings (loss) from continuing
            operations ...................          (12.8)          (0.8)          (3.9)           0.9
        Earnings (loss) from discontinued
            operations ...................            0.5            0.4            0.1           (0.3)
                                                ----------------------------------------------------------
        Net earnings (loss) ..............          (12.3)%         (0.4)%         (3.8)%          0.6%
                                                ----------------------------------------------------------
     </TABLE>


     (a)  EBITDA represents earnings from continuing operations before interest
          expense, minority interests, income taxes, provision for asset
          revaluation, closure and other costs, recapitalization costs and
          depreciation and amortization. Although EBITDA should not be
          considered in isolation or as a substitute for net earnings, operating
          cash flows or other cash flow statement data determined in accordance
          with accounting principles generally accepted in the United States,
          management understands that EBITDA is commonly used to evaluate a
          company's financial performance, especially in evaluating healthcare
          companies. EBITDA, as presented, may not be comparable to similarly
          titled measures of other companies.

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

         Net revenue for the three months ended June 30, 2001 was $217.0
million, an increase of $6.1 million, or 2.9%, from $210.9 million for the same
period in 2000. The increase in net revenue consisted of a $12.5 million
increase due to increasing volume and net revenue growth in our hospital
operations, which we refer to as our acute care service segment in our financial
statements, and Health Choice. Offsetting a portion of this increase was a
reduction to net revenue of $6.35 million during the three months ended June 30,
2001 for certain managed care valuation allowances. During the three months
ended June 30, 2001, net revenue was reduced by a $4.5 million valuation
allowance to provide for healthcare service claims currently in dispute with
managed care organizations and other third-party payors. These claims resulted
from services rendered to patients in previous quarters and were considered
valid claims for reimbursement. We substantially completed an information
systems conversion in 2000. Certain managed care and other claims submitted
during the conversion period were denied, in whole or in part, by third-party
payors as being improperly submitted. Although we are appealing these denials
and believe the claims should be paid, the allowance was provided to report the
claims at their current estimated net realizable value. Also,



                                       15

<PAGE>   18

we terminated a capitated contract with a managed care organization at one of
our Phoenix hospitals in March 2001. A provision of $1.85 million to reduce net
revenue in the quarter was recognized due to disputes that have arisen relating
to costs associated with patients previously covered under that capitated
contract.

         Net revenue from our hospital operations for the three months ended
June 30, 2001 was $189.0 million, an increase of $1.2 million, or .6%, from
$187.8 million for the same period in 2000. Net revenue from Rocky Mountain
Medical Center increased $1.5 million from $1.7 million for the three months
ended June 30, 2000 to $3.2 million for the same period in 2001. Rocky Mountain
Medical Center was closed on June 2, 2001, as discussed below. Excluding Rocky
Mountain Medical Center and the $6.35 million managed care valuation allowances
noted above, the increase in net revenue of $6.1 million was due primarily to
volume growth and, to a lesser extent, price increases in our hospital
operations. The increase in net revenue and volume growth was negatively
affected by a decline in both net revenue and volume in the hospital operations
in one of our markets. Net revenue in this market declined $6.0 million and
admissions declined by 553 during the quarter ended June 30, 2001 compared to
the same quarter in 2000. The decline in net revenue and volume in this market
was due primarily to the closure of a sub-acute unit, the lack of availability
of anesthesia coverage which negatively impacted surgical procedures and
turnover in management at certain of the hospitals. Since June 30, 2001, the
issues with anesthesia coverage have been corrected and we are in the process of
putting new leadership in place for our hospital operations in that market. The
increase in volume in our other markets was attributable largely to our
increased focus on improving physician relations and communications, physician
recruitment, new services, facility improvements and population growth in our
primary service areas.

         Admissions, excluding Rocky Mountain Medical Center, increased 5.3%
from 18,605 for the three months ended June 30, 2000 to 19,590 for the same
period in 2001, and patient days, excluding Rocky Mountain Medical Center,
increased 0.9% from 82,372 for the three months ended June 30, 2000 to 83,119
for the same period in 2001. Adjusted admissions, excluding Rocky Mountain
Medical Center, increased 3.3% from 31,233 for the three months ended June 30,
2000 to 32,248 for the same period in 2001 and adjusted patient days, excluding
Rocky Mountain Medical Center, decreased 0.9% from 133,977 for the three months
ended June 30, 2000 to 132,719 for the same period in 2001. These changes in
volume were negatively impacted during the quarter ended June 30, 2001 by the
results from one of our markets, as discussed above. Excluding Rocky Mountain
Medical Center, the average length of stay resulting from admissions and patient
days decreased 4.2% from 4.43 days for the three months ended June 30, 2000 to
4.24 days for the same period in 2001. This decrease in length of stay was
attributable in part to improved case management and growth in services
requiring shorter length of stays.

