##### Table of Contents









UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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FORM 10-Q


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|     |  |                                                          
|---- |  | ---------------------------------------------------------
|[X]  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE 
|    
|    
|    
|    
|     |  | SECURITIES EXCHANGE ACT OF 1934                          
|    
|    
|    
|    
|    
|    
|    
|    
|     |  | For the quarterly period ended September 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    0-29818

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LifePoint Hospitals, Inc.
(Exact name of registrant as specified in its charter)


|                                         |  |                    
|---------------------------------------- |  | -------------------
|Delaware                                 |  | 52-2165845         
|(State or other jurisdiction             |  | (IRS Employer      
|of incorporation or organization)        |  | Identification No.)
|                                        
|103 Powell Court                         |  | 37027              
|Brentwood, Tennessee                     |  | (Zip Code)         
|(Address of principal executive offices) |  |                    

(615) 372-8500
(Registrants telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)



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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 [  ]





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##### Table of Contents



Commission file number    333-84755

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LifePoint Hospitals Holdings, Inc.
(Exact name of registrant as specified in its charter)


|                                         |  |                    
|---------------------------------------- |  | -------------------
|Delaware                                 |  | 52-2167869         
|(State or other jurisdiction             |  | (IRS Employer      
|of incorporation or organization)        |  | Identification No.)
|                                        
|103 Powell Court                         |  | 37027              
|Brentwood, Tennessee                     |  | (Zip Code)         
|(Address of principal executive offices) |  |                    

(615) 372-8500
(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, and (2) has been subject to such filing
requirements for the past 90 days.

Yes  [X]     No [  ]

As of October 31, 2001, the number of outstanding shares of Common Stock
of LifePoint Hospitals, Inc. was 39,273,087, and all of the shares of Common
Stock of LifePoint Hospitals Holdings, Inc. were owned by LifePoint Hospitals,
Inc.





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TABLE OF CONTENTS



|                                                                                              |                                                      |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  |  | 
|Part I:  Financial Information                                                               
|Item 1: Financial Statements                                                                 
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF INCOME         
|                                                                                              | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                                                              | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
|Item 3: Quantitative and Qualitative Disclosures about Market Risk                           
|Part II: Other Information                                                                   
|Item 6: Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   
|EXHIBIT INDEX                                                                                



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##### Table of Contents






Part I:    Financial Information




Item 1:    Financial Statements

LIFEPOINT HOSPITALS, INC.




CONDENSED CONSOLIDATED STATEMENTS OF INCOME

UNAUDITED
(Dollars in millions, except per share amounts)


|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |      |        |       | 
|------------------------------------------------------------------------------- | ---------- | --------------------------------------------------- | ---------------------------------------------------- | --- | ------------------ | ----- | ----------------- | --- | ------ | ----- | ----- | ---- | ------ | ----- | ----- | ---- | ------ | ----- | 
|                                                                                |            |                                                     |                                                      |     | THREE MONTHS ENDED |       | NINE MONTHS ENDED
|                                                                                |            |                                                     |                                                      |     | SEPTEMBER 30,      |       | SEPTEMBER 30,    
|                                                                                |            |                                                     |                                                      |     |                    |       |                  
|                                                                                |            |                                                     |                                                      |     | 2001               |       | 2000              |     | 2001   |       | 2000 
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |      
|Revenues                                                                        |            | $                                                   | 149.2                                                |     |                    | $     | 145.3             |     |        | $     | 455.1 |      |        | $     | 414.6 |     
|                                                                               
|Salaries and benefits                                                           |            |                                                     | 59.3                                                 |     |                    |       | 58.1              |     |        |       | 179.0 |      |        |       | 168.2 |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Supplies                                                                        |            |                                                     | 19.0                                                 |     |                    |       | 17.1              |     |        |       | 57.4  |      |        |       | 50.1  |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Other operating expenses                                                        |            |                                                     | 29.1                                                 |     |                    |       | 30.6              |     |        |       | 88.5  |      |        |       | 88.8  |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Provision for doubtful accounts                                                 |            |                                                     | 11.5                                                 |     |                    |       | 12.5              |     |        |       | 34.1  |      |        |       | 31.4  |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Depreciation and amortization                                                   |            |                                                     | 8.2                                                  |     |                    |       | 8.5               |     |        |       | 24.8  |      |        |       | 25.3  |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Interest expense, net                                                           |            |                                                     | 4.0                                                  |     |                    |       | 8.3               |     |        |       | 14.2  |      |        |       | 22.9  |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|ESOP expense                                                                    |            |                                                     | 3.0                                                  |     |                    |       | 2.0               |     |        |       | 8.0   |      |        |       | 4.4   |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Gain on previously impaired assets                                              |            |                                                     |                                                     |     |                    |       | (1.4              | )   |        |       | (0.5  | )    |        |       | (1.4  | )   
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|                                                                                |            |                                                     | 134.1                                                |     |                    |       | 135.7             |     |        |       | 405.5 |      |        |       | 389.7 |     
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|Income before minority interests,
income taxes and extraordinary item           |            |                                                     | 15.1                                                 |     |                    |       | 9.6               |     |        |       | 49.6  |      |        |       | 24.9  |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Minority interests in earnings of consolidated
entities                         |            |                                                     | 0.6                                                  |     |                    |       | 0.5               |     |        |       | 1.9   |      |        |       | 1.8   |     
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|Income before income taxes and extraordinary item                               |            |                                                     | 14.5                                                 |     |                    |       | 9.1               |     |        |       | 47.7  |      |        |       | 23.1  |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Provision for income taxes                                                      |            |                                                     | 7.0                                                  |     |                    |       | 4.3               |     |        |       | 23.1  |      |        |       | 10.6  |     
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|Income before extraordinary item                                                |            |                                                     | 7.5                                                  |     |                    |       | 4.8               |     |        |       | 24.6  |      |        |       | 12.5  |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|Extraordinary loss on early retirement of bank debt,
net of tax benefit of $1.0 |            |                                                     |                                                     |     |                    |       |                  |     |        |       | 1.6   |      |        |       |      |     
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|                                                                                | Net income |                                                     | $                                                    | 7.5 |                    |       | $                 | 4.8 |        |       | $     | 23.0 |        |       | $     | 12.5 |       
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|Basic earnings per share:                                                       |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |            | Income before extraordinary item                    |                                                      | $   | 0.20               |       |                   | $   | 0.15   |       |       | $    | 0.70   |       |       | $    | 0.40   |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |            | Extraordinary loss on early retirement of bank debt |                                                      |     |                   |       |                   |     |       |       |       |      | (0.05  | )     |       |      |       |      
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|                                                                                |            | Net income                                          |                                                      | $   | 0.20               |       |                   | $   | 0.15   |       |       | $    | 0.65   |       |       | $    | 0.40   |      
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|Diluted earnings per share:                                                     |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |            | Income before extraordinary item                    |                                                      | $   | 0.20               |       |                   | $   | 0.14   |       |       | $    | 0.67   |       |       | $    | 0.38   |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |            | Extraordinary loss on early retirement of bank debt |                                                      |     |                   |       |                   |     |       |       |       |      | (0.04  | )     |       |      |       |      
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|                                                                                |            | Net income                                          |                                                      | $   | 0.20               |       |                   | $   | 0.14   |       |       | $    | 0.63   |       |       | $    | 0.38   |      
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|Shares used in earnings per share calculations (000s):                          |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |            | Basic                                               |                                                      |     | 36,783             |       |                   |     | 31,706 |       |       |      | 35,216 |       |       |      | 31,400 |      
|                                                                               
|                                                                               
|                                                                               
|                                                                               
|                                                                                |            |                                                     | Dilutive
securitiesstock options,
restricted shares |     |                    | 1,447 |                   |     |        | 1,624 |       |      |        | 1,524 |       |      |        | 1,231 | 
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     
|                                                                                |            | Diluted                                             |                                                      |     | 38,230             |       |                   |     | 33,330 |       |       |      | 36,740 |       |       |      | 32,631 |      
|                                                                                |            |                                                     |                                                      |     |                    |       |                   |     |        |       |       |      |        |       |       |     

See accompanying notes.

2



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##### Table of Contents



LIFEPOINT HOSPITALS, INC.




CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)


|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |       |   |  | 
|---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------ | ----- | ------------- | - | ------------ | ----- | - |  | 
|                                                                                                                 |                                                                                                                                                                                       |   |        |       | SEPTEMBER 30, |   | DECEMBER 31,
|                                                                                                                 |                                                                                                                                                                                       |   |        |       | 2001          |   | 2000        
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |             
|                                                                                                                 |                                                                                                                                                                                       |   |        |       | (unaudited)   |   | (1)         
|ASSETS                                                                                                           |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Current assets:                                                                                                  |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Cash and cash equivalents                                                                                                                                                             |   | $      | 73.5  |               |   | $            | 39.7  |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Accounts receivable, less allowances for doubtful accounts of $53.9
at September 30, 2001 and $52.3 at December 31, 2000                                                              |   |        | 42.0  |               |   |              | 41.7  |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Inventories                                                                                                                                                                           |   |        | 14.4  |               |   |              | 13.9  |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Deferred taxes and other current assets                                                                                                                                               |   |        | 17.0  |               |   |              | 22.2  |  
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                 |                                                                                                                                                                                       |   | 146.9  |       |               |   | 117.5        |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Property and equipment:                                                                                          |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Land                                                                                                                                                                                  |   |        | 9.4   |               |   |              | 8.7   |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Buildings and improvements                                                                                                                                                            |   |        | 244.1 |               |   |              | 236.9 |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Equipment                                                                                                                                                                             |   |        | 248.5 |               |   |              | 244.9 |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Construction in progress (estimated cost to complete and equip
after September 30, 2001$8.1)                                                                                         |   |        | 16.6  |               |   |              | 9.4   |  
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                 |                                                                                                                                                                                       |   | 518.6  |       |               |   | 499.9        |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Accumulated depreciation                                                                                         |                                                                                                                                                                                       |   | (195.9 | )     |               |   | (183.4       | )    
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                 |                                                                                                                                                                                       |   | 322.7  |       |               |   | 316.5        |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Intangible assets, net of accumulated amortization of $12.1 at
September 30, 2001 and $11.3 at December 31, 2000 |                                                                                                                                                                                       |   | 55.0   |       |               |   | 53.8         |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Other                                                                                                            |                                                                                                                                                                                       |   | 0.1    |       |               |   | 0.2          |      
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                 |                                                                                                                                                                                       | $ | 524.7  |       |               | $ | 488.0        |      
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |      
|LIABILITIES AND EQUITY                                                                                           |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Current liabilities:                                                                                             |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Accounts payable                                                                                                                                                                      |   | $      | 15.8  |               |   | $            | 16.1  |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Accrued salaries                                                                                                                                                                      |   |        | 16.2  |               |   |              | 13.8  |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Other current liabilities                                                                                                                                                             |   |        | 23.4  |               |   |              | 11.1  |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Current maturities of long-term debt                                                                                                                                                  |   |        |      |               |   |              | 11.1  |  
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                 |                                                                                                                                                                                       |   | 55.4   |       |               |   | 52.1         |      
|                                                                                                                
|Long-term debt                                                                                                   |                                                                                                                                                                                       |   | 150.0  |       |               |   | 278.3        |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Deferred taxes                                                                                                   |                                                                                                                                                                                       |   | 18.0   |       |               |   | 15.2         |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Professional liability risks and other liabilities                                                               |                                                                                                                                                                                       |   | 16.2   |       |               |   | 9.4          |      
|                                                                                                                
|Minority interests in equity of consolidated entities                                                            |                                                                                                                                                                                       |   | 4.4    |       |               |   | 4.6          |      
|                                                                                                                
|Stockholders equity:                                                                                            |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Preferred stock, $0.01 par value; 10,000,000 shares authorized;
no shares issued                                                                                                      |   |        |      |               |   |              |      |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Common stock, $0.01 par value; 90,000,000 shares authorized;
39,261,748 shares and 34,709,504 shares issued and
outstanding at September 30, 2001 and December 31, 2000,
respectively |   |        | 0.4   |               |   |              | 0.3   |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Capital in excess of par value                                                                                                                                                        |   |        | 283.3 |               |   |              | 156.5 |  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Unearned ESOP compensation                                                                                                                                                            |   |        | (23.3 | )             |   |              | (25.7 | )
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Notes receivable for shares sold to employees                                                                                                                                         |   |        | (7.2  | )             |   |              | (7.2  | )
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Retained earnings                                                                                                                                                                     |   |        | 27.5  |               |   |              | 4.5   |  
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                 |                                                                                                                                                                                       |   | 280.7  |       |               |   | 128.4        |      
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |      
|                                                                                                                 |                                                                                                                                                                                       | $ | 524.7  |       |               | $ | 488.0        |      
|                                                                                                                 |                                                                                                                                                                                       |   |        |       |               |   |              |      



|(1) |  | Derived from audited financial statements
|--- |  | -----------------------------------------

See accompanying notes.

3



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##### Table of Contents



LIFEPOINT HOSPITALS, INC.




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In millions)

|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |       |      |       |  
|------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ------ | ----------------- | ----- | ---- | ----- | ---- | ----- | -
|                                                 |                                                                                   |                                                                                                                     |                                                     |        | NINE MONTHS ENDED
|                                                 |                                                                                   |                                                                                                                     |                                                     |        | SEPTEMBER 30,    
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                  
|                                                 |                                                                                   |                                                                                                                     |                                                     |        | 2001              |       | 2000
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |     
|Cash flows from operating activities:            |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income                                                                        |                                                                                                                     | $                                                   | 23.0   |                   |       | $    | 12.5  |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income to
net cash provided by operating activities: |                                                                                                                     |                                                     |        |                   |       |      |       |     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | ESOP expense                                                                                                        |                                                     |        | 8.0               |       |      |       | 4.4  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Provision for doubtful accounts                                                                                     |                                                     |        | 34.1              |       |      |       | 31.4 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Depreciation and amortization                                                                                       |                                                     |        | 24.8              |       |      |       | 25.3 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Minority interests in earnings of consolidated
entities                                                             |                                                     |        | 1.9               |       |      |       | 1.8  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Deferred income taxes                                                                                               |                                                     |        | 0.6               |       |      |       | 13.3 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Reserve for professional liability risk                                                                             |                                                     |        | 6.3               |       |      |       | 3.8  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Gain on previously impaired assets                                                                                  |                                                     |        | (0.5              | )     |      |       | (1.4 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Extraordinary loss on early retirement of
bank debt                                                                 |                                                     |        | 2.6               |       |      |       |     |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Tax benefit from stock option exercises                                                                             |                                                     |        | 8.1               |       |      |       | 4.6  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Increase (decrease) in cash from operating
assets and liabilities, net of effects
of acquisitions and divestitures: |                                                     |        |                   |       |      |       |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   |                                                                                                                     | Accounts receivable                                 |        |                   | (34.2 | )    |       |      | (27.0 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   |                                                                                                                     | Inventories and other current assets                |        |                   |      |      |       |      | (1.8  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   |                                                                                                                     | Accounts payable and accrued expenses               |        |                   | 14.4  |      |       |      | (3.5  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   |                                                                                                                     | Income taxes payable                                |        |                   | 1.2   |      |       |      | (7.4  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                   | Other                                                                                                               |                                                     |        | 1.3               |       |      |       | 1.7  |      
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                 |                                                                                   |                                                                                                                     | Net cash provided by operating activities           |        |                   | 91.6  |      |       |      | 57.7  |  
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                
|                                                
|                                                
|                                                
|Cash flows from investing activities:            |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of property and equipment, net                                          |                                                                                                                     |                                                     | (28.5  | )                 |       |      | (23.3 | )   
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of facilities                                                           |                                                                                                                     |                                                     | (5.8   | )                 |       |      | (83.3 | )   
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from sale of facilities                                                  |                                                                                                                     |                                                     |       |                   |       |      | 24.4  |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                                                                             |                                                                                                                     |                                                     | 4.3    |                   |       |      | (2.4  | )   
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                 |                                                                                   |                                                                                                                     | Net cash used in investing activities               |        |                   | (30.0 | )    |       |      | (84.6 | )
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                
|                                                
|                                                
|                                                
|Cash flows from financing activities:            |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from stock offering, net                                                 |                                                                                                                     |                                                     | 100.4  |                   |       |      |      |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Repayments of bank debt                                                           |                                                                                                                     |                                                     | (139.3 | )                 |       |      | (33.9 | )   
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from bank debt borrowings                                                |                                                                                                                     |                                                     |       |                   |       |      | 65.0  |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from exercise of stock options                                           |                                                                                                                     |                                                     | 12.0   |                   |       |      | 4.3   |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                                                                             |                                                                                                                     |                                                     | (0.9   | )                 |       |      | (0.7  | )   
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                 |                                                                                   |                                                                                                                     | Net cash (used in) provided by
financing activities |        |                   | (27.8 | )    |       |      | 34.7  |  
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                
|                                                
|                                                
|                                                
|Change in cash and cash equivalents              |                                                                                   |                                                                                                                     | 33.8                                                |        |                   |       | 7.8  |      
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                                   |                                                                                                                     | 39.7                                                |        |                   |       | 12.5 |      
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|Cash and cash equivalents at end of period       |                                                                                   | $                                                                                                                   | 73.5                                                |        |                   | $     | 20.3 |      
|                                                 |                                                                                   |                                                                                                                     |                                                     |        |                   |       |      |      
|                                                
|Interest payments                                |                                                                                   | $                                                                                                                   | 12.2                                                |        |                   | $     | 17.7 |      
|                                                
|                                                
|                                                
|                                                
|Income tax payments                              |                                                                                   | $                                                                                                                   | 12.0                                                |        |                   | $     |     |      

