##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
  For the Fiscal Year Ended December 31, 2007
  Commission file
    No. 333-144337
  UNITED SURGICAL PARTNERS
    INTERNATIONAL, INC.
 (Exact name of Registrant as
    specified in its charter)
   Delaware

75-2749762(State of
    Incorporation)

(I.R.S. Employer Identification
    No.)15305 Dallas Parkway, Suite 1600
    Addison, Texas

75001(Zip Code)(Address of principal executive
    offices)   (972) 713-3500
 (Registrants telephone number, including area code)
  Securities Registered Pursuant to Section 12(b) of the
    Act: None
  Securities Registered Pursuant to Section 12(g) of the
    Act: None
   o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  non-accelerated Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer þ
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      Documents Incorporated by Reference




---



##### 





UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    2007 ANNUAL REPORT ON
    FORM 10-K
    TABLE OF CONTENTS
   
 PART IItem 1.


Business


2Item 1A.


Risk Factors


25Item 1B.


Unresolved Staff Comments


36Item 2.


Properties


37Item 3.


Legal Proceedings


37Item 4.


Submission of Matters to a Vote of Security
    Holders


37PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


37Item 6.


Selected Consolidated Financial Data


37Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


38Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


63Item 8.


Financial Statements and Supplementary Data


64Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


64Item 9A.


Controls and Procedures


64Item 9B.


Other Information


66PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


66Item 11.


Executive Compensation


68Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


79Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


80Item 14.


Principal Accounting Fees and Services


83PART IVItem 15


Exhibits, Financial Statement Schedules


84List of the Company's SubsidiariesPower of Attorney - Donald E. SteenPower of Attorney - Joel T. AllisonPower of Attorney - Michael E. DonovanPower of Attorney - John C. Garrett, M.D.Power of Attorney - D. Scott MackesyPower of Attorney - James Ken NewmanPower of Attorney - Boone Powell, Jr.Power of Attorney - Paul B. QueallyPower of Attorney - Raymond A. RanelliCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906   1




---



##### Table of Contents



FORWARD
    LOOKING STATEMENTS
  Form 10-K, Form 10-K.
 PART I  Item 1.
    Business  General
       2




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##### Table of Contents



The
    Merger Transaction
    Form 10-K,
  Available
    Information
  1-800-SEC-0330 http://www.sec.gov. http://www.unitedsurgical.com Form 10-K, Form 10-Q, Form 8-K Form 10-K.
  Industry
    Background
   3




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##### Table of Contents



United
    States
        United
    Kingdom
    Our
    Business Strategy
    
    attract and retain top quality surgeons and other physicians;
    expand our presence in existing markets;
    pursue strategic relationships with not-for-profit healthcare
    systems;
    expand selectively in new markets; and
    enhance operating efficiencies. 4




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##### Table of Contents



Attract
    and retain top quality surgeons and other
    physicians
    Pursue
    strategic relationships with not-for-profit healthcare
    systems
    Expand
    our presence in existing markets
    Expand
    selectively in new markets
      
    the potential to achieve strong increases in revenues and cash
    flows;
    whether the physicians, healthcare systems and payors in the
    market are receptive to surgery centers
    and/or
    surgical hospitals;
    the demographics of the market;
    the number of surgical facilities in the market;
    the number and nature of outpatient surgical procedures
    performed in the market;
    the case mix of the facilities to be acquired or developed;
    whether the facility is or will be well-positioned to negotiate
    agreements with insurers and other payors; and
    licensing and other regulatory considerations. 5




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##### Table of Contents



Enhance
    operating efficiencies
    Recent
    Developments
    Operations
  Operations
    in the United States
   6




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##### Table of Contents



Strategic
    Relationships
     7




---



##### Table of Contents



Operations
    in the United Kingdom
  on-site on-site
    on-site
   8




---



##### Table of Contents



Case
    Mix
    Specialty

U.S.


U.K.Orthopedic


20
%


23
%Pain management


20



2Gynecology


4



11
(1)General surgery


5



17Ear, nose and throat


8



2Gastrointestinal


17



2Cosmetic surgery


4



20Ophthalmology


11



2Other


11



21Total


100
%


100
%     (1)
    
    Also includes in vitro fertilization.  Payor
    Mix
    Payor

U.S.


U.K.Private insurance


66
%


60
%Self-pay


3



39Government


27
(1)


1Other


4



Total


100
%


100
%     (1)
    
    Based solely on case volume. Because government payors typically
    pay less than private insurance, the percentage of our U.S.
    revenue attributable to government payors is approximately 11%
    for Medicare and 1% for Medicaid.    Number ofFacilitiesHealthcare Systems

OperatedHealthcare System

Geographical Focus

with USPISingle Market Systems:Baylor Health Care System

Dallas/Fort Worth, Texas


25Covenant Health:

Eastern Tennessee


1Fort Sanders Parkwest Medical Center

Knoxville, TennesseeEvanston Northwestern Healthcare

Chicago, Illinois


4INTEGRIS Health

Oklahoma


3McLaren Health Care Corporation

Michigan


4Memorial Hermann Healthcare System

Houston, Texas


12 9




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##### Table of Contents



Number ofFacilitiesHealthcare Systems

OperatedHealthcare System

Geographical Focus

with USPIMeridian Health System

New Jersey


5Mountain States Health Alliance:

Northeast Tennessee


1Johnson City Medical Center

Johnson City, TennesseeNorth Kansas City Hospital

Kansas City, Missouri


2Sarasota Memorial Hospital

Sarasota, Florida


1Scripps Health

San Diego, California(f)Multi-Market Systems:Adventist Health System:

10 states(a)


2Adventist Hinsdale Hospital

Hinsdale, IllinoisHuguley Memorial Medical Center

Fort Worth, TexasAscension Health:

18 states and D.C.(b)


10Carondelet Health System (1 facility)

Blue Springs, MissouriSt. Thomas Health Services System (6 facilities)

Middle TennesseeSt. Vincent Health (1 facility)

IndianaSeton Healthcare Network (2 facilities)

Austin, TexasBon Secours Health System:

Eight states(c)


5Bon Secours Health Center at Virginia Beach

Virginia Beach, VirginiaMary Immaculate Hospital

Newport News, VirginiaMaryview Medical Center

Suffolk, VirginiaMemorial Regional Medical Center

Richmond, VirginiaSt. Marys Hospital

Richmond, VirginiaCatholic Healthcare West:

California, Arizona, Nevada


9Mercy Hospital of Folsom (1 facility)

Sacramento, CaliforniaMercy San Juan Medical Center (1 facility)

Roseville, CaliforniaSan Gabriel Valley Medical Center (1 facility)

San Gabriel, CaliforniaSt. Johns Regional Medical Center (1 facility)

Oxnard, CaliforniaSt. Josephs Hospital and Medical Center (2 facilities) and
    Arizona Orthopedic Surgical Hospital (2 facilities)

Phoenix, ArizonaSt. Rose Dominican Hospital (1 facility)

Henderson, NevadaCHRISTUS Health:

Seven states(d)


5CHRISTUS Health Central Louisiana (1 facility)

Alexandria, LouisianaCHRISTUS Santa Rosa Health Corporation (2 facilities)

San Antonio, TexasCHRISTUS Spohn Health System (2 facilities)

Corpus Christi, TexasProvidence Health System:

Five western states(e)


2Providence Holy Cross Health Center

Santa Clarita, CaliforniaProvidence Holy Cross Medical Center

Mission Hills, CaliforniaTotals




91     (a)
    
    Colorado, Florida, Georgia, Illinois, Kansas, Kentucky, North
    Carolina, Tennessee, Texas and Wisconsin.(b)
    
    Alabama, Arkansas, Arizona, Connecticut, District of Columbia,
    Florida, Idaho, Illinois, Indiana, Louisiana, Maryland,
    Michigan, Missouri, New York, Pennsylvania, Tennessee, Texas,
    Washington, and Wisconsin.(c)
    
    Florida, Kentucky, Maryland, Michigan, New York, Pennsylvania,
    South Carolina, and Virginia. 10




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##### Table of Contents



(d)
    
    Arkansas, Georgia, Louisiana, Missouri, Oklahoma, Texas, and
    Utah.(e)
    
    Alaska, California, Montana, Oregon, and Washington.(f)
    
    We opened our first facility in partnership with Scripps Health
    in January 2008.  Facilities
    Date of


NumberAcquisition


of


Percentageor


Operating


Owned byFacility

Affiliation


Rooms


USPIUnited StatesAtlantaEast West Surgery Center, Austell, Georgia


9/1/00
(2)


3



53
%Lawrenceville Surgery Center, Lawrenceville, Georgia


8/1/01



2



15Northwest Georgia Surgery Center, Marietta, Georgia


11/1/00
(2)


3



15Orthopaedic South Surgical Center, Morrow, Georgia


11/28/03



2



15Resurgens Surgical Center, Atlanta, Georgia


10/1/98
(2)


4



48Roswell Surgery Center, Roswell, Georgia


10/1/00
(2)


3



15Austin*

Cedar Park Surgery Center, Cedar Park, Texas


11/22/05



2



26*

Northwest Surgery Center, Austin, Texas(1)


5/30/07



7



31Texan Surgery Center, Austin, Texas


6/1/03



3



60Chicago*

Hinsdale Surgical Center, Hinsdale, Illinois


5/1/06



4



22*

Same Day Surgery 25 East, Chicago, Illinois


10/15/04



4



46*

Same Day Surgery Elmwood Park, Elmwood Park, Illinois


10/15/04



3



38*

Same Day Surgery North Shore, Evanston, Illinois


10/15/04



2



44*

Same Day Surgery River North, Chicago, Illinois


10/15/04



4



34ClevelandNortheast Ohio Surgery Center, Cleveland, Ohio


4/19/06
(5)


3



49The Surgery Center, Middleburg Heights, Ohio(1)


6/19/02



7



74Corpus Christi*

Corpus Christi Outpatient Surgery Center, Corpus Christi,
    Texas(1)


5/1/02



5



31*

Shoreline Surgery Center, Corpus Christi, Texas


7/1/06



4



26Dallas/Fort Worth*

Baylor Medical Center at Frisco, Frisco, Texas(3)


9/30/02



11



25*

Baylor Surgicare, Dallas, Texas(1)


6/1/99



6



31*

Baylor Surgicare at Denton, Denton, Texas(1)


2/1/99



4



27*

Baylor Surgicare at Garland, Garland, Texas


2/1/99



4



35*

Baylor Surgicare at Grapevine, Grapevine, Texas


2/16/02



4



28*

Baylor Surgicare at Lewisville, Lewisville, Texas(1)


9/16/02



6



36*

Baylor Surgicare at North Garland, Garland, Texas


5/1/05



6



26*

Baylor Surgicare at Trophy Club, Trophy Club, Texas(3)