         Net revenue from Health Choice was $28.0 million for the three months
ended June 30, 2001, an increase of $4.9 million, or 21.2%, from $23.1 million
in the same period in 2000. Covered lives under this prepaid Medicaid plan have
increased from 38,304 at June 30, 2000 to 44,562 at June 30, 2001, an increase
of 16.3%. The increase in covered lives has positively impacted Health Choice
net revenue for the three months ended June 30, 2001 compared to the prior year
period.

         Operating expenses increased $16.4 million from $183.4 million for the
three months ended June 30, 2000 to $199.8 million for the three months ended
June 30, 2001. Operating expenses as a percentage of net revenue were 92.1% for
the three months ended June 30, 2001, compared to 86.9% for the three months
ended June 30, 2000. Excluding Rocky Mountain Medical Center and the effect of
the $6.35 million managed care valuation allowances as a reduction of net
revenue, operating expenses as a percentage of net revenue were 87.8% for the
three months ended June 30, 2001 and 85.5% for the three months ended June 30,
2000.

         Operating expenses from our hospital operations for the three months
ended June 30, 2001 were $172.6 million, an increase of $11.4 million, or 7.1%,
from $161.2 million for the three months ended June 30, 2000. Approximately $1.9
million of the increase was due to Rocky Mountain Medical Center. Excluding
Rocky Mountain Medical Center and the managed care valuation allowances,
operating expenses from our hospital operations as a percentage of net revenue
were 86.4% for the three months ended June 30, 2001 compared to 84.1% for the
three months ended June 30, 2000. This increase was due primarily to a decline
in net revenue in one of our markets and a combination of increased salaries and
benefits expense and provision for bad debts as a percentage of net revenue for
the three months ended June 30, 2001 compared to the same period in 2000.
Salaries and benefits expense as a percentage of net revenue increased .9% from
period to period primarily due to an increased level of temporary staffing in
certain of our markets where volume has been growing compared to the same period
in the prior year. Provision for bad debts as a percentage of net revenue
increased 1.4% from period to period primarily



                                       16
<PAGE>   19

due to significant self-pay inpatient volume principally through our emergency
room services and an increase in self-pay accounts receivable resulting from
balances due after insurance payments, such as deductibles and co-insurance.

         We opened Rocky Mountain Medical Center in Salt Lake City, Utah on
April 10, 2000 with 118 licensed beds and 71 beds in service. Our census levels
and net revenue were slow to grow and significantly lower than we expected prior
to opening the hospital primarily as a result of what we believe to be
exclusionary contracting practices pursued in the Salt Lake City market by a
competitor. We believe these exclusionary contracting practices had a material
adverse effect on the business and operations of Rocky Mountain Medical Center
by precluding certain significant managed care companies from contracting with
Rocky Mountain Medical Center, thereby preventing certain physicians and
patients from using this facility. On August 18, 2000, we filed a lawsuit
against the competitor seeking damages and other remedies. The lawsuit is
currently pending.

         We negotiated managed care contracts that became effective January 1,
2001 with two large managed care plans in the Salt Lake City market. We believe
these managed care plans previously did not contract with Rocky Mountain Medical
Center because of the exclusionary contracting practices of our competitor. We
completed operating room modifications that enabled us to perform orthopedic
procedures and began providing new cardiology, obstetric and neonatal services
in January 2001. Primarily as a result of these new contracts and services, our
average daily census increased to 17 during the three months ended March 31,
2001 compared to less than ten for the three months ended December 31, 2000.
However, our census level did not continue to grow due to a number of factors,
including slower than expected growth and utilization of services, including
obstetric and cardiology services, competition and, we believe, the continuing
impact of the exclusionary contracting practices noted above. As a result, we
closed Rocky Mountain Medical Center on June 2, 2001 and recorded asset
revaluation and closure costs of $11.9 million during the three months ended
June 30, 2001, as discussed below.

         We incurred operating expenses of $6.5 million during the three months
ended June 30, 2001, at Rocky Mountain Medical Center, consisting of $2.1
million in salaries and benefits, $1.3 million in supplies, $700,000 in
provision for bad debts and $2.4 million in other operating expenses. During the
three months ended June 30, 2000, we incurred operating expenses of $4.6 million
at Rocky Mountain Medical Center, consisting of $2.2 million in salaries and
benefits, $300,000 in supplies, $300,000 in provision for bad debts and $1.8
million in other operating expenses. Other operating expenses included costs for
purchased services, rents and leases, utilities, marketing, insurance and other
expenses, including approximately $320,000 of professional fees associated with
the lawsuit noted above which were incurred during the three months ended June
30, 2001.

         Operating expenses for Health Choice increased $5.0 million during the
three months ended June 30, 2001 compared to the same period in 2000 due to the
incremental cost of increased enrollment. Operating expenses as a percentage of
net revenue for Health Choice were 97.3% for the three months ended June 30,
2001 compared to 96.0% for the three months ended June 30, 2000.

