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



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FORM 10-Q



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|                                                   |  |                                                          
|-------------------------------------------------- |  | ---------------------------------------------------------
|[X]                                                |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE 
|SECURITIES EXCHANGE ACT OF 1934                   
|                                                  
|For the quarterly period ended March 31, 2002
 
OR
|                                                   |  |                                                          
|[  ]                                               |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
|SECURITIES EXCHANGE ACT OF 1934                   

For the transition period from ________ to ________

Commission file number 0-29818



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

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

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

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



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

YES [X]   NO [ ]





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TABLE OF CONTENTS



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



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Commission file number 333-84755



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


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

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

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

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

YES [X]    NO [ ]

As of April 30, 2002, the number of outstanding shares of Common Stock of
LifePoint Hospitals, Inc. was 39,404,719 and all of the shares of Common Stock
of LifePoint Hospitals Holdings, Inc. were owned by LifePoint Hospitals, Inc.



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##### Table of Contents






Part I:    Financial Information




Item 1:   Financial Statements

LIFEPOINT HOSPITALS, INC.




CONDENSED CONSOLIDATED STATEMENTS OF INCOME

UNAUDITED
(Dollars in millions, except per share amounts)


|                                                                           |  |                    |        |      |  |   |        |  
|-------------------------------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                                                           |  | THREE MONTHS ENDED
|                                                                           |  | MARCH 31,         
|                                                                           |  |                   
|                                                                           |  | 2002               |        | 2001
|                                                                           |  |                    |        |     
|Revenues                                                                   |  | $                  | 181.6  |      |  | $ | 154.3  |  
|                                                                          
|Salaries and benefits                                                      |  |                    | 70.7   |      |  |   | 60.3   |  
|Supplies                                                                   |  |                    | 22.9   |      |  |   | 19.6   |  
|Other operating expenses                                                   |  |                    | 32.2   |      |  |   | 28.4   |  
|Provision for doubtful accounts                                            |  |                    | 13.2   |      |  |   | 12.0   |  
|Depreciation and amortization                                              |  |                    | 9.4    |      |  |   | 8.1    |  
|Interest expense, net                                                      |  |                    | 4.1    |      |  |   | 6.5    |  
|ESOP expense                                                               |  |                    | 2.5    |      |  |   | 2.6    |  
|Gain on previously impaired assets                                         |  |                    |       |      |  |   | (0.5   | )
|                                                                           |  |                    |        |      |  |   |        |  
|                                                                           |  |                    | 155.0  |      |  |   | 137.0  |  
|                                                                           |  |                    |        |      |  |   |        |  
|Income before minority interests,
income taxes and extraordinary item      |  |                    | 26.6   |      |  |   | 17.3   |  
|Minority interests in earnings of consolidated entity                      |  |                    | 0.7    |      |  |   | 0.6    |  
|                                                                           |  |                    |        |      |  |   |        |  
|Income before income taxes and extraordinary item                          |  |                    | 25.9   |      |  |   | 16.7   |  
|Provision for income taxes                                                 |  |                    | 11.4   |      |  |   | 8.1    |  
|                                                                           |  |                    |        |      |  |   |        |  
|Income before extraordinary item                                           |  |                    | 14.5   |      |  |   | 8.6    |  
|Extraordinary loss on early retirement of debt,
net of tax benefit of $0.5 |  |                    | 0.8    |      |  |   |       |  
|                                                                           |  |                    |        |      |  |   |        |  
|Net income                                                                 |  | $                  | 13.7   |      |  | $ | 8.6    |  
|                                                                           |  |                    |        |      |  |   |        |  
|Basic earnings per share:                                                  |  |                    |        |      |  |   |        |  
|                                                                           |  |                    |        |      |  |   |        |  
|Income before extraordinary item                                           |  | $                  | 0.39   |      |  | $ | 0.26   |  
|Extraordinary loss on early retirement of debt                             |  |                    | (0.02  | )    |  |   |       |  
|                                                                           |  |                    |        |      |  |   |        |  
|Net income                                                                 |  | $                  | 0.37   |      |  | $ | 0.26   |  
|                                                                           |  |                    |        |      |  |   |        |  
|Diluted earnings per share:                                                |  |                    |        |      |  |   |        |  
|                                                                           |  |                    |        |      |  |   |        |  
|Income before extraordinary item                                           |  | $                  | 0.38   |      |  | $ | 0.25   |  
|Extraordinary loss on early retirement of debt                             |  |                    | (0.02  | )    |  |   |       |  
|                                                                           |  |                    |        |      |  |   |        |  
|Net income                                                                 |  | $                  | 0.36   |      |  | $ | 0.25   |  
|                                                                           |  |                    |        |      |  |   |        |  
|Shares
used in earnings per share calculations (000s):                    |  |                    |        |      |  |   |        |  
|                                                                           |  |                    |        |      |  |   |        |  
|Basic                                                                      |  |                    | 37,303 |      |  |   | 32,583 |  
|Dilutive securities-stock options,
restricted shares                       |  |                    | 1,153  |      |  |   | 1,486  |  
|                                                                           |  |                    |        |      |  |   |        |  
|Diluted                                                                    |  |                    | 38,456 |      |  |   | 34,069 |  
|                                                                           |  |                    |        |      |  |   |        |  

See accompanying notes.





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LIFEPOINT HOSPITALS, INC.




CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per
share amounts)


|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  
|--------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | ------ | ------------ | - | ----- | ------ | -
|                                                    |                                                                                                                                                                                   |   | MARCH 31,   |        | DECEMBER 31,
|                                                    |                                                                                                                                                                                   |   | 2002        |        | 2001        
|                                                    |                                                                                                                                                                                   |   |             |        |             
|                                                    |                                                                                                                                                                                   |   | (unaudited) |        | (1)         
|ASSETS                                              |                                                                                                                                                                                   |   |             |        |              |   |       |       
|                                                   
|Current assets:                                     |                                                                                                                                                                                   |   |             |        |              |   |       |       
|                                                    | Cash and cash equivalents                                                                                                                                                         |   | $           | 73.8   |              |   | $     | 57.2   |  
|                                                    | Accounts receivable, less allowances for doubtful accounts of $59.6
at March 31, 2002 and $59.0 at December 31, 2001                                                              |   |             | 77.5   |              |   |       | 56.7   |  
|                                                    | Inventories                                                                                                                                                                       |   |             | 16.6   |              |   |       | 16.3   |  
|                                                    | Deferred income taxes and other current assets                                                                                                                                    |   |             | 13.8   |              |   |       | 18.7   |  
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  
|                                                    |                                                                                                                                                                                   |   | 181.7       |        |              |   | 148.9 |       
|Property and equipment:                             |                                                                                                                                                                                   |   |             |        |              |   |       |       
|                                                    | Land                                                                                                                                                                              |   |             | 10.6   |              |   |       | 10.7   |  
|                                                    | Buildings and improvements                                                                                                                                                        |   |             | 261.9  |              |   |       | 262.0  |  
|                                                    | Equipment                                                                                                                                                                         |   |             | 271.0  |              |   |       | 263.4  |  
|                                                    | Construction in progress (estimated cost to complete and equip
after March 31, 2002 - $47.1)                                                                                      |   |             | 8.4    |              |   |       | 7.2    |  
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  
|                                                    |                                                                                                                                                                                   |   | 551.9       |        |              |   | 543.3 |       
|                                                    | Accumulated depreciation                                                                                                                                                          |   |             | (213.7 | )            |   |       | (204.9 | )
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  
|                                                    |                                                                                                                                                                                   |   | 338.2       |        |              |   | 338.4 |       
|                                                   
|Deferred loan costs, net                            |                                                                                                                                                                                   |   | 6.6         |        |              |   | 7.1   |       
|Goodwill                                            |                                                                                                                                                                                   |   | 47.2        |        |              |   | 47.1  |       
|Other                                               |                                                                                                                                                                                   |   | 11.9        |        |              |   | 12.8  |       
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  
|                                                    |                                                                                                                                                                                   | $ | 585.6       |        |              | $ | 554.3 |       
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |       
|LIABILITIES AND EQUITY                              |                                                                                                                                                                                   |   |             |        |              |   |       |       
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |       
|Current liabilities:                                |                                                                                                                                                                                   |   |             |        |              |   |       |       
|                                                    | Accounts payable                                                                                                                                                                  |   | $           | 20.7   |              |   | $     | 19.0   |  
|                                                    | Accrued salaries                                                                                                                                                                  |   |             | 16.8   |              |   |       | 18.6   |  
|                                                    | Other current liabilities                                                                                                                                                         |   |             | 16.6   |              |   |       | 10.7   |  
|                                                    | Estimated third-party payor settlements                                                                                                                                           |   |             | 29.2   |              |   |       | 17.9   |  
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  
|                                                    |                                                                                                                                                                                   |   | 83.3        |        |              |   | 66.2  |       
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |       
|Long-term debt                                      |                                                                                                                                                                                   |   | 142.5       |        |              |   | 150.0 |       
|Deferred income taxes                               |                                                                                                                                                                                   |   | 22.2        |        |              |   | 21.0  |       
|Professional liability risks and other liabilities  |                                                                                                                                                                                   |   | 19.4        |        |              |   | 16.9  |       
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |       
|Minority interests in equity of consolidated entity |                                                                                                                                                                                   |   | 5.0         |        |              |   | 5.2   |       
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |       
|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;
39,385,845 shares and 39,276,745 shares issued and outstanding at
March 31, 2002 and December 31, 2001, respectively |   |             | 0.4    |              |   |       | 0.4    |  
|                                                    | Capital in excess of par value                                                                                                                                                    |   |             | 288.7  |              |   |       | 285.0  |  
|                                                    | Unearned ESOP compensation                                                                                                                                                        |   |             | (21.7  | )            |   |       | (22.5  | )
|                                                    | Notes receivable for shares sold to employees                                                                                                                                     |   |             | (5.7   | )            |   |       | (5.7   | )
|                                                    | Retained earnings                                                                                                                                                                 |   |             | 51.5   |              |   |       | 37.8   |  
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  
|                                                    |                                                                                                                                                                                   |   | 313.2       |        |              |   | 295.0 |       
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  
|                                                    |                                                                                                                                                                                   | $ | 585.6       |        |              | $ | 554.3 |       
|                                                    |                                                                                                                                                                                   |   |             |        |              |   |       |        |  

