##### Table of Contents



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

FORM 10-Q

(Mark One)

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

or

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | 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

LifePoint Hospitals, Inc.

(Exact name of registrant as specified in its charter)

|                                         |  |                                     
|---------------------------------------- |  | ------------------------------------
|Delaware                                 |  | 52-2165845                          
|(State or other jurisdiction             |  | (I.R.S. Employer Identification No.)
|of incorporation or organization)        |  |                                     
|                                         |  |                                     
|103 Powell Court, Suite 200              |  | 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 (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 o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES x NO o

As of April 21, 2003, the number of outstanding shares of Common Stock of
LifePoint Hospitals, Inc. was 39,598,412.

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TABLE OF CONTENTS



|                                      |  |  |  |  |  |  |  | 
|------------------------------------- |  |  |  |  |  |  |  | 
|PART I-FINANCIAL INFORMATION         
|PART II-OTHER INFORMATION            
|CERTIFICATIONS                       
|EXHIBIT INDEX                        
|EX-99.1  302 CERTIFICATION OF THE CEO
|EX-99.2  302 CERTIFICATION OF THE CFO
|EX-99.3  906 CERTIFICATION OF THE CEO
|EX-99.4  906 CERTIFICATION OF THE CFO



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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
|                                                                            |            |   | March 31,         
|                                                                            |            |   |                   
|                                                                            |            |   | 2003               |        | 2002
|                                                                            |            |   |                    |        |     
|Revenues                                                                    |            | $ | 220.9              |        |      | $ | 181.6 |       
|                                                                           
|Salaries and benefits                                                       |            |   | 90.3               |        |      |   | 70.7  |       
|Supplies                                                                    |            |   | 28.5               |        |      |   | 22.9  |       
|Other operating expenses                                                    |            |   | 38.6               |        |      |   | 32.2  |       
|Provision for doubtful accounts                                             |            |   | 17.5               |        |      |   | 13.2  |       
|Depreciation and amortization                                               |            |   | 11.2               |        |      |   | 9.4   |       
|Interest expense, net                                                       |            |   | 3.3                |        |      |   | 4.1   |       
|Debt retirement costs                                                       |            |   |                   |        |      |   | 1.3   |       
|ESOP expense                                                                |            |   | 1.6                |        |      |   | 2.5   |       
|                                                                            |            |   |                    |        |      |   |       |       
|                                                                            |            |   | 191.0              |        |      |   | 156.3 |       
|                                                                            |            |   |                    |        |      |   |       |        | 
|Income before minority interest and income taxes                            |            |   | 29.9               |        |      |   | 25.3  |       
|Minority interest in earnings of consolidated entity                        |            |   |                   |        |      |   | 0.7   |       
|                                                                            |            |   |                    |        |      |   |       |       
|Income before income taxes                                                  |            |   | 29.9               |        |      |   | 24.6  |       
|Provision for income taxes                                                  |            |   | 12.2               |        |      |   | 10.9  |       
|                                                                            |            |   |                    |        |      |   |       |       
|                                                                            | Net income |   | $                  | 17.7   |      |   | $     | 13.7   | 
|                                                                            |            |   |                    |        |      |   |       |       
|Basic earnings per share:                                                   |            |   |                    |        |      |   |       |       
|                                                                            | Net income |   | $                  | 0.47   |      |   | $     | 0.37   | 
|                                                                            |            |   |                    |        |      |   |       |       
|Diluted earnings per share:                                                 |            |   |                    |        |      |   |       |       
|                                                                            | Net income |   | $                  | 0.45   |      |   | $     | 0.36   | 
|                                                                            |            |   |                    |        |      |   |       |       
|Weighted average shares and dilutive securities
outstanding (in thousands): |            |   |                    |        |      |   |       |       
|                                                                            | Basic      |   |                    | 37,878 |      |   |       | 37,303 | 
|                                                                            |            |   |                    |        |      |   |       |       
|                                                                            | Diluted    |   |                    | 43,912 |      |   |       | 38,456 | 
|                                                                            |            |   |                    |        |      |   |       |       

See accompanying notes.

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##### Table of Contents



LIFEPOINT HOSPITALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)

|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |              |       |   |  | 
|-------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ----- | ------ | ----- | ----------- | ----- | ------------ | ----- | - |  | 
|                                                               |                                                                                                                                                                                   |                                |       |        |       | March 31,   |       | December 31,
|                                                               |                                                                                                                                                                                   |                                |       |        |       | 2003        |       | 2002        
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               |                                                                                                                                                                                   |                                |       |        |       | (unaudited) |       | (1)         
|ASSETS                                                        
|Current assets:                                                |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               | Cash and cash equivalents                                                                                                                                                         |                                | $     | 40.3   |       |             | $     | 23.0         |      
|                                                               | Accounts receivable, less allowances for doubtful accounts of $111.5 at March
31, 2003 and $109.1 at December 31, 2002                                                            |                                |       | 97.8   |       |             |       | 85.0         |      
|                                                               | Inventories                                                                                                                                                                       |                                |       | 21.0   |       |             |       | 20.5         |      
|                                                               | Deferred income taxes and other current assets                                                                                                                                    |                                |       | 17.8   |       |             |       | 14.8         |      
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               |                                                                                                                                                                                   |                                | 176.9 |        |       |             | 143.3 |             
|Property and equipment:                                        |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               | Land                                                                                                                                                                              |                                |       | 11.3   |       |             |       | 11.3         |      
|                                                               | Buildings and improvements                                                                                                                                                        |                                |       | 288.0  |       |             |       | 285.3        |      
|                                                               | Equipment                                                                                                                                                                         |                                |       | 299.9  |       |             |       | 295.5        |      
|                                                               | Construction in progress (estimated cost to complete and equip after March 31,
2003 is $48.3)                                                                                     |                                |       | 26.5   |       |             |       | 18.1         |      
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               |                                                                                                                                                                                   |                                | 625.7 |        |       |             | 610.2 |             
|                                                               | Accumulated depreciation                                                                                                                                                          |                                |       | (247.7 | )     |             |       | (238.0       | )    
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               |                                                                                                                                                                                   |                                | 378.0 |        |       |             | 372.2 |             
|                                                              
|Deferred loan costs, net                                       |                                                                                                                                                                                   |                                | 8.2   |        |       |             | 8.6   |             
|Unallocated purchase price                                     |                                                                                                                                                                                   |                                | 134.0 |        |       |             | 136.1 |             
|Intangible assets, net                                         |                                                                                                                                                                                   |                                | 3.6   |        |       |             | 3.8   |             
|Goodwill                                                       |                                                                                                                                                                                   |                                | 69.2  |        |       |             | 69.2  |             
|Other                                                          |                                                                                                                                                                                   |                                |      |        |       |             | 0.3   |             
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               |                                                                                                                                                                                   | $                              | 769.9 |        |       | $           | 733.5 |             
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |              |      
|LIABILITIES AND EQUITY                                        
|Current liabilities:                                           |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               | Accounts payable                                                                                                                                                                  |                                | $     | 28.4   |       |             | $     | 28.5         |      
|                                                               | Accrued salaries                                                                                                                                                                  |                                |       | 19.6   |       |             |       | 24.4         |      
|                                                               | Other current liabilities                                                                                                                                                         |                                |       | 32.7   |       |             |       | 14.3         |      
|                                                               | Estimated third-party payor settlements                                                                                                                                           |                                |       | 9.6    |       |             |       | 8.2          |      
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               |                                                                                                                                                                                   |                                | 90.3  |        |       |             | 75.4  |             
|                                                              
|Long-term debt                                                 |                                                                                                                                                                                   |                                | 250.0 |        |       |             | 250.0 |             
|Deferred income taxes                                          |                                                                                                                                                                                   |                                | 25.6  |        |       |             | 24.9  |             
|Professional and general liability risks and other liabilities |                                                                                                                                                                                   |                                | 26.6  |        |       |             | 25.6  |             
|                                                              
|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; 39,597,812
shares and 39,550,540 shares issued and outstanding at March 31, 2003 and
December 31, 2002, respectively |                                |       | 0.4    |       |             |       | 0.4          |      
|                                                               |                                                                                                                                                                                   | Capital in excess of par value |       |        | 298.5 |             |       |              | 297.2 |  
|                                                               |                                                                                                                                                                                   | Unearned ESOP compensation     |       |        | (18.5 | )           |       |              | (19.3 | )
|                                                               |                                                                                                                                                                                   | Retained earnings              |       |        | 97.0  |             |       |              | 79.3  |  
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               |                                                                                                                                                                                   |                                | 377.4 |        |       |             | 357.6 |             
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |             
|                                                               |                                                                                                                                                                                   | $                              | 769.9 |        |       | $           | 733.5 |             
|                                                               |                                                                                                                                                                                   |                                |       |        |       |             |       |              |      



---

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

See accompanying notes.