5/3/04



6



32*

Bellaire Surgery Center, Fort Worth, Texas


10/15/02



4



25*

Day Surgery Center of North Texas, Plano, Texas


10/1/07



1



30*

Doctors Surgery Center at Huguley, Burleson, Texas


2/14/06



3



19*

Heath Surgicare, Rockwall, Texas(1)


11/1/04



3



25*

Irving-Coppell Surgical Hospital, Irving, Texas(3)


10/20/03



5



9*

Mary Shiels Hospital, Dallas, Texas(3)


4/1/03



5



31 11




---



##### Table of Contents



Date of


NumberAcquisition


of


Percentageor


Operating


Owned byFacility

Affiliation


Rooms


USPI*

Medical Centre Surgical Hospital, Fort Worth, Texas(3)


12/18/98



8



30*

Metroplex Surgicare, Bedford, Texas(1)


12/18/98



5



43*

North Central Surgery Center, Dallas, Texas


12/12/05



5



16*

North Texas Surgery Center, Dallas, Texas(1)


12/18/98



4



44*

Park Cities Surgery Center, Dallas, Texas(1)


6/9/03



4



41*

Physicians Day Surgery Center, Dallas, Texas


10/12/00



4



31*

Physicians Surgical Center of Fort Worth,
    Fort Worth, Texas


7/13/04



4



26*

Physicians Surgical Center of Fort Worth 
    Campus II, Fort Worth, Texas


5/1/07



2



26*

Rockwall Surgery Center, Rockwall, Texas


09/1/06



3



39*

Surgery Center of Arlington, Arlington, Texas(1)


2/1/99



6



29*

Texas Surgery Center, Dallas, Texas(1)


6/1/99



4



31*

Valley View Surgery Center, Dallas, Texas


12/18/98



4



32Houston*

Doctors Outpatient Surgicenter, Pasadena, Texas(1)


9/1/99



5



41*

KSF Orthopaedic Surgery Center, Houston, Texas(1)


5/1/07



3



48*

Memorial Hermann Specialty Hospital Kingwood, Kingwood,
    Texas(3)


9/1/07



6



30*

Memorial Hermann Surgery Center  Katy, Katy,
    Texas(1)


1/19/07



4



10*

Memorial Hermann Surgery Center   Northwest,
    Houston, Texas(1)


9/1/04



5



11*

Memorial Hermann Surgery Center   Southwest,
    Houston, Texas(1)


9/21/06



6



10*

Memorial Hermann Surgery Center  Sugar Land,
    Sugar Land, Texas(1)


9/21/06



4



14*

Memorial Hermann Surgery Center  Texas Medical
    Center, Houston, Texas(1)


1/17/07



5



11*

Memorial Hermann Surgery Center  The Woodlands,
    The Woodlands, Texas


8/9/05



4



11Northwest Surgery Center, Houston, Texas


4/19/06
(5)


5



49*

Sugar Land Surgical Hospital, Sugar Land, Texas(3)


12/28/02



4



13*

TOPS Surgical Specialty Hospital, Houston, Texas(3)


7/1/99



7



41*

United Surgery Center  Southeast, Houston,
    Texas(1)


9/1/99



3



35West Houston Ambulatory Surgical Associates, Houston, Texas


4/19/06
(5)


5



51Kansas City*

Briarcliff Surgery Center, Kansas City, Missouri


6/1/05



2



29Creekwood Surgery Center, Kansas City, Missouri(1)


7/29/98



4



49*

Liberty Surgery Center, Liberty, Missouri


6/1/05



2



30*

Saint Marys Surgical Center, Blue Springs, Missouri


5/1/05



4



21Lansing*

Genesis Surgery Center, Lansing, Michigan


11/1/06



4



22*

Lansing Surgery Center, Lansing, Michigan


11/1/06



4



22Los AngelesCoast Surgery Center of South Bay, Torrance, California(1)


12/18/01



3



61Pacific Endo-Surgical Center, Torrance, California


8/1/03



1



61*

San Fernando Valley Surgery Center, Mission Hills,
    California


11/1/04



4



33*

San Gabriel Ambulatory Surgery Center,
    San Gabriel, California


4/1/05



3



41San Gabriel Valley Surgical Center, West Covina,
    California


11/16/01



3



52*

Santa Clarita Ambulatory Surgery Center, Santa Clarita,
    California(1)


3/7/06



3



36The Center for Ambulatory Surgical Treatment, Los Angeles,
    California(1)


11/14/02



4



49Nashville*

Baptist Ambulatory Surgery Center, Nashville, Tennessee


3/1/98
(2)


6



22*

Baptist Plaza Surgicare, Nashville, Tennessee


12/3/03



9



21 12




---



##### Table of Contents



Date of


NumberAcquisition


of


Percentageor


Operating


Owned byFacility

Affiliation


Rooms


USPI*

Middle Tennessee Ambulatory Surgery Center, Murfreesboro,
    Tennessee


7/29/98



4



40*

Northridge Surgery Center, Nashville, Tennessee


4/19/06
(5)


5



32*

Physicians Pavilion Surgery Center, Smyrna, Tennessee


7/29/98



4



47*

Saint Thomas Surgicare, Nashville, Tennessee


7/15/02



5



20New Jersey*

Central Jersey Surgery Center, Eatontown, New Jersey


11/1/04



3



39*

Northern Monmouth Regional Surgery Center, Manalapan, New
    Jersey


7/10/06



4



30Robert Wood Johnson Surgery Center, East Brunswick, New
    Jersey


6/26/02



5



16*

Shore Outpatient Surgicenter, Lakewood, New Jersey


11/1/04



3



56*

Shrewsbury Surgery Center, Shrewsbury, New Jersey


4/1/99



4



14Suburban Endoscopy Services, Verona, New Jersey


4/19/06
(5)


2



51*

Toms River Surgery Center, Toms River, New Jersey


3/15/02



4



20Oklahoma City*

Oklahoma Center for Orthopedic MultiSpecialty Surgery,
    Oklahoma City,Oklahoma(3)


8/2/04



4



23*

Southwest Orthopaedic Ambulatory Surgery Center, Oklahoma
    City, Oklahoma


8/2/04



2



23*

Specialists Surgery Center, Oklahoma City, Oklahoma(1)


3/27/02



3



25Phoenix*

Arizona Orthopedic Surgical Hospital, Chandler, Arizona(3)


5/19/04



6



34*

Desert Ridge Outpatient Surgery Center, Phoenix, Arizona


3/30/07



4



29Metro Surgery Center, Phoenix, Arizona


4/19/06
(5)


4



75Physicians Surgery Center of Tempe, Tempe, Arizona


4/19/06
(5)


2



10*

St. Josephs Outpatient Surgery Center, Phoenix,
    Arizona(1)


9/2/03



8



31Surgery Center of Peoria, Peoria, Arizona


4/19/06
(5)


3



55Surgery Center of Scottsdale, Scottsdale, Arizona


4/19/06
(5)


4



56Surgery Center of Gilbert, Gilbert, Arizona


4/19/06
(5)


3



21*

Warner Outpatient Surgery Center, Chandler, Arizona


7/1/99



4



24Richmond*

Memorial Ambulatory Surgery Center, Mechanicsville,
    Virginia


12/30/05



5



47*

St. Marys Ambulatory Surgery Center, Richmond,
    Virginia


11/29/06



4



20Sacramento*

Folsom Outpatient Surgery Center, Folsom, California


6/1/05



2



33*

Roseville Surgery Center, Roseville, California


7/1/06



2



30San Antonio*

Alamo Heights Surgery Center, San Antonio, Texas(1)


12/1/04



3



58*

CHRISTUS Santa Rosa Surgery Center, San Antonio,
    Texas(1)


5/3/04



5



31San Antonio Endoscopy Center, San Antonio, Texas


5/1/05



1



54St. LouisAdvanced Surgical Care, Creve Coeur, Missouri(1)


1/1/06



2



66Chesterfield Surgery Center, Chesterfield, Missouri(1)


1/1/06



2



66Frontenac Surgery and Spine Care Center, Frontenac,
    Missouri(1)


5/1/07



2



33Manchester Surgery Center, St. Louis, Missouri


2/1/07



3



33Mason Ridge Surgery Center, St. Louis, Missouri(1)


2/1/07



2



32Mid Rivers Surgery Center, Saint Peters, Missouri


1/1/06



2



67Olive Surgery Center, St. Louis, Missouri


1/1/06



2



64Riverside Ambulatory Surgery Center, Florissant, Missouri


8/1/06



2



33 13




---



##### Table of Contents



Date of


NumberAcquisition


of


Percentageor


Operating


Owned byFacility

Affiliation


Rooms


USPISunset Hills Surgery Center, St. Louis, Missouri


1/1/06



2



66The Ambulatory Surgical Center of St. Louis,
    Bridgeton, Missouri


8/1/06



2



33Webster Surgery Center, Webster Groves, Missouri


3/1/07



2



32Additional MarketsAustintown Ambulatory Surgery Center, Austintown, Ohio


4/12/02



5



65Beaumont Surgical Affiliates, Beaumont, Texas(1)


4/19/06
(5)


6



49*

Bon Secours Surgery Center at Harbour View, Suffolk,
    Virginia


11/12/07



6



19*

Bon Secours Surgery Center at Virginia Beach, Virginia
    Beach, Virginia


5/30/07



2



30*

Cape Surgery Center, Sarasota, Florida


10/18/04



6



45Chico Surgery Center, Chico, California


4/19/06
(5)


3



60*

CHRISTUS Cabrini Surgery Center, Alexandria, Louisiana


6/22/07



4



25Court Street Surgery Center, Redding, California


4/19/06
(5)


2



56Day-Op Center of Long Island, Mineola, New York(4)


12/4/98



4



Destin Surgery Center, Destin, Florida


9/25/02



2



32Great Plains Surgery Center, Lawton, Oklahoma


4/19/06
(5)


2



49Greater Baton Rouge Surgical Hospital, Baton Rouge,
    Louisiana(3)


10/11/05



4



30Idaho Surgery Center, Caldwell, Idaho


4/19/06
(5)


3



19Las Cruces Surgical Center, Las Cruces, New Mexico


2/1/01



3



50Manitowoc Surgery Center, Manitowoc, Wisconsin


12/18/06
(5)


2



30*

Mary Immaculate Ambulatory Surgical Center, Newport News,
    Virginia


7/19/04



3



18*

McLaren ASC of Flint, Flint, Michigan


8/2/07



4



44*

Mountain Empire Surgery Center, Johnson City, Tennessee


2/20/00
(2)


4



18New Horizons Surgery Center, Marion, Ohio


4/19/06
(5)


2



10New Mexico Orthopaedic Surgery Center, Albuquerque, New
    Mexico


2/29/00
(2)


6



51*

Parkway Surgery Center, Henderson (Las Vegas), Nevada


8/3/98



5



36*

Parkwest Surgery Center, Knoxville, Tennessee


7/26/01



5



22Reading Surgery Center, Spring Township, Pennsylvania


7/1/04



3



57Redding Surgery Center, Redding, California


4/19/06
(5)