(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,         
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                   
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      | 2002               |       | 2001 
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |      
|Cash flows from operating activities:            |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |      
|                                                 | Net income                                                                        |                                                                    | $                                       | 13.7                                                |      |                    | $     | 8.6   |     
|                                                 | Adjustments to reconcile net income
to net cash provided by operating activities: |                                                                    |                                         |                                                     |      |                    |       |       |     
|                                                 |                                                                                   | Depreciation and amortization                                      |                                         |                                                     | 9.4  |                    |       |       | 8.1  |      
|                                                 |                                                                                   | ESOP expense                                                       |                                         |                                                     | 2.5  |                    |       |       | 2.6  |      
|                                                 |                                                                                   | Minority interests in earnings of consolidated
entity              |                                         |                                                     | 0.7  |                    |       |       | 0.6  |      
|                                                 |                                                                                   | Deferred income taxes (benefit)                                    |                                         |                                                     | 0.4  |                    |       |       | (0.5 | )    
|                                                 |                                                                                   | Reserve for professional liability risk, net                       |                                         |                                                     | 3.1  |                    |       |       | 1.4  |      
|                                                 |                                                                                   | Gain on previously impaired assets                                 |                                         |                                                     |     |                    |       |       | (0.5 | )    
|                                                 |                                                                                   | Extraordinary loss on early retirement of debt                     |                                         |                                                     | 1.3  |                    |       |       |     |      
|                                                 |                                                                                   | Tax benefit from stock option exercises                            |                                         |                                                     | 0.7  |                    |       |       |     |      
|                                                 |                                                                                   | Increase (decrease) in cash from operating assets
and liabilities: |                                         |                                                     |      |                    |       |       |      |      
|                                                 |                                                                                   |                                                                    | Accounts receivable                     |                                                     |      | (20.8              | )     |       |      | (13.5 | )   
|                                                 |                                                                                   |                                                                    | Inventories and other current assets    |                                                     |      | (1.4               | )     |       |      | 0.1   |     
|                                                 |                                                                                   |                                                                    | Accounts payable and accrued expenses   |                                                     |      | 1.5                |       |       |      | 7.4   |     
|                                                 |                                                                                   |                                                                    | Income taxes payable                    |                                                     |      | 12.0               |       |       |      | 8.7   |     
|                                                 |                                                                                   |                                                                    | Estimated third-party payor settlements |                                                     |      | 11.3               |       |       |      | 14.3  |     
|                                                 |                                                                                   | Other                                                              |                                         |                                                     | (0.2 | )                  |       |       | 0.3  |      
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |       |     
|                                                 |                                                                                   |                                                                    |                                         | Net cash provided by operating activities           |      |                    | 34.2  |       |      |       | 37.6 |  
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |      
|Cash flows from investing activities:            |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |      
|                                                 | Purchases of property and equipment, net                                          |                                                                    |                                         | (10.0                                               | )    |                    |       | (9.4  | )   
|                                                 | Other                                                                             |                                                                    |                                         | (0.1                                                | )    |                    |       |      |     
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |       |     
|                                                 |                                                                                   |                                                                    |                                         | Net cash used in investing activities               |      |                    | (10.1 | )     |      |       | (9.4 | )
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |      
|Cash flows from financing activities:            |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |      
|                                                 | Proceeds from stock offering, net                                                 |                                                                    |                                         |                                                    |      |                    |       | 100.4 |     
|                                                 | Repayments of bank debt                                                           |                                                                    |                                         |                                                    |      |                    |       | (22.2 | )   
|                                                 | Repurchases of senior subordinated notes                                          |                                                                    |                                         | (8.6                                                | )    |                    |       |      |     
|                                                 | Proceeds from exercise of stock options                                           |                                                                    |                                         | 1.2                                                 |      |                    |       | 0.3   |     
|                                                 | Other                                                                             |                                                                    |                                         | (0.1                                                | )    |                    |       | 0.2   |     
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |       |     
|                                                 |                                                                                   |                                                                    |                                         | Net cash (used in) provided
by financing activities |      |                    | (7.5  | )     |      |       | 78.7 |  
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |      
|Change in cash and cash equivalents              |                                                                                   |                                                                    | 16.6                                    |                                                     |      |                    | 106.9 |      
|Cash and cash equivalents at beginning of period |                                                                                   |                                                                    | 57.2                                    |                                                     |      |                    | 39.7  |      
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |       |     
|Cash and cash equivalents at end of period       |                                                                                   | $                                                                  | 73.8                                    |                                                     |      | $                  | 146.6 |      
|                                                 |                                                                                   |                                                                    |                                         |                                                     |      |                    |       |       |     
|Interest payments                                |                                                                                   | $                                                                  | 0.6                                     |                                                     |      | $                  | 3.1   |      
|Income taxes received                            |                                                                                   | $                                                                  | (2.2                                    | )                                                   |      | $                  |      |      

See accompanying notes.





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##### Table of Contents



LIFEPOINT HOSPITALS, INC.




NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS


(UNAUDITED)


NOTE 1  ORGANIZATION AND BASIS OF PRESENTATION

At March 31, 2002, the Company was comprised of 23 general, acute care
hospitals and related health care entities located in non-urban areas in the
states of Alabama, Florida, Kansas, Kentucky, Louisiana, Tennessee, Utah and
Wyoming.

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2002. 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, 2001.

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

NOTE 2  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for
Asset Retirement Obligations. SFAS 143 is effective for financial statements
issued for fiscal years beginning after June 15, 2002, but earlier application
is encouraged. SFAS 143 establishes accounting standards for recognition and
measurement of a liability for an asset retirement obligation and the
associated retirement costs. SFAS 143 applies to all entities and to legal
obligations associated with the retirement of long-lived assets that result
from the acquisition, construction, development and (or) the normal operation
of a long-lived asset, except for certain obligations of lessees. The Company
does not expect SFAS 143 to have a material effect on its results of operations
or financial position.

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

In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections. Under certain provisions of SFAS 145, gains and losses related to the extinguishment of debt should
no longer be segregated on the income statement as extraordinary items net of the effects of income taxes. Instead, those gains and losses
should be included as a component of income before income taxes. The provisions of SFAS 145 are effective for fiscal years beginning
after May 15, 2002 with early adoption encouraged. Any gain or loss on extinguishment of debt that was classified
as an extraordinary item in prior periods presented that does not meet the criteria in Accounting Principles Board Opinion No. 30 for
classifications as an extraordinary item should be reclassified upon adoption. Had the Company adopted SFAS 145 in the first quarter of fiscal year 2002,
the extraordinary loss on early retirement of debt of $1.3 million, gross of the $0.5 million effect of income taxes, would have been reflected in income before income taxes. There would
be no resulting change in net income.

NOTE 3  GOODWILL AND INTANGIBLE ASSETS

In July 2001, the FASB issued SFAS 141, Business Combinations, and SFAS
142, Goodwill and Other Intangible Assets, (the Statements). These Statements
made significant changes to the accounting for business combinations, goodwill
and intangible assets.





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##### Table of Contents



SFAS 141 eliminates the pooling-of-interests method of accounting for
business combinations. In addition, it further clarifies the criteria for
recognition of intangible assets separately from goodwill. SFAS 141 was
effective for transactions completed subsequent to June 30, 2001. The
application of SFAS 141 did not have a material effect on the Companys results
of operations or financial position.

Under SFAS 142, goodwill and intangible assets with indefinite lives are
no longer amortized but are reviewed at least annually for impairment.
The amortization provisions of SFAS 142 apply to goodwill and intangible
assets acquired after June 30, 2001. With respect to goodwill and
intangible assets acquired prior to July 1, 2001, the Company is required
to adopt SFAS 142 effective January 1, 2002. Pursuant to SFAS 142, the
Company will complete its transition impairment tests of goodwill during
the second quarter of 2002. The Company anticipates no impairment and will perform
its initial annual impairment test later in 2002.

The table below shows the Companys income before extraordinary loss and
net income for the three months ended March 31, 2002 and 2001 adjusted for the cessation of goodwill amortization required by the
new standard as if it had occurred as of January 1, 2001 (dollars in millions
except per share amounts):

|                                                             |  |      |      |      |  |   |      | 
|------------------------------------------------------------ |  | ---- | ---- | ---- |  | - | ---- | 
|                                                             |  | 2002 |      | 2001
|                                                             |  |      |      |     
|Income before extraordinary loss, as reported                |  | $    | 14.5 |      |  | $ | 8.6  | 
|Goodwill amortization, net of applicable income tax benefits |  |      |     |      |  |   | 0.3  | 
|                                                             |  |      |      |      |  |   |      | 
|Adjusted income before extraordinary loss                    |  | $    | 14.5 |      |  | $ | 8.9  | 
|                                                             |  |      |      |      |  |   |      | 
|Net income, as reported                                      |  | $    | 13.7 |      |  | $ | 8.6  | 
|Goodwill amortization, net of applicable income tax benefits |  |      |     |      |  |   | 0.3  | 
|                                                             |  |      |      |      |  |   |      | 
|Adjusted net income                                          |  | $    | 13.7 |      |  | $ | 8.9  | 
|                                                             |  |      |      |      |  |   |      | 
|Diluted earnings per share:                                  |  |      |      |      |  |   |      | 
|Income before extraordinary loss, as reported                |  | $    | 0.38 |      |  | $ | 0.25 | 
|Goodwill amortization, net of applicable income tax benefits |  |      |     |      |  |   | 0.01 | 
|                                                             |  |      |      |      |  |   |      | 
|Adjusted income before extraordinary loss                    |  | $    | 0.38 |      |  | $ | 0.26 | 
|                                                             |  |      |      |      |  |   |      | 
|Diluted earnings per share:                                  |  |      |      |      |  |   |      | 
|Net income, as reported                                      |  | $    | 0.36 |      |  | $ | 0.25 | 
|Goodwill amortization, net of applicable income tax benefits |  |      |     |      |  |   | 0.01 | 
|                                                             |  |      |      |      |  |   |      | 
|Adjusted net income                                          |  | $    | 0.36 |      |  | $ | 0.26 | 
|                                                             |  |      |      |      |  |   |      | 

NOTE 4  REPURCHASE OF SENIOR SUBORDINATED NOTES

During the three months ended March 31, 2002, the Company repurchased $7.5
million of its 10 3/4% Senior Subordinated Notes due 2009 (the Notes) and
paid a $1.1 million premium on these repurchases. In connection with these
repurchases, the Company recorded an extraordinary charge from early retirement
of debt in the amount of $0.8 million, net of tax benefits of $0.5 million.

Subsequent to March 31, 2002, the Company repurchased an additional $57.5 million of the Notes and paid $9.8 million in premiums related to these additional repurchases. The Company will incur an additional
extraordinary charge to income of $7.0 million, net of tax
benefits of $4.6 million, during the three months ended June 30,
2002 as a result of these additional repurchases.





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NOTE 5  CONTINGENCIES

HCA Investigations, Litigation and Indemnification Rights

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

HCA is a defendant in several qui tam actions, or actions brought by
private parties, known as relators, on behalf of the United States of America,
which have been unsealed and served on HCA. The actions allege, in general,
that HCA and certain subsidiaries and/or affiliated partnerships violated the
False Clams Act, 31 U.S.C. ss. 3729 et seq., for improper claims submitted to
the government for reimbursement. The lawsuits generally seek three times the
amount of damages caused to the United States by the submission of any Medicare
or Medicaid false claims presented by the defendants to the federal government,
civil penalties of not less than $5,500 nor more than $11,000 for each such
Medicare or Medicaid claim, attorneys fees and costs. HCA has disclosed that,
on March 15, 2001, the Department of Justice filed a status report setting
forth the governments decisions regarding intervention in existing qui tam
actions against HCA and filed formal complaints for those suits in which the
government has intervened. HCA stated that, of the original 30 qui tam actions,
the Department of Justice remains active and has elected to intervene in eight
actions. HCA has also disclosed that it is aware of additional qui tam actions
that remain under seal and believes that there may be other sealed qui tam
cases of which it is unaware.

Based on the Companys review of HCAs public filings, the Company
understands that, in December 2000, HCA entered into a Plea Agreement with the
Criminal Division of the Department of Justice and various U.S. Attorneys
Offices (which the Company will refer to as the plea agreement) and a Civil and
Administrative Settlement Agreement with the Civil Division of the Department
of Justice (which the Company will refer to as the civil agreement). Based on
the Companys review of HCAs public filings, the Company understands that the
agreements resolve 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 diagnosis related group, or DRG, coding, outpatient
laboratory billing and home health issues. Pursuant to the plea agreement, HCA
paid the government $95 million during the first quarter of 2001. The civil
agreement was approved by the Federal District Court of the District of
Columbia in August 2001. Pursuant to the civil agreement, HCA agreed to pay the
government $745 million plus interest, which was paid in the third quarter of
2001. Based on the Companys review of HCAs public filings, the Company
understands that certain civil issues are not covered by the civil agreement
and remain outstanding, including claims related to costs reports and physician
relations issues. The plea agreement and the civil agreement announced in
December 2000 relate only to conduct that was the subject of the federal
investigations resolved in the agreements and do not resolve various qui tam
actions filed by private parties against HCA, or pending state actions.

On March 28, 2002, HCA announced that it reached an understanding with the
Centers for Medicare and Medicaid Services (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.





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

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

Americans with Disabilities Act Claim

On January 12, 2001, Access Now, Inc., a disability rights organization,
filed a class action lawsuit against each of the Companys hospitals alleging
non-compliance with the accessibility guidelines under the Americans with
Disabilities Act (the 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 May 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.





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General Liability Claims

The Company is, from time to time, subject to claims and suits arising in
the ordinary course of business, including claims for damages for personal
injuries, breach of management contracts, for wrongful restriction of, or
interference with physicians staff privileges and employment related
claims. In 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 has committed to advance amounts of approximately
$18.3 million at March 31, 2002. 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.

Acquisitions

The Company has acquired and will continue to acquire businesses with
prior operating histories. Acquired companies may have unknown or contingent
liabilities, including liabilities for failure to comply with health care laws
and regulations, such as billing and reimbursement, fraud and abuse and similar
anti-referral laws. Although the Company institutes policies 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  SENIOR SUBORDINATED NOTES

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

At March 31, 2002, all but one of the Subsidiary Guarantors were wholly
owned and fully and unconditionally guaranteed the Notes. Separate financial
statements and other disclosures of the wholly owned Subsidiary Guarantors are
not presented because management believes that such separate financial
statements and disclosures would not provide additional material information to
investors. The Companys only non-wholly owned Subsidiary, Dodge City
Healthcare Group, L.P. is consolidated and all of its assets, liabilities,
equity and earnings of this entity fully and unconditionally, jointly and
severally guarantee the Notes. The Company owns approximately 70% of the
partnership interests in this mostly owned Subsidiary Guarantor.