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LIFEPOINT HOSPITALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In millions)

|                                                 |                                                                                                      |                                         |                                                     |                                           |       |                    |       |       |       |      |       |  
|------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | --------------------------------------- | --------------------------------------------------- | ----------------------------------------- | ----- | ------------------ | ----- | ----- | ----- | ---- | ----- | -
|                                                 |                                                                                                      |                                         |                                                     |                                           |       | Three Months Ended
|                                                 |                                                                                                      |                                         |                                                     |                                           |       | March 31,         
|                                                 |                                                                                                      |                                         |                                                     |                                           |       |                   
|                                                 |                                                                                                      |                                         |                                                     |                                           |       | 2003               |       | 2002 
|                                                 |                                                                                                      |                                         |                                                     |                                           |       |                    |       |      
|Cash flows from operating activities:            |                                                                                                      |                                         |                                                     |                                           |       |                    |       |      
|                                                 | Net income                                                                                           |                                         | $                                                   | 17.7                                      |       |                    | $     | 13.7  |      
|                                                 | Adjustments to reconcile net income to net cash
provided by operating activities:                    |                                         |                                                     |                                           |       |                    |       |       |      
|                                                 | Depreciation and amortization                                                                        |                                         |                                                     | 11.2                                      |       |                    |       | 9.4   |      
|                                                 | Debt retirement costs                                                                                |                                         |                                                     |                                          |       |                    |       | 1.3   |      
|                                                 | ESOP expense                                                                                         |                                         |                                                     | 1.6                                       |       |                    |       | 2.5   |      
|                                                 | Minority interest in earnings of consolidated entity                                                 |                                         |                                                     |                                          |       |                    |       | 0.7   |      
|                                                 | Deferred income taxes (benefit)                                                                      |                                         |                                                     | (0.1                                      | )     |                    |       | 0.4   |      
|                                                 | Reserve for professional and general liability risks, net                                            |                                         |                                                     | 1.2                                       |       |                    |       | 3.1   |      
|                                                 | Tax benefit from stock option exercises                                                              |                                         |                                                     |                                          |       |                    |       | 0.7   |      
|                                                 | Increase (decrease) in cash from operating assets and
liabilities, net of effects from acquisitions: |                                         |                                                     |                                           |       |                    |       |       |      
|                                                 |                                                                                                      | Accounts receivable                     |                                                     |                                           | (11.1 | )                  |       |       | (20.8 | )   
|                                                 |                                                                                                      | Inventories and other current assets    |                                                     |                                           | (2.8  | )                  |       |       | (1.4  | )   
|                                                 |                                                                                                      | Accounts payable and accrued expenses   |                                                     |                                           | 2.4   |                    |       |       | 1.5   |     
|                                                 |                                                                                                      | Income taxes payable                    |                                                     |                                           | 11.8  |                    |       |       | 12.0  |     
|                                                 |                                                                                                      | Estimated third-party payor settlements |                                                     |                                           | 1.4   |                    |       |       | 11.3  |     
|                                                 | Other                                                                                                |                                         |                                                     | 0.9                                       |       |                    |       | (0.2  | )    
|                                                 |                                                                                                      |                                         |                                                     |                                           |       |                    |       |      
|                                                 |                                                                                                      |                                         |                                                     | Net cash provided by operating activities |       |                    | 34.2  |       |       |      | 34.2  |  
|Cash flows from investing activities:            |                                                                                                      |                                         |                                                     |                                           |       |                    |       |      
|                                                 | Purchases of property and equipment, net                                                             |                                         |                                                     | (17.2                                     | )     |                    |       | (10.0 | )    
|                                                 | Other                                                                                                |                                         |                                                     | (0.2                                      | )     |                    |       | (0.1  | )    
|                                                 |                                                                                                      |                                         |                                                     |                                           |       |                    |       |      
|                                                 |                                                                                                      |                                         |                                                     | Net cash used in investing activities     |       |                    | (17.4 | )     |       |      | (10.1 | )
|Cash flows from financing activities:            |                                                                                                      |                                         |                                                     |                                           |       |                    |       |      
|                                                 | Repurchases of senior subordinated notes                                                             |                                         |                                                     |                                          |       |                    |       | (8.6  | )    
|                                                 | Proceeds from exercise of stock options                                                              |                                         |                                                     | 0.2                                       |       |                    |       | 1.2   |      
|                                                 | Other                                                                                                |                                         |                                                     | 0.3                                       |       |                    |       | (0.1  | )    
|                                                 |                                                                                                      |                                         |                                                     |                                           |       |                    |       |      
|                                                 |                                                                                                      |                                         | Net cash provided by (used in) financing activities |                                           |       | 0.5                |       |       |       | (7.5 | )    
|                                                
|Change in cash and cash equivalents              |                                                                                                      |                                         | 17.3                                                |                                           |       |                    | 16.6  |      
|Cash and cash equivalents at beginning of period |                                                                                                      |                                         | 23.0                                                |                                           |       |                    | 57.2  |      
|                                                 |                                                                                                      |                                         |                                                     |                                           |       |                    |       |      
|Cash and cash equivalents at end of period       |                                                                                                      | $                                       | 40.3                                                |                                           |       | $                  | 73.8  |      
|                                                 |                                                                                                      |                                         |                                                     |                                           |       |                    |       |       |      
|Interest payments                                |                                                                                                      | $                                       | 0.2                                                 |                                           |       | $                  | 0.6   |      
|Income taxes paid (received), net                |                                                                                                      | $                                       | 0.4                                                 |                                           |       | $                  | (2.2  | )    

See accompanying notes.

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LIFEPOINT HOSPITALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003
(UNAUDITED)

NOTE 1  ORGANIZATION AND BASIS OF PRESENTATION

At March 31, 2003, LifePoint Hospitals, Inc. (the Company) was comprised
of 28 general, acute care hospitals and related health care entities located in
non-urban communities in the states of Alabama, Florida, Kansas, Kentucky,
Louisiana, Tennessee, Utah, West Virginia 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) and disclosures considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2003 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2003. 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, 2002.

Certain prior year amounts have been reclassified to conform to the
current year presentation. These reclassifications have no impact on total
assets, liabilities, shareholders equity, net income or cash flows.

As of January 1, 2003, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 145, a standard that addresses the
classification of gains or losses from early retirement of debt. Prior to the
adoption of SFAS No. 145, the Company reported losses from the early retirement
of debt as extraordinary items, net of tax benefits in the consolidated
statement of income. During the three months ended March 31, 2002, the Company
recorded a $0.8 million extraordinary loss, net of tax benefits of $0.5
million, that resulted from the early retirement of debt. This charge was
reclassified to comply with SFAS No. 145 by reducing previously reported income
before minority interest and income taxes by $1.3 million and reducing income
taxes by $0.5 million for the three months ended March 31, 2002 in the
accompanying condensed consolidated statement of income. This reclassification
had no impact on reported net income.

NOTE 2  EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per share for net income (income in millions and shares in thousands):

|                                                                              |                        |   |                    |       |      |   |        |       | 
|----------------------------------------------------------------------------- | ---------------------- | - | ------------------ | ----- | ---- | - | ------ | ----- | 
|                                                                              |                        |   | Three Months Ended
|                                                                              |                        |   | March 31,         
|                                                                              |                        |   |                   
|                                                                              |                        |   | 2003               |       | 2002
|                                                                              |                        |   |                    |       |     
|Numerator:                                                                    |                        |   |                    |       |      |   |        |      
|Numerator for basic earnings per share  net income                           |                        | $ | 17.7               |       |      | $ | 13.7   |      
|Effect of convertible notes                                                   |                        |   | 1.9                |       |      |   |       |      
|                                                                              |                        |   |                    |       |      |   |        |      
|Numerator for diluted earnings per share  net income                         |                        | $ | 19.6               |       |      | $ | 13.7   |      
|                                                                              |                        |   |                    |       |      |   |        |      
|Denominator:                                                                  |                        |   |                    |       |      |   |        |      
|Denominator for basic earnings per share-weighted
average shares              |                        |   | 37,878             |       |      |   | 37,303 |      
|Effect of dilutive securities:                                                |                        |   |                    |       |      |   |        |      
|                                                                              | Employee stock options |   |                    | 690   |      |   |        | 1,061 | 
|                                                                              | Convertible notes      |   |                    | 5,279 |      |   |        |      | 
|                                                                              | Other                  |   |                    | 65    |      |   |        | 92    | 
|                                                                              |                        |   |                    |       |      |   |        |      
|Denominator for diluted earnings per share  adjusted
weighted average shares |                        |   | 43,912             |       |      |   | 38,456 |      
|                                                                              |                        |   |                    |       |      |   |        |      
|Basic earnings per share  net income                                         |                        | $ | 0.47               |       |      | $ | 0.37   |      
|                                                                              |                        |   |                    |       |      |   |        |      
|Diluted earnings per share  net income                                       |                        | $ | 0.45               |       |      | $ | 0.36   |      
|                                                                              |                        |   |                    |       |      |   |        |      

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NOTE 3  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51 (FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after June 15, 2003. The Company does not expect this new
interpretation to have a material effect on its future results of operations or
financial position.