2



56Redmond Surgery Center, Redmond, Oregon


4/19/06
(5)


2



65*

Saint Johns Outpatient Surgery Center, Oxnard,
    California


12/5/05



4



34Surgi-Center of Central Virginia, Fredericksburg, Virginia


11/29/01



4



79Surgery Center of Canfield, Canfield, Ohio(1)


4/19/06
(5)


3



22Surgery Center of Columbia, Columbia, Missouri(1)


8/1/06



2



30Surgery Center of Fort Lauderdale,
    Fort Lauderdale, Florida


11/1/04



4



61Templeton Surgery Center, Templeton, California


1/20/07



2



65*

Terre Haute Surgical Center, Terre Haute, Indiana


12/19/07



2



36Teton Outpatient Services, Jackson, Wyoming(1)


8/1/98
(2)


2



49Tri-City Orthopaedic Center, Richland, Washington(4)


4/19/06
(5)


2



Tulsa Outpatient Surgery Center, Tulsa, Oklahoma


11/1/04



4



30University Surgical Center, Winter Park, Florida


10/15/98



3



40*

Utica Surgery and Endoscopy Center, Utica, Michigan


4/1/07



3



32Victoria Ambulatory Surgery Center, Victoria, Texas


4/19/06
(5)


2



59United KingdomParkside Hospital, Wimbledon


4/6/00



4



100Holly House Hospital, Essex


4/6/00



3



100Highgate Private Clinic, Highgate


4/29/03



3



100  14




---



##### Table of Contents



*
    
    Facilities jointly owned with not-for-profit hospital systems.(1)
    
    Certain of our surgery centers are licensed and equipped to
    accommodate
    23-hour
    stays.(2)
    
    Indicates date of acquisition by OrthoLink Physician
    Corporation. We acquired OrthoLink in February 2001.(3)
    
    Surgical hospitals, all of which are licensed and equipped for
    overnight stays.(4)
    
    Operated through a consulting and administrative agreement.(5)
    
    Indicates the date of our acquisition of Surgis          Acquisitions
    and Development
      Expected


Number ofHospital



Opening


OperatingFacility Location

Partner

Type

Date


RoomsCleveland, Ohio



Surgery Center


1Q08
(1)


2Dallas, Texas

Baylor

Surgical Hospital


1Q08
(1)


5Orlando, Florida



Surgery Center


1Q08



3San Diego, California

Scripps

Surgery Center


1Q08
(2)


3Chicago, Illinois

ENH

Surgery Center


Q208



3Murfreesboro, Tennessee

Ascension

Surgery Center


Q208



6San Martin (Las Vegas), Nevada

CHW

Surgery Center


Q208



4Clarkston (Detroit), Michigan

McLaren

Surgery Center


Q109



4     (1)
    
    Opened in January 2008(2)
    
    Opened in February 2008    Marketing
   15




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##### Table of Contents



Competition
          Employees
    Professional
    and General Liability Insurance
   16




---



##### Table of Contents



Government
    Regulation
  United
    States
  General
          Licensure
    and certificate-of-need regulations
     17




---



##### Table of Contents



Medicare
    and Medicaid Participation in Short Stay Surgical
    Facilities
       18




---



##### Table of Contents



Federal
    Anti-Kickback Law
    
    referring patients for services or items payable under a federal
    healthcare program, including Medicare or Medicaid, or
    purchasing, leasing, or ordering, or arranging for or
    recommending purchasing, leasing, or ordering any good,
    facility, service or item for which payment may be made in whole
    or in part by a federal healthcare program.     19




---



##### Table of Contents



20




---



##### Table of Contents



Federal
    Physician Self-Referral Law
     21




---



##### Table of Contents



18-month
  False and
    Other Improper Claims
       22




---



##### Table of Contents



State
    Anti-Kickback and Physician Self-Referral Laws
      Health
    Information Security and Privacy Practices
    
    electronic transactions and code sets;
    unique identifiers for providers, employers, health plans and
    individuals;
    security and electronic signatures;
    privacy; and
    enforcement.     23




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##### Table of Contents



European
    Union and United Kingdom
         24




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##### Table of Contents



Item 1A.
    Risk
    Factors  You should carefully read the risks and uncertainties
    described below and the other information included or
    incorporated by reference in this report. Any of the following
    risks could materially and adversely affect our business,
    financial condition or results of operations. Additional risks
    and uncertainties not currently known to us or those we
    currently view to be immaterial may also materially and
    adversely affect our business, financial condition or results of
    operations.
  We
    depend on payments from third party payors, including government
    healthcare programs. If these payments are reduced, our revenue
    will decrease.
    If we
    are unable to acquire and develop additional surgery centers or
    surgical hospitals on favorable terms, are not successful in
    integrating operations of acquired centers or hospitals, or are
    unable to manage growth, we may be unable to execute our
    acquisition and development strategy, which could limit our
    future growth.
    Our
    substantial leverage could adversely affect our ability to raise
    additional capital to fund our operations, limit our ability to
    react to changes in the economy or our industry, expose us to
    interest rate risk to the extent of our variable rate debt and
    prevent us from meeting our obligations under the
    notes.
      
    requires us and certain of our subsidiaries to dedicate a
    substantial portion of cash flow from operations to payments on
    indebtedness, reducing the availability of cash flow to fund
    working capital, capital expenditures, development activity,
    acquisitions and other general corporate purposes;
    increases vulnerability to adverse general economic or industry
    conditions;
    limits flexibility in planning for, or reacting to, changes in
    our business or the industry in which we operate; 25




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##### Table of Contents




    makes us and our subsidiaries more vulnerable to increases in
    interest rates, as borrowings under the new senior secured
    credit facilities are at variable rates;
    limits our and our subsidiaries ability to obtain
    additional financing in the future for working capital or other
    purposes, such as raising the funds necessary to repurchase all
    notes tendered to us upon the occurrence of specified changes of
    control in our ownership; or
    places us at a competitive disadvantage compared to our
    competitors that have less indebtedness.  Our
    significant indebtedness could limit our
    flexibility.
      Our
    debt agreements contain restrictions that limit our flexibility
    in operating our business.
    
    incur, assume or permit to exist additional indebtedness or
    guarantees;
    incur liens and engage in sale leaseback transactions;
    make loans, investments and other advances;
    declare dividends, make payments or redeem or repurchase capital
    stock;
    engage in mergers, acquisitions and other business combinations;
    prepay, redeem or repurchase certain indebtedness including the
    notes;
    amend or otherwise alter terms of certain subordinated
    indebtedness including the notes;    
    sell assets;
    engage in certain transactions with affiliates;
    alter the business that we conduct; and
    issue and sell capital stock of subsidiaries.    
    incur or permit to exist additional indebtedness;
    incur liens;
    make loans, investments or acquisitions;
    declare dividends or other distributions;
    enter into operating leases; 26




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##### Table of Contents




    engage in mergers, joint ventures or partnerships;
    sell assets;
    alter the business that the U.K. borrowers and their
    subsidiaries conduct; and
    incur financial lease expenditures.        If we
    incur material liabilities as a result of acquiring companies or
    surgical facilities, our operating results could be adversely
    affected.
   27




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We
    depend on our relationships with not-for-profit healthcare
    systems and their ability to assist in negotiating managed care
    contracts on behalf of the surgical facilities that we jointly
    own with healthcare systems. If we are not able to maintain our
    strategic alliances with these not-for-profit healthcare
    systems, or enter into new alliances, we may be unable to
    implement our business strategies successfully.
    If we
    and our not-for-profit healthcare system partners are unable to
    successfully negotiate contracts and maintain satisfactory
    relationships with managed care organizations or other third
    party payors, our revenues may decrease.
      We
    depend on our relationships with the physicians who use our
    facilities. Our ability to provide medical services at our
    facilities would be impaired and our revenues reduced if we are
    not able to maintain these relationships.
   28




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##### Table of Contents



Our
    surgery centers and surgical hospitals face competition for
    patients from other hospitals and health care
    providers.
  27-question
    and/or
  Our
    United Kingdom operations are subject to unique risks, any of
    which, if they actually occur, could adversely affect our
    results.
    
    competition with government sponsored healthcare systems;
    unforeseen changes in foreign regulatory requirements or
    domestic regulatory requirements affecting our foreign
    operations;
    identifying, attracting, retaining and working successfully with
    qualified local management;
    fluctuations in exchange rates; 29




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##### Table of Contents




    difficulties in staffing and managing geographically and
    culturally diverse, multinational operations; and
    the possibility of an economic downturn in the United Kingdom,
    which could adversely affect the ability or willingness of
    employers and individuals in these countries to purchase private
    health insurance.    Our
    revenues may be reduced by changes in payment methods or rates
    under the Medicare or Medicaid programs.
    Efforts
    to regulate the construction, acquisition or expansion of
    healthcare facilities could prevent us from acquiring additional
    surgery centers or surgical hospitals, renovating our existing
    facilities or expanding the breadth of services we
    offer.
    Failure
    to comply with federal and state statutes and regulations
    relating to patient privacy and electronic data security could
    negatively impact our financial results.
     30




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##### Table of Contents



If we
    fail to comply with applicable laws and regulations, we could
    suffer penalties or be required to make significant changes to
    our operations.
    
    physician ownership of our domestic facilities;
    the adequacy of medical care, equipment, personnel, operating
    policies and procedures;
    building codes;
    licensure, certification and accreditation;
    billing for services;
    maintenance and protection of records; and
    environmental protection.      If a
    federal or state agency asserts a different position or enacts
    new laws or regulations regarding illegal remuneration under the
    Medicare or Medicaid programs, we may be subject to civil and
    criminal penalties, experience a significant reduction in our
    revenues or be excluded from participation in the Medicare and
    Medicaid programs.
     31




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If
    physician self-referral laws are interpreted differently or if
    other legislative restrictions are issued, we could incur
    significant sanctions and loss of reimbursement
    revenues.
     32




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##### Table of Contents



Companies
    within the healthcare industry continue to be the subject of
    federal and state audits and investigations, which increases the
    risk that we may become subject to investigations in the
    future.
    
    cost reporting and billing practices;
    quality of care;
    financial reporting;
    financial relationships with referral sources; and
    medical necessity of services provided.    If
    laws governing the corporate practice of medicine change, we may
    be required to restructure some of our domestic relationships
    which may result in significant costs to us and divert other
    resources.
   33




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##### Table of Contents



If
    domestic regulations change, we may be obligated to purchase
    some or all of the ownership interests of the physicians
    affiliated with us.
    
    make illegal the referral of Medicare or other patients to our
    surgical facilities by physicians affiliated with us;
    create the substantial likelihood that cash distributions from
    the limited partnerships or limited liability companies through
    which we operate our surgical facilities to physicians
    affiliated with us would be illegal; or
    make illegal the ownership by the physicians affiliated with us
    of interests in the partnerships or limited liability companies
    through which we own and operate our surgical facilities.    Future
    legislation could restrict our ability to operate our domestic
    surgical hospitals.
  18-month
  If we
    become subject to significant legal actions, we could be subject
    to substantial uninsured liabilities.
   34