Presented below is summarized condensed unaudited consolidating financial
information for the Company and its subsidiaries as of March 31, 2002 and
December 31, 2001, and for the three months ended March 31, 2002 and 2001
segregating the parent company, the issuer of the Notes (LifePoint Hospitals
Holdings, Inc.), the combined wholly owned Subsidiary Guarantors, the mostly
owned Subsidiary Guarantor and eliminations.





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LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2002
(IN MILLIONS)

|                                                                      |  |        |       |          |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|--------------------------------------------------------------------- |  | ------ | ----- | -------- |  | ---------- | ----- | ---------- |  | ------------ | ----- | ------------ |  | - | ---- | ------------ |  | - | ----- | - |  | - | ----- | 
|                                                                      |  |        |       |          |  |            |       |            |  | Wholly Owned |       | Mostly Owned |  |   |      |              |  |   |       |  
|                                                                      |  |        |       |          |  | Issuer     |       | Subsidiary |  | Subsidiary   |       |              |  |   |      | Consolidated
|                                                                      |  | Parent |       | of Notes |  | Guarantors |       | Guarantor  |  | Eliminations |       | Total       
|                                                                      |  |        |       |          |  |            |       |            |  |              |       |             
|Revenues                                                              |  | $      |      |          |  | $          |      |            |  | $            | 173.1 |              |  | $ | 8.5  |              |  | $ |      |   |  | $ | 181.6 | 
|                                                                      |  |        |       |          |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|Salaries and benefits                                                 |  |        |      |          |  |            |      |            |  |              | 68.1  |              |  |   | 2.6  |              |  |   |      |   |  |   | 70.7  | 
|Supplies                                                              |  |        |      |          |  |            |      |            |  |              | 21.9  |              |  |   | 1.0  |              |  |   |      |   |  |   | 22.9  | 
|Other operating expenses                                              |  |        |      |          |  |            |      |            |  |              | 31.0  |              |  |   | 1.2  |              |  |   |      |   |  |   | 32.2  | 
|Provision for doubtful accounts                                       |  |        |      |          |  |            |      |            |  |              | 12.4  |              |  |   | 0.8  |              |  |   |      |   |  |   | 13.2  | 
|Depreciation and amortization                                         |  |        |      |          |  |            |      |            |  |              | 9.1   |              |  |   | 0.3  |              |  |   |      |   |  |   | 9.4   | 
|Management fees                                                       |  |        |      |          |  |            |      |            |  |              | (0.2  | )            |  |   | 0.2  |              |  |   |      |   |  |   |      | 
|Interest expense, net                                                 |  |        |      |          |  |            | 4.4   |            |  |              | (0.2  | )            |  |   | (0.1 | )            |  |   |      |   |  |   | 4.1   | 
|ESOP expense                                                          |  |        |      |          |  |            |      |            |  |              | 2.4   |              |  |   | 0.1  |              |  |   |      |   |  |   | 2.5   | 
|Equity in earnings of affiliates                                      |  |        | (13.7 | )        |  |            | (18.4 | )          |  |              |      |              |  |   |     |              |  |   | 32.1  |   |  |   |      | 
|                                                                      |  |        |       |          |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|                                                                      |  |        | (13.7 | )        |  |            | (14.0 | )          |  |              | 144.5 |              |  |   | 6.1  |              |  |   | 32.1  |   |  |   | 155.0 | 
|                                                                      |  |        |       |          |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|Income before minority
interests, income taxes and extraordinary item |  |        | 13.7  |          |  |            | 14.0  |            |  |              | 28.6  |              |  |   | 2.4  |              |  |   | (32.1 | ) |  |   | 26.6  | 
|Minority interests in earnings
of consolidated entity                 |  |        |      |          |  |            | 0.7   |            |  |              |      |              |  |   |     |              |  |   |      |   |  |   | 0.7   | 
|                                                                      |  |        |       |          |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|Income before income taxes and extraordinary item                     |  |        | 13.7  |          |  |            | 13.3  |            |  |              | 28.6  |              |  |   | 2.4  |              |  |   | (32.1 | ) |  |   | 25.9  | 
|Provision for income taxes                                            |  |        |      |          |  |            | (1.2  | )          |  |              | 12.6  |              |  |   |     |              |  |   |      |   |  |   | 11.4  | 
|                                                                      |  |        |       |          |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|Income before extraordinary item                                      |  |        | 13.7  |          |  |            | 14.5  |            |  |              | 16.0  |              |  |   | 2.4  |              |  |   | (32.1 | ) |  |   | 14.5  | 
|Extraordinary loss on early
retirement of debt, net                   |  |        |      |          |  |            | 0.8   |            |  |              |      |              |  |   |     |              |  |   |      |   |  |   | 0.8   | 
|                                                                      |  |        |       |          |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 
|Net income                                                            |  | $      | 13.7  |          |  | $          | 13.7  |            |  | $            | 16.0  |              |  | $ | 2.4  |              |  | $ | (32.1 | ) |  | $ | 13.7  | 
|                                                                      |  |        |       |          |  |            |       |            |  |              |       |              |  |   |      |              |  |   |       |   |  |   |       | 





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LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(IN MILLIONS)

|                                                      |            |   |        |     |          |   |            |     |            |   |              |      |              |   |     |     |              |   |       |       |   |   |       |     | 
|----------------------------------------------------- | ---------- | - | ------ | --- | -------- | - | ---------- | --- | ---------- | - | ------------ | ---- | ------------ | - | --- | --- | ------------ | - | ----- | ----- | - | - | ----- | --- | 
|                                                      |            |   |        |     |          |   |            |     |            |   | Wholly Owned |      | Mostly Owned |   |     |     |              |   |       |       |  
|                                                      |            |   |        |     |          |   | Issuer     |     | Subsidiary |   | Subsidiary   |      |              |   |     |     | Consolidated
|                                                      |            |   | Parent |     | of Notes |   | Guarantors |     | Guarantor  |   | Eliminations |      | Total       
|                                                      |            |   |        |     |          |   |            |     |            |   |              |      |             
|Revenues                                              |            | $ |       |     |          | $ |           |     |            | $ | 146.4        |      |              | $ | 7.9 |     |              | $ |      |       |   | $ | 154.3 |    
|                                                      |            |   |        |     |          |   |            |     |            |   |              |      |              |   |     |     |              |   |       |       |   |   |       |    
|Salaries and benefits                                 |            |   |       |     |          |   |           |     |            |   | 57.8         |      |              |   | 2.5 |     |              |   |      |       |   |   | 60.3  |    
|Supplies                                              |            |   |       |     |          |   |           |     |            |   | 18.6         |      |              |   | 1.0 |     |              |   |      |       |   |   | 19.6  |    
|Other operating expenses                              |            |   |       |     |          |   |           |     |            |   | 27.4         |      |              |   | 1.0 |     |              |   |      |       |   |   | 28.4  |    
|Provision for doubtful accounts                       |            |   |       |     |          |   |           |     |            |   | 11.4         |      |              |   | 0.6 |     |              |   |      |       |   |   | 12.0  |    
|Depreciation and amortization                         |            |   |       |     |          |   |           |     |            |   | 7.7          |      |              |   | 0.4 |     |              |   |      |       |   |   | 8.1   |    
|Management fees                                       |            |   |       |     |          |   |           |     |            |   | (0.2         | )    |              |   | 0.2 |     |              |   |      |       |   |   |      |    
|Interest expense, net                                 |            |   |       |     |          |   | 7.6        |     |            |   | (1.1         | )    |              |   |    |     |              |   |      |       |   |   | 6.5   |    
|ESOP expense                                          |            |   |       |     |          |   |           |     |            |   | 2.5          |      |              |   | 0.1 |     |              |   |      |       |   |   | 2.6   |    
|Gain on previously impaired assets                    |            |   |       |     |          |   |           |     |            |   | (0.5         | )    |              |   |    |     |              |   |      |       |   |   | (0.5  | )  
|Equity in earnings of affiliates                      |            |   | (8.6   | )   |          |   | (13.9      | )   |            |   |             |      |              |   |    |     |              |   | 22.5  |       |   |   |      |    
|                                                      |            |   |        |     |          |   |            |     |            |   |              |      |              |   |     |     |              |   |       |       |   |   |       |    
|                                                      |            |   | (8.6   | )   |          |   | (6.3       | )   |            |   | 123.6        |      |              |   | 5.8 |     |              |   | 22.5  |       |   |   | 137.0 |    
|                                                      |            |   |        |     |          |   |            |     |            |   |              |      |              |   |     |     |              |   |       |       |   |   |       |    
|Income before minority interests
and income taxes     |            |   | 8.6    |     |          |   | 6.3        |     |            |   | 22.8         |      |              |   | 2.1 |     |              |   | (22.5 | )     |   |   | 17.3  |    
|Minority interests in earnings of
consolidated entity |            |   |       |     |          |   | 0.6        |     |            |   |             |      |              |   |    |     |              |   |      |       |   |   | 0.6   |    
|                                                      |            |   |        |     |          |   |            |     |            |   |              |      |              |   |     |     |              |   |       |       |   |   |       |    
|Income before income taxes                            |            |   | 8.6    |     |          |   | 5.7        |     |            |   | 22.8         |      |              |   | 2.1 |     |              |   | (22.5 | )     |   |   | 16.7  |    
|Provision for income taxes                            |            |   |       |     |          |   | (2.9       | )   |            |   | 11.0         |      |              |   |    |     |              |   |      |       |   |   | 8.1   |    
|                                                      |            |   |        |     |          |   |            |     |            |   |              |      |              |   |     |     |              |   |       |       |   |   |       |    
|                                                      | Net income |   | $      | 8.6 |          |   | $          | 8.6 |            |   | $            | 11.8 |              |   | $   | 2.1 |              |   | $     | (22.5 | ) |   | $     | 8.6 | 
|                                                      |            |   |        |     |          |   |            |     |            |   |              |      |              |   |     |     |              |   |       |       |   |   |       |    





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LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2002
(IN MILLIONS)