See accompanying notes.

4



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##### Table of Contents



LIFEPOINT HOSPITALS, INC.




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


NOTE 1  ORGANIZATION AND BASIS OF PRESENTATION

At September 30,
2001, the Company was comprised of 21 general, acute care
hospitals and related health care entities located in non-urban areas in the
states of Alabama, Florida, Kansas, Kentucky, Tennessee, Utah and Wyoming.

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months and nine months ended September 30, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Companys Annual
Report on Form 10-K for the year ended December 31, 2000.

Certain prior year amounts have been reclassified to conform to the
current year presentation.

NOTE 2  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 141
is effective for transactions completed subsequent to June 30, 2001 and SFAS
142 is effective for fiscal years beginning after December 15, 2001. Under the
new rules, goodwill will no longer be amortized but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their useful lives.

The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of SFAS No. 142 is anticipated to result in an
increase in net income of approximately $0.8 million per year ($0.02 per
diluted share), based on the Companys 2001 projected net income and diluted
shares. During 2002, the Company will perform the first of the required
impairment tests of goodwill as of January 1, 2002 and management believes that
these tests will not have a material effect on the earnings and financial
position of the Company.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144), which supersedes SFAS
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, and the accounting and reporting provisions of APB
Opinion No. 30, Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.
SFAS 144 is effective for fiscal years beginning after
December 15, 2001. SFAS 144 removes goodwill from its scope and clarifies other implementation
issues related to SFAS 121. SFAS 144 also provides a single framework for
evaluating long-lived assets to be disposed of by sale. The Company does not
anticipate SFAS 144 to have a material effect on its earnings or financial
position.

NOTE 3  SECONDARY OFFERING AND AMENDED AND RESTATED CREDIT AGREEMENT

In March 2001, the Company completed a public offering of 3,680,000 shares
of common stock. The net proceeds from the offering were approximately $100.4
million. During April and May of 2001, the Company used the proceeds, along
with existing cash, to repay approximately $117.1 million of bank debt which
represented the remaining borrowings outstanding under its existing bank credit
agreement.

In June 2001, the Company completed a $200 million, five-year amended and
restated credit agreement with a syndicate of banks, which increased the
Companys available credit under its revolving credit agreement from $65
million to $200 million. Upon consummation of this amended and restated
agreement, the Company wrote off $2.6 million of deferred loan costs related to
the original credit agreement,
which resulted in an extraordinary charge of $1.6 million, net of a tax
benefit of $1.0 million.

5



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##### Table of Contents



NOTE 4  CONTINGENCIES

HCA Investigations, Litigation and Indemnification Rights

HCA Inc. (HCA) is currently the subject of various federal and state
investigations, qui tam actions, shareholder derivative and class action suits,
patient/payer actions and general liability claims. HCA is also the subject of
a formal order of investigation by the SEC. Based on the Companys review of
HCAs public filings, the Company understands that the SECs investigation of
HCA includes the anti-fraud, insider trading, periodic reporting and internal
accounting control provisions of the federal securities laws. These
investigations, actions and claims relate to HCA and its subsidiaries,
including subsidiaries that, before the Companys formation as an independent
company, owned the facilities the Company now owns.

HCA is a defendant in several qui tam actions, or actions brought by
private parties, known as relators, on behalf of the United States of America,
which have been unsealed and served on HCA. The actions allege, in general,
that HCA and certain subsidiaries and/or affiliated partnerships violated the
False Claims Act, 31 U.S.C. ss. 3729 et seq., by submitting improper claims to
the government for reimbursement. The lawsuits seek three times the amount of
damages caused to the United States by the submission of any Medicare or
Medicaid false claims presented by the defendants to the federal government,
civil penalties of not less than $5,000 nor more than $10,000 for each such
Medicare or Medicaid claim, attorneys fees and costs. HCA has disclosed that,
on March 15, 2001, the Department of Justice filed a status report setting
forth the governments decisions regarding intervention in existing qui tam
actions against HCA and filed formal complaints for those suits in which the
government has intervened. HCA stated that, of the original 30 qui tam actions,
the Department of Justice remains active and has elected to intervene in eight
actions. HCA has also disclosed that it is aware of additional qui tam actions
that remain under seal and believes that there may be other sealed qui tam
cases of which it is unaware.

On December 14, 2000, HCA announced that it signed an agreement with the
Department of Justice and four U.S. attorneys offices resolving all pending
federal criminal issues in the governments investigation. The criminal
agreement has been accepted by the federal district courts. The criminal
agreement provided that HCA pay the government $95 million, which payment was
made during the first quarter of 2001, and that two non-operating subsidiaries
enter certain criminal pleas, which pleas were entered in January 2001.

HCA also announced that it signed a civil settlement agreement with the
Department of Justice resolving civil false claims issues related to DRG
coding, outpatient laboratory and home health. The civil settlement agreement
provides that in return for releases on these issues, HCA will pay the
government $745 million, with interest accruing from May 18, 2000 to the
payment date at a rate of 6.5%. Court approval of this settlement was received
on August 7, 2001 and HCA made the payment on August 10, 2001. The civil
issues that are not covered by the civil agreement include claims related to
cost reports and physician relations issues.

The agreements announced on December 14, 2000 relate only to conduct that
was the subject of the federal investigations resolved in the agreements, and
HCA has stated publicly that it continues to discuss civil claims relating to
cost reporting and physician relations with the government. These agreements
with the government do not resolve various qui tam actions filed by private
parties against HCA, or any pending state actions. In addition to other claims
not covered by these agreements, the government also reserved its rights under
these agreements to pursue any claims it may have for:



| |  |  | any civil, criminal or administrative liability under the
Internal Revenue code;
| | - |  | --------------------------------------------------------------------------------
|
| |  |  | any other criminal liability;                                                   

6



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##### Table of Contents





| |  |  | any administrative liability, including mandatory exclusion
from federal health care programs;                                                                   
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | any liability to the United States (or its agencies) for any
conduct other than the conduct covered in the governments
investigation;                           
|
| |  |  | any express or implied warranty claims or other claims for
defective or deficient products or services, including quality of
goods and services, provided by HCA;
|
| |  |  | any claims for personal injury or property damage or for
other similar consequential damages arising from the conduct subject
to the investigation; and          
|
| |  |  | any civil or administrative claims of the United States
against individuals.                                                                                     

In addition, five of the Companys current and former hospitals received
notices in early 2001 from the Centers for Medicare and Medicaid Services
(CMS), formerly known as the Health Care Financing Administration, a United
States government agency that runs the Medicare and Medicaid programs. The
notices stated that CMS was re-opening, for examination, cost reports for
Medicare and Medicaid reimbursement filed by these hospitals for periods
between 1993 and 1998, which pre-dates the Companys spin-off from HCA.

HCA has agreed to indemnify the Company for any losses, other than
consequential damages, arising from the pending governmental investigations of
HCAs business practices prior to the date of the distribution and losses
arising from legal proceedings, present or future, related to the investigation
or actions engaged in before the distribution that relate to the investigation.
HCA has also agreed that, in the event that any hospital owned by the Company
at the time of the spin-off is permanently excluded from participation in the
Medicare and Medicaid programs as a result of the proceedings described above,
then HCA will make a cash payment to the Company, in an amount (if positive)
equal to five times the excluded hospitals 1998 income from continuing
operations before depreciation and amortization, interest expense, management
fees, minority interests and income taxes, as set forth on a schedule to the
distribution agreement, less the net proceeds of the sale or other disposition
of the excluded hospital. However, the Company could be held responsible for
any claims that are not covered by the agreements reached with the federal
government or for which HCA is not required to, or
fails to, indemnify the Company. If indemnified matters were asserted
successfully against the Company or any of the Companys facilities, and HCA
failed to meet its indemnification obligations, then this event could have a
material adverse effect on the Companys business, financial condition, results
of operations or prospects.

The extent to which the Company may or may not continue to be affected by
the ongoing investigations of HCA and the initiation of additional
investigations, if any, cannot be predicted. These matters could have a
material adverse effect on the Companys business, financial condition, results
of operations or prospects in future periods.

Americans with Disabilities Act Claim

On January 12, 2001, Access Now, Inc., a disability rights organization,
filed a class action lawsuit against each of the Companys hospitals alleging
non-compliance with the accessibility guidelines under the Americans with
Disabilities Act. The lawsuit, filed in the United States District Court for
the Eastern District of Tennessee, seeks injunctive relief requiring facility
modification, where necessary, to meet the Americans with Disabilities Act
guidelines, along with attorneys fees and costs. The Company is working with
Access Now, Inc. to determine the scope of facility modification needed to
comply with the Act.

7



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##### Table of Contents



Corporate Integrity Agreement

In December 2000, the Company entered into a corporate integrity agreement
with the Office of Inspector General and agreed to maintain its compliance
program in accordance with the corporate integrity agreement. Complying with
the compliance measures and reporting and auditing requirements of the
corporate integrity agreement requires additional efforts and costs. Failure to
comply with the terms of the corporate integrity agreement could subject the
Company to significant monetary penalties.

General Liability Claims

The Company is, from time to time, subject to claims and suits arising in
the ordinary course of business, including claims for damages for personal
injuries, breach of management contracts, for wrongful restriction of, or
interference with, physicians staff privileges and employment related claims.
In some of these actions, plaintiffs request punitive or other damages against
the Company which may not be covered by insurance. The Company is currently not
a party to any proceeding which, in managements opinion, would have a material
adverse effect on the Companys business, financial condition or results of
operations.

Physician Commitments

The Company has committed to provide certain financial assistance pursuant
to recruiting agreements with various physicians practicing in the communities
it serves. In consideration for a physician relocating to one of its
communities and agreeing to engage in private practice for the benefit of the
respective community, the Company may loan certain amounts of money to a
physician, normally over a period of one year, to assist in establishing his or
her practice. The Company has committed to advance amounts of approximately
$9.1 million at September 30, 2001. The actual amount of such commitments to be
subsequently advanced to physicians often depends upon the financial results of
a physicians private practice during the guarantee period. Generally, amounts
advanced under the recruiting agreements may be forgiven pro rata over a period
of 48 months contingent upon the physician continuing to practice in the
respective community. It is managements opinion that amounts actually advanced
and not repaid will not have a material adverse effect on the Companys results
of operations or financial position.

Acquisitions

The Company has acquired and will continue to acquire businesses with
prior operating histories. Acquired companies may have unknown or contingent
liabilities, including liabilities for failure to comply with health care laws
and regulations, such as billing and reimbursement, fraud and abuse and similar
anti-referral laws. Although the Company institutes policies intended to
conform practices to its standards following completion of acquisitions, there
can be no assurance that the Company will not become liable for past activities
that may later be asserted to be improper by private plaintiffs or government
agencies. Although the Company generally seeks to obtain indemnification from
prospective sellers covering such matters, there can be no assurance that any
such matter will be covered by indemnification, or if covered, that such
indemnification will be adequate to cover potential losses and fines.

NOTE 5  SENIOR SUBORDINATED NOTES

The Companys senior subordinated notes (the Notes) are guaranteed
jointly and severally on a full and unconditional basis by all of the Companys
operating subsidiaries (Subsidiary Guarantors). The Company is a holding
company with no operations apart from its ownership of the Subsidiary
Guarantors. The aggregate assets, liabilities, equity and earnings of the
Subsidiary Guarantors are substantially equivalent to the total assets,
liabilities, equity and earnings of the Company and its subsidiaries on a
consolidated basis.

Separate financial statements and other disclosures of the wholly owned
Subsidiary Guarantors are not presented because management believes that such
separate
financial statements and disclosures would not provide additional material
information to investors.

8



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##### Table of Contents



At September 30, 2001, only one of the Companys subsidiaries, Dodge City
Healthcare Group, L.P., was not wholly owned, although all assets, liabilities,
equity and earnings of this entity fully and unconditionally, jointly and
severally, guarantee the Notes. The Company owns approximately 70% of the
partnership interests in this mostly owned guarantor subsidiary.

Presented below is summarized condensed unaudited consolidating financial
information for the Company and its subsidiaries as of September 30, 2001 and
December 31, 2000, and for the three months and nine months ended September 30,
2001 and 2000 segregating the parent company, the issuer of the Notes
(LifePoint Hospitals Holdings, Inc.), the combined wholly owned Subsidiary
Guarantors, the mostly owned Subsidiary Guarantor and eliminations.