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##### Table of Contents



If we
    are unable to effectively compete for physicians, strategic
    relationships, acquisitions and managed care contracts, our
    business could be adversely affected.
    Because
    our senior management has been key to our growth and success, we
    may be adversely affected if we lose any member of our senior
    management.
    The
    growth of patient receivables and a deterioration in the
    collectability of these accounts could adversely affect our
    results of operations.
      We may
    have a special legal responsibility to the holders of ownership
    interests in the entities through which we own short stay
    surgical facilities, and that responsibility may prevent us from
    acting solely in our own best interests or the interests of our
    stockholders.
   35




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##### Table of Contents



We do
    not have exclusive control over the distribution of revenues
    from some of our domestic operating entities and may be unable
    to cause all or a portion of the revenues of these entities to
    be distributed.
    Welsh
    Carson controls us and may have conflicts of interest with us or
    you in the future.
      Item 1B.
    Unresolved
    Staff Comments   36




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##### Table of Contents



Item 2.
    Properties    Item 3.
    Legal
    Proceedings      Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Item 6.
    Selected
    Consolidated Financial Data      Successor



PredecessorPeriod from



Period fromApril 19



January 1through



throughDecember 31,



April 18,


Years Ended December 31,2007



2007


2006


2005


2004


2003Consolidated Statement of Operations Data:Total revenues

$
457,978



$
193,564


$
574,556


$
465,326


$
379,059


$
300,389Equity in earnings of unconsolidated affiliates


23,867




9,906



31,568



23,998



18,626



15,074Operating expenses excluding depreciation and amortization


(318,960
)



(164,547
)


(412,016
)


(324,572
)


(264,925
)


(207,919
)Depreciation and amortization


(26,960
)



(12,550
)


(34,929
)


(30,584
)


(26,365
)


(21,823
)Operating income


135,925




26,373



159,179



134,168



106,395



85,721 37




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##### Table of Contents



Successor



PredecessorPeriod from



Period fromApril 19



January 1through



throughDecember 31,



April 18,


Years Ended December 31,2007



2007


2006


2005


2004


2003Other income (expense):Interest income


3,208




934



4,067



4,455



1,591



1,025Interest expense


(67,873
)



(9,526
)


(32,624
)


(27,403
)


(26,354
)


(24,545
)Loss on early retirement of debt







(2,435
)


(14,880
)






(1,635
)


Other


(442
)



798



1,778



533



247



733Income before minority interests


70,818




16,144



117,520



111,753



80,244



62,934Minority interests in income of consolidated subsidiaries


(45,130
)



(18,859
)


(54,642
)


(38,440
)


(30,266
)


(23,920
)Income tax expense


(14,666
)



(4,158
)


(22,780
)


(26,173
)


(17,729
)


(14,711
)Income (loss) from continuing operations


11,022




(6,873
)


40,098



47,140



32,249



24,303Earnings (loss) from discontinued operations, net of tax


(2,293
)



(276
)


(5,852
)


154



53,926



5,573Net income (loss)

$
8,729



$
(7,149
)

$
34,246


$
47,294


$
86,175


$
29,876Other Data:Number of facilities operated as of the end of period(a)


155




149



141



99



87



65Cash flows from operating activities

$
67,920



$
29,264


$
102,129


$
107,031


$
80,558


$
65,504   PredecessorSuccessor



As of December 31,2007



2006


2005


2004


2003(Dollars in thousands)Consolidated Balance Sheet Data:Working capital (deficit)

$
(12,569
)


$
(41,834
)

$
90,946


$
87,178


$
29,957Cash and cash equivalents


76,758




31,740



130,440



93,467



28,519Total assets


2,277,393




1,231,856



1,028,841



922,304



870,509Total debt


1,098,062




347,330



286,486



288,485



304,744Total stockholders equity


806,806




599,274



531,050



474,609



390,655     (a)
    
    Does not include Spanish facilities disposed of in September
    2004. Not derived from audited financial statements.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation    Overview
   38




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39




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##### Table of Contents



Combination
    of Operating Results
    Predecessor


Successor


CombinedPeriod from


Period from


Year EndedJanuary 1 through


April 19 through


December 31,April 18, 2007


December 31, 2007


2007Revenues:Net patient service revenue

$
172,807


$
407,923


$
580,730Management and contract service revenue


19,142



46,503



65,645Other revenue


1,615



3,552



5,167Total revenues


193,564



457,978



651,542Equity in earnings of unconsolidated affiliates


9,906



23,867



33,773Operating expenses:Salaries, benefits, and other employee costs


54,727



127,715



182,442Medical services and supplies


34,768



78,089



112,857Other operating expenses


32,451



76,047



108,498General and administrative expenses


39,277



29,340



68,617Provision for doubtful accounts


3,324



7,769



11,093Depreciation and amortization


12,550



26,960



39,510Total operating expenses


177,097



345,920



523,017Operating income


26,373



135,925



162,298Interest income


934



3,208



4,142Interest expense


(9,526
)


(67,873
)


(77,399
)Loss on early retirement of debt


(2,435
)






(2,435
)Other


798



(442
)


356Total other expense, net


(10,229
)


(65,107
)


(75,336
)Income before minority interests


16,144



70,818



86,962Minority interests in income of consolidated subsidiaries


(18,859
)


(45,130
)


(63,989
)Income (loss) from continuing operations before income taxes


(2,715
)


25,688



22,973Income tax expense


(4,158
)


(14,666
)


(18,824
)Income (loss) from continuing operations


(6,873
)


11,022



4,149Loss from discontinued operations, net of tax


(276
)


(2,293
)


(2,569
)Net income (loss)

$
(7,149
)

$
8,729


$
1,580  40




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##### Table of Contents



Critical
    Accounting Policies and Estimates
    Consolidation
    Consolidation of Variable Interest Entities (as amended)
    Revenue
    Recognition and Accounts Receivable
  Revenue Recognition in Financial
    Statements
  
    Existence of persuasive evidence that an arrangement exists;
    Delivery has occurred or services have been rendered;
    The sellers price to the buyer is fixed or
    determinable; and
    Collectibility is reasonably assured.   41




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##### Table of Contents



Income
    Taxes
    Goodwill
    and Intangible Assets
  Accounting for Goodwill
    and Intangible Assets
 42




---



##### Table of Contents



and/or
  Equity-based
    Compensation
  Share-Based Payment
  Merger
    Transaction
        
    an investment of cash and rollover equity in the equity of
    Parent by Welsh Carson, management and other equity investors of
    approximately $785.0 million;
    borrowings by the Company of $430.0 million in new senior
    secured credit facilities; 43




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##### Table of Contents




    the issuance by the Company of $240.0 million in aggregate
    principal amount of
    87/8% senior
    subordinated notes, due 2017, and $200.0 million in
    aggregate principal amount of
    91/4%/10% senior
    subordinated toggle notes, due 2017;
    additional borrowings of £10.0 million (approximately
    $19.7 million) by Global Healthcare Partners Limited, which
    was repatriated to the U.S.; and
    approximately $21.9 million of cash on hand.  Acquisitions,
    Equity Investments and Development Projects
  buy-up
    
    Receipt of $9.8 million from a not-for-profit hospital
    partner that obtained additional ownership in certain of our
    surgical facilities in the Chicago, Illinois area;
    Receipt of $0.5 million from a not-for-profit hospital
    partner that obtained additional ownership in one of our
    facilities in the Oklahoma City, Oklahoma area;
    Investment of $5.7 million in a company jointly operated
    with one of our not-for-profit hospital partners, which the
    joint venture used to acquire ownership in a surgical hospital
    in the Houston, Texas area;
    Investment of $1.5 million in a joint venture with one of
    our not-for-profit hospital partners, which the joint venture
    used to acquire ownership in a surgery center in the Detroit,
    Michigan area; and
    Net payment of approximately $3.3 million related to other
    purchases and sales of equity interests and contributions of
    cash to equity method investees.     44




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##### Table of Contents




    Receipt of $19.8 million as final payment from the buyers
    of our Spanish operations,
    Investment of $4.1 million in a joint venture with one of
    our not-for-profit hospital partners, which the joint venture
    used to acquire ownership in a surgery center in the Sacramento,
    California area,
    Investment of $3.7 million in a joint venture with one of
    our not-for-profit hospital partners, which the joint venture
    used to acquire ownership in two surgery centers in the Lansing,
    Michigan area,
    Receipt of $4.8 million from another of our not-for-profit
    hospital partners, as we sold a controlling interest in a
    surgical facility in Fort Worth, Texas,
    Payment of $3.1 million to sellers based on certain
    financial targets or objectives being met for acquired
    facilities or based upon the resolution of certain contingencies,
    Receipt of $2.0 million for the sale of a facility in Ocean
    Springs, Mississippi, which we had acquired in April as part of
    the Surgis acquisition,
    Receipt of $1.3 million for the sale of a facility in
    Phoenix, Arizona, which we had acquired in April as part of the
    Surgis acquisition,
    Receipt of $0.5 million for the sale of a facility in
    Lyndhurst, Ohio, and
    Net payment of $3.4 million related to other purchases and
    sales of equity interests and contributions of cash to equity
    method investees.          
    $34.0 million was paid to acquire additional ownership in
    nine facilities we operate in the Dallas/Fort Worth market,
    net of proceeds from the sale of a portion of three other
    facilities in this same market,
    $5.2 million was paid for equity method investments in two
    surgery centers near Kansas City, Missouri,
    $4.7 million was paid for an equity method investment in a
    surgery center in the Sacramento, California area,
    $5.5 million was paid to acquire additional ownership in a
    facility the we operate in New Jersey,
    $12.0 million was received from three not-for-profit
    healthcare systems for noncontrolling interests in six
    facilities we already operated. Included in these transactions
    are call options allowing the healthcare systems to acquire
    additional noncontrolling ownership interests in each facility
    in 2006. With respect to four of the facilities, the approximate
    sales price is $10.2 million and we have a put option with
    the same terms. With respect to the other two facilities, the
    systems have call options that, for one facility, fix the price
    at 45




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##### Table of Contents



$2.0 million and in the other case base the price on a
    multiple of earnings when the option is exercised. We have no
    put options with respect to these two facilities, and  
    $1.3 million of other net purchases of equity interests.    Discontinued
    Operations and Other Dispositions
            Sources
    of Revenue
    
    net patient service revenue of the facilities that we
    consolidate for financial reporting purposes, which are those in
    which we have ownership interests of greater than 50% or
    otherwise maintain effective control;
    management and contract service revenue, consisting of the fees
    that we earn from managing the facilities that we do not
    consolidate for financial reporting purposes and the fees we
    earn from providing certain consulting and other contracted
    services to physicians and hospitals. Our consolidated revenues
    and expenses do not include the management fees we earn from
    operating the facilities that we consolidate for financial
    reporting purposes as those fees are charged to subsidiaries and
    thus eliminate in consolidation. 46