NOTE 4  STOCK BENEFIT PLANS

The Company issues stock options and other stock-based awards to key
employees and directors. SFAS No. 123, Accounting for Stock-Based Compensation,
encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. The Company has chosen
to continue to account for employee stock-based compensation using the
intrinsic value method as prescribed in Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations,
under which no compensation cost related to stock options has been recognized
in net income for the three months ended March 31, 2002 and 2003.

Pro forma information regarding interim net income and earnings per share
is required by SFAS No. 148 and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The fair
value for these options was estimated at the date of grant using a
Black-Scholes option valuation model with the following range of
weighted-average assumptions: risk-free interest rates of 1.86% to 7.60%;
expected dividend yield of 0.0%; volatility factors of the expected market
price of the Companys common stock of 35.0% to 53.0%; and an expected life of
the options of 3.0 to 4.7 years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. Option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. The
Companys employee stock options have characteristics significantly different
from those of traded options. Changes in the subjective input assumptions can
materially affect the fair value estimate. Other option valuation models may
produce significantly different fair values of the Companys employee stock
options.

The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123 to stock-based compensation (dollars in millions, except per share
amounts):

|                                                                                                                          |  |                              |      |      |  |   |      |  
|------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---- | ---- |  | - | ---- | -
|                                                                                                                          |  | Three Months Ended March 31,
|                                                                                                                          |  |                             
|                                                                                                                          |  | 2003                         |      | 2002
|                                                                                                                          |  |                              |      |     
|Net income, as reported                                                                                                   |  | $                            | 17.7 |      |  | $ | 13.7 |  
|Less stock-based compensation expense
determined under fair value based method for
all awards, net of related tax effects |  |                              | (2.4 | )    |  |   | (1.7 | )
|                                                                                                                          |  |                              |      |      |  |   |      |  
|Pro forma net income                                                                                                      |  | $                            | 15.3 |      |  | $ | 12.0 |  
|                                                                                                                          |  |                              |      |      |  |   |      |  
|Earnings per share:                                                                                                       |  |                              |      |      |  |   |      |  
|Basic  as reported                                                                                                       |  | $                            | 0.47 |      |  | $ | 0.37 |  
|                                                                                                                          |  |                              |      |      |  |   |      |  
|Basic  pro forma                                                                                                         |  | $                            | 0.40 |      |  | $ | 0.32 |  
|                                                                                                                          |  |                              |      |      |  |   |      |  
|Diluted  as reported                                                                                                     |  | $                            | 0.45 |      |  | $ | 0.36 |  
|                                                                                                                          |  |                              |      |      |  |   |      |  
|Diluted  pro forma                                                                                                       |  | $                            | 0.39 |      |  | $ | 0.31 |  
|                                                                                                                          |  |                              |      |      |  |   |      |  

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In February 2003, the Company granted options to purchase
an additional 913,350 shares of common stock at an exercise price of $21.05 and an estimated
weighted-average fair value of $7.82 per share. These options will be fully
vested three years after the date of grant. The above table includes these
additional stock options for the period subsequent to their grant.

NOTE 5  CONTINGENCIES

HCA Investigations, Litigation and Indemnification Rights

HCA Inc. (HCA) is currently the subject of various federal and state
investigations, qui tamactions, shareholder derivative and class action suits,
patient/payor actions and general liability claims. HCA is also the subject of
a formal order of investigation by the SEC. The description of the matters
below is 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 many of the facilities that the
Company now owns.

HCA is a defendant in several qui tamactions brought on behalf of the
United States by private parties, known as relators, 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. § 3729, et seq. by submitting improper claims for reimbursement to the
government. The lawsuits generally seek: a) restitution of amounts paid to HCA
entities as a result of any Medicare or Medicaid false claims, b) a penalty in
the amount of three times the restitution amount, c) civil fines of not less
than $5,500 nor more than $11,000 for each such claim, and d) attorneys fees
and costs. HCA has disclosed that, on March 15, 2001, the Department of Justice
announced its decision to intervene in certain of the qui tamactions against
HCA. HCA stated that, of the original 30 qui tamactions, the Department of
Justice elected to intervene in eight actions. HCA has disclosed that it is
aware of additional qui tamactions that remain under seal and that it also
believes there may be other sealed qui tamcases of which it is unaware.

In December 2000, HCA entered into a series of agreements with the
Criminal Division of the Department of Justice and various U.S. Attorneys
Offices and with the Civil Division of the Department of Justice which resolved
all federal criminal issues outstanding against HCA and certain issues
involving federal civil claims by or on behalf of the government against HCA
relating to DRG coding, outpatient laboratory billing and home health issues.
These December 2000 agreements related only to conduct that was the subject of
the various federal investigations and did not resolve various qui tamactions
filed by private parties against HCA or pending state actions.

On March 28, 2002, HCA announced that it reached an understanding with CMS
to resolve all Medicare cost report, home office cost statement, and appeal
issues between HCA and CMS. The understanding provides that HCA would pay CMS
$250 million with respect to these matters. The resolution is subject to
approval by the Department of Justice and execution of a definitive written
agreement.

On December 18, 2002, HCA announced that it reached an understanding with
the Department of Justice to settle, subject to certain conditions, the
remaining litigation brought by the Department of Justice against HCA. The
understanding provides that, in exchange for releases by the Department of
Justice, HCA will pay the Department of Justice an additional $631 million. HCA
announced that, in addition, it has also reached an agreement in principle with
representatives of certain states to pay $17.5 million to state Medicaid
agencies to resolve similar claims against HCA made by those states.

HCA has agreed to indemnify the Company for any losses, other than
consequential damages, arising from the 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

7



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relate to the investigation. HCA has also agreed to make specified payments to
the Company if 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. 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. In addition, should HCA be unable to fulfill its
obligations to the federal government, the Company could ultimately be held
responsible for any settlement related to the former HCA hospitals operated by
the Company. If indemnified matters were asserted successfully against the
Company or any of its facilities, and HCA failed to meet its indemnification
obligations, such an event could have a material adverse effect on the
Companys business, financial condition, results of operations or prospects.

The Company cannot predict with accuracy 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. These matters, if resulting in
a successful claim against the Company, 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 ADA). 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. In January 2002, the
District Court certified the class action and issued a scheduling order that
requires the parties to complete discovery and inspection for approximately six
facilities per year. The Company intends to vigorously defend the lawsuit,
recognizing the Companys obligation to correct any deficiencies in order to
comply with the ADA.

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. This agreement
was amended in April 2002. Complying with the compliance measures and reporting
and auditing requirements of the corporate integrity agreement will require
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, medical malpractice, breach of management contracts, 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 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 had committed to advance amounts of approximately
$16.7 million at March 31, 2003. 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 guaranteed 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.

8



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Capital Expenditure Commitments

The Company is reconfiguring some of its facilities to accommodate more
effectively inpatient and outpatient services and restructuring existing
surgical capacity in some of its hospitals to permit additional patient volume
and a greater variety of services. The Company had incurred approximately $26.5
million in uncompleted projects as of March 31, 2003, which is included in
construction in progress in its accompanying condensed consolidated balance
sheet. At March 31, 2003, the Company had projects under construction with an
estimated additional cost to complete and equip of approximately $48.3 million.

Pursuant to the asset purchase agreement for Ville Platte Medical Center,
the Company has agreed to make certain capital improvements which, including
the initial cash payment and liabilities assumed, are not required to exceed
$25.0 million. The capital improvements must be completed by December 1, 2004.
The initial cash payment and liabilities assumed totaled $15.1 million, which
leaves $9.9 million required for capital improvements. The Company had incurred
approximately $2.3 million of the required capital improvements as of March 31,
2003.