9



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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(IN MILLIONS)

|                                                        |  |        |      |       |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|------------------------------------------------------- |  | ------ | ---- | ----- |  | ---------- | ----- | ---------- |  | ------------ | ----- | ------------ |  | - | ---- | ------------ |  | - | ----- | - |  | - | ----- | 
|                                                        |  |        |      |       |  |            |       |            |  | WHOLLY OWNED |       | MOSTLY OWNED |  |   |      |              |  |   |       |  
|                                                        |  |        |      |       |  | ISSUER OF  |       | SUBSIDIARY |  | SUBSIDIARY   |       |              |  |   |      | CONSOLIDATED
|                                                        |  | PARENT |      | NOTES |  | GUARANTORS |       | GUARANTOR  |  | ELIMINATIONS |       | TOTAL       
|                                                        |  |        |      |       |  |            |       |            |  |              |       |             
|Revenues                                                |  | $      |     |       |  | $          |      |            |  | $            | 141.5 |              |  | $ | 7.7  |              |  | $ |      |   |  | $ | 149.2 | 
|                                                       
|Salaries and benefits                                   |  |        |     |       |  |            |      |            |  |              | 56.7  |              |  |   | 2.6  |              |  |   |      |   |  |   | 59.3  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Supplies                                                |  |        |     |       |  |            |      |            |  |              | 17.9  |              |  |   | 1.1  |              |  |   |      |   |  |   | 19.0  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Other operating expenses                                |  |        |     |       |  |            |      |            |  |              | 28.0  |              |  |   | 1.1  |              |  |   |      |   |  |   | 29.1  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Provision for doubtful accounts                         |  |        |     |       |  |            |      |            |  |              | 11.1  |              |  |   | 0.4  |              |  |   |      |   |  |   | 11.5  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Depreciation and amortization                           |  |        |     |       |  |            |      |            |  |              | 7.8   |              |  |   | 0.4  |              |  |   |      |   |  |   | 8.2   | 
|                                                       
|                                                       
|                                                       
|                                                       
|Management fees                                         |  |        |     |       |  |            |      |            |  |              | (0.2  | )            |  |   | 0.2  |              |  |   |      |   |  |   |      | 
|                                                       
|                                                       
|                                                       
|                                                       
|Interest expense, net                                   |  |        |     |       |  |            | 4.5   |            |  |              | (0.4  | )            |  |   | (0.1 | )            |  |   |      |   |  |   | 4.0   | 
|                                                       
|                                                       
|                                                       
|                                                       
|ESOP expense                                            |  |        |     |       |  |            |      |            |  |              | 2.8   |              |  |   | 0.2  |              |  |   |      |   |  |   | 3.0   | 
|                                                       
|                                                       
|                                                       
|                                                       
|Equity in earnings of affiliates                        |  |        | (7.5 | )     |  |            | (11.0 | )          |  |              |      |              |  |   |     |              |  |   | 18.5  |   |  |   |      | 
|                                                        |  |        |      |       |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|                                                        |  |        | (7.5 | )     |  |            | (6.5  | )          |  |              | 123.7 |              |  |   | 5.9  |              |  |   | 18.5  |   |  |   | 134.1 | 
|                                                        |  |        |      |       |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|Income before minority interests and
income taxes       |  |        | 7.5  |       |  |            | 6.5   |            |  |              | 17.8  |              |  |   | 1.8  |              |  |   | (18.5 | ) |  |   | 15.1  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Minority interests in earnings of
consolidated entities |  |        |     |       |  |            | 0.6   |            |  |              |      |              |  |   |     |              |  |   |      |   |  |   | 0.6   | 
|                                                        |  |        |      |       |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|Income before income taxes                              |  |        | 7.5  |       |  |            | 5.9   |            |  |              | 17.8  |              |  |   | 1.8  |              |  |   | (18.5 | ) |  |   | 14.5  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Provision for income taxes                              |  |        |     |       |  |            | (1.6  | )          |  |              | 8.6   |              |  |   |     |              |  |   |      |   |  |   | 7.0   | 
|                                                        |  |        |      |       |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|Net income                                              |  | $      | 7.5  |       |  | $          | 7.5   |            |  | $            | 9.2   |              |  | $ | 1.8  |              |  | $ | (18.5 | ) |  | $ | 7.5   | 
|                                                        |  |        |      |       |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 

10



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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
(IN MILLIONS)

|                                                        |            |   |        |     |       |   |            |     |            |   |              |     |              |   |     |     |              |   |       |       |   |   |       |     | 
|------------------------------------------------------- | ---------- | - | ------ | --- | ----- | - | ---------- | --- | ---------- | - | ------------ | --- | ------------ | - | --- | --- | ------------ | - | ----- | ----- | - | - | ----- | --- | 
|                                                        |            |   |        |     |       |   |            |     |            |   | WHOLLY OWNED |     | MOSTLY OWNED |   |     |     |              |   |       |       |  
|                                                        |            |   |        |     |       |   | ISSUER OF  |     | SUBSIDIARY |   | SUBSIDIARY   |     |              |   |     |     | CONSOLIDATED
|                                                        |            |   | PARENT |     | NOTES |   | GUARANTORS |     | GUARANTOR  |   | ELIMINATIONS |     | TOTAL       
|                                                        |            |   |        |     |       |   |            |     |            |   |              |     |             
|Revenues                                                |            | $ |       |     |       | $ |           |     |            | $ | 137.4        |     |              | $ | 7.9 |     |              | $ |      |       |   | $ | 145.3 |    
|                                                       
|Salaries and benefits                                   |            |   |       |     |       |   |           |     |            |   | 55.6         |     |              |   | 2.5 |     |              |   |      |       |   |   | 58.1  |    
|                                                       
|                                                       
|                                                       
|                                                       
|Supplies                                                |            |   |       |     |       |   |           |     |            |   | 16.1         |     |              |   | 1.0 |     |              |   |      |       |   |   | 17.1  |    
|                                                       
|                                                       
|                                                       
|                                                       
|Other operating expenses                                |            |   |       |     |       |   |           |     |            |   | 29.5         |     |              |   | 1.1 |     |              |   |      |       |   |   | 30.6  |    
|                                                       
|                                                       
|                                                       
|                                                       
|Provision for doubtful accounts                         |            |   |       |     |       |   |           |     |            |   | 11.7         |     |              |   | 0.8 |     |              |   |      |       |   |   | 12.5  |    
|                                                       
|                                                       
|                                                       
|                                                       
|Depreciation and amortization                           |            |   |       |     |       |   |           |     |            |   | 8.1          |     |              |   | 0.4 |     |              |   |      |       |   |   | 8.5   |    
|                                                       
|                                                       
|                                                       
|                                                       
|Management fees                                         |            |   |       |     |       |   |           |     |            |   | (0.2         | )   |              |   | 0.2 |     |              |   |      |       |   |   |      |    
|                                                       
|                                                       
|                                                       
|                                                       
|Interest expense, net                                   |            |   |       |     |       |   | 8.3        |     |            |   | (0.1         | )   |              |   | 0.1 |     |              |   |      |       |   |   | 8.3   |    
|                                                       
|                                                       
|                                                       
|                                                       
|ESOP expense                                            |            |   |       |     |       |   |           |     |            |   | 1.9          |     |              |   | 0.1 |     |              |   |      |       |   |   | 2.0   |    
|                                                       
|                                                       
|                                                       
|                                                       
|Gain on previously impaired assets                      |            |   |       |     |       |   |           |     |            |   | (1.4         | )   |              |   |    |     |              |   |      |       |   |   | (1.4  | )  
|                                                       
|                                                       
|                                                       
|                                                       
|Equity in earnings of affiliates                        |            |   | (4.8   | )   |       |   | (10.2      | )   |            |   |             |     |              |   |    |     |              |   | 15.0  |       |   |   |      |    
|                                                        |            |   |        |     |       |   |            |     |            |   |              |     |              |   |     |     |              |   |       |       |   |   |       |    
|                                                        |            |   | (4.8   | )   |       |   | (1.9       | )   |            |   | 121.2        |     |              |   | 6.2 |     |              |   | 15.0  |       |   |   | 135.7 |    
|                                                        |            |   |        |     |       |   |            |     |            |   |              |     |              |   |     |     |              |   |       |       |   |   |       |    
|Income before minority
interests and income taxes       |            |   | 4.8    |     |       |   | 1.9        |     |            |   | 16.2         |     |              |   | 1.7 |     |              |   | (15.0 | )     |   |   | 9.6   |    
|                                                       
|                                                       
|                                                       
|                                                       
|Minority interests in earnings of
consolidated entities |            |   |       |     |       |   | 0.5        |     |            |   |             |     |              |   |    |     |              |   |      |       |   |   | 0.5   |    
|                                                        |            |   |        |     |       |   |            |     |            |   |              |     |              |   |     |     |              |   |       |       |   |   |       |    
|Income before income taxes                              |            |   | 4.8    |     |       |   | 1.4        |     |            |   | 16.2         |     |              |   | 1.7 |     |              |   | (15.0 | )     |   |   | 9.1   |    
|                                                       
|                                                       
|                                                       
|                                                       
|Provision for income taxes                              |            |   |       |     |       |   | (3.4       | )   |            |   | 7.7          |     |              |   |    |     |              |   |      |       |   |   | 4.3   |    
|                                                        |            |   |        |     |       |   |            |     |            |   |              |     |              |   |     |     |              |   |       |       |   |   |       |    
|                                                        | Net income |   | $      | 4.8 |       |   | $          | 4.8 |            |   | $            | 8.5 |              |   | $   | 1.7 |              |   | $     | (15.0 | ) |   | $     | 4.8 | 
|                                                        |            |   |        |     |       |   |            |     |            |   |              |     |              |   |     |     |              |   |       |       |   |   |       |    

11



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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN MILLIONS)

|                                                                      |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |      | 
|--------------------------------------------------------------------- | ---------- | - | ------ | ---- | ----- | - | ---------- | ---- | ---------- | - | ------------ | ---- | ------------ | - | ---- | --- | ------------ | - | ----- | ----- | - | - | ----- | ---- | 
|                                                                      |            |   |        |      |       |   |            |      |            |   | WHOLLY OWNED |      | MOSTLY OWNED |   |      |     |              |   |       |       |  
|                                                                      |            |   |        |      |       |   | ISSUER OF  |      | SUBSIDIARY |   | SUBSIDIARY   |      |              |   |      |     | CONSOLIDATED
|                                                                      |            |   | PARENT |      | NOTES |   | GUARANTORS |      | GUARANTOR  |   | ELIMINATIONS |      | TOTAL       
|                                                                      |            |   |        |      |       |   |            |      |            |   |              |      |             
|Revenues                                                              |            | $ |       |      |       | $ |           |      |            | $ | 431.2        |      |              | $ | 23.9 |     |              | $ |      |       |   | $ | 455.1 |     
|                                                                     
|Salaries and benefits                                                 |            |   |       |      |       |   |           |      |            |   | 171.3        |      |              |   | 7.7  |     |              |   |      |       |   |   | 179.0 |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Supplies                                                              |            |   |       |      |       |   |           |      |            |   | 54.3         |      |              |   | 3.1  |     |              |   |      |       |   |   | 57.4  |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Other operating expenses                                              |            |   |       |      |       |   |           |      |            |   | 85.1         |      |              |   | 3.4  |     |              |   |      |       |   |   | 88.5  |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Provision for doubtful accounts                                       |            |   |       |      |       |   |           |      |            |   | 32.8         |      |              |   | 1.3  |     |              |   |      |       |   |   | 34.1  |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Depreciation and amortization                                         |            |   |       |      |       |   |           |      |            |   | 23.5         |      |              |   | 1.3  |     |              |   |      |       |   |   | 24.8  |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Management fees                                                       |            |   |       |      |       |   |           |      |            |   | (0.5         | )    |              |   | 0.5  |     |              |   |      |       |   |   |      |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Interest expense, net                                                 |            |   |       |      |       |   | 16.7       |      |            |   | (2.4         | )    |              |   | (0.1 | )   |              |   |      |       |   |   | 14.2  |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|ESOP expense                                                          |            |   |       |      |       |   |           |      |            |   | 7.6          |      |              |   | 0.4  |     |              |   |      |       |   |   | 8.0   |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Gain on previously impaired assets                                    |            |   |       |      |       |   |           |      |            |   | (0.5         | )    |              |   |     |     |              |   |      |       |   |   | (0.5  | )   
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Equity in earnings of affiliates                                      |            |   | (23.0  | )    |       |   | (37.2      | )    |            |   |             |      |              |   |     |     |              |   | 60.2  |       |   |   |      |     
|                                                                      |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     
|                                                                      |            |   | (23.0  | )    |       |   | (20.5      | )    |            |   | 371.2        |      |              |   | 17.6 |     |              |   | 60.2  |       |   |   | 405.5 |     
|                                                                      |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     
|Income before minority interests,
income taxes and extraordinary
item |            |   | 23.0   |      |       |   | 20.5       |      |            |   | 60.0         |      |              |   | 6.3  |     |              |   | (60.2 | )     |   |   | 49.6  |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Minority interests in earnings of
consolidated entities               |            |   |       |      |       |   | 1.9        |      |            |   |             |      |              |   |     |     |              |   |      |       |   |   | 1.9   |     
|                                                                      |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     
|Income before income taxes and
extraordinary item                     |            |   | 23.0   |      |       |   | 18.6       |      |            |   | 60.0         |      |              |   | 6.3  |     |              |   | (60.2 | )     |   |   | 47.7  |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Provision (benefit)for income taxes                                   |            |   |       |      |       |   | (6.0       | )    |            |   | 29.1         |      |              |   |     |     |              |   |      |       |   |   | 23.1  |     
|                                                                      |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     
|Income before extraordinary item                                      |            |   | 23.0   |      |       |   | 24.6       |      |            |   | 30.9         |      |              |   | 6.3  |     |              |   | (60.2 | )     |   |   | 24.6  |     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Extraordinary loss on early
retirement of debt, net                   |            |   |       |      |       |   | 1.6        |      |            |   |             |      |              |   |     |     |              |   |      |       |   |   | 1.6   |     
|                                                                      |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     
|                                                                      | Net income |   | $      | 23.0 |       |   | $          | 23.0 |            |   | $            | 30.9 |              |   | $    | 6.3 |              |   | $     | (60.2 | ) |   | $     | 23.0 | 
|                                                                      |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     