|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |        |   |  |  | 
|--------------------------------------------------- | ---------------------------------------------- | - | ----- | - |  | ------ | ----- | -------- |  | ---------- | ----- | ---------- | - | ------------ | ---- | ------------ | - | - | ------ | ------------ |  | - | ----- | ------ | - |  |  | 
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   | Wholly Owned |      | Mostly Owned |   |   |        |              |  |   |       |       
|                                                    |                                                |   |       |   |  |        |       |          |  | Issuer     |       | Subsidiary |   | Subsidiary   |      |              |   |   |        | Consolidated
|                                                    |                                                |   |       |   |  | Parent |       | of Notes |  | Guarantors |       | Guarantor  |   | Eliminations |      | Total       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |             
|ASSETS                                              |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|Current assets:                                     |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|                                                    | Cash and cash equivalents                      |   | $     |  |  |        | $     |         |  |            | $     | 73.8       |   |              | $    |             |   |   | $      |             |  |   | $     | 73.8   |  
|                                                    | Accounts receivable, net                       |   |       |  |  |        |       |         |  |            |       | 72.1       |   |              |      | 5.4          |   |   |        |             |  |   |       | 77.5   |  
|                                                    | Inventories                                    |   |       |  |  |        |       |         |  |            |       | 15.5       |   |              |      | 1.1          |   |   |        |             |  |   |       | 16.6   |  
|                                                    | Deferred income taxes and other
current assets |   |       |  |  |        |       |         |  |            |       | 13.7       |   |              |      | 0.1          |   |   |        |             |  |   |       | 13.8   |  
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |        |   | 
|                                                    |                                                |   |      |   |  |        |      |          |  |            | 175.1 |            |   |              | 6.6  |              |   |   |       |              |  |   | 181.7 |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|Property and equipment:                             |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|                                                    | Land                                           |   |       |  |  |        |       |         |  |            |       | 10.3       |   |              |      | 0.3          |   |   |        |             |  |   |       | 10.6   |  
|                                                    | Buildings and improvements                     |   |       |  |  |        |       |         |  |            |       | 252.0      |   |              |      | 9.9          |   |   |        |             |  |   |       | 261.9  |  
|                                                    | Equipment                                      |   |       |  |  |        |       |         |  |            |       | 260.0      |   |              |      | 11.0         |   |   |        |             |  |   |       | 271.0  |  
|                                                    | Construction in progress                       |   |       |  |  |        |       |         |  |            |       | 8.4        |   |              |      |             |   |   |        |             |  |   |       | 8.4    |  
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |        |   | 
|                                                    |                                                |   |      |   |  |        |      |          |  |            | 530.7 |            |   |              | 21.2 |              |   |   |       |              |  |   | 551.9 |       
|                                                    | Accumulated depreciation                       |   |       |  |  |        |       |         |  |            |       | (200.1     | ) |              |      | (13.6        | ) |   |        |             |  |   |       | (213.7 | )
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |        |   | 
|                                                    |                                                |   |       |   |  |        |       |          |  |            | 330.6 |            |   |              | 7.6  |              |   |   |       |              |  |   | 338.2 |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|Net investment in and advances to
subsidiaries      |                                                |   | 313.2 |   |  |        | 496.1 |          |  |            |      |            |   |              |     |              |   |   | (809.3 | )            |  |   |      |       
|Deferred loan costs, net                            |                                                |   |      |   |  |        | 6.6   |          |  |            |      |            |   |              |     |              |   |   |       |              |  |   | 6.6   |       
|Goodwill                                            |                                                |   |      |   |  |        |      |          |  |            | 37.3  |            |   |              | 9.9  |              |   |   |       |              |  |   | 47.2  |       
|Other                                               |                                                |   |      |   |  |        |      |          |  |            | 11.9  |            |   |              |     |              |   |   |       |              |  |   | 11.9  |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |        |   | 
|                                                    |                                                | $ | 313.2 |   |  | $      | 502.7 |          |  | $          | 554.9 |            |   | $            | 24.1 |              |   | $ | (809.3 | )            |  | $ | 585.6 |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |        |   | 
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|LIABILITIES AND EQUITY                              |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|Current liabilities                                 |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|                                                    | Accounts payable                               |   | $     |  |  |        | $     |         |  |            | $     | 20.0       |   |              | $    | 0.7          |   |   | $      |             |  |   | $     | 20.7   |  
|                                                    | Accrued salaries                               |   |       |  |  |        |       |         |  |            |       | 16.8       |   |              |      |             |   |   |        |             |  |   |       | 16.8   |  
|                                                    | Other current liabilities                      |   |       |  |  |        |       | 5.7      |  |            |       | 10.5       |   |              |      | 0.4          |   |   |        |             |  |   |       | 16.6   |  
|                                                    | Estimated third party settlements              |   |       |  |  |        |       |         |  |            |       | 29.3       |   |              |      | (0.1         | ) |   |        |             |  |   |       | 29.2   |  
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |        |   | 
|                                                    |                                                |   |      |   |  |        | 5.7   |          |  |            | 76.6  |            |   |              | 1.0  |              |   |   |       |              |  |   | 83.3  |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|Intercompany balances to affiliates                 |                                                |   |      |   |  |        | 36.3  |          |  |            | (41.4 | )          |   |              | 5.1  |              |   |   |       |              |  |   |      |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|Long-term debt                                      |                                                |   |      |   |  |        | 142.5 |          |  |            |      |            |   |              |     |              |   |   |       |              |  |   | 142.5 |       
|Deferred income taxes                               |                                                |   |      |   |  |        |      |          |  |            | 22.2  |            |   |              |     |              |   |   |       |              |  |   | 22.2  |       
|Professional liability risks and
other liabilities  |                                                |   |      |   |  |        |      |          |  |            | 19.4  |            |   |              |     |              |   |   |       |              |  |   | 19.4  |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|Minority interests in equity of
consolidated entity |                                                |   |      |   |  |        | 5.0   |          |  |            |      |            |   |              |     |              |   |   |       |              |  |   | 5.0   |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |       
|Stockholders equity                                |                                                |   | 313.2 |   |  |        | 313.2 |          |  |            | 478.1 |            |   |              | 18.0 |              |   |   | (809.3 | )            |  |   | 313.2 |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |        |   | 
|                                                    |                                                | $ | 313.2 |   |  | $      | 502.7 |          |  | $          | 554.9 |            |   | $            | 24.1 |              |   | $ | (809.3 | )            |  | $ | 585.6 |       
|                                                    |                                                |   |       |   |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |  |   |       |        |   | 





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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2001
(IN MILLIONS)

|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |        |   |  |  | 
|--------------------------------------------------- | ---------------------------------------------- | - | ----- | ----- |  | ------ | ----- | -------- |  | ---------- | ----- | ---------- | - | ------------ | ---- | ------------ | - | - | ------ | ------------ | - | - | ----- | ------ | - |  |  | 
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   | Wholly Owned |      | Mostly Owned |   |   |        |              |   |   |       |       
|                                                    |                                                |   |       |       |  |        |       |          |  | Issuer     |       | Subsidiary |   | Subsidiary   |      |              |   |   |        | Consolidated
|                                                    |                                                |   |       |       |  | Parent |       | of Notes |  | Guarantors |       | Guarantor  |   | Eliminations |      | Total       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |             
|ASSETS                                              |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|Current assets:                                     |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|                                                    | Cash and cash equivalents                      |   | $     |      |  |        | $     |         |  |            | $     | 57.2       |   |              | $    |             |   |   | $      |             |   |   | $     | 57.2   |  
|                                                    | Accounts receivable, net                       |   |       |      |  |        |       |         |  |            |       | 51.7       |   |              |      | 5.0          |   |   |        |             |   |   |       | 56.7   |  
|                                                    | Inventories                                    |   |       |      |  |        |       |         |  |            |       | 15.3       |   |              |      | 1.0          |   |   |        |             |   |   |       | 16.3   |  
|                                                    | Deferred income taxes and other
current assets |   |       |      |  |        |       |         |  |            |       | 18.6       |   |              |      | 0.1          |   |   |        |             |   |   |       | 18.7   |  
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |        |   | 
|                                                    |                                                |   |      |       |  |        |      |          |  |            | 142.8 |            |   |              | 6.1  |              |   |   |       |              |   |   | 148.9 |       
|Property and equipment:                             |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|                                                    | Land                                           |   |       |      |  |        |       |         |  |            |       | 10.4       |   |              |      | 0.3          |   |   |        |             |   |   |       | 10.7   |  
|                                                    | Buildings and improvements                     |   |       |      |  |        |       |         |  |            |       | 252.1      |   |              |      | 9.9          |   |   |        |             |   |   |       | 262.0  |  
|                                                    | Equipment                                      |   |       |      |  |        |       |         |  |            |       | 252.4      |   |              |      | 11.0         |   |   |        |             |   |   |       | 263.4  |  
|                                                    | Construction in progress                       |   |       |      |  |        |       |         |  |            |       | 7.2        |   |              |      |             |   |   |        |             |   |   |       | 7.2    |  
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |        |   | 
|                                                    |                                                |   |      |       |  |        |      |          |  |            | 522.1 |            |   |              | 21.2 |              |   |   |       |              |   |   | 543.3 |       
|                                                    | Accumulated depreciation                       |   |       |      |  |        |       |         |  |            |       | (191.6     | ) |              |      | (13.3        | ) |   |        |             |   |   |       | (204.9 | )
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |        |   | 
|                                                    |                                                |   |      |       |  |        |      |          |  |            | 330.5 |            |   |              | 7.9  |              |   |   |       |              |   |   | 338.4 |       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|                                                    | Net investment in and advances to
subsidiaries |   |       | 295.0 |  |        |       | 480.9    |  |            |       |           |   |              |      |             |   |   |        | (775.9       | ) |   |       |       |  
|                                                    | Deferred loan costs, net                       |   |       |      |  |        |       | 7.1      |  |            |       |           |   |              |      |             |   |   |        |             |   |   |       | 7.1    |  
|                                                    | Goodwill                                       |   |       |      |  |        |       |         |  |            |       | 37.2       |   |              |      | 9.9          |   |   |        |             |   |   |       | 47.1   |  
|                                                    | Other                                          |   |       |      |  |        |       |         |  |            |       | 12.8       |   |              |      |             |   |   |        |             |   |   |       | 12.8   |  
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |        |   | 
|                                                    |                                                | $ | 295.0 |       |  | $      | 488.0 |          |  | $          | 523.3 |            |   | $            | 23.9 |              |   | $ | (775.9 | )            |   | $ | 554.3 |       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |        |   | 
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|LIABILITIES AND EQUITY                              |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|Current liabilities                                 |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|                                                    | Accounts payable                               |   | $     |      |  |        | $     |         |  |            | $     | 18.3       |   |              | $    | 0.7          |   |   | $      |             |   |   | $     | 19.0   |  
|                                                    | Accrued salaries                               |   |       |      |  |        |       |         |  |            |       | 18.6       |   |              |      |             |   |   |        |             |   |   |       | 18.6   |  
|                                                    | Other current liabilities                      |   |       |      |  |        |       | 2.0      |  |            |       | 8.4        |   |              |      | 0.3          |   |   |        |             |   |   |       | 10.7   |  
|                                                    | Estimated third-party payor settlements        |   |       |      |  |        |       |         |  |            |       | 17.8       |   |              |      | 0.1          |   |   |        |             |   |   |       | 17.9   |  
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |        |   | 
|                                                    |                                                |   |      |       |  |        | 2.0   |          |  |            | 63.1  |            |   |              | 1.1  |              |   |   |       |              |   |   | 66.2  |       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|Intercompany balances to affiliates                 |                                                |   |      |       |  |        | 35.8  |          |  |            | (39.7 | )          |   |              | 3.9  |              |   |   |       |              |   |   |      |       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|Long-term debt                                      |                                                |   |      |       |  |        | 150.0 |          |  |            |      |            |   |              |     |              |   |   |       |              |   |   | 150.0 |       
|Deferred income taxes                               |                                                |   |      |       |  |        |      |          |  |            | 21.0  |            |   |              |     |              |   |   |       |              |   |   | 21.0  |       
|Professional liability risks and
other liabilities  |                                                |   |      |       |  |        |      |          |  |            | 16.9  |            |   |              |     |              |   |   |       |              |   |   | 16.9  |       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|Minority interests in equity of
consolidated entity |                                                |   |      |       |  |        | 5.2   |          |  |            |      |            |   |              |     |              |   |   |       |              |   |   | 5.2   |       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |       
|Stockholders equity                                |                                                |   | 295.0 |       |  |        | 295.0 |          |  |            | 462.0 |            |   |              | 18.9 |              |   |   | (775.9 | )            |   |   | 295.0 |       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |        |   | 
|                                                    |                                                | $ | 295.0 |       |  | $      | 488.0 |          |  | $          | 523.3 |            |   | $            | 23.9 |              |   | $ | (775.9 | )            |   | $ | 554.3 |       
|                                                    |                                                |   |       |       |  |        |       |          |  |            |       |            |   |              |      |              |   |   |        |              |   |   |       |        |   | 





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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2002
(IN MILLIONS)