         EBITDA was $17.2 million, or 7.9% of net revenue, for the three months
ended June 30, 2001, compared to $27.5 million, or 13.1% of net revenue, for the
three months ended June 30, 2000. Excluding results from Rocky Mountain Medical
Center and the managed care valuation allowances, net revenue and EBITDA were
$220.2 million and $26.8 million, respectively, for the three months ended June
30, 2001, resulting in an EBITDA margin of 12.2%. Excluding results from Rocky
Mountain Medical Center, net revenue and EBITDA were $209.2 million and $30.4
million, respectively, for the three months ended June 30, 2000, resulting in an
EBITDA margin of 14.5%.

         EBITDA for hospital operations, excluding Rocky Mountain Medical Center
and the managed care valuation allowances, was $26.1 million, or 13.6% of net
revenue, for the three months ended June 30, 2001, compared to $29.5 million, or
15.9% of net revenue, for the three months ended June 30, 2000. The decline in
the EBITDA margin for hospital operations, excluding the effect of Rocky
Mountain Medical Center and the managed care valuation allowances, was due
primarily to a decline in the net revenue in one of our markets and increases in
salaries and benefits expense and provision for bad debts as noted above.

         Health Choice, our Medicaid managed health plan, has a significantly
lower EBITDA margin than hospital operations. EBITDA for Health Choice was
$800,000, or 2.7% of net revenue, for the three months ended June 30, 2001,
compared to $900,000, or 4.0% of net revenue, for the three months ended June
30, 2000. The EBITDA decline was due primarily to increased costs of delivering
medical services to members.



                                       17
<PAGE>   20

         Interest expense decreased $400,000 from $16.1 million for the three
months ended June 30, 2000 to $15.7 million for the three months ended June 30,
2001 due to interest rate decreases.

         We recorded no provision for income taxes for the three months ended
June 30, 2001 and 2000 due to the uncertainty of realizing a tax benefit related
to the losses incurred.

          We recorded no preferred stock dividends or accretion during the three
months ended June 30, 2001, compared to preferred stock dividends and accretion
of $6.6 million recorded during the three months ended June 30, 2000. The
preferred stock, which was exchanged for shares of our common stock on the basis
of ten common shares for each preferred share in October 2000, was mandatorily
redeemable and dividends were payable in shares of our common stock. The
preferred stock was exchanged for common stock without benefit to the preferred
stockholders of the accrued dividends, therefore, the accrual of dividends was
reversed in the first quarter of fiscal 2001. Net loss attributable to common
stockholders after the effect of the preferred stock dividends and accretion for
the three months ended June 30, 2001 was $26.7 million compared to a net loss of
$7.4 million for the same period in 2000.

NINE MONTHS ENDED JUNE 30, 2001 COMPARED TO NINE MONTHS ENDED JUNE 30, 2000

         Net revenue for the nine months ended June 30, 2001 was $669.0 million,
an increase of $59.9 million, or 9.8%, from $609.1 million for the nine months
ended June 30, 2000. Approximately $22.8 million of the increase in net revenue
was due to the three months ended December 31, 2000 including a full three
months of net revenue for the Tenet facilities and Health Choice compared to the
prior year period, which included the results of operations for the Tenet
facilities and Health Choice from their acquisition date, October 15, 1999. The
remaining $37.1 million increase consisted of a $43.5 million increase in net
revenue due to increasing volume and net revenue growth in our hospital
operations and Health Choice, offset by a reduction to net revenue of $6.35
million during the nine months ended June 30, 2001 for managed care valuation
allowances, as discussed above.

         Net revenue from our hospital operations for the nine months ended June
30, 2001 was $588.3 million, an increase of $44.4 million, or 8.2%, from $543.9
million for the nine months ended June 30, 2000. Approximately $19.5 million of
the increase was due to the results of the Tenet hospital facilities being
included for a full three months for the quarter ended December 31, 2000. Net
revenue from Rocky Mountain Medical Center increased $11.2 million from $1.7
million for the nine months ended June 30, 2000 to $12.9 million for the same
period in 2001 due to the opening of this facility on April 10, 2000. As
discussed above, we closed Rocky Mountain Medical Center on June 2, 2001. The
remaining increase in net revenue was due primarily to volume growth and, to a
lesser extent, price increases in our hospital operations. The increase in
volume was attributable largely to our increased focus on improving physician
relations and communications, physician recruitment, new services, facility
improvements and population growth in our primary service areas. Our net revenue
was reduced by $6.35 million during the three months ended June 30, 2001 for
managed care valuation allowances, as discussed above. During a portion of the
nine months ended June 30, 2001, we had a significant capitated Medicare
contract in our Phoenix market under which we received specific fixed periodic
payments based on the number of members of the organization we served,
regardless of the actual costs incurred. During the three months ended March 31,
2001, our net revenue was negatively impacted by approximately $1.9 million as a
result of an increase in utilization and other costs under this contract without
corresponding increases in net revenue. Effective March 1, 2001, we restructured
this contract to a per-diem arrangement under which we will generally be paid a
fixed payment for each day a patient under this contract receives care in our
hospitals.