12



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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN MILLIONS)

|                                                        |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |      | 
|------------------------------------------------------- | ---------- | - | ------ | ---- | ----- | - | ---------- | ---- | ---------- | - | ------------ | ---- | ------------ | - | ---- | --- | ------------ | - | ----- | ----- | - | - | ----- | ---- | 
|                                                        |            |   |        |      |       |   |            |      |            |   | WHOLLY OWNED |      | MOSTLY OWNED |   |      |     |              |   |       |       |  
|                                                        |            |   |        |      |       |   | ISSUER OF  |      | SUBSIDIARY |   | SUBSIDIARY   |      |              |   |      |     | CONSOLIDATED
|                                                        |            |   | PARENT |      | NOTES |   | GUARANTORS |      | GUARANTOR  |   | ELIMINATIONS |      | TOTAL       
|                                                        |            |   |        |      |       |   |            |      |            |   |              |      |             
|Revenues                                                |            | $ |       |      |       | $ |           |      |            | $ | 390.5        |      |              | $ | 24.1 |     |              | $ |      |       |   | $ | 414.6 |     
|                                                       
|Salaries and benefits                                   |            |   |       |      |       |   |           |      |            |   | 160.4        |      |              |   | 7.8  |     |              |   |      |       |   |   | 168.2 |     
|                                                       
|                                                       
|                                                       
|                                                       
|Supplies                                                |            |   |       |      |       |   |           |      |            |   | 47.0         |      |              |   | 3.1  |     |              |   |      |       |   |   | 50.1  |     
|                                                       
|                                                       
|                                                       
|                                                       
|Other operating expenses                                |            |   |       |      |       |   |           |      |            |   | 85.3         |      |              |   | 3.5  |     |              |   |      |       |   |   | 88.8  |     
|                                                       
|                                                       
|                                                       
|                                                       
|Provision for doubtful accounts                         |            |   |       |      |       |   |           |      |            |   | 29.5         |      |              |   | 1.9  |     |              |   |      |       |   |   | 31.4  |     
|                                                       
|                                                       
|                                                       
|                                                       
|Depreciation and amortization                           |            |   |       |      |       |   |           |      |            |   | 24.0         |      |              |   | 1.3  |     |              |   |      |       |   |   | 25.3  |     
|                                                       
|                                                       
|                                                       
|                                                       
|Interest expense, net                                   |            |   |       |      |       |   | 22.9       |      |            |   | (0.3         | )    |              |   | 0.3  |     |              |   |      |       |   |   | 22.9  |     
|                                                       
|                                                       
|                                                       
|                                                       
|Management fees                                         |            |   |       |      |       |   |           |      |            |   | (0.5         | )    |              |   | 0.5  |     |              |   |      |       |   |   |      |     
|                                                       
|                                                       
|                                                       
|                                                       
|ESOP expense                                            |            |   |       |      |       |   |           |      |            |   | 4.2          |      |              |   | 0.2  |     |              |   |      |       |   |   | 4.4   |     
|                                                       
|                                                       
|                                                       
|                                                       
|Gain on previously impaired assets                      |            |   |       |      |       |   |           |      |            |   | (1.4         | )    |              |   |     |     |              |   |      |       |   |   | (1.4  | )   
|                                                       
|                                                       
|                                                       
|                                                       
|Equity in earnings of affiliates                        |            |   | (12.5  | )    |       |   | (28.4      | )    |            |   |             |      |              |   |     |     |              |   | 40.9  |       |   |   |      |     
|                                                        |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     
|                                                        |            |   | (12.5  | )    |       |   | (5.5       | )    |            |   | 348.2        |      |              |   | 18.6 |     |              |   | 40.9  |       |   |   | 389.7 |     
|                                                        |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     
|Income before minority interests
and income taxes       |            |   | 12.5   |      |       |   | 5.5        |      |            |   | 42.3         |      |              |   | 5.5  |     |              |   | (40.9 | )     |   |   | 24.9  |     
|                                                       
|                                                       
|                                                       
|                                                       
|Minority interests in earnings of
consolidated entities |            |   |       |      |       |   | 1.8        |      |            |   |             |      |              |   |     |     |              |   |      |       |   |   | 1.8   |     
|                                                        |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     
|Income before income taxes                              |            |   | 12.5   |      |       |   | 3.7        |      |            |   | 42.3         |      |              |   | 5.5  |     |              |   | (40.9 | )     |   |   | 23.1  |     
|                                                       
|                                                       
|                                                       
|                                                       
|Provision for income taxes                              |            |   |       |      |       |   | (8.8       | )    |            |   | 19.4         |      |              |   |     |     |              |   |      |       |   |   | 10.6  |     
|                                                        |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     
|                                                        | Net income |   | $      | 12.5 |       |   | $          | 12.5 |            |   | $            | 22.9 |              |   | $    | 5.5 |              |   | $     | (40.9 | ) |   | $     | 12.5 | 
|                                                        |            |   |        |      |       |   |            |      |            |   |              |      |              |   |      |     |              |   |       |       |   |   |       |     

13



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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2001
(IN MILLIONS)

|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |   |       |  | 
|----------------------------------------------------- | ---------------------- | --------------------------------------- | ------ | - | ------ | - | ----- | - | ---------- | - | ---------- | - | ------------ | - | ------------ | - | ---- | - | ------------ | - | - | - | ------ | - | ----- |  | 
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   | WHOLLY OWNED |   | MOSTLY OWNED |   |      |   |              |   |   |   |       
|                                                      |                        |                                         |        |   |        |   |       |   | ISSUER OF  |   | SUBSIDIARY |   | SUBSIDIARY   |   |              |   |      |   | CONSOLIDATED
|                                                      |                        |                                         |        |   | PARENT |   | NOTES |   | GUARANTORS |   | GUARANTOR  |   | ELIMINATIONS |   | TOTAL       
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |             
|                                                      |                        |                                         | ASSETS |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |   |       |  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Current assets:                                       |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Cash and cash equivalents               |        | $ |       |   |       | $ |           |   |            | $ | 73.5         |   |              | $ |     |   |              | $ |  |   |        | $ | 73.5  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Accounts receivable, net                |        |   |       |   |       |   |           |   |            |   | 37.3         |   |              |   | 4.7  |   |              |   |  |   |        |   | 42.0  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Inventories                             |        |   |       |   |       |   |           |   |            |   | 13.3         |   |              |   | 1.1  |   |              |   |  |   |        |   | 14.4  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Deferred taxes and other
current assets |        |   |       |   |       |   |           |   |            |   | 16.9         |   |              |   | 0.1  |   |              |   |  |   |        |   | 17.0  | 
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                      |                        |                                         |       |   |        |   |      |   |            |   | 141.0      |   |              |   | 5.9          |   |      |   |             |   |   |   | 146.9  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Property and equipment:                               |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Land                                    |        |   |       |   |       |   |           |   |            |   | 9.1          |   |              |   | 0.3  |   |              |   |  |   |        |   | 9.4   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Buildings and improvements              |        |   |       |   |       |   |           |   |            |   | 234.2        |   |              |   | 9.9  |   |              |   |  |   |        |   | 244.1 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Equipment                               |        |   |       |   |       |   |           |   |            |   | 237.7        |   |              |   | 10.8 |   |              |   |  |   |        |   | 248.5 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Construction in progress                |        |   |       |   |       |   |           |   |            |   | 16.6         |   |              |   |     |   |              |   |  |   |        |   | 16.6  | 
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                      |                        |                                         |       |   |        |   |      |   |            |   | 497.6      |   |              |   | 21.0         |   |      |   |             |   |   |   | 518.6  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Accumulated depreciation                              |                        |                                         |        |   |        |   |       |   |            |   | (182.9     | ) |              |   | (13.0        | ) |      |   |             |   |   |   | (195.9 | )
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                      |                        |                                         |       |   |        |   |      |   |            |   | 314.7      |   |              |   | 8.0          |   |      |   |             |   |   |   | 322.7  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Net investment in and advances to
subsidiaries        |                        |                                         | 280.7  |   |        |   | 470.2 |   |            |   |           |   |              |   |             |   |      |   | (750.9       | ) |   |   |       |  
|                                                     
|                                                     
|                                                     
|                                                     
|Intangible assets, net                                |                        |                                         |       |   |        |   | 7.2   |   |            |   | 37.8       |   |              |   | 10.0         |   |      |   |             |   |   |   | 55.0   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Other                                                 |                        |                                         |       |   |        |   |      |   |            |   | 0.1        |   |              |   |             |   |      |   |             |   |   |   | 0.1    |  
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                      |                        | $                                       | 280.7  |   |        | $ | 477.4 |   |            | $ | 493.6      |   |              | $ | 23.9         |   |      | $ | (750.9       | ) |   | $ | 524.7  |  
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                      | LIABILITIES AND EQUITY |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |   |      
|                                                     
|                                                     
|                                                     
|                                                     
|Current liabilities                                   |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Accounts payable                        |        | $ |       |   |       | $ |           |   |            | $ | 15.1         |   |              | $ | 0.7  |   |              | $ |  |   |        | $ | 15.8  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Accrued salaries                        |        |   |       |   |       |   |           |   |            |   | 16.2         |   |              |   |     |   |              |   |  |   |        |   | 16.2  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                        | Other current liabilities               |        |   |       |   |       |   | 6.3        |   |            |   | 16.7         |   |              |   | 0.4  |   |              |   |  |   |        |   | 23.4  | 
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                      |                        |                                         |       |   |        |   | 6.3   |   |            |   | 48.0       |   |              |   | 1.1          |   |      |   |             |   |   |   | 55.4   |  
|                                                     
|Intercompany balances to affiliates                   |                        |                                         |       |   |        |   | 36.0  |   |            |   | (42.6      | ) |              |   | 6.6          |   |      |   |             |   |   |   |       |  
|                                                     
|                                                     
|                                                     
|                                                     
|Long-term debt                                        |                        |                                         |       |   |        |   | 150.0 |   |            |   |           |   |              |   |             |   |      |   |             |   |   |   | 150.0  |  
|                                                     
|                                                     
|                                                     
|                                                     
|Deferred income taxes                                 |                        |                                         |       |   |        |   |      |   |            |   | 18.0       |   |              |   |             |   |      |   |             |   |   |   | 18.0   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Professional liability risks and
other liabilities    |                        |                                         |       |   |        |   |      |   |            |   | 16.2       |   |              |   |             |   |      |   |             |   |   |   | 16.2   |  
|                                                     
|                                                     
|                                                     
|                                                     
|Minority interests in equity of
consolidated entities |                        |                                         |       |   |        |   | 4.4   |   |            |   |           |   |              |   |             |   |      |   |             |   |   |   | 4.4    |  
|                                                     
|                                                     
|                                                     
|                                                     
|Stockholders equity                                  |                        |                                         | 280.7  |   |        |   | 280.7 |   |            |   | 454.0      |   |              |   | 16.2         |   |      |   | (750.9       | ) |   |   | 280.7  |  
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  
|                                                      |                        | $                                       | 280.7  |   |        | $ | 477.4 |   |            | $ | 493.6      |   |              | $ | 23.9         |   |      | $ | (750.9       | ) |   | $ | 524.7  |  
|                                                      |                        |                                         |        |   |        |   |       |   |            |   |            |   |              |   |              |   |      |   |              |   |   |   |        |  

14



---



##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2000
(IN MILLIONS)

|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |       |  |  | 
|----------------------------------------------------- | --------------------------------------- | ---------------------- | ------ | - | ------ | - | ----- | ---- | ---------- | - | ---------- | ----- | ------------ | - | ------------ | ---- |  | - | ------------ | - |  | - | ------ | ----- |  |  | 
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       | WHOLLY OWNED |   | MOSTLY OWNED |      |  |   |              |   |  |   |       
|                                                      |                                         |                        |        |   |        |   |       |      | ISSUER OF  |   | SUBSIDIARY |       | SUBSIDIARY   |   |              |      |  |   | CONSOLIDATED
|                                                      |                                         |                        |        |   | PARENT |   | NOTES |      | GUARANTORS |   | GUARANTOR  |       | ELIMINATIONS |   | TOTAL       
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |             
|                                                      |                                         |                        | ASSETS |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |       |  |  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Current assets:                                       |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash and cash equivalents               |                        | $      |  |        |   | $     |     |            |   | $          | 39.7  |              |   | $            |     |  |   | $            |  |  |   | $      | 39.7  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts receivable, net                |                        |        |  |        |   |       |     |            |   |            | 36.4  |              |   |              | 5.3  |  |   |              |  |  |   |        | 41.7  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Inventories                             |                        |        |  |        |   |       |     |            |   |            | 12.9  |              |   |              | 1.0  |  |   |              |  |  |   |        | 13.9  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred taxes and other
current assets |                        |        |  |        |   |       |     |            |   |            | 22.1  |              |   |              | 0.1  |  |   |              |  |  |   |        | 22.2  | 
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                      |                                         |                        |       |   |        |   |      |      |            |   | 111.1      |       |              |   | 6.4          |      |  |   |             |   |  |   | 117.5  |      
|                                                     
|                                                     
|                                                     
|                                                     
|Property and equipment:                               |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Land                                    |                        |        |  |        |   |       |     |            |   |            | 8.4   |              |   |              | 0.3  |  |   |              |  |  |   |        | 8.7   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Buildings and improvements              |                        |        |  |        |   |       |     |            |   |            | 227.0 |              |   |              | 9.9  |  |   |              |  |  |   |        | 236.9 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Equipment                               |                        |        |  |        |   |       |     |            |   |            | 234.4 |              |   |              | 10.5 |  |   |              |  |  |   |        | 244.9 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Construction in progress                |                        |        |  |        |   |       |     |            |   |            | 9.4   |              |   |              |     |  |   |              |  |  |   |        | 9.4   | 
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                      |                                         |                        |       |   |        |   |      |      |            |   | 479.2      |       |              |   | 20.7         |      |  |   |             |   |  |   | 499.9  |      
|                                                     
|                                                     
|                                                     
|                                                     
|Accumulated depreciation                              |                                         |                        |       |   |        |   |      |      |            |   | (170.9     | )     |              |   | (12.5        | )    |  |   |             |   |  |   | (183.4 | )    
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                      |                                         |                        |       |   |        |   |      |      |            |   | 308.3      |       |              |   | 8.2          |      |  |   |             |   |  |   | 316.5  |      
|                                                     
|                                                     
|                                                     
|                                                     
|Net investment in and advances to
subsidiaries        |                                         |                        | 128.4  |   |        |   | 401.5 |      |            |   |           |       |              |   |             |      |  |   | (529.9       | ) |  |   |       |      
|                                                     
|                                                     
|                                                     
|                                                     
|Intangible assets, net                                |                                         |                        |       |   |        |   | 9.1   |      |            |   | 34.5       |       |              |   | 10.2         |      |  |   |             |   |  |   | 53.8   |      
|                                                     
|                                                     
|                                                     
|                                                     
|Other                                                 |                                         |                        |       |   |        |   |      |      |            |   | 0.2        |       |              |   |             |      |  |   |             |   |  |   | 0.2    |      
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                      |                                         | $                      | 128.4  |   |        | $ | 410.6 |      |            | $ | 454.1      |       |              | $ | 24.8         |      |  | $ | (529.9       | ) |  | $ | 488.0  |      
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                      |                                         | LIABILITIES AND EQUITY |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |       |  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Current liabilities:                                  |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts payable                        |                        | $      |  |        |   | $     |     |            |   | $          | 15.6  |              |   | $            | 0.5  |  |   | $            |  |  |   | $      | 16.1  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accrued salaries                        |                        |        |  |        |   |       |     |            |   |            | 13.8  |              |   |              |     |  |   |              |  |  |   |        | 13.8  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other current liabilities               |                        |        |  |        |   |       | 2.6  |            |   |            | 8.2   |              |   |              | 0.3  |  |   |              |  |  |   |        | 11.1  | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Current maturities of long-term
debt    |                        |        |  |        |   |       | 11.0 |            |   |            | 0.1   |              |   |              |     |  |   |              |  |  |   |        | 11.1  | 
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                      |                                         |                        |       |   |        |   | 13.6  |      |            |   | 37.7       |       |              |   | 0.8          |      |  |   |             |   |  |   | 52.1   |      
|                                                     
|Intercompany balances to affiliates                   |                                         |                        |       |   |        |   | (14.3 | )    |            |   | 6.4        |       |              |   | 7.9          |      |  |   |             |   |  |   |       |      
|                                                     
|                                                     
|                                                     
|                                                     
|Long-term debt                                        |                                         |                        |       |   |        |   | 278.3 |      |            |   |           |       |              |   |             |      |  |   |             |   |  |   | 278.3  |      
|                                                     
|                                                     
|                                                     
|                                                     
|Deferred taxes                                        |                                         |                        |       |   |        |   |      |      |            |   | 15.2       |       |              |   |             |      |  |   |             |   |  |   | 15.2   |      
|                                                     
|                                                     
|                                                     
|                                                     
|Professional liability risks and
other liabilities    |                                         |                        |       |   |        |   |      |      |            |   | 9.4        |       |              |   |             |      |  |   |             |   |  |   | 9.4    |      
|                                                     
|                                                     
|                                                     
|                                                     
|Minority interests in equity of
consolidated entities |                                         |                        |       |   |        |   | 4.6   |      |            |   |           |       |              |   |             |      |  |   |             |   |  |   | 4.6    |      
|                                                     
|                                                     
|                                                     
|                                                     
|Stockholders equity                                  |                                         |                        | 128.4  |   |        |   | 128.4 |      |            |   | 385.4      |       |              |   | 16.1         |      |  |   | (529.9       | ) |  |   | 128.4  |      
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      
|                                                      |                                         | $                      | 128.4  |   |        | $ | 410.6 |      |            | $ | 454.1      |       |              | $ | 24.8         |      |  | $ | (529.9       | ) |  | $ | 488.0  |      
|                                                      |                                         |                        |        |   |        |   |       |      |            |   |            |       |              |   |              |      |  |   |              |   |  |   |        |      