Pursuant to the asset purchase agreement for Logan Regional Medical
Center, the Company has agreed to expend, regardless of the results of the
hospitals operations, at least $20.0 million in the aggregate for capital
expenditures and improvements during the ten-year period following the date of
acquisition of December 1, 2002. The Company had incurred approximately $0.1
million of the required capital improvements as of March 31, 2003.

Prior Period Cost Report Settlements

Hospitals participating in the Medicare and some Medicaid programs,
whether paid on a reasonable cost basis or under a Prospective Payment System
(PPS), are required to meet certain financial reporting requirements. Federal
and, where applicable, state regulations require submission of annual cost
reports identifying medical costs and expenses associated with the services
provided by each hospital to Medicare beneficiaries and Medicaid recipients.
Since implementation of outpatient PPS in August 2000, due dates of all
Medicare cost reports were extended because of a delay in receiving certain
government reports. Most of the Companys postponed cost reports were filed
during 2002. During the three months ended March 31, 2003, the Company filed
its remaining seven cost reports, which completes the backlog of cost reports
that had been postponed.

Net adjustments to estimated third-party payor settlements resulted in an
increase to the Companys revenues of $2.9 million for the three months ended
March 31, 2003. The Company had net adjustments to estimated third
party payor settlements that decreased revenues by $31,000 during the three months ended March 31, 2002. The
adjustments had a favorable diluted earnings per share effect of $0.04 for the
three months ended March 31, 2003.

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 healthcare laws
and regulations, such as billing and reimbursement, fraud and abuse and similar
anti-referral laws. Although the Company institutes policies designed 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 6  SUBSEQUENT EVENT

On April 28,
2003, the Company announced that its Board of Directors authorized the repurchase of up
to $100 million of its outstanding shares of common stock either in the
open market or through privately negotiated transactions, subject to market
conditions, regulatory constraints and other factors. The Company, which
had approximately 39.6 million shares of common stock outstanding as of
March 31, 2003, is not obligated to repurchase any specific number of
shares under the program. The Company expects its purchases to be
funded with a portion of the Companys available cash and funds available
under the Companys amended and restated credit facility. The Company
intends to seek approvals under the credit facility, as necessary.

9



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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 March 31, 2003, we operated 28 general, acute care hospitals and
related health care entities located in non-urban communities in the states of
Alabama, Florida, Kansas, Kentucky, Louisiana, Tennessee, Utah, West Virginia
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, results of operations and cash flows. These
factors include, but are not limited to:



| |  | reduction in payments to healthcare providers by government and
commercial third party payors, as well as cost-containment efforts of
insurers and other payors;                                
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | failure to comply, or allegations of lack of compliance with, applicable laws and regulations;                                                                                                  
| 
| |  | the possibility of adverse changes in federal, state or local regulations affecting the healthcare industry;                                                                                    
| 
| |  | our ability to manage healthcare risks resulting from the delivery of
patient care, claims and legal actions relating to professional
liabilities and the lack of state and federal tort reform;
| 
| |  | uncertainty associated with compliance with the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) regulations;                                                              
| 
| |  | the ability to enter into and renew payor arrangements on acceptable
terms;                                                                                                                     
| 
| |  | the ability to maintain and increase patient volumes and control the
costs of providing services and supply costs;                                                                              
| 
| |  | the availability, cost and terms of insurance coverage for us, our
hospitals and physicians who practice at our hospitals;                                                                      
| 
| |  | the highly competitive nature of the healthcare business, including
competition to recruit and retain general and specialized physicians;                                                       
| 
| |  | the ability to attract and retain qualified management and personnel,
including physicians, nurses and clinical support personnel, consistent
with our expectations and targets;                
| 
| |  | the geographic concentration of our operations;                                                                                                                                                 
| 
| |  | our ability to acquire hospitals on favorable terms and to complete
budgeted capital improvements of our existing facilities successfully;                                                      
| 
| |  | our ability to integrate newly acquired facilities successfully;                                                                                                                                

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| |  | the availability and terms of capital to fund our business strategy;                                                                                                                                                                                                                                                                                                                                                                             
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the potential adverse impact of government investigations and
litigation involving the business practices of HCA (to the extent
relating to periods prior to our formation) and of other healthcare
providers (to the extent such investigations and litigation may affect
us or our industry segment);                                                                                                                                          
| 
| |  | the financial viability of third-party payors;                                                                                                                                                                                                                                                                                                                                                                                                   
| 
| |  | 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, and amended in April 2002, and those that,
if violated, could cause any of our facilities to lose its state license
or its ability to receive payments under the Medicare, Medicaid and
TRICARE programs;
| 
| |  | successful development or license of software and management
information systems used for effective claims processing;                                                                                                                                                                                                                                                                                                                           
| 
| |  | changes in accounting practices as required under generally accepted
accounting principles in the United States;                                                                                                                                                                                                                                                                                                                                 
| 
| |  | volatility in the market value of our common stock and resulting
costs to us to administer our Employee Stock Ownership Plan (ESOP);                                                                                                                                                                                                                                                                                                           
| 
| |  | changes in general economic conditions in the markets where our
facilities are located and changes in the manner in which employers
provide healthcare coverage to their employees;                                                                                                                                                                                                                                                              
| 
| |  | inflationary pressures;                                                                                                                                                                                                                                                                                                                                                                                                                          
| 
| |  | changes in our liquidity or indebtedness; and                                                                                                                                                                                                                                                                                                                                                                                                    
| 
| |  | other risk 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 rely
unduly on such forward-looking statements when evaluating the information
presented in this report.

Results of Operations

The key metrics we use internally to evaluate our revenues are equivalent
admissions, which equates to volume, and revenues per equivalent admissions,
which relates to pricing and acuity. The growth in outpatient revenues lowers
our growth in revenues per equivalent admissions, as revenues from outpatient
services are generally lower than inpatient revenues. We continue to receive
pressures from payors for a shift to more outpatient procedures.

Revenue/Volume Trends

We anticipate that
our patient volumes and related revenues will 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 March 31, 2003, we recruited 380 physicians, of which 272 have
been retained by us. Adding new physicians should help increase both
inpatient and outpatient volumes which, in turn, should increase
revenues. Approximately 60% of our retained physicians are specialists.
Continuing to
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | add specialists should also allow us to grow by offering new services. In
addition, increases in capital expenditures in our hospitals should
increase local market share and help persuade patients to obtain healthcare
services within their communities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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.                           

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



| |  |  | Discounted payments from Medicare, Medicaid and managed care plans.
We derive a significant portion of our business from Medicare, Medicaid
and managed care plans. Admissions related to Medicare, Medicaid and
managed care plan patients were 92.0% and 92.3% of total admissions for
the three months ended March 31, 2003 and 2002, respectively. These
payors receive significant discounts.                                                                                                                                                                                                                                                                                                                                            
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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 predetermined
payment amounts regardless of the cost incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Growth in Outpatient Services. We anticipate that the growth trend in
outpatient services will 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 those for
similar procedures performed in an inpatient setting. Net outpatient
revenues as a percentage of total revenues increased from 47.7% in the
three months ended March 31, 2002 to 50.2% in the three months ended
March 31, 2003.

Cost Containment

We seek to control costs by, among other things, reducing labor costs by
improving labor productivity and attempting to decrease the use of contract
labor, when appropriate, controlling supply expenses through the use of a group
purchasing organization and reducing uncollectible revenues. We have
implemented cost control initiatives including adjusting staffing levels
according to patient volumes, modifying supply purchases according to usage
patterns and providing training to hospital staff in more efficient billing and
collection processes. We believe that as our company grows, we will likely
benefit from our ability to spread fixed administrative costs over a larger
base of operations.

There is no assurance that we can contain certain costs in the future. As
a result of the general shortage of nurses and medical technicians in the
healthcare industry, we may experience an increase in salaries and benefits
expense as we may be forced to hire additional contract health professionals or
increase salaries to attract and retain our clinical employees.

In addition, the healthcare industry has recently experienced an increase
in the cost of all insurance lines, especially professional and general
liability insurance. We currently have no information that would lead us to
believe that this trend is only temporary in nature. Accordingly, there is no
assurance that these costs will not have a material adverse effect on our
future operating results.

Pressure on payment levels, the increase in outpatient services and the
large number of our patients who participate in managed care plans will present
ongoing challenges for us. These challenges are intensified 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.