         Admissions, excluding Rocky Mountain Medical Center, increased 10.2%
from 54,936 for the nine months ended June 30, 2000 to 60,530 for the same
period in 2001, and patient days, excluding Rocky Mountain Medical Center,
increased 7.2% from 246,195 for the nine months ended June 30, 2000 to 263,974
for the same period in 2001. Adjusted admissions, excluding Rocky Mountain
Medical Center, increased 8.3% from 89,812 for the nine months ended June 30,
2000 to 97,255 for the same period in 2001 and adjusted patient days, excluding
Rocky Mountain Medical Center, increased 5.1% from 391,014 for the nine months
ended June 30, 2000 to 410,899 for the same period in 2001. Assuming that the
acquisition of the Tenet hospital facilities on October 15, 1999 was effective
as of October 1, 1999, admissions, patient days, adjusted admissions and
adjusted patient days, excluding Rocky Mountain Medical Center, would have
increased 6.2%, 3.1%, 4.6% and 1.2%, respectively. Excluding Rocky Mountain
Medical Center, the average length of stay resulting from admissions and patient
days decreased 2.7% from 4.48 days for the nine months ended June 30, 2000 to
4.36 days for the same period in 2001. This



                                       18
<PAGE>   21

decrease in length of stay was attributable in part to improved case management
and growth in services requiring shorter length of stays.

         Net revenue from Health Choice was $80.6 million for the nine months
ended June 30, 2001, an increase of $15.5 million, or 23.8%, from $65.1 million
in the same period in 2000. Approximately $3.3 million of the increase is due to
the results of the Health Choice business segment being included for a full
three months for the quarter ended December 31, 2000. Additionally, covered
lives under this prepaid Medicaid plan have increased 16.3% from June 30, 2000
to June 30, 2001, as noted above. The increase in covered lives has positively
impacted Health Choice net revenue for the nine months ended June 30, 2001
compared to the prior year period.

         Operating expenses increased $71.5 million from $516.9 million for the
nine months ended June 30, 2000 to $588.4 million for the nine months ended June
30, 2001. Operating expenses as a percentage of net revenue were 88.0% for the
nine months ended June 30, 2001 and 84.9% for the nine months ended June 30,
2000. Excluding Rocky Mountain Medical Center and the effect of the $6.35
million managed care valuation allowances as a reduction of net revenue,
operating expenses as a percentage of net revenue were 85.6% for the nine months
ended June 30, 2001 and 84.0% for the nine months ended June 30, 2000.

         Operating expenses from our hospital operations for the nine months
ended June 30, 2001 were $510.9 million, an increase of $56.5 million, or 12.4%,
from $454.4 million for the nine months ended June 30, 2000. Approximately $18.6
million of the increase, consisting of $8.7 million in salaries and benefits,
$1.8 million in supplies, $400,000 in provision for bad debts and $7.7 million
in other operating expenses, was due to the results of the Tenet hospital
facilities being included for a full three months for the quarter ended December
31, 2000. Of the remaining $37.9 million increase in operating expenses, $15.0
million was due to increase in the operating expenses of Rocky Mountain Medical
Center and $22.9 million was due primarily to the volume growth in our hospital
operations and increases in labor costs, including increased use of contract
labor.

         Excluding Rocky Mountain Medical Center and the managed care valuation
allowances, operating expenses from our hospital operations as a percentage of
net revenue were 84.2% for the nine months ended June 30, 2001 compared to 82.6%
for the nine months ended June 30, 2000. This increase was due primarily to a
combination of increased salaries and benefits expense and provision for bad
debts as a percentage of net revenue for the nine months ended June 30, 2001
compared to the same period in 2000. Salaries and benefits expense as a
percentage of net revenue increased 1.3% from period to period primarily due to
general wage inflation, an increased level of temporary staffing in certain of
our markets where volume has been growing and increased staffing at our
corporate office compared to the same period in the prior year. Corporate
salaries and wages increased by approximately $1.1 million for the nine months
ended June 30, 2001, compared to the same period in 2000, as a result of
building our corporate support infrastructure. Provision for bad debts as a
percentage of net revenue increased 0.9% from period to period primarily due to
significant self-pay inpatient volume principally through our emergency room
services and an increase in self-pay accounts receivable resulting from balances
due after insurance payments, such as deductibles and co-insurance.

         During the nine months ended June 30, 2001, Rocky Mountain Medical
Center generated net revenue of $12.9 million and incurred operating expenses of
$21.4 million, resulting in a loss before interest, taxes, depreciation and
amortization of $8.5 million. During the nine months ended June 30, 2000, Rocky
Mountain Medical Center generated net revenue of $1.7 million and incurred
operating expenses of $6.4 million, resulting in a loss before interest, taxes,
depreciation and amortization of $4.7 million. We incurred operating expenses of
$21.4 million during the nine months ended June 30, 2001 at Rocky Mountain
Medical Center, consisting of $7.8 million in salaries and benefits, $2.6
million in supplies, $2.7 million in provision for bad debts and $8.3 million in
other operating expenses. We incurred operating expenses of $6.4 million during
the nine months ended June 30, 2000 at Rocky Mountain Medical Center, consisting
of $2.8 million in salaries and benefits, $500,000 in supplies, $300,000 in
provision for bad debts and $2.8 million in other operating expenses. Other
operating expenses included costs for purchased services, rents and leases,
utilities, marketing, insurance and other expenses, including approximately
$900,000 of professional fees incurred during the nine months ended June 30,
2001 associated with the lawsuit we have filed with respect to Rocky Mountain
Medical Center.