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##### Table of Contents



Years Ended December 31,Combined2007


2006


2005Net patient service revenues


89
%


90
%


92
%Management and contract service revenues


10



9



8Other revenues


1



1



Total revenues


100
%


100
%


100
%       Years Ended December 31,Combined2007


2006


2005Management of surgical facilities

$
34,161


$
26,623


$
20,069Contract services provided to physicians, hospitals and related
    entities


31,484



25,613



15,835Total management and contract service revenues

$
65,645


$
52,236


$
35,904     Years Ended December 31,Combined2007


2006


2005United States


82
%


83
%


81
%United Kingdom


18



17



19Total


100
%


100
%


100
%      47




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##### Table of Contents



Equity in
    Earnings of Unconsolidated Affiliates
    Years Ended December 31,Combined2007


2006


2005Revenues

$
788,813


$
610,160


$
443,292Equity in earnings of unconsolidated affiliates


118



224



27Operating expenses:Salaries, benefits, and other employee costs


207,154



150,625



109,734Medical services and supplies


166,229



125,981



86,573Other operating expenses


203,841



150,108



111,140Depreciation and amortization


41,057



29,884



20,287Total operating expenses


618,281



456,598



327,734Operating income


170,650



153,786



115,585Interest expense, net


(20,501
)


(14,400
)


(10,560
)Other


1,843



282



772Income before income taxes

$
151,992


$
139,668


$
105,797Long-term debt

$
278,417


$
169,304


$
118,458USPIs equity in earnings of unconsolidated affiliates


33,773



31,568



23,998USPIs imputed weighted average ownership percentage based
    on affiliates pretax income(1)


22.2
%


22.6
%


22.7
%USPIs imputed weighted average ownership percentage based
    on affiliates debt(2)


26.9
%


29.2
%


28.1
%Unconsolidated facilities operated at period end


93



80



57     (1)
    
    Our weighted average percentage ownership in our unconsolidated
    affiliates is calculated as USPIs equity in earnings of
    unconsolidated affiliates divided by the total net income of
    unconsolidated affiliates for each respective period. This is a
    non-GAAP measure but management believes it provides further
    useful information about its involvement in equity method
    investments.(2)
    
    Our weighted average percentage ownership in our unconsolidated
    affiliates is calculated as the total debt of each
    unconsolidated affiliate, multiplied by the percentage ownership
    USPI held in the affiliate as of the end of each respective
    period, divided by the total debt of all of the unconsolidated
    affiliates as of the end of each respective period. This
    percentage is lower at December 31, 2007 as compared to
    prior periods as a result of our largest U.S. facility, in
    which we own a 25% interest, borrowing to finance a major
    expansion during 2007. This percentage is higher in 2006 as
    compared to the corresponding prior year due primarily to our
    acquisition, in the second quarter of 2006, of four facilities
    in which we own a majority economic interest but account for
    under the equity method due to a lack of effective control over
    the facilities operations. This is a non-GAAP measure but
    management believes it provides further useful information about
    its involvement in equity method investments.  Form 10-K
 48




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##### Table of Contents



Results
    of Operations
    Years Ended December 31,Combined2007


2006


2005Total revenues


100.0
%


100.0
%


100.0
%Equity in earnings of unconsolidated affiliates


5.2



5.5



5.2Operating expenses, excluding depreciation and amortization


(74.2
)


(71.7
)


(69.8
)Depreciation and amortization


(6.1
)


(6.1
)


(6.6
)Operating income


24.9



27.7



28.8Minority interests in income of consolidated subsidiaries


(9.8
)


(9.5
)


(8.3
)Interest and other expense, net


(11.6
)


(7.3
)


(4.7
)Income from continuing operations before income taxes


3.5



10.9



15.8Income tax expense


(2.9
)


(3.9
)


(5.6
)Income from continuing operations


0.6



7.0



10.2Loss from discontinued operations


(0.4
)


(1.0
)


Net income


0.2
%


6.0
%


10.2
%   Executive
    Summary
         49




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##### Table of Contents



Revenues
           50




---



##### Table of Contents



Years Ended December 31,Combined2007


2006


2005United States facilities:Net revenue


10
%


9
%


9
%Surgical cases


6
%


7
%


4
%Net revenue per case(1)


3
%


2
%


5
%United Kingdom facilities:Net revenue using actual exchange rates


23
%


7
%


6
%Net revenue using constant exchange rates(2)


13
%


6
%


7
%All same store facilities:Net revenue using actual exchange rates


11
%


9
%


9
%     (1)
    
    Our overall domestic same store growth in net revenue per case
    for each year was favorably impacted by the growth at our eleven
    same store surgical hospitals, which on average perform more
    complex cases and thus earn a higher average net revenue per
    case than ambulatory surgery centers.(2)
    
    Calculated using 2007 exchange rates for both periods. Although
    this computation represents a non-GAAP measure, we believe that
    using a constant currency translation rate more accurately
    reflects the trend of the business.  Joint
    Ventures with Not-for-Profit Hospitals
    2007


2006


2005United States facilities(1):With a hospital partner


91



78



66Without a hospital partner


61



60



30Total U.S. facilities


152



138



96United Kingdom facilities


3



3



3Total facilities operated


155



141



99Change from prior year-end:De novo (newly constructed)


11



8



9Acquisition


9



38



4Disposals(2)


(6
)


(4
)


(1
)Total increase in number of facilities


14



42



12  51




---



##### Table of Contents



(1)
    
    At December 31, 2007, physicians own a portion of all of
    these facilities.(2)
    
    We sold our ownership interests in facilities in Canton,
    Mississippi; Atlanta, Georgia; Baltimore, Maryland; and Houston,
    Texas and classified one facility as held for sale during 2007.
    Additionally, we ceased operating a facility effective
    October 1, 2007 although we still hold an ownership
    interest. During 2006, we sold our ownership interests in
    facilities in Lyndhurst, Ohio and Chicago, Illinois. We also
    disposed of Surgis interests in two of its facilities, one
    in Phoenix, Arizona, the other in Ocean Springs, Mississippi.  Facility
    Operating Margins
         52




---



##### Table of Contents



Year Ended December 31,Combined2007


2006


2005United States facilities:With a hospital partner


(210
) bps


(50
) bps


(270
) bpsWithout a hospital partner


40



(50
)


(20
)Total U.S. facilities


(140
)


(50
)


(200
)United Kingdom facilities(2)


300
bps


(205
) bps


(90
) bps     (1)
    
    Operating margin is calculated as operating income divided by
    total revenues. This table aggregates all of the same store
    facilities we operate using 100% of their results. This does not
    represent the overall margin for USPIs operations in
    either the U.S. or U.K. because we have a variety of ownership
    levels in the facilities we operate, and facilities open for
    less than a year are excluded from same store calculations.(2)
    
    Calculated using 2007 exchange rates for both periods. Although
    this computation represents a non-GAAP measure, we believe that
    using a constant translation rate more accurately reflects the
    trend of the business.  Combined
    Year Ended December 31, 2007 compared to Year Ended
    December 31, 2006
           53




---



##### Table of Contents



Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
   54




---



##### Table of Contents



gross-ups,
         55




---



##### Table of Contents



Liquidity
    and Capital Resources
  Years Ended December 31,Combined2007


2006


2005Net cash provided by operating activities

$
97,184


$
102,129


$
107,031Net cash used in investing activities


(99,647
)


(279,337
)


(102,042
)Net cash provided by financing activities


47,516



80,055



32,062   Overview
    Operating
    Activities
    follow-up and/or
 56




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##### Table of Contents



Investing
    Activities
    Acquisitions
    and Sales
    
    $51.9 million was paid to acquire controlling interests in
    four ambulatory surgery centers in the St. Louis, Missouri
    area;
    $34.3 million was paid to acquire additional ownership
    interests via a
    buy-up
    option in five of our existing facilities in the St. Louis,
    Missouri area;
    $9.8 million was received from a not-for-profit hospital
    partner that obtained additional ownership in certain of our
    surgical facilities in the Chicago, Illinois area;
    $9.0 million was paid to acquire a controlling interest in
    an ambulatory surgery center in the Houston, Texas area;
    $6.1 million was received from a not-for-profit hospital
    partner that obtained additional ownership in certain of our
    surgical in the Corpus Christi, Texas area;
    $3.7 million was received from a not-for-profit hospital
    partner that obtained additional ownership in certain of our
    surgical facilities in the Dallas, Texas area;
    $5.7 million was invested in a company jointly operated
    with one of our not-for-profit hospital partners, which the
    joint venture used to acquire ownership in a surgical hospital
    in the Houston, Texas area;
    $1.5 million was invested in a joint venture with one of
    our not-for-profit hospital partners, which the joint venture
    used to acquire ownership in a surgery center in the Detroit,
    Michigan area;
    $1.8 million was received from the sale of a surgery center
    in the Atlanta, Georgia area;
    $0.5 million was received from a not-for-profit hospital
    partner that obtained additional ownership in one of our
    facilities in the Oklahoma City, Oklahoma area, and;
    Net payment of approximately $3.3 million related to other
    purchases and sales of equity interests and contributions of
    cash to equity method investees. 57




---



##### Table of Contents



Property
    and Equipment/Facilities under Development
          Financing
    Activities
   58




---



##### Table of Contents



Debt
    New
    senior secured credit facility
  buy-up
    New
    senior subordinated notes
  7 8 1 4 payment-in-kind 1 4
 59




---



##### Table of Contents



sale-leaseback
    United
    Kingdom borrowings
        Equity
    Contribution from USPI Group Holdings, Inc. and Payments to
    Repurchase Stock
    Stock
    Option and Stock Purchase Plans
   60




---



##### Table of Contents



Contractual
    Cash Obligations
    Payments Due by PeriodWithin


Years


Years


BeyondContractual Cash Obligations

Total


1 Year


2 and 3


4 and 5


5 Years(In thousands)Long term debt obligations (principal plus interest)(1):Senior secured credit facility

$
709,502


$
40,121


$
80,504


$
79,062


$
509,815Senior subordinated notes, due 2017


440,575



21,300



42,600



42,600



334,075Senior subordinated toggle notes, due 2017


374,208



18,500



37,000



37,000



281,708Amended and restated U.K. credit facility


111,757



12,271



26,541



28,003



44,942Other debt at operating subsidiaries


44,496



13,161



18,568



7,515



5,252Capitalized lease obligations


84,172



9,002



16,639



13,201



45,330Operating lease obligations


64,597



14,193



21,118



13,682



15,604Total contractual cash obligations

$
1,829,307


$
128,548


$
242,970


$
221,063


$
1,236,726     (1)
    