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Impact of Acquisitions

Because of the relatively small number of hospitals we own, each hospital
acquisition can materially affect our overall operating margin. We typically
take a number of steps to lower operating costs when we acquire a hospital. The
impact of our actions may be offset by other cost increases to expand services,
strengthen medical staff and attract additional patients to our facilities. The
benefits of our investments and of other activities to improve operating
margins generally do not occur immediately. Consequently, the financial
performance of a newly acquired hospital may adversely affect our overall
operating margins in the short term. As we acquire additional hospitals, this
effect may be mitigated by the expanded financial base of our existing
hospitals and the allocation of corporate overhead among a larger number of
hospitals.

13



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##### Table of Contents



Operating Results Summary

The following is a summary of results of operations for the three months
ended March 31, 2003 and 2002 (dollars in millions, except for revenues per
equivalent admission):

|                                                     |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|---------------------------------------------------- |  | ---------------------------- | ----- | -------- |  | ------ | ----- | -------- |  | - | ----- | ---- |  |  | ----- | -
|                                                     |  | Three Months Ended March 31,
|                                                     |  |                             
|                                                     |  | 2003                         |       | 2002     |  |        |       |         
|                                                     |  |                              |       |          |  |        |       |         
|                                                     |  |                              |       |          |  | % of   |       |          |  |   |       | % of
|                                                     |  | Amount                       |       | Revenues |  | Amount |       | Revenues
|                                                     |  |                              |       |          |  |        |       |         
|Revenues                                             |  | $                            | 220.9 |          |  |        | 100.0 | %        |  | $ | 181.6 |      |  |  | 100.0 | %
|Salaries and benefits (a)                            |  |                              | 90.3  |          |  |        | 40.9  |          |  |   | 70.7  |      |  |  | 39.0  |  
|Supplies (b)                                         |  |                              | 28.5  |          |  |        | 12.9  |          |  |   | 22.9  |      |  |  | 12.6  |  
|Other operating expenses (c)                         |  |                              | 38.6  |          |  |        | 17.5  |          |  |   | 32.2  |      |  |  | 17.7  |  
|Provision for doubtful accounts                      |  |                              | 17.5  |          |  |        | 7.9   |          |  |   | 13.2  |      |  |  | 7.3   |  
|Depreciation and amortization                        |  |                              | 11.2  |          |  |        | 5.1   |          |  |   | 9.4   |      |  |  | 5.2   |  
|Interest expense, net                                |  |                              | 3.3   |          |  |        | 1.5   |          |  |   | 4.1   |      |  |  | 2.2   |  
|Debt retirement costs                                |  |                              |      |          |  |        |      |          |  |   | 1.3   |      |  |  | 0.7   |  
|ESOP expense                                         |  |                              | 1.6   |          |  |        | 0.7   |          |  |   | 2.5   |      |  |  | 1.4   |  
|                                                     |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                     |  |                              | 191.0 |          |  |        | 86.5  |          |  |   | 156.3 |      |  |  | 86.1  |  
|                                                     |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before minority interest and income taxes     |  |                              | 29.9  |          |  |        | 13.5  |          |  |   | 25.3  |      |  |  | 13.9  |  
|Minority interest in earnings of consolidated entity |  |                              |      |          |  |        |      |          |  |   | 0.7   |      |  |  | 0.4   |  
|                                                     |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before income taxes                           |  |                              | 29.9  |          |  |        | 13.5  |          |  |   | 24.6  |      |  |  | 13.5  |  
|Provision for income taxes                           |  |                              | 12.2  |          |  |        | 5.5   |          |  |   | 10.9  |      |  |  | 6.0   |  
|                                                     |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Net income                                           |  | $                            | 17.7  |          |  |        | 8.0   | %        |  | $ | 13.7  |      |  |  | 7.5   | %
|                                                     |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  

|                                                        |  |                              |        |        |  |                 |        |   |  |  |      |  
|------------------------------------------------------- |  | ---------------------------- | ------ | ------ |  | --------------- | ------ | - |  |  | ---- | -
|                                                        |  | Three Months Ended March 31,
|                                                        |  |                             
|                                                        |  | 2003                         |        | 2002   |  | % Changes      
|                                                        |  | Amount                       |        | Amount |  | From Prior Year
|                                                        |  |                              |        |        |  |                
|Consolidated:                                           |  |                              |        |        |  |                 |        |   |  |  |      |  
|Revenues                                                |  | $                            | 220.9  |        |  | $               | 181.6  |   |  |  | 21.6 | %
|Number of hospitals at end of period                    |  |                              | 28     |        |  |                 | 23     |   |  |  | 21.7 |  
|Admissions(d)                                           |  |                              | 23,477 |        |  |                 | 20,551 |   |  |  | 14.2 |  
|Equivalent admissions(e)                                |  |                              | 44,912 |        |  |                 | 37,588 |   |  |  | 19.5 |  
|Revenues per equivalent admission                       |  | $                            | 4,919  |        |  | $               | 4,832  |   |  |  | 1.8  |  
|Outpatient factor (e)                                   |  |                              | 1.91   |        |  |                 | 1.83   |   |  |  | 4.5  |  
|Emergency room visits (f)                               |  |                              | 99,738 |        |  |                 | 84,987 |   |  |  | 17.4 |  
|Inpatient surgeries                                     |  |                              | 6,663  |        |  |                 | 5,652  |   |  |  | 17.9 |  
|Outpatient surgeries (g)                                |  |                              | 18,859 |        |  |                 | 16,166 |   |  |  | 16.7 |  
|Total surgeries                                         |  |                              | 25,522 |        |  |                 | 21,818 |   |  |  | 17.0 |  
|Licensed beds at end of period                          |  |                              | 2,624  |        |  |                 | 2,197  |   |  |  | 19.4 |  
|Weighted average licensed beds                          |  |                              | 2,619  |        |  |                 | 2,197  |   |  |  | 19.2 |  
|Average daily census                                    |  |                              | 1,055  |        |  |                 | 935    |   |  |  | 12.8 |  
|Average length of stay (days)                           |  |                              | 4.0    |        |  |                 | 4.1    |   |  |  | (2.4 | )
|Net outpatient revenues as a percentage of net
revenues |  |                              | 50.2   | %      |  |                 | 47.7   | % |  |  | N/A  |  
|Same Hospital (h):                                      |  |                              |        |        |  |                 |        |   |  |  |      |  
|Revenues                                                |  | $                            | 186.2  |        |  | $               | 181.6  |   |  |  | 2.5  | %
|Number of hospitals at end of period                    |  |                              | 23     |        |  |                 | 23     |   |  |  |     |  
|Admissions (d)                                          |  |                              | 19,489 |        |  |                 | 20,551 |   |  |  | (5.2 | )
|Equivalent admissions (e)                               |  |                              | 36,951 |        |  |                 | 37,588 |   |  |  | (1.7 | )
|Revenues per equivalent admission                       |  | $                            | 5,039  |        |  | $               | 4,832  |   |  |  | 4.3  |  
|Outpatient factor (e)                                   |  |                              | 1.90   |        |  |                 | 1.83   |   |  |  | 3.6  |  
|Emergency room visits (f)                               |  |                              | 84,492 |        |  |                 | 84,987 |   |  |  | (0.6 | )
|Inpatient surgeries                                     |  |                              | 5,659  |        |  |                 | 5,652  |   |  |  | 0.1  |  
|Outpatient surgeries (g)                                |  |                              | 15,910 |        |  |                 | 16,166 |   |  |  | (1.6 | )
|Total surgeries                                         |  |                              | 21,569 |        |  |                 | 21,818 |   |  |  | (1.1 | )
|Licensed beds at end of period                          |  |                              | 2,203  |        |  |                 | 2,197  |   |  |  | 0.3  |  
|Weighted average licensed beds                          |  |                              | 2,198  |        |  |                 | 2,197  |   |  |  |     |  
|Average daily census                                    |  |                              | 890    |        |  |                 | 935    |   |  |  | (4.8 | )
|Average length of stay (days)                           |  |                              | 4.1    |        |  |                 | 4.1    |   |  |  |     |  
|Net outpatient revenues as a percentage of net
revenues |  |                              | 49.8   | %      |  |                 | 47.7   | % |  |  | N/A  |  