         Operating expenses for Health Choice increased $15.0 million during the
nine months ended June 30, 2001 compared to the same period in 2000 due to the
incremental cost of increased enrollment and the fact Health Choice was acquired
effective October 15, 1999 and therefore did not have a full nine months of
expenses in the prior



                                       19

<PAGE>   22

period. Operating expenses as a percentage of net revenue for Health Choice were
comparable at 96.1% for the nine months ended June 30, 2001 and 96.0% for the
nine months ended June 30, 2000.

         EBITDA was $80.5 million, or 12.0% of net revenue, for the nine months
ended June 30, 2001, compared to $92.2 million, or 15.1% of net revenue, for the
nine months ended June 30, 2000. Excluding results from Rocky Mountain Medical
Center and the managed care valuation allowances, net revenue and EBITDA were
$662.4 million and $95.4 million, respectively, for the nine months ended June
30, 2001, resulting in an EBITDA margin of 14.4%, and $607.4 million and $96.9
million, respectively, for the nine months ended June 30, 2000, resulting in an
EBITDA margin of 16.0%.

         EBITDA for hospital operations, excluding Rocky Mountain Medical Center
and the managed care valuation allowances, was $92.2 million, or 15.9% of net
revenue, for the nine months ended June 30, 2001, compared to $94.3 million, or
17.4% of net revenue, for the nine months ended June 30, 2000. Assuming that the
acquisition of the Tenet hospital facilities on October 15, 1999 was effective
as of October 1, 1999, EBITDA for hospital operations, excluding Rocky Mountain
Medical Center, for the nine months ended June 30, 2000 would have been $93.1
million, or 16.6% of net revenue.

          Health Choice, our Medicaid managed health plan, has a significantly
lower EBITDA margin than hospital operations. EBITDA for Health Choice was $3.1
million, or 3.9% of net revenue, for the nine months ended June 30, 2001,
compared to $2.6 million, or 4.0% of net revenue, for the nine months ended June
30, 2000. Assuming that the acquisition of Health Choice on October 15, 1999 was
effective as of October 1, 1999, the EBITDA margin for Health Choice for the
nine months ended June 30, 2000 would have been 3.8% of net revenue.

         Depreciation and amortization expense increased $6.1 million from $34.2
million for the nine months ended June 30, 2000 to $40.3 million for the nine
months ended June 30, 2001 due to the acquisition of the Tenet facilities on
October 15, 1999, the depreciation of assets associated with Rocky Mountain
Medical Center while in operation and the depreciation of information systems
equipment that was acquired during or subsequent to fiscal year 2000.

         Interest expense increased $4.0 million from $45.6 million for the nine
months ended June 30, 2000 to $49.6 million for the nine months ended June 30,
2001 due to the timing of borrowings of $560.0 million associated with the
acquisition of the Tenet hospitals and the recapitalization of the Paracelsus
hospitals in October 1999 and increased borrowings during the nine months ended
June 30, 2001.

         We incurred legal, accounting and other related costs of $3.5 million
during the nine months ended June 30, 2000 related to the recapitalization
transaction.

         We recorded no provision for income taxes for the nine months ended
June 30, 2001 due to the uncertainty of realizing a tax benefit related to the
losses incurred. We recorded a provision for income taxes for the nine months
ended June 30, 2000, of $2.9 million, or approximately 33% of earnings from
continuing operations before income taxes.

         We recorded a reversal of preferred stock dividends of $25.3 million
during the nine months ended June 30, 2001, compared to preferred stock
dividends and accretion of $18.8 million recorded during the nine months ended
June 30, 2000. The preferred stock, which was exchanged for shares of our common
stock on the basis of ten common shares for each preferred share in October
2000, was mandatorily redeemable and dividends were payable in shares of our
common stock. The preferred stock was exchanged for common stock without benefit
to the preferred stockholders of the accrued dividends, therefore, the accrual
of dividends was reversed in the first quarter of fiscal 2001. Net earnings
attributable to common stockholders after the effect of the preferred stock
dividends and accretion for the nine months ended June 30, 2001 was $20,000
compared to a net loss of $15.1 million for the same period in 2000.



                                       20
<PAGE>   23


ASSET REVALUATION, CLOSURE AND OTHER COSTS

ASSET REVALUATION

          During the quarter ended June 30, 2001, we closed Rocky Mountain
Medical Center and recorded a pre-tax asset revaluation charge of approximately
$2.8 million related to the closure and revaluation of net assets in conjunction
with their classification as held for sale.