15



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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(IN MILLIONS)

|                                                 |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |        |      |       |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ---- | ------ | - | ----- | ------ | ---------- | ---- | ---------- | ----- | ------------ | ----- | ------------ | ---- | --- | ---- | ------------ | ----- | ---- | - | ---- | ------ | ---- | ----- | -
|                                                 |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       | WHOLLY OWNED |       | MOSTLY OWNED |      |     |      |              |       |      |   |     
|                                                 |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        | ISSUER OF  |      | SUBSIDIARY |       | SUBSIDIARY   |       |              |      |     |      | CONSOLIDATED
|                                                 |                                                                                             |                                                                                                    |                                                     |      | PARENT |   | NOTES |        | GUARANTORS |      | GUARANTOR  |       | ELIMINATIONS |       | TOTAL       
|                                                 |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |             
|Cash flows from operating activities:            |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income                                                                                  |                                                                                                    | $                                                   | 23.0 |        |   | $     | 23.0   |            |      | $          | 30.9  |              |       | $            | 6.3  |     |      | $            | (60.2 | )    |   | $    | 23.0   |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net
income to net cash provided
by (used in) operating activities: |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |        |     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | ESOP expense                                                                                       |                                                     |      |       |   |       |        |           |      |            |       | 7.6          |       |              |      | 0.4 |      |              |       |     |   |      |        | 8.0  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Equity in earnings of
affiliates                                                                   |                                                     |      | (23.0  | ) |       |        | (37.2      | )    |            |       |             |       |              |      |    |      |              |       | 60.2 |   |      |        |     |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Provision for doubtful accounts                                                                    |                                                     |      |       |   |       |        |           |      |            |       | 32.8         |       |              |      | 1.3 |      |              |       |     |   |      |        | 34.1 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Depreciation and amortization                                                                      |                                                     |      |       |   |       |        |           |      |            |       | 23.5         |       |              |      | 1.3 |      |              |       |     |   |      |        | 24.8 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Minority interests in earnings
of consolidated entities                                            |                                                     |      |       |   |       |        | 1.9        |      |            |       |             |       |              |      |    |      |              |       |     |   |      |        | 1.9  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Deferred income taxes                                                                              |                                                     |      |       |   |       |        |           |      |            |       | 0.6          |       |              |      |    |      |              |       |     |   |      |        | 0.6  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Reserve for professional
liability risk                                                            |                                                     |      |       |   |       |        |           |      |            |       | 6.3          |       |              |      |    |      |              |       |     |   |      |        | 6.3  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Gain on previously impaired
assets                                                                 |                                                     |      |       |   |       |        |           |      |            |       | (0.5         | )     |              |      |    |      |              |       |     |   |      |        | (0.5 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Extraordinary loss on early
retirement of bank debt                                                |                                                     |      |       |   |       |        | 2.6        |      |            |       |             |       |              |      |    |      |              |       |     |   |      |        | 2.6  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Tax benefit from stock option
exercises                                                            |                                                     |      |       |   |       |        |           |      |            |       | 8.1          |       |              |      |    |      |              |       |     |   |      |        | 8.1  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Increase (decrease) in cash
from operating assets and
liabilities, net of effects
of acquisitions: |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |        |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                                                                                    | Accounts receivable                                 |      |        |  |       |        |            |     |            |       |              | (33.5 | )            |      |     | (0.7 | )            |       |      |  |      |        |      | (34.2 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                                                                                    | Inventories and other current
assets                |      |        |  |       |        |            |     |            |       |              | 0.1   |              |      |     | (0.1 | )            |       |      |  |      |        |      |      |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                                                                                    | Accounts payable and
accrued expenses               |      |        |  |       |        |            | 3.7  |            |       |              | 10.4  |              |      |     | 0.3  |              |       |      |  |      |        |      | 14.4  |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                                                                                    | Income taxes payable                                |      |        |  |       |        |            |     |            |       |              | 1.2   |              |      |     |     |              |       |      |  |      |        |      | 1.2   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Other                                                                                              |                                                     |      |       |   |       |        | 1.8        |      |            |       | (0.5         | )     |              |      |    |      |              |       |     |   |      |        | 1.3  |      
|                                                 |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |       
|                                                 |                                                                                             |                                                                                                    | Net cash provided by (used
in) operating activities |      |        |  |       |        |            | (4.2 | )          |       |              | 87.0  |              |      |     | 8.8  |              |       |      |  |      |        |      | 91.6  |  
|                                                
|                                                
|                                                
|                                                
|Cash flows from investing activities:            |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of property and equipment,
net                                                    |                                                                                                    |                                                     |     |        |   |       |       |            |      |            | (27.6 | )            |       |              | (0.9 | )   |      |              |      |      |   |      | (28.5  | )   
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of facilities                                                                     |                                                                                                    |                                                     |     |        |   |       |       |            |      |            | (5.8  | )            |       |              |     |     |      |              |      |      |   |      | (5.8   | )   
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                                                                                       |                                                                                                    |                                                     |     |        |   |       | (2.1   | )          |      |            | 6.4   |              |       |              |     |     |      |              |      |      |   |      | 4.3    |     
|                                                 |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |       
|                                                 |                                                                                             |                                                                                                    | Net cash used in investing
activities               |      |        |  |       |        |            | (2.1 | )          |       |              | (27.0 | )            |      |     | (0.9 | )            |       |      |  |      |        |      | (30.0 | )
|                                                
|                                                
|                                                
|                                                
|Cash flows from financing activities:            |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from stock offering, net                                                           |                                                                                                    |                                                     |     |        |   |       | 100.4  |            |      |            |      |              |       |              |     |     |      |              |      |      |   |      | 100.4  |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Repayments of bank debt                                                                     |                                                                                                    |                                                     |     |        |   |       | (139.3 | )          |      |            |      |              |       |              |     |     |      |              |      |      |   |      | (139.3 | )   
|                                                
|                                                
|                                                
|                                                
|                                                 | Distributions                                                                               |                                                                                                    |                                                     |     |        |   |       |       |            |      |            | 6.6   |              |       |              | (6.6 | )   |      |              |      |      |   |      |       |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from exercise of stock
options                                                     |                                                                                                    |                                                     |     |        |   |       |       |            |      |            | 12.0  |              |       |              |     |     |      |              |      |      |   |      | 12.0   |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Increase (decrease) in
intercompany balances with
affiliates, net                           |                                                                                                    |                                                     |     |        |   |       | 46.1   |            |      |            | (44.8 | )            |       |              | (1.3 | )   |      |              |      |      |   |      |       |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                                                                                       |                                                                                                    |                                                     |     |        |   |       | (0.9   | )          |      |            |      |              |       |              |     |     |      |              |      |      |   |      | (0.9   | )   
|                                                 |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |       
|                                                 |                                                                                             |                                                                                                    | Net cash provided by (used
in) financing activities |      |        |  |       |        |            | 6.3  |            |       |              | (26.2 | )            |      |     | (7.9 | )            |       |      |  |      |        |      | (27.8 | )
|                                                
|                                                
|                                                
|                                                
|Change in cash and cash equivalents              |                                                                                             |                                                                                                    |                                                    |      |        |   |      |        |            |      | 33.8       |       |              |       |             |      |     |      |             |       |      |   | 33.8 |       
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at
beginning of period |                                                                                             |                                                                                                    |                                                    |      |        |   |      |        |            |      | 39.7       |       |              |       |             |      |     |      |             |       |      |   | 39.7 |       
|                                                 |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |       
|Cash and cash equivalents at end
of period       |                                                                                             | $                                                                                                  |                                                    |      |        | $ |      |        |            | $    | 73.5       |       |              | $     |             |      |     | $    |             |       |      | $ | 73.5 |       
|                                                 |                                                                                             |                                                                                                    |                                                     |      |        |   |       |        |            |      |            |       |              |       |              |      |     |      |              |       |      |   |      |       

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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN MILLIONS)

|                                                 |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |       |      |       |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ---- | ------ | - | ----- | ----- | ---------- | ----- | ---------- | ----- | ------------ | ----- | ------------ | ---- | --- | ---- | ------------ | ----- | ---- | - | ---- | ----- | ---- | ----- | -
|                                                 |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       | WHOLLY OWNED |       | MOSTLY OWNED |      |     |      |              |       |      |   |     
|                                                 |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       | ISSUER OF  |       | SUBSIDIARY |       | SUBSIDIARY   |       |              |      |     |      | CONSOLIDATED
|                                                 |                                                                                             |                                                                                                                     |                                                     |      | PARENT |   | NOTES |       | GUARANTORS |       | GUARANTOR  |       | ELIMINATIONS |       | TOTAL       
|                                                 |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |             
|Cash flows from operating activities:            |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income                                                                                  |                                                                                                                     | $                                                   | 12.5 |        |   | $     | 12.5  |            |       | $          | 22.9  |              |       | $            | 5.5  |     |      | $            | (40.9 | )    |   | $    | 12.5  |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net
income to net cash provided by
(used in) operating activities: |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |       |     
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | ESOP expense                                                                                                        |                                                     |      |       |   |       |       |           |       |            |       | 4.2          |       |              |      | 0.2 |      |              |       |     |   |      |       | 4.4  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Equity in earnings of affiliates                                                                                    |                                                     |      | (12.5  | ) |       |       | (28.4      | )     |            |       |             |       |              |      |    |      |              |       | 40.9 |   |      |       |     |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Provision for doubtful accounts                                                                                     |                                                     |      |       |   |       |       |           |       |            |       | 29.5         |       |              |      | 1.9 |      |              |       |     |   |      |       | 31.4 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Depreciation and amortization                                                                                       |                                                     |      |       |   |       |       |           |       |            |       | 24.0         |       |              |      | 1.3 |      |              |       |     |   |      |       | 25.3 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Minority interests in earnings
of consolidated entities                                                             |                                                     |      |       |   |       |       | 1.8        |       |            |       |             |       |              |      |    |      |              |       |     |   |      |       | 1.8  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Deferred income taxes                                                                                               |                                                     |      |       |   |       |       |           |       |            |       | 13.3         |       |              |      |    |      |              |       |     |   |      |       | 13.3 |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Reserve for professional
liability risk                                                                             |                                                     |      |       |   |       |       |           |       |            |       | 3.8          |       |              |      |    |      |              |       |     |   |      |       | 3.8  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Gain on previously impaired assets                                                                                  |                                                     |      |       |   |       |       |           |       |            |       | (1.4         | )     |              |      |    |      |              |       |     |   |      |       | (1.4 | )    
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Tax benefit from stock option
exercises                                                                             |                                                     |      |       |   |       |       |           |       |            |       | 4.6          |       |              |      |    |      |              |       |     |   |      |       | 4.6  |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Increase (decrease) in cash
from operating assets and
liabilities, net of effects
of acquisitions and divestitures: |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |       |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                                                                                                     | Accounts receivable                                 |      |        |  |       |       |            |      |            |       |              | (24.7 | )            |      |     | (2.3 | )            |       |      |  |      |       |      | (27.0 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                                                                                                     | Inventories and other current
assets                |      |        |  |       |       |            |      |            |       |              | (1.9  | )            |      |     | 0.1  |              |       |      |  |      |       |      | (1.8  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                                                                                                     | Accounts payable and accrued
expenses               |      |        |  |       |       |            | 4.2   |            |       |              | (7.6  | )            |      |     | (0.1 | )            |       |      |  |      |       |      | (3.5  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             |                                                                                                                     | Income taxes payable                                |      |        |   |       |       |            |      |            |       |              | (7.4  | )            |      |     |     |              |       |      |  |      |       |      | (7.4  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                                             | Other                                                                                                               |                                                     |      |       |   |       |       | (1.8       | )     |            |       | 3.5          |       |              |      |    |      |              |       |     |   |      |       | 1.7  |      
|                                                 |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |      
|                                                 |                                                                                             |                                                                                                                     | Net cash provided by (used
in) operating activities |      |        |  |       |       |            | (11.7 | )          |       |              | 62.8  |              |      |     | 6.6  |              |       |      |  |      |       |      | 57.7  |  
|                                                
|                                                
|                                                
|                                                
|Cash flows from investing activities:            |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of property and
equipment, net                                                    |                                                                                                                     |                                                     |     |        |   |       |      |            |       |            | (23.1 | )            |       |              | (0.2 | )   |      |              |      |      |   |      | (23.3 | )   
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of facilities                                                                     |                                                                                                                     |                                                     |     |        |   |       |      |            |       |            | (83.3 | )            |       |              |     |     |      |              |      |      |   |      | (83.3 | )   
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from sale of facilities                                                            |                                                                                                                     |                                                     |     |        |   |       |      |            |       |            | 24.4  |              |       |              |     |     |      |              |      |      |   |      | 24.4  |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                                                                                       |                                                                                                                     |                                                     |     |        |   |       |      |            |       |            | (2.4  | )            |       |              |     |     |      |              |      |      |   |      | (2.4  | )   
|                                                 |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |      
|                                                 |                                                                                             |                                                                                                                     | Net cash used in investing
activities               |      |        |  |       |       |            |      |            |       |              | (84.4 | )            |      |     | (0.2 | )            |       |      |  |      |       |      | (84.6 | )
|                                                
|                                                
|                                                
|                                                
|Cash flows from financing activities:            |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Repayments of bank debt                                                                     |                                                                                                                     |                                                     |     |        |   |       | (33.9 | )          |       |            |      |              |       |              |     |     |      |              |      |      |   |      | (33.9 | )   
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from bank debt borrowings                                                          |                                                                                                                     |                                                     |     |        |   |       | 65.0  |            |       |            |      |              |       |              |     |     |      |              |      |      |   |      | 65.0  |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Distributions                                                                               |                                                                                                                     |                                                     |     |        |   |       |      |            |       |            | 6.7   |              |       |              | (6.7 | )   |      |              |      |      |   |      |      |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from exercise of stock
options                                                     |                                                                                                                     |                                                     |     |        |   |       |      |            |       |            | 4.3   |              |       |              |     |     |      |              |      |      |   |      | 4.3   |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Increase (decrease) in intercompany
balances with affiliates, net                           |                                                                                                                     |                                                     |     |        |   |       | (18.7 | )          |       |            | 18.4  |              |       |              | 0.3  |     |      |              |      |      |   |      |      |     
|                                                
|                                                
|                                                
|                                                
|                                                 | Other                                                                                       |                                                                                                                     |                                                     |     |        |   |       | (0.7  | )          |       |            |      |              |       |              |     |     |      |              |      |      |   |      | (0.7  | )   
|                                                 |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |      
|                                                 |                                                                                             |                                                                                                                     | Net cash provided by (used in)
financing activities |      |        |  |       |       |            | 11.7  |            |       |              | 29.4  |              |      |     | (6.4 | )            |       |      |  |      |       |      | 34.7  |  
|                                                
|                                                
|                                                
|                                                
|Change in cash and cash equivalents              |                                                                                             |                                                                                                                     |                                                    |      |        |   |      |       |            |       | 7.8        |       |              |       |             |      |     |      |             |       |      |   | 7.8  |      
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at
beginning of period |                                                                                             |                                                                                                                     |                                                    |      |        |   |      |       |            |       | 12.5       |       |              |       |             |      |     |      |             |       |      |   | 12.5 |      
|                                                 |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |      
|Cash and cash equivalents at end
of period       |                                                                                             | $                                                                                                                   |                                                    |      |        | $ |      |       |            | $     | 20.3       |       |              | $     |             |      |     | $    |             |       |      | $ | 20.3 |      
|                                                 |                                                                                             |                                                                                                                     |                                                     |      |        |   |       |       |            |       |            |       |              |       |              |      |     |      |              |       |      |   |      |      

17



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##### Table of Contents



NOTE 6   BLUEGRASS COMMUNITY HOSPITAL

Effective January 2, 2001, the Company entered into a two-year lease to
operate Bluegrass Community Hospital, a 25-bed critical access hospital located
in Versailles, Kentucky. The Company has an option to extend the term of the
lease until December 31, 2014 and a separate option to purchase the hospital
between January 1, 2004 and January 1, 2007.