|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |       |      |       |  
|------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ----------------------------------------- | ---- | ------ | - | -------- | ---- | ---------- | ---- | ---------- | ----- | ------------ | ----- | ------------ | ---- | ---- | ---- | ------------ | ----- | ---- | - | ---- | ----- | ---- | ----- | -
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       | Wholly Owned |       | Mostly Owned |      |      |      |              |       |      |   |     
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      | Issuer     |      | Subsidiary |       | Subsidiary   |       |              |      |      |      | Consolidated
|                                                 |                                                                                   |                                                                    |                                           |      | Parent |   | of Notes |      | Guarantors |      | Guarantor  |       | Eliminations |       | Total       
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |             
|Cash flows from operating activities:            |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |      
|                                                 | Net income                                                                        |                                                                    | $                                         | 13.7 |        |   | $        | 13.7 |            |      | $          | 16.0  |              |       | $            | 2.4  |      |      | $            | (32.1 | )    |   | $    | 13.7  |     
|                                                 | Adjustments to reconcile net income to net
cash provided by operating
activities: |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |       |     
|                                                 |                                                                                   | Equity in earnings of affiliates                                   |                                           |      | (13.7  | ) |          |      | (18.4      | )    |            |       |             |       |              |      |     |      |              |       | 32.1 |   |      |       |     |      
|                                                 |                                                                                   | Depreciation and amortization                                      |                                           |      |       |   |          |      |           |      |            |       | 9.1          |       |              |      | 0.3  |      |              |       |      |   |      |       | 9.4  |      
|                                                 |                                                                                   | ESOP expense                                                       |                                           |      |       |   |          |      |           |      |            |       | 2.4          |       |              |      | 0.1  |      |              |       |      |   |      |       | 2.5  |      
|                                                 |                                                                                   | Minority interests in earnings of
consolidated entity              |                                           |      |       |   |          |      | 0.7        |      |            |       |             |       |              |      |     |      |              |       |     |   |      |       | 0.7  |      
|                                                 |                                                                                   | Deferred income taxes (benefit)                                    |                                           |      |       |   |          |      |           |      |            |       | 0.4          |       |              |      |     |      |              |       |     |   |      |       | 0.4  |      
|                                                 |                                                                                   | Reserve for professional liability risk, net                       |                                           |      |       |   |          |      |           |      |            |       | 3.1          |       |              |      |     |      |              |       |     |   |      |       | 3.1  |      
|                                                 |                                                                                   | Extraordinary loss on early retirement
of debt                     |                                           |      |       |   |          |      | 1.3        |      |            |       |             |       |              |      |     |      |              |       |     |   |      |       | 1.3  |      
|                                                 |                                                                                   | Tax benefit from stock option exercises                            |                                           |      |       |   |          |      |           |      |            |       | 0.7          |       |              |      |     |      |              |       |     |   |      |       | 0.7  |      
|                                                 |                                                                                   | Increase (decrease) in cash from
operating assets and liabilities: |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |       |      |      
|                                                 |                                                                                   |                                                                    | Accounts receivable                       |      |        |  |          |      |            |     |            |       |              | (20.4 | )            |      |      | (0.4 | )            |       |      |  |      |       |      | (20.8 | )
|                                                 |                                                                                   |                                                                    | Inventories and other current assets      |      |        |  |          |      |            |     |            |       |              | (1.3  | )            |      |      | (0.1 | )            |       |      |  |      |       |      | (1.4  | )
|                                                 |                                                                                   |                                                                    | Accounts payable and accrued expenses     |      |        |  |          |      |            | 3.7  |            |       |              | (2.3  | )            |      |      | 0.1  |              |       |      |  |      |       |      | 1.5   |  
|                                                 |                                                                                   |                                                                    | Income taxes payable                      |      |        |  |          |      |            |     |            |       |              | 12.0  |              |      |      |     |              |       |      |  |      |       |      | 12.0  |  
|                                                 |                                                                                   |                                                                    | Estimated third-party payor settlements   |      |        |  |          |      |            |     |            |       |              | 11.5  |              |      |      | (0.2 | )            |       |      |  |      |       |      | 11.3  |  
|                                                 |                                                                                   | Other                                                              |                                           |      |       |   |          |      | 0.1        |      |            |       | (0.3         | )     |              |      |     |      |              |       |     |   |      |       | (0.2 | )    
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |       |     
|                                                 |                                                                                   |                                                                    | Net cash provided by operating
activities |      |        |  |          |      |            | 1.1  |            |       |              | 30.9  |              |      |      | 2.2  |              |       |      |  |      |       |      | 34.2  |  
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |      
|Cash flows from investing activities:            |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |      
|                                                 | Purchases of property and equipment, net                                          |                                                                    |                                           |     |        |   |          |     |            |      |            | (10.0 | )            |       |              |     |      |      |              |      |      |   |      | (10.0 | )   
|                                                 | Other                                                                             |                                                                    |                                           |     |        |   |          | (0.9 | )          |      |            | 0.8   |              |       |              |     |      |      |              |      |      |   |      | (0.1  | )   
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |       |     
|                                                 |                                                                                   |                                                                    | Net cash used in investing activities     |      |        |  |          |      |            | (0.9 | )          |       |              | (9.2  | )            |      |      |     |              |       |      |  |      |       |      | (10.1 | )
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |      
|Cash flows from financing activities:            |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |      
|                                                 | Repurchases of senior subordinated notes                                          |                                                                    |                                           |     |        |   |          | (8.6 | )          |      |            |      |              |       |              |     |      |      |              |      |      |   |      | (8.6  | )   
|                                                 | Distributions                                                                     |                                                                    |                                           |     |        |   |          |     |            |      |            | 3.4   |              |       |              | (3.4 | )    |      |              |      |      |   |      |      |     
|                                                 | Proceeds from exercise of stock options                                           |                                                                    |                                           |     |        |   |          |     |            |      |            | 1.2   |              |       |              |     |      |      |              |      |      |   |      | 1.2   |     
|                                                 | Increase (decrease) in intercompany
balances with affiliates, net                 |                                                                    |                                           |     |        |   |          | 8.5  |            |      |            | (9.7  | )            |       |              | 1.2  |      |      |              |      |      |   |      |      |     
|                                                 | Other                                                                             |                                                                    |                                           |     |        |   |          | (0.1 | )          |      |            |      |              |       |              |     |      |      |              |      |      |   |      | (0.1  | )   
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |       |     
|                                                 |                                                                                   | Net cash used in financing
activities                              |                                           |      |       |   |          |      | (0.2       | )    |            |       | (5.1         | )     |              |      | (2.2 | )    |              |       |     |   |      |       | (7.5 | )    
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |      
|Change in cash and cash equivalents              |                                                                                   |                                                                    |                                          |      |        |   |         |      |            |      | 16.6       |       |              |       |             |      |      |      |             |       |      |   | 16.6 |      
|Cash and cash equivalents at beginning of
period |                                                                                   |                                                                    |                                          |      |        |   |         |      |            |      | 57.2       |       |              |       |             |      |      |      |             |       |      |   | 57.2 |      
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |       |     
|Cash and cash equivalents at end of period       |                                                                                   | $                                                                  |                                          |      |        | $ |         |      |            | $    | 73.8       |       |              | $     |             |      |      | $    |             |       |      | $ | 73.8 |      
|                                                 |                                                                                   |                                                                    |                                           |      |        |   |          |      |            |      |            |       |              |       |              |      |      |      |              |       |      |   |      |       |     





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LIFEPOINT HOSPITALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(IN MILLIONS)

|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |       |      |      |       |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | ------------------------------------- | ------------------------------------------------------------------ | --------------------------------------------------- | - | ------ | - | ----- | ---- | ---------- | ----- | ---------- | ---- | ------------ | ----- | ------ | ---- | ---- | --- | ------------ | - | ---- | ----- | ----- | ---- | ---- | ----- | -
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      | Wholly       |       | Mostly |      |      |     |              |   |      |       |      
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      | Issuer     |       | Owned      |      | Owned        |       |        |      |      |     |              |   |     
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      | of         |       | Subsidiary |      | Subsidiary   |       |        |      |      |     | Consolidated
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   | Parent |   | Notes |      | Guarantors |       | Guarantor  |      | Eliminations |       | Total 
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |       
|Cash flows from operating activities:            |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |      
|                                                 | Net income                                                                                  |                                       | $                                                                  | 8.6                                                 |   |        | $ | 8.6   |      |            | $     | 11.8       |      |              | $     | 2.1    |      |      | $   | (22.5        | ) |      | $     | 8.6   |     
|                                                 | Adjustments to reconcile net income to
net cash provided by (used in)
operating activities: |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |       |     
|                                                 |                                                                                             |                                       | Equity in earnings of affiliates                                   |                                                     |   | (8.6   | ) |       |      | (13.9      | )     |            |      |             |       |        |      |     |     |              |   | 22.5 |       |       |      |     |      
|                                                 |                                                                                             |                                       | Depreciation and amortization                                      |                                                     |   |       |   |       |      |           |       |            |      | 7.7          |       |        |      | 0.4  |     |              |   |     |       |       |      | 8.1  |      
|                                                 |                                                                                             |                                       | ESOP expense                                                       |                                                     |   |       |   |       |      |           |       |            |      | 2.5          |       |        |      | 0.1  |     |              |   |     |       |       |      | 2.6  |      
|                                                 |                                                                                             |                                       | Minority interests in earnings of
consolidated entity              |                                                     |   |       |   |       |      | 0.6        |       |            |      |             |       |        |      |     |     |              |   |     |       |       |      | 0.6  |      
|                                                 |                                                                                             |                                       | Deferred income taxes (benefit)                                    |                                                     |   |       |   |       |      |           |       |            |      | (0.5         | )     |        |      |     |     |              |   |     |       |       |      | (0.5 | )    
|                                                 |                                                                                             |                                       | Reserve for professional liability
risk, net                       |                                                     |   |       |   |       |      |           |       |            |      | 1.4          |       |        |      |     |     |              |   |     |       |       |      | 1.4  |      
|                                                 |                                                                                             |                                       | Gain on previously impaired assets                                 |                                                     |   |       |   |       |      |           |       |            |      | (0.5         | )     |        |      |     |     |              |   |     |       |       |      | (0.5 | )    
|                                                 |                                                                                             |                                       | Increase (decrease) in cash from
operating assets and liabilities: |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |       |      |      |      
|                                                 |                                                                                             |                                       |                                                                    | Accounts receivable                                 |   |        |  |       |      |            |      |            |      |              | (13.6 | )      |      |      | 0.1 |              |   |      |      |       |      |      | (13.5 | )
|                                                 |                                                                                             |                                       |                                                                    | Inventories and other current
assets                |   |        |  |       |      |            |      |            |      |              | 0.1   |        |      |      |    |              |   |      |      |       |      |      | 0.1   |  
|                                                 |                                                                                             |                                       |                                                                    | Accounts payable and accrued
expenses               |   |        |  |       |      |            | 4.0   |            |      |              | 3.3   |        |      |      | 0.1 |              |   |      |      |       |      |      | 7.4   |  
|                                                 |                                                                                             |                                       |                                                                    | Income taxes payable                                |   |        |  |       |      |            |      |            |      |              | 8.7   |        |      |      |    |              |   |      |      |       |      |      | 8.7   |  
|                                                 |                                                                                             |                                       |                                                                    | Estimated third-party payor settlements             |   |        |  |       |      |            |      |            |      |              | 14.2  |        |      |      | 0.1 |              |   |      |      |       |      |      | 14.3  |  
|                                                 |                                                                                             |                                       | Other                                                              |                                                     |   |       |   |       |      | 0.2        |       |            |      | 0.1          |       |        |      |     |     |              |   |     |       |       |      | 0.3  |      
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |       |     
|                                                 |                                                                                             |                                       |                                                                    | Net cash (used in) provided by
operating activities |   |        |  |       |      |            | (0.5  | )          |      |              | 35.2  |        |      |      | 2.9 |              |   |      |      |       |      |      | 37.6  |  
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |      
|Cash flows from investing activities:            |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |      
|                                                 | Purchases of property and equipment,
net                                                    |                                       |                                                                    |                                                    |   |        |   |      |      |            |       | (9.0       | )    |              |       | (0.4   | )    |      |     |             |   |      |       | (9.4  | )   
|                                                 | Other                                                                                       |                                       |                                                                    |                                                    |   |        |   | (0.5  | )    |            |       | 0.5        |      |              |       |       |      |      |     |             |   |      |       |      |     
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |       |     
|                                                 |                                                                                             | Net cash used in investing activities |                                                                    |                                                     |  |        |   |       | (0.5 | )          |       |            | (8.5 | )            |       |        | (0.4 | )    |     |              |  |      |       |       | (9.4 | )   
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |      
|Cash flows from financing activities:            |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |      
|                                                 | Proceeds from stock offering, net                                                           |                                       |                                                                    |                                                    |   |        |   | 100.4 |      |            |       |           |      |              |       |       |      |      |     |             |   |      |       | 100.4 |     
|                                                 | Repayments of bank debt                                                                     |                                       |                                                                    |                                                    |   |        |   | (22.2 | )    |            |       |           |      |              |       |       |      |      |     |             |   |      |       | (22.2 | )   
|                                                 | Distributions                                                                               |                                       |                                                                    |                                                    |   |        |   |      |      |            |       | 1.4        |      |              |       | (1.4   | )    |      |     |             |   |      |       |      |     
|                                                 | Proceeds from exercise of stock options                                                     |                                       |                                                                    |                                                    |   |        |   |      |      |            |       | 0.3        |      |              |       |       |      |      |     |             |   |      |       | 0.3   |     
|                                                 | Increase (decrease) in intercompany
balances with affiliates, net                           |                                       |                                                                    |                                                    |   |        |   | (77.4 | )    |            |       | 78.5       |      |              |       | (1.1   | )    |      |     |             |   |      |       |      |     
|                                                 | Other                                                                                       |                                       |                                                                    |                                                    |   |        |   | 0.2   |      |            |       |           |      |              |       |       |      |      |     |             |   |      |       | 0.2   |     
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |       |     
|                                                 |                                                                                             |                                       | Net cash provided by (used in)
financing activities                |                                                     |   |       |   |       |      | 1.0        |       |            |      | 80.2         |       |        |      | (2.5 | )   |              |   |     |       |       |      | 78.7 |      
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |      
|Change in cash and cash equivalents              |                                                                                             |                                       |                                                                   |                                                     |   |        |  |       |      |            | 106.9 |            |      |              |      |        |      |      |    |              |   |      | 106.9 |      
|Cash and cash equivalents at beginning of
period |                                                                                             |                                       |                                                                   |                                                     |   |        |  |       |      |            | 39.7  |            |      |              |      |        |      |      |    |              |   |      | 39.7  |      
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |       |     
|Cash and cash equivalents at end of period       |                                                                                             | $                                     |                                                                   |                                                     |   | $      |  |       |      | $          | 146.6 |            |      | $            |      |        |      | $    |    |              |   | $    | 146.6 |      
|                                                 |                                                                                             |                                       |                                                                    |                                                     |   |        |   |       |      |            |       |            |      |              |       |        |      |      |     |              |   |      |       |       |     





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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, 2002, we operated 23 general, acute care hospitals in the
states of Alabama, Florida, Kansas, Kentucky, Louisiana, Tennessee, Utah and
Wyoming.