         At June 30, 2001, Rocky Mountain Medical Center net assets held for
sale and expected to be sold within the next 12 months totaled approximately
$24.1 million, net of the asset revaluation allowance. There can be no
assurance, however, that we will recover the entire amount.

         Net revenue and pre-tax losses from Rocky Mountain Medical Center were
$3.2 million and $4.9 million for the three months ended June 30, 2001 and $1.7
million and $3.7 million for the three months ended June 30, 2000. Net revenue
and pre-tax losses from Rocky Mountain Medical Center were $12.9 million and
$14.2 million for the nine months ended June 30, 2001 and $1.7 million and $5.7
million for the nine months ended June 30, 2000.

CLOSURE COSTS

         During the quarter ended June 30, 2001, we adopted and implemented an
exit plan and recorded pre-tax closure charges of approximately $9.1 million
with respect to the closure of Rocky Mountain Medical Center. These charges were
comprised of approximately $1.5 million in severance and related costs, $3.5
million in facility and lease termination costs, $2.4 million in contract
termination costs and $1.7 million in other exit costs. These closure plans
include the involuntary termination of approximately 200 hospital and business
office personnel, which are expected to be completed by September 30, 2001.
During the quarter ended June 30, 2001, we paid approximately $700,000 in
severance and related costs, $300,000 in facility and lease termination costs,
$100,000 in contract termination costs and $50,000 in other costs related to
closure of Rocky Mountain Medical Center. At June 30, 2001, accrued closure
costs totaled approximately $7.9 million and consisted of approximately $800,000
in severance and related costs, $3.2 million in facility and lease termination
costs, $2.3 million in contract termination costs and $1.6 million in other
costs. We estimate that approximately $5.9 million of the remaining accrued
closure costs will be paid during the next 12 months. The remaining $2.0 million
relates primarily to long-term facility and lease commitments.

OTHER COSTS

         We recorded employee severance costs of $2.5 million during the quarter
ended June 30, 2001 related to management severance and the termination of
employees in one of our markets.

         During the quarter ended June 30, 2001, we recorded costs of $2.2
million to write-off deferred initial public offering costs. On January 22,
2001 we filed a Registration Statement on Form S-1 with the Securities and
Exchange Commission, which was amended on February 13, 2001 and March 6, 2001,
to register the sale of our common stock through an underwritten public
offering. On March 9, 2001, we postponed the initial public offering of our
common stock.

LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 2001, we had $89.9 million in working capital, compared to
$65.0 million at September 30, 2000, an increase of $24.9 million. We generated
cash of $21.3 million in operating activities during the nine months ended June
30, 2001, compared to using $56.7 million of cash in operating activities during
the nine months ended June 30, 2000. During the nine months ended June 30, 2001,
the increase in working capital was due primarily to reclassification of $24.1
million of Rocky Mountain Medical Center assets as assets held for sale at June
30, 2001. Net accounts receivable increased $5.2 million from $146.7 million at
September 30, 2000 to $151.9 million at June 30, 2001 and amounted to
approximately 70 days of net revenue outstanding at June 30, 2001 and September
30, 2000. The increase in net accounts both receivable at June 30, 2001 was due
to a combination of the growth in our business, the seasonality of our business
and slower payments from insurance companies and other third party payors.
Prepaid expenses and other current assets increased $5.2 million from



                                       21
<PAGE>   24

$12.6 million at September 30, 2000 to $17.8 million at June 30, 2001 due in
part to increased Health Choice receivables from the Arizona Health Care Cost
Containment System.

         Our investing activities used $28.8 million during the nine months
ended June 30, 2001. Capital expenditures for the nine months ended June 30,
2001 were approximately $29.3 million, including capital expenditures of $10.1
million for information systems, $4.2 million for equipment and improvements at
Rocky Mountain Medical Center, $2.2 million for the purchase of land at one of
our hospitals and $2.0 million for renovation and expansion of the emergency
room and outpatient services area at one of our hospitals. We have forecasted
capital expenditures for the remainder of fiscal 2001 of approximately $12.3
million, including $3.5 million for expansion and renovation at our facilities,
$8.0 million for new and replacement equipment at our facilities and $800,000
for continued implementation and integration of our information systems. The
capital expenditures forecast for 2001 is based upon our analysis of various
factors, many of which are beyond our control, and we cannot assure you that our
capital expenditures will not exceed forecasted amounts.