NOTE 7  VILLE PLATTE MEDICAL
CENTER

On September 24,
2001, the Company entered into a definitive agreement to acquire
116-bed Ville Platte Medical Center in Ville Platte, Louisiana.
Closing of this acquisition, which is subject to the satisfaction of
certain conditions, including governmental and regulatory approvals,
is anticipated to occur in the fourth quarter, following a public referendum
scheduled for November 17, 2001.

NOTE 8  SUBSEQUENT EVENT

Effective October 1, 2001, the Company acquired Athens Regional Medical
Center in Athens, Tennessee for approximately $19.9 million. The purchase
price is subject to adjustment pending the final working capital settlement.

18



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##### Table of Contents






ITEM 2:    Managements Discussion and Analysis of Financial Condition and Results of Operations

You should read this discussion together with our unaudited condensed
consolidated financial statements and related notes included elsewhere in this
report.

Overview

At September 30, 2001, we operated 21 general, acute care hospitals in the
states of Alabama, Florida, Kansas, Kentucky, Tennessee, Utah and Wyoming.

Forward-Looking Statements

This report and other materials we have filed or may file with the
Securities and Exchange Commission, as well as information included in oral
statements or other written statements made, or to be made, by us, contain, or
will contain, disclosures which are forward-looking statements.
Forward-looking statements include all statements that do not relate solely to
historical or current facts and can be identified by the use of words such as
may, believe, will, expect, project, estimate, anticipate, plan
or continue. These forward-looking statements are based on the current plans
and expectations of our management and are subject to a number of uncertainties
and risks that could significantly affect our current plans and expectations
and future financial condition and results. These factors include, but are not
limited to:



| |  |  | the highly competitive nature of the healthcare business
including the competition to recruit general and specialized
physicians;                                                                                                      
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the efforts of insurers, healthcare providers and others to
contain healthcare costs;                                                                                                                                                  
|
| |  |  | possible changes in the Medicare program that may further
limit reimbursements to healthcare providers and insurers;                                                                                                                   
|
| |  |  | the ability to attract and retain qualified management and
personnel, including physicians, nurses and technicians, consistent
with our expectations and targets;                                                                      
|
| |  |  | changes in federal, state or local regulation affecting the
healthcare industry;                                                                                                                                                       
|
| |  |  | the possible enactment of federal or state healthcare reform;                                                                                                                                                                          
|
| |  |  | the possibility that any
favorable governmental reimbursement changes will be delayed or
abandoned due to the focus of Congress on the recent terrorist
attacks and the resulting reallocation of governmental resources;              
|
| |  |  | our ability to acquire
hospitals on favorable terms and to successfully complete budgeted
capital improvements of our existing facilities;                                                                                             
|
| |  |  | liabilities and other claims asserted against us;                                                                                                                                                                                      
|
| |  |  | uncertainty associated with the HIPAA regulations;                                                                                                                                                                                     
|
| |  |  | the ability to enter into, renegotiate and renew payor
arrangements on acceptable terms;                                                                                                                                               
|
| |  |  | the availability and terms of capital to fund our business strategy;                                                                                                                                                                   
|
| |  |  | the availability, cost and terms of insurance coverage;                                                                                                                                                                                
|
| |  |  | implementation of our business strategy and development plans;                                                                                                                                                                         
|
| |  |  | our ongoing efforts to monitor, maintain and comply with
applicable laws, regulations, policies and procedures including
those required by the corporate integrity agreement that we entered
into with the government in December 2000;
|
| |  |  | the ability to increase patient volumes and control the costs of
providing services and supply costs;                                                                                                                                  

19



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##### Table of Contents





| |  |  | claims and legal actions relating to professional liabilities and other
matters;                                                             
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | successful development or license, performance and use of
management information systems, including software for efficient
claims processing;
|
| |  |  | limitations placed on us to preserve the tax treatment of the
distribution of our common stock from HCA;                                     
|
| |  |  | fluctuations in the market value of our common stock and
resulting costs to us to administer our ESOP;                                       
|
| |  |  | changes in accounting practices;                                                                                                             
|
| |  |  | changes in general economic conditions; and                                                                                                  
|
| |  |  | other factors described in this report.                                                                                                      

As a consequence, current plans, anticipated actions and future financial
conditions and results may differ from those expressed in any forward-looking
statements made by or on behalf of our company. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise. You are cautioned not to unduly
rely on such forward-looking statements when evaluating the information
presented in this report.

Results of Operations

Revenue/Volume Trends

We anticipate our patient volumes and related revenues to continue to
increase as a result of the following factors:



| |  |  | Expanding Service Offerings. We believe our efforts to
improve the quality and broaden the scope of healthcare services
available at our facilities will lead to increased patient volumes.
Recruiting and retaining both general practitioners and specialists
for our non-urban communities is a key to the success of these
efforts. Between January 1, 1998 and September 30, 2001, we
recruited 210 physicians, of which approximately 60% are
specialists. Adding new physicians should help increase patient
volumes which, in turn, should increase revenues. Continuing to add
specialists should also allow us to increase patient volumes and
related revenues by offering new services. In addition, our
targeted capital expenditures should increase local market share and
stem patient out-migration.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Improving Managed Care Position. We believe we have been able
to negotiate contract terms that are generally more favorable for
our facilities than terms available in urban markets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | Aging U.S. Population. In general, the population of the
United States and of the communities that we serve is aging. At the
end of 2000, approximately 13% of the U.S. population was 65 years
old or older compared to 11% of the population at the end of 1980.
This aging trend is projected to continue so that by 2025,
approximately 18% of the U.S. population is expected to be older
than 65.                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | Medicare Rate Increases. The Medicare, Medicaid and SCHIP
Benefit Improvement and Protection Act of 2000 (BIPA) was enacted in
December 2000. Under BIPA, we have experienced Medicare rate
increases that began in April 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

20



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Although we expect our patient volumes to increase, the resulting revenues
will likely be offset in part by the following factors:



| |  |  | Revenues from Medicare, Medicaid and Managed Care Plans. We
derive a significant portion of our revenues from Medicare, Medicaid
and managed care plans. Admissions related to Medicare, Medicaid and
managed care plan patients were 91.2% and 90.3% of total admissions
for the nine months ended September 30, 2001 and 2000, respectively.
These payors receive significant discounts compared to other payors.                                                                                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Efforts to Reduce Payments. Other third-party payors also
negotiate discounted fees rather than paying standard prices.
In
addition, an increasing proportion of our services are reimbursed
under prospective payment amounts regardless of the cost incurred.                                                                                                                                                                                                                                                                                           
|
| |  |  | Growth in Outpatient Services. We expect the general growth
trend in outpatient services to continue. A number of procedures
once performed only on an inpatient basis have been, and will likely
continue to be, converted to outpatient procedures. This conversion
has occurred through continuing advances in pharmaceutical and
medical technologies and as a result of efforts made by payors to
control costs. Generally, the payments we receive for outpatient
procedures are less than for similar procedures performed in an
inpatient setting.

Pressure on payment levels, the increase in outpatient services and the
patient volume being related to patients participating in managed care plans
will present ongoing challenges for us. These challenges are exacerbated by our
inability to control these trends and the associated risks. To maintain or
improve operating margins in the future, we must, among other things, increase
patient volumes while controlling the costs of providing services. If we are
not able to achieve these improvements and the trend toward declining
reimbursements and payments continues, results of operations and cash flow will
deteriorate.

21



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##### Table of Contents



Operating Results Summary

The following is a summary of results of operations for the three months
and nine months ended September 30, 2001 and 2000 (dollars in millions):

|                                                        |  |                                  |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|------------------------------------------------------- |  | -------------------------------- | ----- | -------- |  | ------ | ----- | -------- |  | - | ----- | ---- |  |  | ----- | -
|                                                        |  | THREE MONTHS ENDED SEPTEMBER 30,
|                                                        |  |                                 
|                                                        |  | 2001                             |       | 2000    
|                                                        |  |                                  |       |         
|                                                        |  |                                  |       |          |  | % OF   |       |          |  |   |       | % OF
|                                                        |  | AMOUNT                           |       | REVENUES |  | AMOUNT |       | REVENUES
|                                                        |  |                                  |       |          |  |        |       |         
|Revenues                                                |  | $                                | 149.2 |          |  |        | 100.0 | %        |  | $ | 145.3 |      |  |  | 100.0 | %
|                                                       
|Salaries and benefits                                   |  |                                  | 59.3  |          |  |        | 39.7  |          |  |   | 58.1  |      |  |  | 40.1  |  
|                                                       
|                                                       
|                                                       
|                                                       
|Supplies                                                |  |                                  | 19.0  |          |  |        | 12.7  |          |  |   | 17.1  |      |  |  | 11.8  |  
|                                                       
|                                                       
|                                                       
|                                                       
|Other operating expenses                                |  |                                  | 29.1  |          |  |        | 19.6  |          |  |   | 30.6  |      |  |  | 20.9  |  
|                                                       
|                                                       
|                                                       
|                                                       
|Provision for doubtful accounts                         |  |                                  | 11.5  |          |  |        | 7.7   |          |  |   | 12.5  |      |  |  | 8.6   |  
|                                                        |  |                                  |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                        |  |                                  | 118.9 |          |  |        | 79.7  |          |  |   | 118.3 |      |  |  | 81.4  |  
|                                                        |  |                                  |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                       
|EBITDA (a)                                              |  |                                  | 30.3  |          |  |        | 20.3  |          |  |   | 27.0  |      |  |  | 18.6  |  
|                                                       
|Depreciation and amortization                           |  |                                  | 8.2   |          |  |        | 5.5   |          |  |   | 8.5   |      |  |  | 5.9   |  
|                                                       
|                                                       
|                                                       
|                                                       
|Interest expense, net                                   |  |                                  | 4.0   |          |  |        | 2.7   |          |  |   | 8.3   |      |  |  | 5.7   |  
|                                                       
|                                                       
|                                                       
|                                                       
|ESOP expense                                            |  |                                  | 3.0   |          |  |        | 2.0   |          |  |   | 2.0   |      |  |  | 1.4   |  
|                                                       
|                                                       
|                                                       
|                                                       
|Gain on previously impaired assets                      |  |                                  |      |          |  |        |      |          |  |   | (1.4  | )    |  |  | (1.0  | )
|                                                        |  |                                  |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before minority interests and
income taxes       |  |                                  | 15.1  |          |  |        | 10.1  |          |  |   | 9.6   |      |  |  | 6.6   |  
|                                                       
|                                                       
|                                                       
|                                                       
|Minority interests in earnings of
consolidated entities |  |                                  | 0.6   |          |  |        | 0.4   |          |  |   | 0.5   |      |  |  | 0.3   |  
|                                                        |  |                                  |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before income taxes                              |  |                                  | 14.5  |          |  |        | 9.7   |          |  |   | 9.1   |      |  |  | 6.3   |  
|                                                       
|                                                       
|                                                       
|                                                       
|Provision for income taxes                              |  |                                  | 7.0   |          |  |        | 4.7   |          |  |   | 4.3   |      |  |  | 3.0   |  
|                                                        |  |                                  |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Net income                                              |  | $                                | 7.5   |          |  |        | 5.0   | %        |  | $ | 4.8   |      |  |  | 3.3   | %
|                                                        |  |                                  |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|% changes from prior year:                              |  |                                  |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Revenues                                                |  |                                  |       |          |  |        | 2.7   | %        |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Income before income taxes                              |  |                                  |       |          |  |        | 59.5  |          |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Net income                                              |  |                                  |       |          |  |        | 56.9  |          |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Admissions (b)                                          |  |                                  |       |          |  |        | 0.9   |          |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Equivalent admissions (c)                               |  |                                  |       |          |  |        | 1.5   |          |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Revenues per equivalent admission                       |  |                                  |       |          |  |        | 1.2   |          |  |   |       |      |  |  |       |  
|                                                       
|Same hospital % changes from prior year (d):            |  |                                  |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Revenues                                                |  |                                  |       |          |  |        | 8.5   |          |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Admissions (b)                                          |  |                                  |       |          |  |        | 6.5   |          |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Equivalent admissions (c)                               |  |                                  |       |          |  |        | 6.0   |          |  |   |       |      |  |  |       |  
|                                                       
|                                                       
|                                                       
|                                                       
|Revenues per equivalent admission                       |  |                                  |       |          |  |        | 2.3   |          |  |   |       |      |  |  |       |  