Forward-Looking Statements

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



| |  |  | the highly competitive nature of the healthcare business
including the competition to recruit general and specialized
physicians;                                                                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the efforts of insurers, healthcare providers and others to
contain healthcare costs;                                                                                                                                    
|
| |  |  | possible changes in the Medicare program that may further
limit reimbursements to healthcare providers and insurers;                                                                                                     
|
| |  |  | the ability to attract and retain qualified management and
personnel, including physicians, nurses and technicians, consistent
with our expectations and targets;                                                        
|
| |  |  | changes in federal, state or local regulation affecting the healthcare industry;                                                                                                                                         
|
| |  |  | the possible enactment of federal or state healthcare reform;                                                                                                                                                            
|
| |  |  | the possibility that any favorable governmental reimbursement
changes will be delayed or abandoned due to the focus of Congress on
the recent terrorist attacks and the resulting reallocation of
governmental resources;
|
| |  |  | our ability to acquire hospitals on favorable terms and to
successfully complete budgeted capital improvements of our existing
facilities;                                                                               
|
| |  |  | liabilities and other claims asserted against us;                                                                                                                                                                        
|
| |  |  | uncertainty associated with the HIPAA regulations;                                                                                                                                                                       
|
| |  |  | the ability to enter into, renegotiate and renew payor
arrangements on acceptable terms;                                                                                                                                 
|
| |  |  | the availability and terms of capital to fund our business strategy;                                                                                                                                                     





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| |  |  | the availability, cost and terms of insurance coverage;                                                                                                                                                                                                                                                                                                                                                                                       
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | implementation of our business strategy and development plans;                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | our ongoing efforts to monitor, maintain and comply with
applicable laws, regulations, policies and procedures including
those required by the corporate integrity agreement that we entered
into with the government in December 2000 (as amended in May 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;
|
| |  |  | the ability to increase patient volumes and control the costs
of providing services and supply costs;                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | claims and legal actions relating to professional liabilities
and other matters;                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | successful development (or license) of software and
management information systems used for effective claims processing;                                                                                                                                                                                                                                                                                                                      
|
| |  |  | limitations placed on us to preserve the tax treatment of the
distribution of our common stock from HCA;                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | fluctuations in the market value of our common stock and
resulting costs to us to administer our ESOP;                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | changes in accounting practices;                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | changes in general economic conditions; and                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  |  | other 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 unduly
rely on such forward-looking statements when evaluating the information
presented in this report.

Results of Operations

Revenue/Volume Trends

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



| |  |  | Expanding Service Offerings. We believe our efforts to
improve the quality and broaden the scope of healthcare services
available at our facilities will lead to increased patient volumes.
Recruiting and retaining both general practitioners and specialists
for our non-urban communities is a key to the success of these
efforts. Between January 1, 1998 and March 31, 2002, we recruited
233 physicians, of which approximately 62% are specialists. Adding
new physicians should help increase both inpatient and outpatient
volumes which, in turn, should increase revenues. Continuing to 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 stay within their
communities rather than leaving town for healthcare services.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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| |  |  | Improving Managed Care Position. We believe we have been able
to negotiate contract terms that are generally more favorable for
our facilities than terms available in urban markets.                                                                                                                                                                                                                                                                                                                                
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Aging U.S. Population. In general, the population of the
United States and of the communities that we serve is aging. At the
end of 2001, approximately 13% of the U.S. population was 65 years
old or older compared to 11% of the population at the end of 1980.
This aging trend is projected to continue so that by 2025,
approximately 18% of the U.S. population is expected to be older
than 65. Generally, the older population tends to use healthcare
services more frequently than the younger population.
|
| |  |  | 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 impacted in part by the following factors:



| |  |  | Revenues 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 92.3% and 91.3% of total admissions
for the three months ended March 31, 2002 and 2001, respectively.
These payors receive significant discounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Our revenue is heavily concentrated in Kentucky and Tennessee, which makes us particularly sensitive
to regulatory and economic changes in those states. As of March 31, 2002, we operated 23 hospitals with seven located in the Commonwealth of Kentucky and seven
located in the State of Tennessee. Based on those 23 hospitals, we generated 37.5% of our revenue from our Kentucky hospitals (including 4.2% from state-sponsored
Medicaid programs) and 24.0% from our Tennessee hospitals (including 3.2% from state-sponsored TennCare programs) for the three months
ended March 31, 2002. Some managed care organizations that participate in the Medicaid programs of Tennessee and Kentucky have been placed in receivership or encountered other financial difficulties in the past. Other managed care organizations in these states may encounter similar difficulties in paying claims in the future.
|
| |  |  | 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 patient revenues was 48.6% and 46.2% for the three months
ended March 31, 2002 and 2001, respectively. On a same facility basis, net outpatient revenues as a percentage of total patient revenues was 47.8% and 46.2% for the three months ended March 31, 2002 and 2001, respectively.         

Cost Containment

We seek to control costs by, among other things, reducing labor costs by
improving labor productivity and decreasing the use of contracted labor,
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. For the
three months ended March 31, 2002 compared to the three months ended March 31,
2001, total operating expenses decreased as a percentage of revenue to 76.6%
from 78.0%. 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.





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##### Table of Contents



While we were able to control our costs during the three months ended
March 31, 2002, there is no guarantee that we can contain certain costs in the
future. Due to the general shortage of nurses and technicians in the industry
we may experience an increase in salaries and benefits expense as we may be
forced to hire additional contract health professionals.

In addition, the healthcare industry has recently experienced an increase
in the cost of all insurance lines, especially professional and general
liability insurance. We have mitigated a portion of these increases for fiscal
2002 by increasing our self-insured retention levels for professional and
general liabilities. We currently have no information that would lead us to
believe that this trend is only temporary in nature and thus there is no
assurance that these costs will not have a material adverse affect 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 exacerbated by our inability to
control these trends and the associated risks. To maintain or improve operating
margins in the future, we must, among other things, increase patient volumes
while controlling the costs of providing services. If we are not able to
achieve these improvements and the trend toward declining reimbursements and
payments continues, results of operations and cash flow will deteriorate.

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 should be mitigated by the expanded financial base of our existing
hospitals and the allocation of corporate overhead among a larger number of
hospitals.





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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, 2002 and 2001 (dollars in millions except for revenues per equivalent admission):

|                                                                      |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|--------------------------------------------------------------------- |  | ---------------------------- | ----- | -------- |  | ------ | ----- | -------- |  | - | ----- | ---- |  |  | ----- | -
|                                                                      |  | THREE MONTHS ENDED MARCH 31,
|                                                                      |  |                             
|                                                                      |  | 2002                         |       | 2001    
|                                                                      |  |                              |       |         
|                                                                      |  |                              |       |          |  | % OF   |       |          |  |   |       | % OF
|                                                                      |  | AMOUNT                       |       | REVENUES |  | AMOUNT |       | REVENUES
|                                                                      |  |                              |       |          |  |        |       |         
|Revenues                                                              |  | $                            | 181.6 |          |  |        | 100.0 | %        |  | $ | 154.3 |      |  |  | 100.0 | %
|                                                                     
|Salaries and benefits (a)                                             |  |                              | 70.7  |          |  |        | 39.0  |          |  |   | 60.3  |      |  |  | 39.1  |  
|Supplies (b)                                                          |  |                              | 22.9  |          |  |        | 12.6  |          |  |   | 19.6  |      |  |  | 12.7  |  
|Other operating expenses (c)                                          |  |                              | 32.2  |          |  |        | 17.7  |          |  |   | 28.4  |      |  |  | 18.4  |  
|Provision for doubtful accounts                                       |  |                              | 13.2  |          |  |        | 7.3   |          |  |   | 12.0  |      |  |  | 7.8   |  
|                                                                      |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|                                                                      |  |                              | 139.0 |          |  |        | 76.6  |          |  |   | 120.3 |      |  |  | 78.0  |  
|                                                                      |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|EBITDA (d)                                                            |  |                              | 42.6  |          |  |        | 23.4  |          |  |   | 34.0  |      |  |  | 22.0  |  
|                                                                      |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Depreciation and amortization                                         |  |                              | 9.4   |          |  |        | 5.2   |          |  |   | 8.1   |      |  |  | 5.3   |  
|Interest expense, net                                                 |  |                              | 4.1   |          |  |        | 2.2   |          |  |   | 6.5   |      |  |  | 4.2   |  
|ESOP expense                                                          |  |                              | 2.5   |          |  |        | 1.4   |          |  |   | 2.6   |      |  |  | 1.7   |  
|Gain on previously impaired assets                                    |  |                              |      |          |  |        |      |          |  |   | (0.5  | )    |  |  | (0.4  | )
|                                                                      |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before minority interests,
income taxes and extraordinary
item |  |                              | 26.6  |          |  |        | 14.6  |          |  |   | 17.3  |      |  |  | 11.2  |  
|Minority interests in earnings of
consolidated entity                 |  |                              | 0.7   |          |  |        | 0.4   |          |  |   | 0.6   |      |  |  | 0.4   |  
|                                                                      |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before income taxes and
extraordinary item                     |  |                              | 25.9  |          |  |        | 14.2  |          |  |   | 16.7  |      |  |  | 10.8  |  
|Provision for income taxes                                            |  |                              | 11.4  |          |  |        | 6.2   |          |  |   | 8.1   |      |  |  | 5.2   |  
|                                                                      |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Income before extraordinary item                                      |  |                              | 14.5  |          |  |        | 8.0   |          |  |   | 8.6   |      |  |  | 5.6   |  
|Extraordinary loss on early
retirement of debt, net                   |  |                              | 0.8   |          |  |        | 0.5   |          |  |   |      |      |  |  |      |  
|                                                                      |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  
|Net income                                                            |  | $                            | 13.7  |          |  |        | 7.5   | %        |  | $ | 8.6   |      |  |  | 5.6   | %
|                                                                      |  |                              |       |          |  |        |       |          |  |   |       |      |  |  |       |  

|                                  |  |                              |        |        |  |                 |        |  |  |  |      |  
|--------------------------------- |  | ---------------------------- | ------ | ------ |  | --------------- | ------ |  |  |  | ---- | -
|                                  |  | THREE MONTHS ENDED MARCH 31,
|                                  |  |                             
|                                  |  | 2002                         |        | 2001   |  | % CHANGES      
|                                  |  | AMOUNT                       |        | AMOUNT |  | FROM PRIOR YEAR
|                                  |  |                              |        |        |  |                
|Revenues                          |  | $                            | 181.6  |        |  | $               | 154.3  |  |  |  | 17.7 | %
|Admissions(e)                     |  |                              | 20,551 |        |  |                 | 18,900 |  |  |  | 8.7  |  
|Equivalent Admissions(f)          |  |                              | 37,588 |        |  |                 | 33,075 |  |  |  | 13.6 |  
|Revenues per equivalent admission |  | $                            | 4,832  |        |  | $               | 4,664  |  |  |  | 3.6  |  
|Outpatient factor (f)             |  |                              | 1.83   |        |  |                 | 1.75   |  |  |  | 4.6  |  
|Emergency room visits (g)         |  |                              | 84,987 |        |  |                 | 77,573 |  |  |  | 9.6  |  
|Outpatient surgeries (h)          |  |                              | 16,166 |        |  |                 | 13,555 |  |  |  | 19.3 |  
|Total surgeries (h)               |  |                              | 21,818 |        |  |                 | 18,597 |  |  |  | 17.3 |  
|Patient days                      |  |                              | 84,117 |        |  |                 | 76,953 |  |  |  | 9.3  |  
|Average length of stay (days) (j) |  |                              | 4.1    |        |  |                 | 4.1    |  |  |  |     |  
|                                  |  |                              |        |        |  |                 |        |  |  |  |      |  
|Same hospital: (i)                |  |                              |        |        |  |                 |        |  |  |  |      |  
|                                  |  |                              |        |        |  |                 |        |  |  |  |      |  
|Revenues                          |  | $                            | 166.4  |        |  | $               | 154.1  |  |  |  | 8.0  |  
|Admissions (e)                    |  |                              | 18,743 |        |  |                 | 18,900 |  |  |  | (0.8 | )
|Equivalent Admissions(f)          |  |                              | 33,775 |        |  |                 | 33,075 |  |  |  | 2.1  |  
|Revenues per equivalent admission |  | $                            | 4,926  |        |  | $               | 4,659  |  |  |  | 5.7  |  
|Outpatient factor (f)             |  |                              | 1.80   |        |  |                 | 1.75   |  |  |  | 2.9  |  
|Emergency room visits (g)         |  |                              | 76,758 |        |  |                 | 77,573 |  |  |  | (1.1 | )
|Outpatient surgeries (h)          |  |                              | 15,041 |        |  |                 | 13,555 |  |  |  | 11.0 |  
|Total surgeries (h)               |  |                              | 20,200 |        |  |                 | 18,597 |  |  |  | 8.6  |  
|Patient days                      |  |                              | 76,656 |        |  |                 | 76,953 |  |  |  | (0.4 | )
|Average length of stay (days) (j) |  |                              | 4.1    |        |  |                 | 4.1    |  |  |  |     |  