14



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---

|(a) |  | Represents our cost of salaries and benefits, including employee health
benefits and workers compensation insurance, for all hospital and
corporate employees and contract labor.                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Includes our hospitals costs for pharmaceuticals, blood, surgical
instruments and all general supply items, including the cost of freight.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(c) |  | Consists primarily of contract services, physician recruitment,
professional fees, repairs and maintenance, rents and leases, utilities,
insurance, marketing and non-income taxes.                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(d) |  | 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.                                                                                                                                                                                                                                                                                                                                                                           
|   
|(e) |  | 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 outpatient
factor (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.
|   
|(f) |  | Represents the total number of hospital-based emergency room visits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(g) |  | Outpatient surgeries are those surgeries that do not require admission to
our hospitals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(h) |  | Same hospital information excludes the operations of hospitals which we
either acquired or divested during the periods presented. The costs of
corporate overhead are included in same hospital information.                                                                                                                                                                                                                                                                                                                                                                       

The following table presents EBITDA for the periods presented (dollars in
millions):

|                                |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|------------------------------- |  | ---------------------------- | ----- | -------- |  | ------ | ----- | -------- |  | - | ----- | ---- |  |  | ----- | -
|                                |  | Three Months Ended March 31,
|                                |  |                             
|                                |  | 2003                         |       | 2002    
|                                |  |                              |       |         
|                                |  |                              |       |          |  | % of   |       |          |  |   |       | % of
|                                |  | Amount                       |       | Revenues |  | Amount |       | Revenues
|                                |  |                              |       |          |  |        |       |         
|Revenues                        |  | $                            | 220.9 |          |  |        | 100.0 | %        |  | $ | 181.6 |      |  |  | 100.0 | %
|Salaries and benefits           |  |                              | 90.3  |          |  |        | 40.9  |          |  |   | 70.7  |      |  |  | 39.0  |  
|Supplies                        |  |                              | 28.5  |          |  |        | 12.9  |          |  |   | 22.9  |      |  |  | 12.6  |  
|Other operating expenses        |  |                              | 38.6  |          |  |        | 17.5  |          |  |   | 32.2  |      |  |  | 17.7  |  
|Provision for doubtful accounts |  |                              | 17.5  |          |  |        | 7.9   |          |  |   | 13.2  |      |  |  | 7.3   |  
|                                |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                |  |                              | 174.9 |          |  |        | 79.2  |          |  |   | 139.0 |      |  |  | 76.6  |  
|                                |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|EBITDA(a)                       |  | $                            | 46.0  |          |  |        | 20.8  | %        |  | $ | 42.6  |      |  |  | 23.4  | %
|                                |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  



---

|(a) |  | EBITDA is defined as income before depreciation and amortization, interest expense, debt retirement
costs, ESOP expense, minority interest in earnings of consolidated entity and income taxes. Our
management uses EBITDA to evaluate our operating performance and as a measure of performance for
incentive compensation purposes. We believe EBITDA is a measure of performance used by some
investors, equity analysts and others to make informed investment decisions. In addition, multiples
of current or projected EBITDA are used to estimate current or prospective enterprise value. EBITDA
should not be considered as a measure of financial performance under accounting principles generally
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents



| |  | 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 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.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table reconciles EBITDA, as presented above, to
net income
as reflected in our condensed consolidated statements of income and in accordance with
generally accepted accounting principles (in millions):

|                                                     |  |                    |       |      |  |   |       |  
|---------------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ----- | -
|                                                     |  | Three Months Ended
|                                                     |  | March 31,         
|                                                     |  |                   
|                                                     |  | 2003               |       | 2002
|                                                     |  |                    |       |     
|EBITDA                                               |  | $                  | 46.0  |      |  | $ | 42.6  |  
|Depreciation and amortization                        |  |                    | (11.2 | )    |  |   | (9.4  | )
|Interest expense, net                                |  |                    | (3.3  | )    |  |   | (4.1  | )
|Debt retirement costs                                |  |                    |      |      |  |   | (1.3  | )
|ESOP expense                                         |  |                    | (1.6  | )    |  |   | (2.5  | )
|Minority interest in earnings of consolidated entity |  |                    |      |      |  |   | (0.7  | )
|Provision for income taxes                           |  |                    | (12.2 | )    |  |   | (10.9 | )
|                                                     |  |                    |       |      |  |   |       |  
|Net income                                           |  | $                  | 17.7  |      |  | $ | 13.7  |  
|                                                     |  |                    |       |      |  |   |       |  

For the Three Months Ended March 31, 2003 and 2002

Revenues increased 21.6% to $220.9 million for the three months ended
March 31, 2003 compared to $181.6 million for the three months ended March 31,
2002. Of this increase, $34.7 million or 19.1% was from the acquisitions during
the fourth quarter of 2002, $2.9 million or 1.6% was from net adjustments to
estimated third-party payor settlements (prior year contractuals), and $1.7
million or 0.9% was from same-hospital revenues (net of the prior year
contractuals). Prior year contractuals resulted in an increase to net revenues
of $2.9 million for the three months ended March 31, 2003 compared to a
decrease to net revenues of $31,000 for the three months ended March 31,
2002.

On a same-hospital basis, excluding the prior year contractuals,
equivalent admissions decreased 1.7%, while net revenues per equivalent
admissions increased 2.7% for the three months ended March 31, 2003 compared to
the three months ended March 31, 2002. Outpatient revenues, on a same-hospital
basis excluding prior year contractuals, grew 4.4% from $86.7 million to $90.6
million, and inpatient revenues, on a same-hospital basis excluding prior year
contractuals decreased 1.6% from $91.8 million to $90.3 million over the same
period in 2002. On a same-hospital basis, inpatient admissions decreased 5.2%,
total surgeries decreased 1.1%, inpatient surgeries grew 0.1%, outpatient
surgeries decreased 1.6%, and emergency room visits decreased 0.6% for the
three months ended March 31, 2003 compared to the three months ended March 31,
2002. The decreases in admissions and outpatient surgeries were primarily the
result of severe weather conditions and lower incidence of respiratory influenza
in the three months ended
March 31, 2003 as compared to the same period in 2002.

Our breakdown of consolidated revenues for the three months ended March
31, 2003, excluding prior year contractuals, was 35.7% Medicare, 15.0%
Medicaid, 37.1% discounted and commercial and 12.2% other. This measure
compares to the same period in 2002 of 35.4% Medicare, 16.1% Medicaid, 38.4%
discounted and commercial and 10.1% other.

Our breakdown of revenues for the three months ended March 31, 2003, on a
same-hospital basis, excluding prior year contractuals, was 35.8% Medicare,
16.0% Medicaid, 38.0% discounted and commercial and 10.2% other. This measure
compares to the same period in 2002 of 35.4% Medicare, 16.1% Medicaid, 38.4%
discounted and commercial and 10.1% other.

Salaries and benefits increased as a percentage of revenues to 40.9% for
the three months ended March 31, 2003

16



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from 39.0% for the three months ended March 31, 2002. Excluding the effect of
the prior year contractuals, salaries and benefits increased as a percentage of
revenues to 41.4% for the three months ended March 31, 2003 from 39.0% over the
same period in 2002, primarily as a result of the hospitals acquired during the
fourth quarter of 2002 which had higher salaries and benefits as a percentage
of revenues than our average. Salaries and benefits as a percentage of revenues
for the hospitals acquired in 2002 was approximately 49.0%. Salaries and
benefits on a same-hospital basis, excluding the effect of the prior year
contractuals, increased as a percentage of revenues to 40.0% for the three
months ended March 31, 2003 as compared to 38.9% for the same period in 2002.
In addition, on a same-hospital basis, salaries and benefits per man-hour
increased 3.7% and man-hours per equivalent admission increased 1.7% for these
periods. On a same-hospital basis, our salaries and benefits per equivalent
admission grew 5.4% for the three months ended March 31, 2003 as compared to
the same period in 2002. This growth is split roughly between an increase in rate,
contract labor and benefits of 3.7% and an increase in man-hours per equivalent
admission of 1.7%. Of this 3.7% increase, 0.9% relates to contract labor and
2.8% relates to rate.

Supply costs as a percentage of revenues increased to 12.9% for the three
months ended March 31, 2003 from 12.6% for the three months ended March 31,
2002. Excluding the effect of the prior year contractuals, supply costs as a
percentage of revenues increased to 13.1% for the three months ended March 31,
2003 compared to 12.6% for the same period in 2002. Outfitting the hospitals
acquired in 2002 contributed to this increase, as supplies expense as a
percentage of revenues for the hospitals acquired in 2002 was approximately
14.7%. Excluding the prior year contractuals, supply costs, on a same-hospital
basis, increased as a percentage of revenues to 12.8% for the three months
ended March 31, 2003 from 12.6% over the same period in 2002.