22



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|                                                                      |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|--------------------------------------------------------------------- |  | ------------------------------- | ----- | -------- |  | ------ | ----- | -------- |  | - | ----- | ---- |  |  | ----- | -
|                                                                      |  | NINE MONTHS ENDED SEPTEMBER 30,
|                                                                      |  |                                
|                                                                      |  | 2001                            |       | 2000    
|                                                                      |  |                                 |       |         
|                                                                      |  |                                 |       |          |  | % OF   |       |          |  |   |       | % OF
|                                                                      |  | AMOUNT                          |       | REVENUES |  | AMOUNT |       | REVENUES
|                                                                      |  |                                 |       |          |  |        |       |         
|Revenues                                                              |  | $                               | 455.1 |          |  |        | 100.0 | %        |  | $ | 414.6 |      |  |  | 100.0 | %
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Salaries and benefits                                                 |  |                                 | 179.0 |          |  |        | 39.3  |          |  |   | 168.2 |      |  |  | 40.6  |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Supplies                                                              |  |                                 | 57.4  |          |  |        | 12.6  |          |  |   | 50.1  |      |  |  | 12.1  |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Other operating expenses                                              |  |                                 | 88.5  |          |  |        | 19.5  |          |  |   | 88.8  |      |  |  | 21.3  |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Provision for doubtful accounts                                       |  |                                 | 34.1  |          |  |        | 7.5   |          |  |   | 31.4  |      |  |  | 7.6   |  
|                                                                      |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                                      |  |                                 | 359.0 |          |  |        | 78.9  |          |  |   | 338.5 |      |  |  | 81.6  |  
|                                                                      |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                                     
|EBITDA (a)                                                            |  |                                 | 96.1  |          |  |        | 21.1  |          |  |   | 76.1  |      |  |  | 18.4  |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Depreciation and amortization                                         |  |                                 | 24.8  |          |  |        | 5.4   |          |  |   | 25.3  |      |  |  | 6.1   |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Interest expense, net                                                 |  |                                 | 14.2  |          |  |        | 3.1   |          |  |   | 22.9  |      |  |  | 5.5   |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|ESOP expense                                                          |  |                                 | 8.0   |          |  |        | 1.8   |          |  |   | 4.4   |      |  |  | 1.1   |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Gain on previously impaired assets                                    |  |                                 | (0.5  | )        |  |        | (0.1  | )        |  |   | (1.4  | )    |  |  | (0.3  | )
|                                                                      |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before minority interests,
income taxes and extraordinary
item |  |                                 | 49.6  |          |  |        | 10.9  |          |  |   | 24.9  |      |  |  | 6.0   |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Minority interests in earnings of
consolidated entities               |  |                                 | 1.9   |          |  |        | 0.4   |          |  |   | 1.8   |      |  |  | 0.4   |  
|                                                                      |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before income taxes and
extraordinary item                     |  |                                 | 47.7  |          |  |        | 10.5  |          |  |   | 23.1  |      |  |  | 5.6   |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Provision for income taxes                                            |  |                                 | 23.1  |          |  |        | 5.1   |          |  |   | 10.6  |      |  |  | 2.6   |  
|                                                                      |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before extraordinary item                                      |  |                                 | 24.6  |          |  |        | 5.4   |          |  |   | 12.5  |      |  |  | 3.0   |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Extraordinary loss on early
retirement of bank debt, net              |  |                                 | 1.6   |          |  |        | 0.3   |          |  |   |      |      |  |  |      |  
|                                                                      |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Net income                                                            |  | $                               | 23.0  |          |  |        | 5.1   | %        |  | $ | 12.5  |      |  |  | 3.0   | %
|                                                                      |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|% changes from prior year:                                            |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Revenues                                                              |  |                                 |       |          |  |        | 9.8   | %        |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Income before income taxes
and extraordinary item                     |  |                                 |       |          |  |        | 106.2 |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Income before extraordinary item                                      |  |                                 |       |          |  |        | 97.0  |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Net income                                                            |  |                                 |       |          |  |        | 84.2  |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Admissions (b)                                                        |  |                                 |       |          |  |        | 7.5   |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Equivalent admissions (c)                                             |  |                                 |       |          |  |        | 6.2   |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Revenues per equivalent admission                                     |  |                                 |       |          |  |        | 3.3   |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Same hospital % changes from prior year (d):                          |  |                                 |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Revenues                                                              |  |                                 |       |          |  |        | 9.8   |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Admissions (b)                                                        |  |                                 |       |          |  |        | 6.2   |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Equivalent admissions (c)                                             |  |                                 |       |          |  |        | 7.3   |          |  |   |       |      |  |  |       |  
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Revenues per equivalent admission                                     |  |                                 |       |          |  |        | 2.4   |          |  |   |       |      |  |  |       |  

23



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##### Table of Contents





---

|(a) |  | EBITDA is defined as income before depreciation and amortization,
interest expense, gain on previously impaired assets, ESOP expense,
minority interests in earnings of consolidated entities, extraordinary
items and income taxes. EBITDA is commonly used as an
analytical indicator within the health care industry and also serves as a
measure of leverage capacity and debt service ability. EBITDA should not
be considered as a measure of financial performance under accounting
principles generally accepted in the United States
and the items excluded from EBITDA are significant components in
understanding and assessing financial performance. EBITDA should not be
considered in isolation or as an alternative to net income, cash flows
generated by operating, investing or financing activities or other
financial statement data
presented in the condensed consolidated financial statements as an
indicator of financial performance or liquidity. Because EBITDA is not a
measurement determined in accordance with accounting principles generally
accepted in the United States and is susceptible to varying calculations,
EBITDA as
presented may not be comparable to other similarly titled measures
of other companies.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Represents the total number of patients admitted (in the facility for a
period in excess of 23 hours) to our hospitals and is used by management
and investors as a general measure of inpatient volume.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(c) |  | Management and investors use equivalent admissions as a general measure
of combined inpatient and outpatient volume. We compute equivalent
admissions by multiplying admissions (inpatient volume) by the sum of
gross inpatient revenue and gross outpatient revenue and then dividing the
resulting amount by gross inpatient revenue. The equivalent admissions
computation equates outpatient revenue to the volume measure
(admissions) used to measure inpatient volume resulting in a general
measure of combined inpatient and outpatient volume.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(d) |  | Same hospital information excludes the operations of hospitals which we
either acquired or divested during 2000 and 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

For the Three Months Ended September 30, 2001 and 2000

Revenues increased
2.7% to $149.2 million for the three months ended September 30, 2001
compared to $145.3 million for the three months ended September 30,
2000. The rate of increase was lower than the growth rates reported
in prior quarters primarily due to a decrease in the number of
hospitals we operated during the current period as compared to the
same period last
year. We operated 23 hospitals (2,092 weighted average licensed beds)
during the three months ended September 30, 2000 compared to 21
hospitals (1,963 weighted average licensed beds) during the three
months ended September 30, 2001. The net effect of the decrease in
the number of hospitals and weighted average licensed beds was a
decrease in revenues of $6.8 million. On a same hospital basis,
revenues increased 8.5% over the same period last year. The 8.5%
increase in same hospital revenues resulted primarily from a 6.5%
increase in same hospital inpatient admissions and a 6.0% increase in
same hospital equivalent admissions (adjusted to reflect combined
inpatient and outpatient volume). In addition, revenues per
equivalent admissions increased 2.3% on a same hospital basis for the three months ended September 30, 2001 compared to the three
months ended September 30, 2000.

Our costs did not increase at the same rate as our revenues. The increase
in volumes and revenues per equivalent admission contributed to the reduction
of our operating expenses as a percentage of revenues because we were able to
spread our operating costs over an increased base of revenues.

Salaries and benefits decreased as a percentage of revenues to 39.7% for
the three months ended September 30, 2001 from 40.1% for the three months ended
September 30, 2000 primarily as a result of improvements in labor productivity
and an increase in revenues per equivalent admission.
Man-hours per equivalent admission decreased 4.7% over the same period last
year. The decrease in salaries and benefits as a percentage of revenues was
partially offset by a 5.3% increase in salaries and benefits per man-hour for
the three months ended September 30, 2001 compared to the three months ended
September 30, 2000.

Supply costs increased as a percentage of revenues to 12.7% for the three
months ended September 30, 2001 from 11.8% for the three months ended September
30, 2000. The cost of supplies per equivalent admission increased 9.1%
primarily as a result of increases in the number of surgeries performed by us
during the three months ended September 30, 2001 compared to the three months
ended September 30, 2000 as supply costs incurred in connection with surgeries
are higher than supply costs incurred for other procedures. In addition, the
increase is partially due to increases
in pharmaceutical costs and new product development costs as well as
general inflation.

24



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##### Table of Contents



Other operating expenses decreased as a percentage of revenues to 19.6%
for the three months ended September 30, 2001 from 20.9% for the three months
ended September 30, 2000. Other operating expenses consist primarily of
contract services, physician recruitment, professional fees, repairs and
maintenance, rents and leases, utilities, insurance, marketing and non-income
taxes. The decrease was primarily the result of an increase in volumes and
revenues per equivalent admission and a decrease in professional fees and
contract services as a percentage of revenues.

Provision for doubtful accounts decreased as a percentage of revenues to
7.7% for the three months ended September 30, 2001 from 8.6% for the three
months ended September 30, 2000 primarily as a result of the significant improvement in
collections at one facility acquired during 2000 and the effect of three
of the facilities sold during 2000. The provision for doubtful accounts as a
percentage of revenues at the sold facilities was significantly higher than our
average.

Depreciation and amortization expense decreased to $8.2 million for the
three months ended September 30, 2001 compared to $8.5 million for the three
months ended September 30, 2000. Depreciation expense decreased
primarily due to a decrease in the number of facilities we operated
during the three months ended September 30, 2001 compared to the same
period last year.

Net interest expense decreased to $4.0 million for the three months ended
September 30, 2001 from $8.3 million for the three months ended September 30,
2000. This decrease was primarily the result of our repayment of the remaining bank debt
borrowings outstanding during April and May 2001.

ESOP expense increased to $3.0 million for the three months ended
September 30, 2001 from $2.0 million for the three months ended September 30,
2000. This increase was primarily because of a higher average fair market
value of our common stock for the three months ended September 30, 2001
compared to the same period last year. We recognize ESOP expense based on the
average fair market value of the shares committed to be released during the
period.

During the three
months ended September 30, 2000, we recorded a $1.4 million pre-tax
gain related to the favorable settlement on the sale of a facility on
which we had previously recorded an impairment charge.

Minority interests in earnings of consolidated entities increased slightly
to $0.6 million for the three months ended September 30, 2001 compared to $0.5
million for the three months ended September 30, 2000.

The provision for income taxes increased to $7.0 million for the three
months ended September 30, 2001 compared to $4.3 million for the three months
ended September 30, 2000 primarily as a result of higher pre-tax income for the
three months ended September 30, 2001 compared to the three months ended
September 30, 2000.

Net income increased to $7.5 million for the three months ended September
30, 2001 compared to $4.8 million for the three months ended September 30, 2000
because of the reasons described above.

For the Nine Months Ended September 30, 2001 and 2000

Revenues increased 9.8% to $455.1 million for the nine months ended
September 30, 2001 compared to $414.6 million for the nine months ended
September 30, 2000 primarily as a result of a 6.2% increase in equivalent
admissions, a 3.3% increase in revenues per equivalent admission and an
increase in services offered. The increase in equivalent admissions
resulted primarily from increases in same hospital equivalent
admissions.

25



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##### Table of Contents



Our costs did not increase at the same rate as our revenues. The increase
in volumes and revenues per equivalent admission contributed to the reduction
of our operating expenses as a percentage of revenues because we were able to
spread our operating costs over an increased base of revenues.

Salaries and benefits decreased as a percentage of revenues to 39.3% for
the nine months ended September 30, 2001 from 40.6% for the nine months ended
September 30, 2000 primarily as a result of improvements in labor productivity
and an increase in revenues per equivalent admission. Man-hours per equivalent
admission decreased 5.9% over the same period last year. The decrease in
salaries and benefits as a percentage of revenue was partially offset by a 6.5%
increase in salaries and benefits per man-hour for the nine months ended
September 30, 2001 compared to the nine months ended September 30, 2000.

Supply costs increased as a percentage of revenues to 12.6% for the nine
months ended September 30, 2001 from 12.1% for the nine months ended September
30, 2000. The cost of supplies per equivalent admission increased 7.5%
primarily as a result of increases in the number of surgeries performed by us
during the nine months ended September 30, 2001 compared to the nine months
ended September 30, 2000 as supply costs incurred in connection with surgeries
are higher than supply costs incurred for other procedures. In addition, the
increase is partially due to increases in pharmaceutical costs and new product
development costs as well as general inflation.

Other operating expenses decreased as a percentage of revenues to 19.5%
for the nine months ended September 30, 2001 from 21.3% for the nine months
ended September 30, 2000. Other operating expenses consist primarily of
contract services, physician recruitment, professional fees, repairs and
maintenance, rents and leases, utilities, insurance, marketing and non-income
taxes. The decrease was primarily the result of an increase in volumes and
revenues per equivalent admission as discussed above and a decrease in
professional fees and contract services as a percentage of revenues.

Provision for doubtful accounts decreased slightly as a percentage of
revenues to 7.5% for the nine months ended September 30, 2001 from 7.6% for the
nine months ended September 30, 2000.

Depreciation and amortization expense decreased to $24.8 million for the
nine months ended September 30, 2001 from $25.3 million for the nine months
ended September 30, 2000 primarily because of the decrease in the number of
facilities we operated during the nine months ended September 30,
2001 compared to the same period last year.

Net interest expense decreased to $14.2 million for the nine months ended
September 30, 2001 from $22.9 million for the nine months ended September 30,
2000. This decrease was primarily the result of our repayment of the remaining
bank debt borrowings outstanding during April and May 2001.

ESOP expense increased to $8.0 million for the nine months ended September
30, 2001 from $4.4 million for the nine months ended September 30, 2000. This
increase was because of a higher average fair market value of our common stock
for the nine months ended September 30, 2001 compared to the same period last
year. We recognize ESOP expense based on the average fair market value of the
shares committed to be released during the period.

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During the nine months ended September 30, 2001 and 2000, we recorded a
$0.5 million and $1.4 million pre-tax gain, respectively, related to the
favorable settlement on the sale of a facility on which we had previously
recorded an impairment charge.

Minority interests in earnings of consolidated entities increased slightly
to $1.9 million for the nine months ended September 30, 2001 compared to $1.8
million for the nine months ended September 30, 2000.

The provision for income taxes increased to $23.1 million for the nine
months ended September 30, 2001 compared to $10.6 million for the nine months
ended September 30, 2000 primarily as a result of higher pre-tax income for the
nine months ended September 30, 2001 compared to the nine months ended
September 30, 2000. These
provisions reflect effective income tax rates of 48.4% for 2001 compared to
46.0% for 2000. The increase in the effective rate results from the increase in
the nondeductible portion of ESOP expense.

In June 2001, we completed a $200 million, five-year amended and restated
credit agreement with a syndicate of banks, which increased our available
credit under our revolving credit agreement from $65 million to $200 million.
Upon consummation of this amended and restated agreement, we wrote off $2.6
million of deferred loan costs related to our original credit agreement, which
resulted in an extraordinary charge of $1.6 million, net of a tax benefit of
$1.0 million.

Net income increased to $23.0 million for the nine months ended September
30, 2001 compared to $12.5 million for the nine months ended September 30, 2000
because of the reasons described above.

Liquidity and Capital Resources

We rely on our bank credit facilities and other traditional funding
sources to supplement any cash needs not met by operations. At September 30,
2001, we had working capital of $91.5 million compared to $65.4 million at
December 31, 2000. The increase in working capital was due to a $33.8 million
increase in cash from December 31, 2000 primarily resulting from an increase in
net cash collections and a decrease in current maturities of long-term debt of
$11.1 million. The decrease in current maturities of long-term
debt resulted
from the full repayment of bank debt made during the nine months ended
September 30, 2001. The increase in working capital was partially offset by an
increase in other current liabilities of approximately $12.3 million primarily
resulting from an increase in accrued interest and other accrued expenses.

Cash provided by operating activities increased to $91.6 million for the
nine months ended September 30, 2001 compared to $57.7 million for the nine
months ended September 30, 2000. This increase was primarily the result of
improved operations in 2001 compared to 2000 and changes in working
capital as described above.