    Amounts shown for long-term debt obligations and capital lease
    obligations include the associated interest. For variable rate
    debt, the interest is calculated using the December 31,
    2007 rates applicable to each debt instrument.  Debt
    at Operating Subsidiaries
       61




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
      Related
    Party Transactions
       62




---



##### Table of Contents



New
    Accounting Pronouncements
  Fair Value Measurement
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities, Including an amendment of FASB Statement
    No. 115
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk   63




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  Form 10-K.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Form 10-K, Form 10-K.
  Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f).
 64




---



##### Table of Contents




    Pertain to the maintenance of records that in reasonable detail,
    accurately and fairly reflect the transactions and dispositions
    of our assets.
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with U.S. generally accepted accounting
    principles, and that our receipts and expenditures are being
    made only in accordance with authorizations of our management
    and board of directors; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.  Internal Control  Integrated
    Framework
  
    USP Houston, Inc. (Investment in Memorial Hermann Specialty
    Hospital Kingwood, L.L.C.)
    USP Des Peres, Inc.
    USP Mason Ridge, Inc.
    USP Webster Groves, Inc.
    USP Frontenac, Inc.
    USP Michigan, Inc. (Investment in Utica ASC Partners, LLC)
    USP North Texas, Inc. (Investment in Baylor Surgicare at Plano,
    L.L.C.)    Limitations
    on the Effectiveness of Controls
   65




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##### Table of Contents



Changes
    in Internal Control Over Financial Reporting
    Item 9B.
    Other
    Information   PART III  ITEM 10.
    Directors,
    Executive Officers and Corporate Governance  Directors
    and Executive Officers
    Name

Age

Position(s)Donald E. Steen


61


Chairman of the BoardWilliam H. Wilcox


56


President, Chief Executive Officer and DirectorBrett P. Brodnax


43


Executive Vice President and Chief Development OfficerMark A. Kopser


43


Executive Vice President and Chief Financial OfficerNiels P. Vernegaard


51


Executive Vice President and Chief Operating OfficerJohn J. Wellik


46


Senior Vice President, Accounting and Administration and
    SecretaryD. Scott Mackesy


39


DirectorPaul B. Queally


43


DirectorMichael E. Donovan


31


DirectorRaymond A. Ranelli


60


DirectorJames Ken Newman


64


DirectorJoel T. Allison


60


DirectorBoone Powell, Jr.


71


DirectorJohn C. Garrett, M.D.


65


Director   Donald E. Steen
  William H. Wilcox
 66




---



##### Table of Contents



Brett P. Brodnax
  Mark A. Kopser
  Niels P. Vernegaard
  John J. Wellik
  D. Scott Mackesy
  Paul B. Queally
  Michael E. Donovan
  Raymond A. Ranelli
  James Ken Newman
  Joel T. Allison
 67




---



##### Table of Contents



Boone Powell, Jr.
  John C. Garrett, M.D.
  Audit
    Committee Financial Expert
    Nominations
    for the Board of Directors
    Section 16(a)
    Beneficial Ownership Reporting Compliance
    Code of
    Ethics
    Item 11.
    Executive
    Compensation  Overview
     68




---



##### Table of Contents



Our
    Compensation Philosophy and Objectives
    
    attract and retain superior executive talent in the healthcare
    industry;
    motivate and reward executives to achieve optimum short-term and
    long-term corporate operating results;
    align the interests of our executive officers and stockholders
    by motivating executive officers to increase stockholder
    value; and
    provide a compensation package that recognizes individual
    contributions as well as overall business results.    Compensation
    Components
    Base
    Salary
    Annual
    Bonus
    Long-Term
    Equity Incentives
   69




---



##### Table of Contents



Termination
    Based Compensation
    Perquisites
    Other
    Benefits
    Compensation
    Committee Report
  Regulation S-K Form 10-K.
    
 70




---



##### Table of Contents



Summary
    Compensation Table for Years ended December 31, 2007 and
    December 31, 2006
    Change inPension ValueandNonqualifiedNon-Equity


Deferred


All OtherStock


Option


Incentive Plan


Compensation


Compen-Name and Principal Position

Year


Salary


Bonus


Awards(1)


Awards(1)


Compensation


Earnings


sation


TotalWilliam H. Wilcox


2007


$
575,000


$
287,500
(2)

$
280,903


$







$
195,436


$
250,739
(5)

$
1,589,578President, Chief Executive


2006


$
566,667


$
308,810
(2)

$
2,745,090


$







$
86,361


$
250,235
(5)

$
3,957,163Officer and DirectorBrett P. Brodnax


2007



365,000



136,875
(3)


112,361











49,850



30,823
(5)


694,909Executive Vice President


2006



346,250



123,661
(4)


1,525,050











26,440



29,575
(5)


2,050,976and Chief Development OfficerMark A. Kopser


2007



340,000



127,500
(3)


100,534











37,264



29,238
(5)


634,536Executive Vice President


2006



327,500



116,964
(4)


1,220,040











13,295



28,303
(5)


1,706,102and Chief Financial OfficerJohn J. Wellik


2007



247,000



74,100
(3)


11,828











25,243



22,138
(5)


380,309Senior Vice President,


2006



237,000



67,714
(4)


406,680











14,734



21,304
(5)


747,432Accounting and AdministrationNiels P. Vernegaard


2007



406,667



152,500
(3)


100,534











25,634



106,250
(5)


791,585Executive Vice President


2006



233,333



83,333
(6)


1,870,800



473,000







2,995



236,900
(5)(7)


2,900,361and Chief Operating Officer     (1)
    
    We account for the cost of stock-based compensation awarded
    under our 2001 Equity-Based Compensation Plan and the 2007
    Equity Incentive Plan adopted by our Parent in accordance with
    the Financial Accounting Standards Board Statement of Financial
    Accounting Standards No. 123 (revised 2004) Share
    Based Payment (SFAS 123R), under which the cost
    of equity awards to employees is measured by the fair value of
    the awards on their grant date and is recognized over the
    vesting periods of the awards, whether or not the awards had any
    intrinsic value during the period. The 2001 Equity-Based
    Compensation Plan was cancelled in connection with the Merger.
    Amounts shown in the table above reflect the dollar amount
    recognized for financial statement reporting purposes for 2006
    and 2007 in accordance with SFAS 123R of awards granted
    under the 2001 Equity-Based Compensation Plan and the 2007
    Equity Incentive Plan and thus may include amounts from awards
    granted in prior years. No forfeitures occurred during 2006 or
    2007. All 2001 Equity-Based Compensation Plan awards are based
    on the closing market price of our common stock on the date of
    grant. The 2007 Equity Incentive Plan awards are valued at $0.32
    per share  which we determined with the assistance of a third
    party valuation firm as the value of our Parents common
    stock on the date of grant. Assumptions used in calculation of
    these amounts are included in Note 12 to our consolidated
    audited financial statements for the fiscal year ended
    December 31, 2006, included in our Annual Report on
    Form 10-K
    filed with the Securities and Exchange Commission
    (SEC) on February 28, 2007; and in Note 11
    to our consolidated audited financial statements for the fiscal
    year ended December 31, 2007, included in this Annual
    Report on Form 10-K.(2)
    
    Thirty five percent of the amount shown was paid in cash and
    sixty five percent was deferred at our named executive
    officers election pursuant to USPIs Deferred
    Compensation Plan (the DCP).(3)
    
    Ten percent of the amount shown was paid in cash and ninety
    percent was deferred at our named executive officers
    election pursuant to the DCP.(4)
    
    Forty percent of the amount shown was paid in cash and sixty
    percent was deferred at our named officers election
    pursuant to the DCP.  71




---



##### Table of Contents



(5)
    
    Includes discretionary contributions to the named executive
    officers DCP and matching contributions to the named
    executive officers 401(k) and DCP accounts as follows:  Discretionary


Matching


MatchingContribution


Contribution


Contributionto DCP


401(k)


DCPMr. Wilcox2007

$
200,000


$
6,548


$
44,1912006


200,000



6,461



43,774Mr. Brodnax2007






6,390



24,4332006






6,079



23,496Mr. Kopser2007






6,390



22,8482006






6,079



22,224Mr. Wellik2007






6,402



15,7362006






6,068



15,236Mr. Vernegaard2007


75,000



6,750



24,5002006


75,000



2,625



10,000    (6)
    
    Sixty-five percent of the amount shown was paid in cash and
    thirty-five percent was deferred at Mr. Vernegaards
    election pursuant to USPIs DCP.(7)
    
    Also includes relocation expenses of $149,275 paid by USPI on
    behalf of Mr. Vernegaard.  Grant of
    Plan-Based Awards
    All otherStock





Grant DateAwards:


Exercise


Fair ValueNumber


of Base


of Stockof Shares


Price of


AndGrant


of Stock


Option


OptionName

Date


or Units(1)


Awards


Awards(2)William H. Wilcox


4/19/07



5,246,536



N/A


$
1,678,892Brett P. Brodnax


4/19/07



2,175,853



N/A



696,273Mark A. Kopser


4/19/07



1,920,683



N/A



614,619John J. Wellik


4/19/07



273,561



N/A



87,540Niels P. Vernegaard


4/19/07



1,945,203



N/A



622,465     (1)
    
    Represents restricted stock awards granted to the named
    executive officers in connection with the Merger.(2)
    
    A third party assisted us with valuing these restricted shares
    of our Parents common stock at $0.32 per share. 72




---



##### Table of Contents



Outstanding
    Equity Awards at Fiscal Year-End
    Stock Awards(1)Number of Shares


Fair Value ofor Units of Stock


Shares or Units ofThat Have Not


Stock That HaveName

Vested


Not Vested(4)William H. Wilcox


4,750,000
(2)

$
4,750,000495,536
(3)


495,536Brett P. Brodnax


1,900,000
(2)


1,900,000275,853
(3)


275,853Mark A. Kopser


1,700,000
(2)


1,700,000220,683
(3)


220,683John J. Wellik


200,000
(2)


200,00073,561
(3)


73,561Niels P. Vernegaard


1,700,000
(2)


1,700,000245,203
(3)


245,203     (1)
    
    Upon consummation of the Merger, our named executive officers
    received new stock awards under the 2007 Equity Incentive Plan.(2)
    
    The restrictions with respect to 12.5% of such shares will lapse
    on April 19 of each of 2008, 2009, 2010 and 2011. The
    restrictions with respect to the remaining shares will lapse on
    April 19, 2015; provided however, that such restrictions
    may lapse sooner if certain internal rate of return targets are
    met.(3)
    
    The restrictions with respect to such shares will lapse upon a
    change at control or other exit event provided that Welsh Carson
    shall have disposed of all of its shares of our Parent acquired
    in connection with the Merger and received its cost basis in
    such shares plus a return of at least 100%.(4)
    
    Based on the shares fair value at December 31, 2007
    of $1.00.  Option
    Exercises and Stock Values
    Option Awards