         Financing activities during the nine months ended June 30, 2001
provided net cash of $12.2 million due primarily to borrowings under our bank
credit facility, the issuance of common stock and sales of limited partnership
units in one of our subsidiaries. During the nine months ended June 30, 2001, we
borrowed $124.0 million pursuant to the terms of our bank credit facility,
repaid $5.9 million in outstanding borrowings pursuant to the terms of our bank
credit facility and capital lease obligations and made voluntary prepayments of
$109.5 million pursuant to the terms of our revolving credit facility. During
the next twelve months, we are required to repay $12.5 million under our bank
credit facility. During the nine months ended June 30, 2001, we received
proceeds of $1.9 million from the issuance of an aggregate of 199,486 shares of
common stock to certain of our existing stockholders. On February 1, 2001, we
sold limited partnership units in our subsidiary that owns Odessa Regional
Hospital to third party investors, including physicians, for net proceeds of
$1.9 million. The net proceeds of this equity sale will be used to fund a
portion of the expansion of the hospital, which is expected to be completed
within 12 to 18 months. As a result of this sale, we own approximately 88.7% of
the equity in this subsidiary.

         Effective October 15, 1999, we entered into a bank credit facility
through which a syndicate of lenders made a total of $455.0 million available to
us in the form of an $80.0 million tranche A term loan, a $250.0 million tranche
B term loan and a $125.0 million revolving credit facility. Proceeds from the
tranche A and tranche B term loans were used in conjunction with the
recapitalization and acquisition transactions. The $125.0 million revolving
credit facility is available for working capital and other general corporate
purposes. The bank credit facility requires that we comply with various
financial ratios and tests and contains covenants limiting our ability to, among
other things, incur debt, engage in acquisitions or mergers, sell assets, make
investments or capital expenditures, make distributions or stock repurchases and
pay dividends. The bank credit facility is guaranteed by our subsidiaries and
these guaranties are secured by a pledge of substantially all of the
subsidiaries' assets.

         At June 30, 2001, amounts outstanding under the tranche A and tranche B
term loans were $75.0 million and $246.3 million, respectively, and we had $14.5
million outstanding under our revolving credit facility. The revolving credit
facility includes a $75.0 million sub-limit for letters of credit that may be
issued by us and, at June 30, 2001, we had issued $34.6 million in letters of
credit. The loans under the bank credit facility bear interest at variable rates
at specified margins above either the agent bank's alternate base rate or its
reserve-adjusted Eurodollar rate. The weighted average interest rate of
outstanding borrowings under the bank credit facility was approximately 10.0% at
June 30, 2001. At August 13, 2001, we had drawn $14.5 million under our
revolving credit facility and had issued $34.6 million in letters of credit,
resulting in remaining availability under the revolving credit facility of $75.9
million.

         On October 13, 1999, we issued $230.0 million of 13% senior
subordinated notes due 2009. On May 25, 2000, we exchanged all of our
outstanding 13% senior subordinated notes due 2009 for 13% senior subordinated
exchange notes due 2009 that have been registered under the Securities Act of
1933, as amended. The notes are unsecured obligations and are subordinated in
right of payment to all of our existing and future senior indebtedness. If a
change in control occurs, as defined in the indenture, each holder of the notes
will have the right to require us to repurchase all or any part of that holder's
notes in cash at 101% of the aggregate principal amount of notes repurchased
plus accrued and unpaid interest to the date of purchase. Except with respect to
a change of control, we are not required to make mandatory redemption or sinking
fund payments with respect to the notes. At June 30, 2001, all of the
subsidiaries fully and unconditionally guaranteed the notes on a joint and
several basis. The



                                       22
<PAGE>   25

indenture for the notes contains certain covenants, including but not limited
to, restrictions on new indebtedness, asset sales, capital expenditures,
dividends and our ability to merge or consolidate.

         Our liquidity and capital resources have been negatively affected by
Rocky Mountain Medical Center, which was closed on June 2, 2001. During the nine
months ended June 30, 2001, at Rocky Mountain Medical Center we incurred
operating losses of $14.2 million, made capital expenditures of $4.2 million and
recorded asset revaluation and closure costs of $11.9 million as discussed
above. During the quarter and nine months ended June 30, 2001, we paid
approximately $700,000 in severance and related costs, $300,000 in facility and
lease termination costs, $100,000 in contract termination costs and $50,000 in
other exit costs related to the closure of Rocky Mountain Medical Center. We
estimate that approximately $5.9 million of the remaining accrued closure costs
at June 30, 2001 will be paid during the next 12 months.

         We recorded employee severance costs of $2.5 million during the quarter
ended June 30, 2001 related to management severance and the termination of
employees in one of our markets. As of June 30, 2001, we had paid approximately
$550,000 of these costs.

         On January 22, 2001, we filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission, which was amended on February 13, 2001
and March 6, 2001, to register the sale of up to 13,350,000 shares of our common
stock, plus up to an additional 2,002,500 shares pursuant to the underwriters'
over-allotment options, through an underwritten public offering. On March 9,
2001, we postponed the initial public offering of our common stock. However, we
have expensed offering costs incurred. As of June 30, 2001, we have paid
approximately $800,000 of costs incurred in conjunction with filing the
Registration Statement, and expect to pay up to $1.4 million of additional costs
during the remainder of fiscal 2001.