Other operating expenses decreased as a percentage of revenues to 17.5%
for the three months ended March 31, 2003 from 17.7% for the three months ended
March 31, 2002. Other operating expenses as a percentage of revenues for the
hospitals acquired in 2002 was approximately 17.5%. Excluding the effect of the
prior year contractuals, other operating expenses, on a same-hospital basis,
was unchanged as a percentage of revenues of 17.7% for the three months ended
March 31, 2003 and 2002. Other operating expenses are largely a fixed expense
and we expect these expenses to decrease as a percentage of revenues as we
acquire more hospitals.

Provision for doubtful accounts increased as a percentage of revenues to
7.9% for the three months ended March 31, 2003 from 7.3% for the three months
ended March 31, 2002. Excluding the effect of the prior year contractuals, the
provision for doubtful accounts increased as a percentage of revenues to 8.0%
for the three months ended March 31, 2003 from 7.3% over the same period in
2002, primarily as a result of the hospitals acquired in 2002 which have a
higher provision for doubtful accounts as a percentage of revenues than our
average. Provision for doubtful accounts as a percentage of revenues for the
hospitals acquired in 2002 was 12.5%. On a same-hospital basis, the provision
for doubtful accounts decreased as a percentage of revenues to 7.1% for the
three months ended March 31, 2003 from 7.3% over the same period in 2002.
Excluding the prior year contractuals, the provision for doubtful accounts, on
a same-hospital basis, decreased as a percentage of revenues to 7.2% for the
three months ended March 31, 2003 from 7.3% over the same period in 2002.

EBITDA increased 8.2% to $46.0 million for the three months ended March
31, 2003 compared to $42.6 million for the three months ended March 31, 2002.
Of this increase, $2.9 million was from prior year contractuals and $2.2
million was EBITDA from the hospitals acquired in 2002. These increases were
partially offset by a decrease in same-hospital EBITDA of $1.7 million,
excluding the effect of the prior year contractuals.

Depreciation and amortization expense increased to $11.2 million for the
three months ended March 31, 2003 from $9.4 million for the three months ended
March 31, 2002, primarily as a result of the hospitals acquired in 2002 and our
increase in capital expenditures during the past 12 months. Depreciation expense
associated with the hospitals acquired in 2002 was $1.6 million for the three
months ended March 31, 2003. Same-hospital depreciation expense was unchanged
for the three months ended March 31, 2003 over the same period last year.

Net interest expense decreased to $3.3 million for the three months ended
March 31, 2003 from $4.1 million for the three months ended March 31, 2002
because of lower interest expense on our $250 million 4 1/2% Convertible
Subordinated Notes due 2009 as compared to the interest expense on our $150
million 10 3/4% Senior Subordinated Notes, which were repurchased during 2002.
During the three months ended March 31, 2002, we repurchased $7.5 million of
our $150.0 million 10 3/4% Senior Subordinated Notes due 2009. In connection
with these repurchases, we incurred debt retirement costs of $1.3 million in
the three months ended March 31, 2002.

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ESOP expense decreased to $1.6 million for the three months ended March
31, 2003 from $2.5 million for the three months ended March 31, 2002. This
decrease was a result of a lower average fair market value of our common stock
during the three months ended March 31, 2003 compared to the same period in
2002. We recognize ESOP expense based on the average fair market value of the
shares committed to be released during the period.

Minority interest in earnings of consolidated entity was zero for the
three months ended March 31, 2003 compared to $0.7 million for the three months
ended March 31, 2002. We purchased the 30% limited partnership interest in
Dodge City Healthcare Group, L.P., the entity that owns and operates the
110-bed Western Plains Regional Hospital and affiliated surgery center in Dodge
City, Kansas, for $25 million in October 2002. Minority interest in earnings of
consolidated entity related solely to this entity.

The provision for income taxes increased to $12.2 million for the three
months ended March 31, 2003 compared to $10.9 million for the three months
ended March 31, 2002. These income tax provisions reflect effective income tax
rates of 40.9% for the three months ended March 31, 2003 compared to 44.3% for
the three months ended March 31, 2002. The effective tax rate decreased
primarily as a result of the decline in the permanent differences between book
and taxable income as a percentage of pre-tax income.

Liquidity and Capital Resources

Cash flows-Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

Our cash and cash equivalents increased to $40.3 million at March 31, 2003
from $23.0 million at December 31, 2002. The increase is primarily from the
$34.2 million provided by operating activities and $0.5 million provided by
financing activities offset in part by $17.4 million used in investing
activities.

Our working capital increased to $86.6 million at March 31, 2003 compared
to $67.9 million at December 31, 2002, primarily as a result of an increase in
cash and cash equivalents of $17.3 million and an increase in accounts
receivable of $12.8 million and partially offset by an increase in other
current liabilities of $18.4 million. Our cash provided by operating
activities remained unchanged at $34.2 million in the three months ended March
31, 2003 and 2002.

Our net revenue days in accounts receivable at March 31, 2003, exclusive
of the hospitals acquired in 2002, were 37.4 days compared to 38.4 days at
March 31, 2002. At March 31, 2002, we had approximately
$8.0 million of non-cash prior year contractuals in the balance
sheet which is equivalent to approximately 4 net revenue days.

Our cash used in investing activities increased to $17.4 million in the
three months ended March 31, 2003 from $10.1 million the same period last year,
resulting primarily from an increase in our capital expenditures. Capital
expenditures increased to $17.2 million during the three months ended March 31,
2003 compared to $10.0 million during the same period last year. Our routine
capital expenditures were $4.4 million for the three months ended March 31,
2003 compared to $4.9 million in the three months ended March 31, 2002. We have
some large projects in process at a number of our facilities. We are
reconfiguring some of our hospitals to accommodate more effectively inpatient
and outpatient services and restructuring existing surgical capacity in some of
our hospitals to permit additional patient volume and a greater variety of
services. At March 31, 2003, we had projects under construction with an
estimated additional cost to complete and equip of approximately $48.3 million.
We anticipate that these projects will be completed over the next three years.
We anticipate that our total capital expenditures in 2003 will range from $75
million to $85 million, excluding acquisitions. We anticipate funding these
expenditures through cash provided by operating activities, available cash and
borrowings under our revolving credit facility.

Our cash provided by financing activities was $0.5 million during the
three months ended March 31, 2003 compared to cash used in financing
activities of $7.5 million during the three months ended March 31, 2002. We
repurchased $7.5 million (excluding $1.1 million in premiums, commissions and
fees) of our 10 3/4% Senior Subordinated Notes during the three months ended
March 31, 2002.

18



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Capital
Resources

We are in compliance with all covenants or other requirements set forth in
our debt agreements. Further, these agreements do not contain provisions that
would accelerate the maturity dates of our debt upon a downgrade in our credit
rating. However, a downgrade in our credit rating could adversely affect our
ability to renew existing credit facilities or obtain access to new credit
facilities in the future and could increase the cost of such facilities. We do
not have any relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance, special
purpose or variable interest entities, established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. Accordingly, we are not materially exposed to any financing,
liquidity, market or credit risk that could arise if we had engaged in such
relationships.

We do 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. Our management anticipates
that operations and amounts available under our revolving credit facility will
provide sufficient liquidity for the next twelve months. As of March 31, 2003,
we had letters of credit in the aggregate amount of $23.8 million outstanding, which
reduced the amount available under our revolving credit facility to $176.2
million.

Our business strategy contemplates the acquisition of additional
hospitals, and we continuously review potential acquisitions. These
acquisitions may, however, require additional financing. We continually
evaluate opportunities to sell additional equity or debt securities, obtain
credit facilities from lenders, or restructure our long-term debt or equity for
strategic reasons or to further strengthen our financial position. The sale of
additional equity or convertible debt securities could result in additional
dilution to our stockholders.

We have never declared or paid dividends on our common stock. We intend to
retain future earnings to finance the growth and development of our business
and, accordingly, do not currently intend to declare or pay any dividends on
our common stock. Our board of directors will evaluate our future earnings,
results of operations, financial condition and capital requirements in
determining whether to declare or pay cash dividends. Delaware law prohibits us
from paying any dividends unless we have capital surplus or net profits
available for this purpose. In addition, our credit facilities impose
restrictions on our ability to pay dividends.