Stock AwardsNumber of





Number ofShares


Value


Shares


ValueAcquired


Realized


Acquired on


RealizedName

on Exercise


on Exercise


Vesting


on VestingWilliam H. Wilcox


35,301
(1)

$
692,571
(3)


22,500
(4)

$
692,775
(6)659,696
(2)


13,169,680



102,362
(5)


3,178,340Brett P. Brodnax


51,931
(1)


1,028,389
(3)


22,821
(4)


702,391
(6)33,067
(2)


506,158



46,073
(5)


1,430,567Mark A. Kopser


40,026
(1)


852,133
(3)


22,286
(4)


686,052
(6)194,972
(2)


4,009,318



17,892
(5)


555,547John J. Wellik


23,885
(1)


399,985
(3)


12,600
(4)


387,804
(6)37,113
(2)


558,607



8,200
(5)


254,610Niels P. Vernegaard






















20,000
(5)


621,000     (1)
    
    Includes options exercised for cash prior to the Merger by the
    named executive officer. 73




---



##### Table of Contents



(2)
    
    Includes options held by the named executive officer immediately
    prior to the Merger that were accelerated and canceled in
    connection with the Merger in exchange for the right to receive
    $31.05 in cash, less the exercise price of the option.(3)
    
    Based on the difference between the closing market price per
    share of common stock on the date of exercise and the exercise
    price of the option.(4)
    
    Includes restricted stock awards that vested prior to the Merger
    in accordance with the terms of the awards.(5)
    
    Includes unvested restricted stock awards held by the named
    executive officer immediately prior to the Merger that were
    accelerated and were converted in the Merger into the right to
    receive $31.05 in cash.(6)
    
    Based on the closing market price per share of common stock on
    the vesting date.  Restricted
    Stock and Option Plan
               74




---



##### Table of Contents



Nonqualified
    Deferred Compensation
    AggregateBalance atExecutive


USPI


Aggregate


December 31,Name

Contribution


Contribution


Earnings


2007William H. Wilcox

$
242,786


$
244,191


$
195,436


$
1,727,509Brett P. Brodnax


130,947



22,433



49,850



388,811Mark A. Kopser


104,179



22,848



37,264



304,975John J. Wellik


65,328



15,736



25,243



221,463Niels P. Vernegaard


69,833



99,500



25,634



302,962   Deferred
    Compensation Plan
           75




---



##### Table of Contents



Employment
    Arrangements and Agreements
             76




---



##### Table of Contents



Potential
    Payments Upon Termination or Change of Control
    Cash








AcceleratedSeverance


Accrued





Vesting UponName

Payment


Bonus(1)(2)


Benefits(3)


Change of Control(4)William H. Wilcox

$
1,150,000
(5)

$
287,500


$
12,024(5
)

$
5,246,536Brett P. Brodnax


365,000
(6)


136,875



6,012(6
)


2,175,853Mark A. Kopser


340,000
(6)


127,500



6,432(6
)


1,920,683John J. Wellik


247,000
(6)


74,100



6,432(6
)


273,561Niels P. Vernegaard


400,000
(6)


152,500



6,432(6
)


1,945,203     (1)
    
    Amounts are based on the bonus amount paid with respect to 2007.(2)
    
    Amounts will be paid at such time as annual bonuses are payable
    to other executive and officers of USPI in accordance with
    USPIs normal payroll practices.(3)
    
    Amounts consist of the cost to continue to pay such named
    executive officers health insurance benefits for the
    designated term or the economic equivalent thereof if such
    continuation is not permissible under the terms of the
    USPIs health insurance plan.(4)
    
    Pursuant to the restricted stock award agreements with our named
    executive officers, all unvested restricted shares of our
    Parents common stock will vest in full upon a change of
    control if, as a result of such change of control, Welsh Carson
    shall have disposed of all of its shares of our Parent acquired
    in connection with the Merger and received its cost basis in
    such shares plus a return of at least 100%. A change of control
    is not defined to include an initial public offering of our
    stock. In the event such restricted shares do not vest on such
    change of control, then such restricted shares shall be
    forfeited upon the closing of such change of control
    transaction. The results in this column are the result of
    multiplying the total possible number of restricted shares of
    our Parents common stock that vest upon a change of
    control by $1.00 per share, which is the fair value per share of
    common stock as of December 31, 2007.(5)
    
    Amounts to be paid over twenty-four months.(6)
    
    Amounts to be paid over twelve months.  Director
    Compensation
   77




---



##### Table of Contents



2007
    Non-Employee Director Compensation Table
  Fees Earned or


Stock


All OtherName

Paid in Cash


Awards


Compensation


TotalJoel T. Allison

$



$







$
John C. Garrett, M.D.


42,500



3,385
(1)






45,885James Ken Newman


53,750



3,385
(1)






57,135Boone Powell, Jr.


51,250



4,162
(1)






55,412Raymond A. Ranelli


57,917



3,385
(1)






61,302     (1)
    
    We account for the cost of stock-based compensation awarded
    under the 2007 Equity Incentive Plan in accordance with
    SFAS 123R, under which the cost of equity awards is
    measured by the fair value of the awards on their grant date and
    is recognized over the vesting periods of the awards, whether or
    not the awards had any intrinsic value during the period.
    Amounts shown in the table above reflect the dollar amount
    recognized for financial statement reporting purposes for 2007
    in accordance with SFAS 123R of awards granted under the
    2007 Equity Incentive Plan. No forfeitures occurred during 2007,
    and all awards are valued at $0.32 per share on the date of
    grant (other than Mr. Powells award, which is valued
    at $1.00 per share on the date of grant). Assumptions used in
    calculation of these amounts are included in Note 11 to our
    consolidated audited financial statements for the fiscal year
    ended December 31, 2007, included in this Annual Report on
    Form 10-K.  Compensation
    Committee Interlocks and Insider Participation
   78




---



##### Table of Contents



Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters      Participating


Percent ofCommon


Percent of


Preferred


OutstandingShares


Outstanding


Shares


ParticipatingBeneficially


Common


Beneficially


PreferredName of Beneficial Owner(1)

Owned


Shares


Owned


SharesWelsh, Carson, Anderson & Stowe(2)


136,448,356



86.6
%


17,326,775



96.3
%California State Teachers Retirement System(3)


22,183,099



14.1
%


2,816,901



15.7
%CPP Investment Board (USRE II) Inc.(4)


26,619,718



16.9
%


3,380,282



18.8
%Silvertech Investment PTE Ltd(5)


8,873,239



5.6
%


1,126,761



6.3
%Donald E. Steen(6)


1,421,127



*



78,873



*William H. Wilcox(7)


6,488,790



4.1
%


157,746



*Brett P. Brodnax(8)


2,388,811



1.5
%


27,042



*Mark A. Kopser(9)


2,364,345



1.5
%


56,338



*Niels P. Vernegaard(10)


2,007,194



1.3
%


7,872



*John J. Wellik(11)


317,927



*



5,634



*Joel T. Allison














Michael E. Donovan(12)(13)


40,000



*







John C. Garrett, M.D.(13)


173,095



*



16,901



*D. Scott Mackesy(12)(13)


40,000



*







James K. Newman(13)


217,463



*



22,535



*Boone Powell, Jr.(13)


111,001



*



9,016



*Paul B. Queally (12)(14)


215,457



*



22,281



*Raymond A. Ranelli(13)


87,919



*



6,085



*All directors and executive officers as a group(15)


15,873,130



10.1
%


410,323



2.3
%     *
    
    Less than one percent(1)
    
    Unless otherwise indicated, the principal executive offices of
    each of the beneficial owners identified are located at 15305
    Dallas Parkway, Suite 1600, Addison, Texas 77001.(2)
    
    Represents (A) 54,671,610 common shares and 6,942,423
    participating preferred shares held by Welsh Carson over which
    Welsh Carson has sole voting and investment power,
    (B) 25,200 common shares and 3,200 participating preferred
    shares held by WCAS Management Corporation, an affiliate of
    Welsh Carson, over which WCAS Management Corporation has sole
    voting and investment power, (C) an aggregate 1,462,785
    common shares and 185,752 participating preferred over which
    individuals who are general partners of WCAS X Associates
    LLC, the sole general partner of Welsh Carson, and/or otherwise
    employed by an affiliate of Welsh, Carson, Anderson &
    Stowe have voting and investment power, and (D) an
    aggregate 80,288,761 common shares and 10,195,400 participating
    preferred shares held by other co-investors, over which
    Welsh Carson has sole voting power. WCAS X Associates LLC,
    the sole general partner of Welsh Carson and the individuals who
    serve as general partners of WCAS X Associates LLC, including D.
    Scott Mackesy, Paul B. Queally and Michael E. Donovan, may be
    deemed to beneficially own the shares beneficially owned 79




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##### Table of Contents



by Welsh Carson. Such persons disclaim beneficial ownership of
    such shares. The principal executive offices of Welsh, Carson,
    Anderson & Stowe are located at 320 Park Avenue,
    Suite 2500, New York, New York 10022.(3)
    
    Such beneficial owner has granted to Welsh Carson sole voting
    power over its shares. The principal executive offices of such
    beneficial owner is 7667 Folsom Blvd., Suite 250,
    Sacramento, California 95826.(4)
    
    Such beneficial owner has granted to Welsh Carson sole voting
    power over its shares. The principal executive offices of such
    beneficial owner is One Queen Street East, Suite 2600,
    Toronto, Ontario, M5C 2W5, Canada.(5)
    
    Such beneficial owner has granted to Welsh Carson sole voting
    power over its shares. The principal executive offices of such
    beneficial owner is 255 Shoreline Drive, Suite 600, Redwood
    City, California 94065.(6)
    
    Includes 100,000 common shares owned by the Michelle Ann Steen
    Trust and 100,000 common shares owned by the Marcus Anthony
    Steen Trust for which, in each case, Mr. Steen acts as a
    trustee and has voting and investment power over such shares.
    Such shares are subject to restrictions on transfer set forth in
    a restricted stock award agreement entered into at the time of
    the consummation of the Merger. Also included are another
    600,000 common shares which are subject to restrictions on
    transfer set forth in a restricted stock award agreement entered
    into at the time of the consummation of the Merger.(7)
    
    Includes 5,246,536 common shares which are subject to
    restrictions on transfer set forth in a restricted stock award
    agreement entered into at the time of the consummation of the
    Merger.(8)
    
    Includes 2,175,853 common shares which are subject to
    restrictions on transfer set forth in a restricted stock award
    agreement entered into at the time of the consummation of the
    Merger.(9)
    
    Includes 1,920,683 common shares which are subject to
    restrictions on transfer set forth in a restricted stock award
    agreement entered into at the time of the consummation of the
    Merger.(10)
    
    Includes 1,945,203 common shares which are subject to
    restrictions on transfer set forth in a restricted stock award
    agreement entered into at the time of the consummation of the
    Merger.(11)
    
    Includes 273,561 common shares which are subject to restrictions
    on transfer set forth in a restricted stock award agreement
    entered into at the time of the consummation of the Merger.(12)
    