|(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.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents



|(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) |  | EBITDA is defined as income before depreciation and
amortization, interest expense, gain on previously impaired assets,
ESOP expense, minority interests in earnings of consolidated
entities, extraordinary items and income taxes. EBITDA is commonly
used as an analytical indicator within the health care industry and
also serves as a measure of leverage capacity and debt service
ability. EBITDA should not be considered as a measure of financial
performance under accounting principles generally accepted in the
United States and the items excluded from EBITDA are significant
components in understanding and assessing financial performance.
EBITDA should not be considered in isolation or as an alternative to
net income, cash flows generated by operating, investing or
financing activities or other financial statement data presented in
the condensed consolidated financial statements as an indicator of
financial performance or liquidity. Because EBITDA is not a
measurement determined in accordance with accounting principles
generally accepted in the United States and is susceptible to
varying calculations, EBITDA as presented may not be comparable to
other similarly titled measures of other companies.
|   
|(e) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(f) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(g) |  | Represents the total number of hospital-based emergency room
visits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(h) |  | Outpatient surgeries are those surgeries that do not require
admission to our hospitals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(i) |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(j) |  | Represents the average number of days an admitted patient stays in our hospitals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

For the Three Months Ended March 31, 2002 and 2001

Revenues increased 17.7% to $181.6 million for the three months ended
March 31, 2002 compared to $154.3 million for the three months ended March 31,
2001 primarily as a result of our two acquisitions during the fourth quarter of
2001 and an 8.0% increase in same hospital revenues. The 2001 acquisitions
increased the growth in our actual revenues by $15.0 million while same
hospital revenues increased by $12.3 million. The 8.0% increase in same
hospital revenues resulted primarily from a 2.1% increase in same hospital
equivalent admissions and a 5.7% increase in same hospital revenues per
equivalent admission. In addition, total surgeries and outpatient surgeries





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##### Table of Contents



increased 8.6% and 11.0%, respectively, on a same hospital basis for the
three months ended March 31, 2002 over the same period last year. The growth in
outpatient surgeries increased our revenue; however, these outpatient revenues
lower our growth in revenues per equivalent admission as revenues from
outpatient services are generally lower than inpatient services.

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

Salaries and benefits decreased as a percentage of revenues to 39.0% for
the three months ended March 31, 2002 from 39.1% for the three months ended
March 31, 2001 primarily as a result of improvements in labor productivity and
an increase in revenues per equivalent admission. Man-hours per equivalent
admission decreased 1.7% over the same period last year. The decrease in
salaries and benefits as a percentage of revenues was partially offset by a
5.0% increase in salaries and benefits per man-hour for the three months ended
March 31, 2002 compared to the three months ended March 31, 2001. On a same
hospital basis, salaries and benefits decreased as a percentage of revenues to
38.5% for the three months ended March 31, 2002 from 39.2% over the same period
last year.

Supply costs decreased slightly as a percentage of revenues to 12.6% for
the three months ended March 31, 2002 from 12.7% for the three months ended
March 31, 2001 primarily as a result of the benefit from group purchasing and
an increase in our net revenues per equivalent admission. However, the cost of
supplies per equivalent admission increased 2.7% primarily as a result of
increases in the number of surgeries performed by us during the three months
ended March 31, 2002 compared to the three months ended March 31, 2001 as
supply costs incurred in connection with surgeries are higher than supply costs
incurred for other procedures. Total surgeries increased 17.3% over the same
period last year. On a same hospital basis, supply costs decreased as a
percentage of revenues to 12.4% for the three months ended March 31, 2002 from
12.7% over the same period last year.

Other operating expenses decreased as a percentage of revenues to 17.7%
for the three months ended March 31, 2002 from 18.4% for the three months ended
March 31, 2001. The decrease was primarily the result of reductions in certain
professional fees, lower utility costs due to a mild winter, and control of
physician recruiting costs. On a same hospital basis, other operating expenses
decreased as a percentage of revenues to 17.8% for the three months ended March
31, 2002 from 18.3% over the same period last year.

Provision for doubtful accounts decreased as a percentage of revenues to
7.3% for the three months ended March 31, 2002 from 7.8% for the three months
ended March 31, 2001 primarily as a result of an improvement in collections. On
a same hospital basis, provision for doubtful accounts decreased as a
percentage of revenues to 7.2% for the three months ended March 31, 2002 from
7.8% over the same period last year.

Depreciation and amortization expense increased to $9.4 million for the
three months ended March 31, 2002 compared to $8.1 million for the three months
ended March 31, 2001 primarily as a result of our two acquisitions during the
fourth quarter of 2001 and the capital expenditures during the past year. This
was partially offset by the cessation of goodwill amortization required by SFAS
142, which was effective January 1, 2002. Goodwill amortization during the three months
ended March 31, 2001 was $0.4 million.

Net interest expense decreased to $4.1 million for the three months ended
March 31, 2002 from $6.5 million for the three months ended March 31, 2001.
This decrease was primarily the result of our repayment of the remaining bank
debt borrowings outstanding during the first half of 2001.





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##### Table of Contents



ESOP expense decreased slightly to $2.5 million for the three months ended
March 31, 2002 from $2.6 million for the three months ended March 31, 2001.
This decrease was primarily because
of a lower average fair market value of our common stock for the three
months ended March 31, 2002 compared to the same period last year. We recognize
ESOP expense based on the average fair market value of the shares committed to
be released during the period.

During the three months ended March 31, 2001, we recorded a $0.5 million
pre-tax gain related to the favorable settlement of the sale of a facility for
which we previously recorded an impairment charge.

Minority interests in earnings of consolidated entity increased to $0.7
million for the three months ended March 31, 2002 compared to $0.6 million for
the three months ended March 31, 2001 primarily because of an increase in the
pre-tax income of our non-wholly owned hospital.

The provision for income taxes increased to $11.4 million for the three
months ended March 31, 2002 compared to $8.1 million for the three months ended
March 31, 2001. These provisions reflect effective income tax rates of 44.3% for the three
months ended March 31, 2002 compared to 48.4% for the three months ended March
31, 2001. The decrease in the effective rate resulted from the decrease in ESOP
expense and higher pre-tax income.

Net income increased to $13.7 million for the three months ended March 31,
2002 compared to $8.6 million for the three months ended March 31, 2001 because
of the reasons described above.

Liquidity and Capital Resources

Our cash and cash equivalents increased to $73.8 million at March 31,
2002, from $57.2 million at December 31, 2001. The increase is primarily from
$34.2 million provided by operating activities offset in part by $10.1 million
and $7.5 million used in investing and financing activities, respectively.

Our working capital increased to $98.4 million at March 31, 2002 compared
to $82.7 million at December 31, 2001, and our cash provided by operating
activities decreased to $34.2 million in the three months ended March 31, 2002
from $37.6 million in the same period last year. The increase in working
capital resulted primarily from an increase in our revenues which led to an increase in accounts receivable and was partially offset by increases in
income taxes payable and estimated third-party payor settlements. The decrease
in cash provided by operating activities was primarily the result of a timing
difference in accrued salaries and benefits and a larger increase in accounts
receivable due to higher revenues during the three months ended March 31, 2002
compared to the same period last year.

The use of our cash in investing activities increased to $10.1 million in
the three months ended March 31, 2002 from $9.4 million in the same period last
year primarily as a result of an increase in capital expenditures. Capital
expenditures increased to $10.0 million during the three months ended March 31,
2002 compared to $9.4 million during the same period last year. At March 31,
2002, we had projects under construction that had an estimated additional cost
to complete and equip of approximately $47.1 million. We anticipate that these
projects will be completed over the next thirty-six months. We anticipate total
capital expenditures in 2002 of approximately $65 million, excluding
acquisitions. We anticipate funding these expenditures through cash provided by
operating activities and borrowings under our revolving credit facility.

In response to the increasing demand for outpatient care, we are
reconfiguring some of our hospitals to more effectively accommodate outpatient
services and restructuring existing surgical capacity in some of our hospitals
to permit additional outpatient volume and a greater variety of outpatient
services.

We used cash in financing activities of $7.5 million during the three
months ended March 31, 2002 compared to cash provided by financing activities
of $78.7 million during the same period last year. During the three months
ended March 31, 2002, we repurchased $7.5 million of our 10 3/4% senior
subordinated notes due 2009 and paid a $1.1 million premium on these
repurchases. During
the three months ended March 31, 2001, we received $100.4 million from our
public offering of common stock and we repaid $22.2 million of bank debt.





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##### Table of Contents



Subsequent to March 31, 2002, we repurchased an additional $57.5 million
of our senior subordinated notes and paid $9.8 million in premiums related to
these additional repurchases.

We borrowed $30 million on May 1, 2002 from our $200 million revolving
credit facility. In addition, as of May
1, 2002, we had a $19.8 million letter of credit which reduced the amount
available under our revolving credit facility.

The following table reflects a summary of our obligations and commitments
outstanding at March 31, 2002:

|                                             |  |               |       |        |  |           |      |           |  |               |      |  |  |   |     |  |  |   |       | 
|-------------------------------------------- |  | ------------- | ----- | ------ |  | --------- | ---- | --------- |  | ------------- | ---- |  |  | - | --- |  |  | - | ----- | 
|CONTRACTUAL CASH OBLIGATIONS                 |  |               |       |        |  | LESS THAN |      |           |  |               |      |  |  |   |     |  |  |  
|(PAYMENTS DUE BY PERIOD)                     |  | TOTAL         |       | 1 YEAR |  | 1-3 YEARS |      | 4-5 YEARS |  | AFTER 5 YEARS
|                                             |  |               |       |        |  |           |      |           |  |              
|                                             |  | (in millions)
|Long-term debt                               |  | $             | 142.5 |        |  | $         |     |           |  | $             |     |  |  | $ |    |  |  | $ | 142.5 | 
|Lease obligations(a)                         |  |               | 15.5  |        |  |           | 4.1  |           |  |               | 5.3  |  |  |   | 2.5 |  |  |   | 3.6   | 
|Other long-term obligations                  |  |               | 0.1   |        |  |           |     |           |  |               | 0.1  |  |  |   |    |  |  |   |      | 
|                                             |  |               |       |        |  |           |      |           |  |               |      |  |  |   |     |  |  |   |       | 
|Subtotal                                     |  | $             | 158.1 |        |  | $         | 4.1  |           |  | $             | 5.4  |  |  | $ | 2.5 |  |  | $ | 146.1 | 
|                                             |  |               |       |        |  |           |      |           |  |               |      |  |  |   |     |  |  |   |       | 
|OTHER COMMERCIAL COMMITMENTS                 |  |               |       |        |  |           |      |           |  |              
|(AMOUNT OF COMMITMENT EXPIRATION PER PERIOD) |  |               |       |        |  |           |      |           |  |              
|                                             |  |              
|Guarantees of surety bonds                   |  | $             | 0.5   |        |  | $         | 0.5  |           |  | $             |     |  |  | $ |    |  |  | $ |      | 
|Letters of credit                            |  |               | 19.8  |        |  |           | 19.8 |           |  |               |     |  |  |   |    |  |  |   |      | 
|Capital expenditure commitments              |  |               | 11.4  |        |  |           | 3.2  |           |  |               | 8.2  |  |  |   |    |  |  |   |      | 
|Physician commitments                        |  |               | 18.3  |        |  |           | 11.6 |           |  |               | 4.4  |  |  |   | 2.3 |  |  |   |      | 
|                                             |  |               |       |        |  |           |      |           |  |               |      |  |  |   |     |  |  |   |       | 
|Subtotal                                     |  | $             | 50.0  |        |  | $         | 35.1 |           |  | $             | 12.6 |  |  | $ | 2.3 |  |  | $ |      | 
|                                             |  |               |       |        |  |           |      |           |  |               |      |  |  |   |     |  |  |   |       | 
|Total obligations and commitments            |  | $             | 208.1 |        |  | $         | 39.2 |           |  | $             | 18.0 |  |  | $ | 4.8 |  |  | $ | 146.1 | 
|                                             |  |               |       |        |  |           |      |           |  |               |      |  |  |   |     |  |  |   |       | 

(a)  Includes capital and operating lease obligations; capital lease obligations
are not material.