         In connection with the recapitalization transaction and the Tenet
transaction, we did not assume any liability or obligation of Paracelsus or
Tenet owed to payors, including private insurers and government payors such as
Medicare and Medicaid programs. We also did not assume any cost report
reimbursements, settlements, repayments or fines, if any, to the extent they
relate to periods prior to the respective closing dates of these transactions.
Our agreements with Paracelsus and Tenet include customary indemnification and
hold harmless provisions for any damages we incur relating to these types of
excluded liabilities. In addition, in the Tenet transaction we agreed to use our
best efforts to cause Tenet to be released from its obligations under certain
contractual obligations that we assumed in the Tenet transaction. If we are
unable to cause Tenet to be released from its obligations by February 28, 2002,
we may be required to make a cash payment to Tenet of up to $4.0 million and
increase a letter of credit we have provided to Tenet by $5.0 million.

         Subsequent to the recapitalization transaction, Paracelsus filed a
petition for relief pursuant to Chapter 11 of the United States Bankruptcy Code.
In October 2000, Paracelsus filed with the United States Bankruptcy Court a
Disclosure Statement and a Plan of Reorganization under Chapter 11 of the
Bankruptcy Code. We filed timely objections and proofs of claim against
Paracelsus. In response to our objections and proofs of claim, and in exchange
for our agreement to withdraw our objections to its Plan of Reorganization, we
negotiated a resolution with Paracelsus whereby Paracelsus agreed that the
restructured debtor would assume all indemnification obligations of Paracelsus
under our recapitalization agreement. The bankruptcy court confirmed this plan
on June 27, 2001. We also continue to have indemnification rights against other
subsidiaries of Paracelsus that are also parties to our recapitalization
agreement, which rights are not affected by the bankruptcy proceeding.

         We have provided performance guaranties in the form of a surety bond in
the amount of $9.4 million and a letter of credit in the amount of $6.6 million
for the benefit of the Arizona Health Care Cost Containment System to support
our obligations under the Health Choice contract to provide and pay for the
healthcare services. The amount of the performance guaranty that the Arizona
Health Care Cost Containment System requires is based upon the membership in the
plan and the related capitation paid to us.

         At July 31, 2001, we had cash and cash equivalents of approximately
$6.0 million and at August 13, 2001, approximately $75.9 million available under
the revolving credit facility. Based upon the current level of operations and
anticipated growth, we believe that cash generated from operations and amounts
available under the revolving credit facility will be adequate to meet our
anticipated debt service requirements, capital expenditures and working capital
needs for the next 12 months. We cannot assure you, however, that our business
will generate sufficient cash




                                       23
<PAGE>   26

flow from operations, that future borrowings will be available under our bank
credit facility, or otherwise, to enable us to grow our business, service our
indebtedness, including the bank credit facility and our senior subordinated
exchange notes, or to make anticipated capital expenditures. One element of our
business strategy is expansion through the acquisition of hospitals in our
existing and new high-growth markets. The completion of acquisitions may result
in the incurrence of, or assumption by us, of additional indebtedness. Our
future operating performance, ability to service or refinance the senior
subordinated exchange notes and ability to service and extend or refinance the
bank credit facility will be subject to future economic conditions and to
financial, business and other factors, many of which are beyond our control.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         During the nine months ended June 30, 2001, there were no material
changes to our quantitative and qualitative disclosures about the market risk
associated with financial instruments as described in our Annual Report on Form
10-K for the year ended September 30, 2000. At June 30, 2001, the fair market
value of our outstanding senior subordinated exchange notes was approximately
$245.0 million, based upon quoted market prices as of that date.

                                     PART II

                                OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      List of Exhibits:

<TABLE>
<S>                                 <C>
                  Exhibit 10.1      Employment Agreement dated May 21, 2001 between
                                    IASIS Healthcare Corporation and Ms. Sandra K. McRee
</TABLE>

          (b)     Reports on Form 8-K:

                  On May 1, 2001, the Company filed a Current Report on Form 8-K
                  to report that it had issued a press release announcing the
                  date and time of the online simulcast of its fiscal 2001
                  second quarter earnings conference call.

                  On May 10, 2001, the Company filed a Current Report on Form
                  8-K to report that it had issued a press release on May 9,
                  2001 announcing its earnings for the second quarter ended
                  March 31, 2001.

                  On June 1, 2001, the Company filed a Current Report on Form
                  8-K to report that it had issued a press release announcing
                  the closure of Rocky Mountain Medical Center.






                                       24
<PAGE>   27

                                   SIGNATURES

         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.

                                IASIS HEALTHCARE CORPORATION

Date:  August 14, 2001          By:    /s/ John K. Crawford
                                      ------------------------------------------
                                      John K. Crawford, Executive Vice President
                                           and Chief Financial Officer


<PAGE>   28


                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
          EXHIBIT NO.             DESCRIPTION
          -----------             -----------
<S>                               <C>
             10.1                 Employment Agreement dated May 21, 2001 between
                                  IASIS Healthcare Corporation and Ms. Sandra K. McRee
</TABLE>