Cash used in investing activities decreased to $30.0 million during the
nine months ended September 30, 2001 compared to $84.6 million in the nine
months ended September 30, 2000. The decrease was primarily the result of our
acquisitions of Putnam Community Medical Center and Lander Valley Medical
Center during the nine months ended September 30, 2000. The decrease was
partially offset by the proceeds from sale of facilities of $24.4 million
during the nine months ended September 30, 2000 and by increased capital
expenditures of $28.5 million during the nine months ended September 30, 2001
compared to $23.3 million during the nine months ended September 30, 2000. At
September 30, 2001, there were projects under construction that had an
estimated additional cost to complete and equip of approximately $8.1 million.
We anticipate that these projects will be completed over the next twelve
months. We believe our capital expenditure program is adequate to expand,
improve and equip our
existing health care facilities. We expect to make total capital
expenditures in 2001 of approximately $40 to $45 million, excluding
acquisitions.

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Cash used in financing activities was $27.8 million for the nine months
ended September 30, 2001 compared to cash provided by financing activities of
$34.7 million for the nine months ended September 30, 2000.
During the nine months ended September 30, 2001, we received
$100.4 million from our public offering of common stock and we repaid
$139.3 million of bank debt. We borrowed $65.0 million during the
nine months ended September 30, 2000 to fund acquisitions of two
hospitals and we repaid $33.9 million of bank debt primarily from our
proceeds from the sale of facilities.

In June 2001, we completed a $200 million, five-year amended and restated
credit agreement with a syndicate of banks. The agreement increased our
available credit under our revolving credit agreement from $65 million to $200
million and extended the current agreement to five years.

Management does not consider the sale of any assets to be necessary to
repay our indebtedness or to provide working capital. However, for other
reasons, we may sell facilities in the future from time to time. Management
expects that operations and amounts available under our bank credit agreement
will provide sufficient liquidity for the next twelve months.

Our business plan contemplates the acquisition of additional hospitals and
we continuously review potential acquisitions. These acquisitions may,
however, require additional financing. We also continually review our capital
needs and financing opportunities and may seek additional financing for our
acquisition program or other needs.

We do not expect to pay dividends on our common stock in the foreseeable
future.

Impact of Recently Issued Accounting Standards

In July 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards (SFAS) No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 141 is effective for
transactions completed subsequent to June 30, 2001 and SFAS 142 is effective
for fiscal years beginning after December 15, 2001. Under the new rules,
goodwill will no longer be amortized but will be subject to annual impairment
tests. Other intangible assets will continue to be amortized over their useful
lives.

We will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of SFAS No. 142 is anticipated to result in an
increase in net income of approximately $0.8 million per year ($0.02 per
diluted share), based on our 2001 projected net income and diluted shares.
During 2002, we will perform the first of the required impairment tests of
goodwill as of January 1, 2002 and we believe that these tests will not have a
material effect on our earnings and financial position.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144), which supersedes SFAS
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, and the accounting and reporting provisions of APB
Opinion No. 30, Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.
SFAS 144 is effective for fiscal years beginning after December 15,
2001. SFAS 144 removes goodwill from its scope and clarifies other implementation
issues related to SFAS 121. SFAS 144 also provides a single framework for
evaluating long-lived assets to be disposed of by sale. We do not anticipate
SFAS 144 to have a material effect on our earnings or financial position.

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Contingencies

HCA Investigations, Litigation and Indemnification Rights

HCA is currently the subject of various federal and state investigations,
qui tam actions, shareholder derivative and class action suits, patient/payer
actions and general liability claims. HCA is also the subject of a formal order
of investigation by the SEC. Based on our review of HCAs public filings, we
understand that the SECs investigation of HCA includes the anti-fraud, insider
trading, periodic reporting and internal accounting control provisions of the
federal securities laws. These investigations, actions and claims relate to HCA
and its subsidiaries, including subsidiaries that, before our formation as an
independent company, owned the facilities we now own.

HCA is a defendant in several qui tam actions, or actions brought by
private parties, known as relators, on behalf of the United States of America,
which have been unsealed and served on HCA. The actions allege, in general,
that HCA and certain subsidiaries and/or affiliated partnerships violated the
False Claims Act, 31 U.S.C. ss. 3729 et seq., by submitting improper claims to
the government for reimbursement. The lawsuits seek three times the amount of
damages caused to the United States by the submission of any Medicare or
Medicaid false claims presented by the defendants to the federal government,
civil penalties of not less than $5,000 nor more than $10,000 for each such
Medicare or Medicaid claim, attorneys fees and costs. HCA has disclosed that,
on March 15, 2001, the Department of Justice filed a status report setting
forth the governments decisions regarding intervention in existing qui tam
actions against HCA and filed formal complaints for those suits in which the
government has intervened. HCA stated that, of the original 30 qui tam actions,
the Department of Justice remains active and has elected to intervene in eight
actions. HCA has also disclosed that is it aware of additional qui tam actions
that remain under seal and believes that there may be other sealed qui tam
cases of which it is unaware.

On December 14, 2000, HCA announced that it signed an agreement with the
Department of Justice and four U.S. attorneys offices resolving all pending
federal criminal issues in the governments investigation. The criminal
agreement has been accepted by the federal district courts. The criminal
agreement provided that HCA pay the government $95 million, which payment was
made during the first quarter of 2001, and that two non-operating subsidiaries
enter certain criminal pleas, which pleas were entered in January 2001.

HCA also announced that it signed a civil settlement agreement with the
Department of Justice resolving civil false claims issues related to DRG
coding, outpatient laboratory and home health. The civil settlement provides
that in return for releases on these issues, HCA will pay the government $745
million, with interest accruing from May 18, 2000 to the payment date at a rate
of 6.5%. Court approval of this settlement was received on August 7, 2001 and
HCA made the payment on August 10, 2001. The civil issues that are not covered
by the civil agreement include claims related to cost reports and physician
relations issues.

The agreements announced on December 14, 2000 relate only to conduct that
was the subject of the federal investigations resolved in the agreements, and
HCA has stated publicly that it continues to discuss civil claims relating to
cost reporting and physician relations with the government. These agreements
with the government do not resolve various qui tam actions filed by private
parties against HCA, or any pending state actions. In addition to other claims
not covered by these agreements, the government also reserved
its rights under these agreements to pursue any claims it may have for:



| |  |  | any civil, criminal or administrative liability under the
Internal Revenue Code;                                                      
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | any other criminal liability;                                                                                                         
|
| |  |  | any administrative liability, including mandatory exclusion
from federal health care programs;                                        
|
| |  |  | any liability to the United States (or its agencies) for any
conduct other than the conduct covered in the governments
investigation;

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| |  |  | any express or implied warranty claims or other claims for
defective or deficient products or services, including quality of
goods and services, provided by HCA;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | any claims for personal injury or property damage or for
other similar consequential damages arising from the conduct subject
to the investigation; and          
|
| |  |  | any civil or administrative claims of the United States
against individuals.                                                                                     

In addition, five of our current and former hospitals received notices in
early 2001 from the Centers for Medicare and Medicaid Services (CMS),
formerly known as the Health Care Financing Administration, a United States
government agency that runs the Medicare and Medicaid programs. The notices
stated that CMS was re-opening, for examination, cost reports for Medicare and
Medicaid reimbursement filed by these hospitals for periods between 1993 and
1998, which pre-dates our spin-off from HCA.

HCA has agreed to indemnify us for any losses, other than consequential
damages, arising from the pending governmental investigations of HCAs business
practice prior to the date of the distribution and losses arising from legal
proceedings, present or future, related to the investigation or actions engaged
in before the distribution that relate to the investigation. HCA has also
agreed that, in the event that any hospital owned by us at the time of the
spin-off is permanently excluded from participation in the Medicare and
Medicaid programs as a result of the proceedings described above, then HCA will
make a cash payment to us, in an amount (if positive) equal to five times the
excluded hospitals 1998 income from continuing operations before depreciation
and amortization, interest expense, management fees, minority interests and
income taxes, as set forth on a schedule to the distribution agreement, less
the net proceeds of the sale or other disposition of the excluded hospital.
However, we could be held responsible for any claims that are not covered by
the agreements reached with the federal government or for which HCA is not
required to, or fails to, indemnify us. If indemnified matters were asserted
successfully against us or any of our facilities, and HCA failed to meet its
indemnification obligations, then this event could have a material adverse
effect on our business, financial condition, results of operations or
prospects.

The extent to which we may or may not continue to be affected by the
ongoing investigations of HCA and the initiation of additional investigations,
if any, cannot be predicted. These matters could have a material adverse effect
on our business, financial condition, results of operations or prospects in
future periods.

Americans With Disabilities Act Claim

On January 12, 2001, Access Now, Inc., a disability rights organization,
filed a class action lawsuit against each of our hospitals alleging
non-compliance with the accessibility guidelines under the Americans with
Disabilities Act. The lawsuit, filed in the United States District Court for
the Eastern District of Tennessee, seeks injunctive relief requiring facility
modification, where necessary, to meet the ADA guidelines, along with
attorneys fees and costs. We are working with Access Now to determine the
scope of facility modification needed to comply with the Act.

Corporate Integrity Agreement

In December 2000, we entered into a corporate integrity agreement with the
Office of Inspector General and agreed to maintain our compliance program in
accordance with the corporate integrity agreement. Complying with the
compliance measures and reporting and auditing requirements of the corporate
integrity agreement requires additional efforts and costs. Failure to comply
with the terms of the corporate integrity agreement could subject us to
significant monetary penalties.

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General Liability Claims

We are, from time to time, subject to claims and suits arising in the
ordinary
course of business, including claims for damages for personal injuries,
breach of management contracts, for wrongful restriction of, or interference
with, physicians staff privileges and employment related claims. In certain
of these actions, plaintiffs request punitive or other damages against us which
may not be covered by insurance. We are currently not a party to any proceeding
which, in managements opinion, would have a material adverse effect on our
business, financial condition or results of operations.

Physician Commitments

We have committed to provide financial assistance pursuant to recruiting
agreements with various physicians practicing in the communities in which we
serve. In consideration for a physician relocating to one of our communities
and agreeing to engage in private practice for the benefit of the respective
community, we may loan money to a physician, normally over a period of one
year, to assist in establishing his or her practice. We have committed to
advance amounts of approximately $9.1 million at September 30, 2001. The
actual amount of commitments to be subsequently advanced to physicians often
depends on the financial results of a physicians private practice during the
guarantee period. Generally, amounts advanced under the recruiting agreements
may be forgiven pro rata over a period of 48 months contingent on the physician
continuing to practice in the respective community. It is managements opinion
that amounts actually advanced and not repaid will not have a material adverse
effect on our results of operations or financial position.

Acquisitions

We have acquired and will continue to acquire businesses with prior
operating histories. Acquired companies may have unknown or contingent
liabilities, including liabilities for failure to comply with health care laws
and regulations, such as billing and reimbursement, fraud and abuse and similar
anti-referral laws.
Although we institute policies intended to conform practices to its standards
following completion of acquisitions, there can be no assurance that we will
not become liable for past activities that may later be asserted to be improper
by private plaintiffs or government agencies. Although we generally seek to
obtain indemnification from prospective sellers covering these matters, there
can be no
assurance that any matter will be covered by indemnification, or if covered,
that the indemnification will be adequate to cover potential losses and fines.

Inflation

The health care industry is labor intensive. Wages and other expenses
increase during periods of inflation and when shortages in marketplaces occur.
In addition, suppliers and insurers pass along rising costs to us in the form
of higher prices. Our ability to pass on these increased costs is limited
because of increasing regulatory and competitive pressures. In the event we
experience inflationary pressures, results of operations may be materially
affected.

Health Care Reform

In recent years, an increasing number of legislative proposals have been
introduced or proposed to Congress and in some state legislatures. While we
are unable to predict which, if any, proposals for health care reform will be
adopted, there can be no assurance that proposals adverse to our business will
not be adopted.




Item 3:   Quantitative and Qualitative Disclosures about Market Risk

During the nine months ended September 30, 2001 there were no material
changes in the quantitative and qualitative disclosures about market risks
presented in our Annual Report on Form 10-K for the year ended December 31,
2000.

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Part II:    Other Information




Item 6:   Exhibits and Reports on Form 8-K



| | (a) |  | List of Exhibits:
| | --- |  | -----------------

|               |  |                                                                         | 
|-------------- |  | ----------------------------------------------------------------------- | 
|EXHIBIT NUMBER |  | DESCRIPTION                                                            
|               |  |                                                                        
|3.1            |  | Certificate of Incorporation of LifePoint Hospitals, Inc. (i)          
|              
|              
|              
|              
|3.2            |  | Bylaws of LifePoint Hospitals, Inc. (i)                                
|              
|              
|              
|              
|3.3            |  | Certificate of Incorporation of LifePoint Hospitals Holdings, Inc. (ii)
|              
|              
|              
|              
|3.4            |  | Bylaws of LifePoint Hospitals Holdings, Inc. (ii)                      



---

|(i)  |  | Incorporated by reference from the LifePoint
Hospitals, Inc. Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.      
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------
|    
|(ii) |  | Incorporated by reference from the LifePoint
Hospitals Holdings, Inc. Annual Report on Form 10-K
for the year ended December 31, 1999.



| | (b) |  | Reports on Form 8-K filed during the three months ended September 30, 2001:
| | --- |  | ---------------------------------------------------------------------------

On July 18, 2001, we furnished information pursuant to Item 9
of Form 8-K concerning the webcast of our second quarter 2001 earnings
results.

On July 25, 2001, we furnished pursuant to Item 9 of Form 8-K
a copy of our press release issued on July 23, 2001 containing our second
quarter 2001 earnings results.

On September 25, 2001, we furnished pursuant to Item 9 of Form 8-K
copies of our two press releases issued on September 24, 2001. The first
press release concerned our pending acquisition of Ville Platte Medical
Center. The second press release concerned our participation in an investor
conference.

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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.

|                        |  |                                             | 
|----------------------- |  | ------------------------------------------- | 
|                        |  | LifePoint Hospitals, Inc.                  
|                       
|                       
|                       
|                       
|                       
|Date: November 14, 2001 |  | /s/ Kenneth C. Donahey                     
|                        |  |                                            
|                        |  | Kenneth C. Donahey                         
|                        |  | Chairman and Chief Executive Officer       
|                        |  | (Principal Executive and Financial Officer)
|                       
|                       
|                       
|                       
|                       
|                       
|                        |  | LifePoint Hospitals Holdings, Inc.         
|                       
|                       
|                       
|                       
|                       
|Date: November 14, 2001 |  | /s/ Kenneth C. Donahey                     
|                        |  |                                            
|                        |  | Kenneth C. Donahey                         
|                        |  | Chairman and Chief Executive Officer       
|                        |  | (Principal Executive and Financial Officer)

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EXHIBIT INDEX

|               |  |                                                                         | 
|-------------- |  | ----------------------------------------------------------------------- | 
|EXHIBIT NUMBER |  | DESCRIPTION                                                            
|               |  |                                                                        
|3.1            |  | Certificate of Incorporation of LifePoint Hospitals, Inc. (i)          
|              
|              
|              
|              
|3.2            |  | Bylaws of LifePoint Hospitals, Inc. (i)                                
|              
|              
|              
|              
|3.3            |  | Certificate of Incorporation of LifePoint Hospitals Holdings, Inc. (ii)
|              
|              
|              
|              
|3.4            |  | Bylaws of LifePoint Hospitals Holdings, Inc. (ii)                      



---

|(i)  |  | Incorporated by reference from the LifePoint
Hospitals, Inc. Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.      
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------
|    
|(ii) |  | Incorporated by reference from the LifePoint
Hospitals Holdings, Inc. Annual Report on Form 10-K
for the year ended December 31, 1999.