We are in compliance with all covenants and other requirements set forth in
our credit agreements and indentures. 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, 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 or
special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. As such, 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.





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##### Table of Contents



Our business plan 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 for strategic reasons or to further strengthen
our financial position. We may, from time to time in the future, acquire senior
subordinated notes in the open market. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders.

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

Impact of Recently Issued Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 141, Business
Combinations, and SFAS 142, Goodwill and Other Intangible Assets, (the
Statements). These Statements make significant changes to the accounting for
business combinations, goodwill and intangible assets.

SFAS 141 eliminates the pooling-of-interests method of accounting for
business combinations. In addition, it further clarifies the criteria for
recognition of intangible assets separately from goodwill. SFAS 141 was
effective for transactions completed subsequent to June 30, 2001. The
application of SFAS 141 did not have a material effect on our results of
operations or financial position.

Under SFAS 142, goodwill and intangible assets with indefinite lives are
no longer amortized but are reviewed at least annually for impairment. The
amortization provisions of SFAS 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, we are required to adopt SFAS 142 effective
January 1, 2002. Application of the non-amortization provisions of SFAS 142 for
goodwill would have resulted in an increase in income before extraordinary
items and net income of approximately $0.4 million ($0.3 million, after-tax or
$0.01 per diluted share) for the three months ended March 31, 2001. Pursuant to
SFAS 142, we will complete our transition impairment tests of goodwill during
the second quarter of 2002. We anticipate no impairment and will perform our
initial annual impairment test later in 2002.

SFAS 143, Accounting for Asset Retirement Obligations, was issued in
August 2001 by the FASB and is effective for financial statements issued for
fiscal years beginning after June 15, 2002. Earlier application is encouraged.
SFAS 143 establishes accounting standards for recognition and measurement of a
liability for an asset retirement obligation and the associated retirement
costs. SFAS 143 applies to all entities and to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development and (or) the normal operation of a long-lived asset,
except for certain obligations of lessees. We do not expect SFAS 143 to have a
material effect on our results of operations or financial position.

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

In April 2002, the FASB issued SFAS 145, Rescission of FASB Statements 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections. Under certain provisions of SFAS 145, gains and losses related to the extinguishment of debt should
no longer be segregated on the income statement as extraordinary items net of the effects of income taxes. Instead, those gains and losses
should be included as a component of income before income taxes. The provisions of SFAS 145 are effective for fiscal years beginning
after May 15, 2002 with early adoption encouraged. Any gain or loss on extinguishment of debt that was classified
as an extraordinary item in prior periods presented that does not meet the criteria in Accounting Principles Board Opinion No. 30 for
classifications as an extraordinary item should be reclassified upon adoption. Had we adopted SFAS 145 in the first quarter of fiscal year 2002,
the extraordinary loss on early retirement of debt of $1.3 million, gross of the $0.5 million effect of income taxes, would have been reflected in income before income taxes. There would
be no resulting change in net income.





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Contingencies

HCA Investigations, Litigation and Indemnification Rights

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

HCA is a defendant in several qui tam actions, or actions brought by
private parties, known as relators, on behalf of the United States of America,
which have been unsealed and served on HCA. The actions allege, in general,
that HCA and certain subsidiaries and/or affiliated partnerships violated the
False Clams Act, 31 U.S.C. ss. 3729 et seq., for improper claims submitted to
the government for reimbursement. The lawsuits generally seek three times the
amount of damages caused to the United States by the submission of any Medicare
or Medicaid false claims presented by the defendants to the federal government,
civil penalties of not less than $5,500 nor more than $11,000 for each such
Medicare or Medicaid claim, attorneys fees and costs. HCA has disclosed that,
on March 15, 2001, the Department of Justice filed a status report setting
forth the governments decisions regarding intervention in existing qui tam
actions against HCA and filed formal complaints for those suits in which the
government has intervened. HCA stated that, of the original 30 qui tam actions,
the Department of Justice remains active and has elected to intervene in eight
actions. HCA has also disclosed that it is aware of additional qui tam actions
that remain under seal and believes that there may be other sealed qui tam
cases of which it is unaware.

Based on our review of HCAs public filings, we understand that, in
December 2000, HCA entered into a Plea Agreement with the Criminal Division of
the Department of Justice and various U.S. Attorneys Offices (which we will
refer to as the plea agreement) and a Civil and Administrative Settlement
Agreement with the Civil Division of the Department of Justice (which we will
refer to as the civil agreement). Based on our review of HCAs public filings,
we understand that the agreements resolve 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. Pursuant to the plea agreement, HCA
paid the government $95 million during the first quarter of 2001. The civil
agreement was approved by the Federal District Court of the District of
Columbia in August 2001. Pursuant to the civil agreement, HCA agreed to pay the
government $745 million plus interest, which was paid in the third quarter of
2001. Based on our review of HCAs public filings, we understand that certain
civil issues are not covered by the civil agreement and remain outstanding,
including claims related to cost reports and physician relations issues. The
plea agreement and the civil agreement relate only to conduct that was the
subject of the federal investigations resolved in the agreements and do not
resolve various qui tam actions 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.

HCA has agreed to indemnify us for any losses, other than consequential
damages, arising from the pending governmental investigations of HCAs business
practices prior to the date of the distribution and losses arising from legal
proceedings, present or future, related to the investigation or actions engaged
in before the distribution that relate to the investigation. HCA has also
agreed that, in the event that any hospital owned by us at the time of the
spin-off is permanently excluded from participation in the Medicare and
Medicaid programs as a result of the proceedings described





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above, then HCA will make a cash payment to us, in an amount (if positive)
equal to five times the excluded hospitals 1998 income from continuing
operations before depreciation and amortization, interest expense, management
fees, minority interests and income taxes, as set forth on a schedule to the
distribution agreement, less the net proceeds of the sale or other disposition
of the excluded hospital. However, we could be held responsible for any claims
that are not covered by the agreements reached with the Federal government or
for which HCA is not required to, or fails to, indemnify us. In addition,
should HCA be unable to fulfill its obligations with the Federal government,
the Company could ultimately be held responsible specifically for any
settlement related to the former HCA hospitals operated by the Company. If
indemnified matters were asserted successfully against us or any of our
facilities, and HCA failed to meet its indemnification obligations, then this
event could have a material adverse effect on our business, financial
condition, results of operations or prospects.

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

Americans with Disabilities Act Claim

On January 12, 2001, Access Now, Inc., a disability rights organization,
filed a class action lawsuit against each of our hospitals alleging
non-compliance with the accessibility guidelines under the Americans with
Disabilities Act. The lawsuit, filed in the United States District Court for
the Eastern District of Tennessee does not seek any monetary damages but,
instead, seeks only injunctive relief requiring facility modification, where
necessary, to meet the ADA 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. We intend to vigorously defend the
lawsuit, recognizing our obligation to correct any deficiencies in order to
comply with the ADA.

General Liability Claims

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

Corporate Integrity Agreement

In December 2000, we 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 May 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 us to
significant monetary penalties.

Physician Commitments

We have committed to provide certain financial assistance pursuant to
recruiting agreements with various physicians practicing in the communities in
which we serve. In consideration for a physician relocating to one of its
communities and agreeing to engage in private practice for the benefit of the
respective community, we may loan certain amounts of money to a physician,
normally over a period of one year, to assist in establishing his or her
practice. We have committed to advance





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amounts of approximately $18.3 million at March 31, 2002. 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 prorata over a period of 48 months contingent upon the
physician continuing to practice in the respective community.

Acquisitions

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

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.

Unfiled Medicare Cost Reports

Hospitals participating in the Medicare and some Medicaid programs,
whether paid on a reasonable cost basis or under a Prospective Payment System, 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, the due dates of all Medicare cost reports have been extended
due to a delay in receiving certain government reports. We anticipate filing
several cost reports with extended due dates during the later half of 2002. Because
of the extensions, the magnitude of potential adjustments and changes in
estimates is significantly greater at March 31, 2002 than in recent periods.




Item 3: Quantitative and Qualitative Disclosures about Market Risk

During the three months ended March 31, 2002 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,
2001.





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##### Table of Contents






Part II: Other Information




Item 6: Exhibits and Reports on Form 8-K

(a)  List of Exhibits:

|               |  |                                                                        
|-------------- |  | -----------------------------------------------------------------------
|EXHIBIT NUMBER |  | DESCRIPTION                                                            
|               |  |                                                                        
|3.1            |  | Certificate of Incorporation of LifePoint Hospitals, Inc. (i)          
|               |  |                                                                        
|3.2            |  | Bylaws of LifePoint Hospitals, Inc. (i)                                
|               |  |                                                                        
|3.3            |  | Certificate of Incorporation of LifePoint Hospitals Holdings, Inc. (ii)
|               |  |                                                                        
|3.4            |  | Bylaws of LifePoint Hospitals Holdings, Inc. (ii)                      
|               |  |                                                                        
|10.1           |  | Form of Amendment to the Corporate Integrity Agreement                 



---

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



| |  | (b)      Reports on Form 8-K filed during the three months ended March
31, 2002:
| |  | --------------------------------------------------------------------------------

On January 7, 2002, we furnished information pursuant to Item 9 of Form
8-K announcing our participation in the J.P. Morgan H & Q 20th Annual
Healthcare Conference held January 7  10, 2002 in San Francisco, CA.

On January 22, 2002, we furnished information pursuant to Item 9 of Form
8-K concerning the webcast of our fourth quarter 2001 and year-end 2001
earnings results.

On February 5, 2002, we furnished pursuant to Item 9 of Form 8-K copies of
our two press releases issued on February 4, 2002. The first press release
contained our participation in an investor conference. The second press release
contained our fourth quarter 2001 and year-end 2001 earnings results.





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##### Table of Contents






SIGNATURES

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

|                  |  |                                                  
|----------------- |  | -------------------------------------------------
|                  |  | LifePoint Hospitals, Inc.                        
|                  |  |                                                  
|Date: May 7, 2002 |  | /s/Michael J. Culotta                            
|                  |  |                                                  
|                  |  | Michael J. Culotta                               
|                  |  | Senior Vice President and Chief Financial Officer
|                  |  | (Principal Financial and Accounting Officer)     
|                  |  |                                                  
|                  |  | LifePoint Hospitals Holdings, Inc.               
|                  |  |                                                  
|Date: May 7, 2002 |  | /s/Michael J. Culotta                            
|                  |  |                                                  
|                  |  | Michael J. Culotta                               
|                  |  | Senior Vice President and Chief Financial Officer
|                  |  | (Principal Financial and Accounting Officer)     





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##### Table of Contents



EXHIBIT INDEX

|               |  |                                                                         |  |  |  | 
|-------------- |  | ----------------------------------------------------------------------- |  |  |  | 
|EXHIBIT NUMBER |  | DESCRIPTION                                                            
|               |  |                                                                        
|3.1            |  | Certificate of Incorporation of LifePoint Hospitals, Inc. (i)          
|               |  |                                                                         |  |  |  | 
|3.2            |  | Bylaws of LifePoint Hospitals, Inc. (i)                                
|               |  |                                                                         |  |  |  | 
|3.3            |  | Certificate of Incorporation of LifePoint Hospitals Holdings, Inc. (ii)
|               |  |                                                                         |  |  |  | 
|3.4            |  | Bylaws of LifePoint Hospitals Holdings, Inc. (ii)                      
|               |  |                                                                         |  |  |  | 
|10.1           |  | Form of Amendment to the Corporate Integrity Agreement                 



---

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