On April 28, 2003, we
announced that our Board of Directors authorized the repurchase of up to $100
million of our outstanding shares of common stock either in the open market or
through privately negotiated transactions, subject to market conditions,
regulatory constraints and other factors. We had approximately 39.6 million
shares of common stock outstanding as of March 31, 2003 and are not obligated
to repurchase any specific number of shares under the program. We
expect that our purchases will be funded with a portion of our available cash and
funds available under our amended and restated credit facility. We intend to
seek approvals under the credit facility, as necessary.

Impact of Recently Issued Accounting Pronouncements

Please refer to Note 3 of our condensed consolidated financial statements
included elsewhere herein for a discussion of the impact of recently issued
accounting pronouncements.

Contingencies

Please refer to Note 5 of our condensed consolidated financial statements
included elsewhere herein for a discussion of our material financial
contingencies, including:



| |  |  | HCA investigations, litigation and indemnification rights;
| | - |  | ----------------------------------------------------------
|
| |  |  | An Americans with Disabilities Act claim;                 
|
| |  |  | Our Corporate Integrity Agreement;                        
|
| |  |  | General liability claims;                                 
|
| |  |  | Physician commitments;                                    
|
| |  |  | Capital expenditure commitments;                          
|
| |  |  | Prior period cost report settlements; and                 
|
| |  |  | Acquisitions.                                             

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Inflation

The healthcare 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, as discussed above.
In the event we experience inflationary pressures, results of operations may be
materially affected.

Healthcare 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 healthcare 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 three months ended March 31, 2003, 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,
2002.

Item 4. Controls and Procedures.

Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information relating to our company (including its consolidated
subsidiaries) required to be included in our periodic SEC filings. There have
been no significant changes in our internal controls or in other factors that
could significantly affect internal controls subsequent to the date of our most
recent evaluation.

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PART II-OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.

(a)  List of Exhibits:

|               |  |                                                                                                                                                                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                   
|2.1            |  | Distribution Agreement dated May 11, 1999 by and among Columbia/HCA, Triad Hospitals,
Inc. and LifePoint Hospitals, Inc. (a)                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                   
|3.1            |  | Certificate of Incorporation (a)                                                                                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                   
|3.2            |  | Bylaws (a)                                                                                                                                                                                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                   
|4.1            |  | Form of Specimen Stock Certificate (b)                                                                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                   
|4.2            |  | Rights Agreement dated as of May 11, 1999 between LifePoint Hospitals, Inc. and
National City Bank as Rights Agent (a)                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                   
|4.3            |  | Indenture, dated as of May 22, 2002, between LifePoint Hospitals, Inc. and National
City Bank, as trustee, relating to the 4 1/2% Convertible Subordinated Notes due 2009
(c)                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                   
|4.4            |  | Registration Rights Agreement, dated as of May 22, 2002, among LifePoint Hospitals,
Inc., UBS Warburg LLC, Credit Suisse First Boston Corporation, Deutsche Bank
Securities, Inc., Lehman Brothers Inc., Salomon Smith Barney Inc., Banc of America
Securities LLC, and Fleet Securities, Inc. (c)
|               |  |                                                                                                                                                                                                                                                                                                   
|4.5            |  | Form of 4 1/2% Convertible Subordinated Note due 2009 of LifePoint Hospitals, Inc. (c)                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                   
|99.1           |  | Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to
Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002                                                                        
|               |  |                                                                                                                                                                                                                                                                                                   
|99.2           |  | Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to
Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002                                                                        
|               |  |                                                                                                                                                                                                                                                                                                   
|99.3           |  | Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002(d)                                                                                                             
|               |  |                                                                                                                                                                                                                                                                                                   
|99.4           |  | Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002(d)                                                                                                             



---

|(a) |  | Incorporated by reference from the LifePoint Hospitals, Inc. Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999, File Number
0-29818.                                                                                                                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Incorporated by reference from exhibits to LifePoint Hospitals
Registration Statement on Form 10 under the Securities Exchange Act of
1934, as amended, File Number 0-29818.                                                                                                                                                                                                   
|   
|(c) |  | Incorporated by reference from the exhibits to LifePoint Hospitals
Registration Statement on Form S-3 under the Securities Act of 1933, as
amended, File Number 333-90536.                                                                                                                                                                                                     
|   
|(d) |  | This certification shall not
be deemed filed for purposes of Section 18 of the
Exchange Act, or otherwise subject to liability pursuant to that
section. Such certification shall not be deemed to be incorporated by
reference into any filing under the Securities Act or the Exchange
Act, except to the extent that the Company specifically incorporates
it by reference.

21



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##### Table of Contents



(b)  Reports on Form 8-K filed during the three months ended March 31,
2003:

On February 20, 2003, we furnished pursuant to Item 9 of Form 8-K a copy
of our press release issued on February 18, 2003, containing our 2002 fourth
quarter and year-end earnings results.

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.

|                     |  |  |                           |                                                                                                                                         
|-------------------- |  |  | ------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------
|Date: April 30, 2003 |  |  | LifePoint Hospitals, Inc.
|                    
|                     |  |  |                           |                                                                                                                                         
|                    
|                     |  |  | By:                       | /s/  Michael J. CulottaMichael J. Culotta
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)




CERTIFICATIONS

I, Kenneth C. Donahey, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of LifePoint
Hospitals, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: April 30, 2003

| |  |                                                                                        
| |  | ---------------------------------------------------------------------------------------
| | 
|
| |  |                                                                                        
|
| |  | /s/Kenneth C. DonaheyKenneth C. Donahey
Chairman, Chief Executive Officer
and President

I, Michael J. Culotta, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of LifePoint
Hospitals, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: April 30, 2003

| |  |                                                                                           
| |  | ------------------------------------------------------------------------------------------
| |  |                                                                                           
|
| |  |                                                                                           
|
| |  | /s/ Michael J. CulottaMichael J. Culotta
Senior Vice President and
Chief Financial Officer





---



##### Table of Contents






EXHIBIT INDEX

|               |  |                                                                                                                                                                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NUMBER |  | DESCRIPTION                                                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                   
|2.1            |  | Distribution Agreement dated May 11, 1999 by and among Columbia/HCA, Triad Hospitals,
Inc. and LifePoint Hospitals, Inc. (a)                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                   
|3.1            |  | Certificate of Incorporation (a)                                                                                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                   
|3.2            |  | Bylaws (a)                                                                                                                                                                                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                   
|4.1            |  | Form of Specimen Stock Certificate (b)                                                                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                   
|4.2            |  | Rights Agreement dated as of May 11, 1999 between LifePoint Hospitals, Inc. and
National City Bank as Rights Agent (a)                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                   
|4.3            |  | Indenture, dated as of May 22, 2002, between LifePoint Hospitals, Inc. and National
City Bank, as trustee, relating to the 4 1/2% Convertible Subordinated Notes due 2009
(c)                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                   
|4.4            |  | Registration Rights Agreement, dated as of May 22, 2002, among LifePoint Hospitals,
Inc., UBS Warburg LLC, Credit Suisse First Boston Corporation, Deutsche Bank
Securities, Inc., Lehman Brothers Inc., Salomon Smith Barney Inc., Banc of America
Securities LLC, and Fleet Securities, Inc. (c)
|               |  |                                                                                                                                                                                                                                                                                                   
|4.5            |  | Form of 4 1/2% Convertible Subordinated Note due 2009 of LifePoint Hospitals, Inc. (c)                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                   
|99.1           |  | Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to
Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002                                                                        
|               |  |                                                                                                                                                                                                                                                                                                   
|99.2           |  | Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to
Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002                                                                        
|               |  |                                                                                                                                                                                                                                                                                                   
|99.3           |  | Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002(d)                                                                                                             
|               |  |                                                                                                                                                                                                                                                                                                   
|99.4           |  | Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002(d)                                                                                                             



---

|(a) |  | Incorporated by reference from the LifePoint Hospitals, Inc. Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999, File Number
0-29818.                                                                                                                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Incorporated by reference from exhibits to LifePoint Hospitals
Registration Statement on Form 10 under the Securities Exchange Act of
1934, as amended, File Number 0-29818.                                                                                                                                                                                                   
|   
|(c) |  | Incorporated by reference from the exhibits to LifePoint Hospitals
Registration Statement on Form S-3 under the Securities Act of 1933, as
amended, File Number 333-90536.                                                                                                                                                                                                     
|   
|(d) |  | This certification shall not
be deemed filed for purposes of Section 18 of the
Exchange Act, or otherwise subject to liability pursuant to that
section. Such certification shall not be deemed to be incorporated by
reference into any filing under the Securities Act or the Exchange
Act, except to the extent that the Company specifically incorporates
it by reference.

25