    Does not include (A) 54,671,610 common shares or 6,942,423
    participating preferred shares owned by Welsh Carson, or
    (B) 25,200 common shares or 3,200 participating preferred
    shares owned by WCAS Management Corporation. Messrs Queally,
    Mackesy and Donovan, as general partners of WCAS X Associates
    LLC, the sole general partner of Welsh Carson, and officers of
    WCAS Management Corporation, may be deemed to beneficially own
    the shares beneficially owned by Welsh Carson and WCAS
    Management Corporation. Each of Messrs Queally, Mackesy and
    Donovan disclaims beneficial ownership of such shares. The
    principal executive offices of Messrs Queally, Mackesy and
    Donovan are located at 320 Park Avenue, Suite 2500, New
    York, New York 10022.(13)
    
    Includes 40,000 common shares which are subject to restrictions
    on transfer set forth in a restricted stock award agreement.(14)
    
    Includes (A) an aggregate 3,090 common shares and 393 preferred
    shares owned by certain trusts established for the benefit of
    Mr. Queallys children for which, in each case,
    Mr. Queally acts as a trustee and has voting and investment
    power over such shares and (B) 40,000 common shares which are
    subject to restrictions on transfer set forth in a restricted
    stock awards agreement.(15)
    
    Does not include (A) 54,671,610 common shares or 6,942,423
    participating preferred shares owned by Welsh Carson, or
    (B) 25,200 common shares or 3,200 participating preferred
    shares owned by WCAS Management Corporation. Includes an
    aggregate 12,361,836 common shares which are subject to
    restrictions on transfer set forth in restricted stock award
    agreements entered into at the time of the consummation of the
    Merger.  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   80




---



##### Table of Contents



Arrangements
    with Our Investors
    Stock
    Subscription and Exchange Agreement
    Stockholders
    Agreement and Registration Rights Agreement
    Transaction
    Fee
    Management
    Agreement
    Agreement
    with Accuro
   81




---



##### Table of Contents



Other
    Arrangements with Directors and Executive Officers
  Restricted
    Stock and Option Plan
    Employment
    Agreements
    Other
    Arrangements
            Regulation S-X.
   82




---



##### Table of Contents



ITEM 14.
    Principal
    Accounting Fees and Services    Description of Fees

2007


2006Audit Fees(1)

$
1,819,144


$
1,352,495Audit Related Fees(2)


140,000



10,620Tax Fees(3)






21,477All Other Fees(4)


130,480



126,000$
2,089,624


$
1,510,592     (1)
    
    Audit Fees. Includes fees billed for professional services
    rendered for the audit of our annual financial statements
    included in our Form
    10-K,
    reviews of our quarterly financial statements included in Forms
    10-Q,
    reviews of our other filings with the SEC, and other research
    work necessary to comply with generally accepted accounting
    standards for the years ended December 31, 2007 and 2006.(2)
    
    Audit Related Fees. Includes fees billed for assurance and
    related services that are reasonably related to the performance
    of the audit or review of our financial statements and are not
    reported under Audit Fees. These services include
    issuance of consents and other accounting and reporting
    consultations.(3)
    
    Tax Fees. Includes fees billed for tax compliance, tax advice,
    and tax planning.(4)
    
    All Other Fees. Includes fees billed for assistance with
    preparation of Medicare cost
    reports.          .   83




---



##### 



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules  (a) (1)  Financial Statements
  Form 10-K:
   
 Reports of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets as of
    December 31, 2007 (Successor) and 2006 (Predecessor)


F-5Consolidated Statements of Operations


F-6Consolidated Statements of Comprehensive Income
    (loss)


F-7Consolidated Statements of Stockholders
    Equity


F-8Consolidated Statements of Cash Flows


F-9Notes to Consolidated Financial Statements


F-102. Financial Statement ScheduleSchedule
    II


S-13. The following consolidated financial statements of Texas
    Health Ventures Group, L.L.C. and Subsidiaries are presented
    pursuant to Rule 3-09 of Regulation S-X:Independent Auditors Report


2Consolidated Balance Sheets as of June 30,
    2007 and 2006


3Consolidated Statements of Income for the year
    ended June 30, 2007 and the six months ended June 30,
    2006


4Consolidated Statements of Members Equity
    for the year ended June 30, 2007 and the six months ended
    June 30, 2006


5Consolidated Statements of Cash Flows for the
    year ended June 30, 2007 and the six months ended
    June 30, 2006


6Notes to the Consolidated Financial Statements


7Unaudited Consolidated Balance Sheets as of
    December 31, 2005 and 2004


19Unaudited Consolidated Statements of Income for
    the years ended December 31, 2005 and 2004


20Unaudited Consolidated Statements of
    Members Equity for the years ended December 31,
    2005
    and 2004


21Unaudited Consolidated Statements of Cash Flows
    for the years ended December 31, 2005 and 2004


22Unaudited Notes to Consolidated Financial
    Statements


23   84




---



##### Table of Contents



Report
    of Independent Registered Public Accounting Firm           Internal Control 
    Integrated Framework
      F-1




---



##### Table of Contents



Report
    of Independent Registered Public Accounting Firm
               F-2




---



##### Table of Contents



Report
    of Independent Registered Public Accounting Firm
             Internal Control 
    Integrated Framework
    
    USP Houston, Inc. (Investment in Memorial Hermann Specialty
    Hospital Kingwood, L.L.C.)
    USP Des Peres, Inc.
    USP Mason Ridge, Inc.
    USP Webster Groves, Inc. F-3




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##### Table of Contents




    USP Frontenac, Inc.
    USP Michigan, Inc. (Investment in Utica ASC Partners, LLC)
    USP North Texas, Inc. (Investment in Baylor Surgicare at Plano,
    L.L.C.)        F-4




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES



Consolidated
    Balance Sheets
    December 31, 2007 and 2006  Successor



Predecessor2007



2006(In thousands, except per share amounts)ASSETSCash and cash equivalents

$
76,758



$
31,740Accounts receivable, net of allowance for doubtful accounts of
    $12,721 and $9,955, respectively


59,557




58,525Other receivables (Note 4)


8,974




16,973Inventories of supplies


9,495




9,108Deferred tax asset, net







14,238Prepaids and other current assets


20,056




13,264Total current assets


174,840




143,848Property and equipment, net (Note 5)


229,039




299,829Investments in affiliates (Note 3)


267,357




158,499Goodwill and intangible assets, net (Note 6)


1,590,820




621,264Other assets


15,337




8,416Total assets

$
2,277,393



$
1,231,856LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable

$
22,982



$
24,436Accrued salaries and benefits


24,671




26,145Due to affiliates


62,500




76,398Accrued interest


13,436




1,742Current portion of long-term debt (Note 7)


25,311




26,373Other current liabilities


38,509




30,588Total current liabilities


187,409




185,682Long-term debt, less current portion (Note 7)


1,072,751




320,957Other long-term liabilities


17,950




10,857Deferred tax liability, net


109,414




42,256Total liabilities


1,387,524




559,752Minority interests (Note 3)


83,063




72,830Commitments and contingencies (Notes 8 and 13)Stockholders equity (Note 11)Common stock, $0.01 par value; 100 shares authorized,
    issued and outstanding at December 31, 2007 (Successor);
    200,000,000 shares authorized:44,714,176 shares issued and 44,710,100 outstanding at
    December 31, 2006 (Predecessor)







447Additional paid-in capital


799,562




382,327Treasury stock, at cost, 4,076 shares at December 31,
    2006







(109
)Accumulated other comprehensive income (loss), net of tax


(1,485
)



16,349Retained earnings


8,729




200,260Total stockholders equity


806,806




599,274Total liabilities and stockholders equity

$
2,277,393



$
1,231,856    F-5




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES



Consolidated
    Statements of Operations  Successor



PredecessorPeriod from



Period fromApril 19 through



January 1December 31,



through April 18,


Years Ended December 31,2007



2007


2006


2005(In thousands)Revenues:Net patient service revenues

$
407,923



$
172,807


$
514,519


$
428,452Management and contract service revenues


46,503




19,142



52,236



35,904Other revenues


3,552




1,615



7,801



970Total revenues


457,978




193,564



574,556



465,326Equity in earnings of unconsolidated affiliates


23,867




9,906



31,568



23,998Operating expenses:Salaries, benefits, and other employee costs


127,715




54,727



161,588



119,947Medical services and supplies


78,089




34,768



103,251



82,666Other operating expenses


76,047




32,451



98,408



84,034General and administrative expenses


29,340




39,277



38,826



28,748Provision for doubtful accounts


7,769




3,324



9,943



9,177Depreciation and amortization


26,960




12,550



34,929



30,584Total operating expenses


345,920




177,097



446,945



355,156Operating income


135,925




26,373



159,179



134,168Interest income


3,208




934



4,067



4,455Interest expense


(67,873
)



(9,526
)


(32,624
)


(27,403
)Loss on early retirement of debt (Note 7)







(2,435
)


(14,880
)


Other


(442
)



798



1,778



533Total other expense, net


(65,107
)



(10,229
)


(41,659
)


(22,415
)Income from continuing operations before minority interests


70,818




16,144



117,520



111,753Minority interests in income of consolidated subsidiaries


(45,130
)



(18,859
)


(54,642
)


(38,440
)Income (loss) from continuing operations before income taxes


25,688




(2,715
)


62,878



73,313Income tax expense


(14,666
)



(4,158
)


(22,780
)


(26,173
)Income (loss) from continuing operations


11,022




(6,873
)


40,098



47,140Discontinued operations, net of tax (Note 2):Income (loss) from discontinued operations


133




(276
)


(109
)


(1
)Net gain (loss) on disposal of discontinued operations


(2,426
)







(5,743
)


155Total earnings (loss) from discontinued operations


(2,293
)



(276
)


(5,852
)


154Net income (loss)

$
8,729



$
(7,149
)

$
34,246


$
47,294    F-6




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES



Consolidated
    Statements of Comprehensive Income (loss)  Successor



PredecessorPeriod from



Period fromApril 19 through



January 1December 31,



through April 18,


Years Ended December 31,2007



2007


2006


2005(In thousands)Net income (loss):

$
8,729



$
(7,149
)

$
34,246


$
47,294Other comprehensive income (loss):Foreign currency translation adjustments


(1,646
)



2,169



13,104



(9,975
)Pension adjustments, net of tax


161








(434
)


(549
)Other comprehensive income (loss)


(1,485
)



2,169



12,670



(10,524
)Comprehensive income (loss)

$
7,244



$
(4,980
)

$
46,916


$
36,770    F-7




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES



Consolidated
    Statements of Stockholders Equity  AccumulatedCommon Stock


Additional








OtherOutstanding





Paid-in


Treasury


Deferred


Comprehensive


RetainedShares


Par Value


Capital


Stock


Compensation


Income (Loss)


Earnings


Total(In thousands)PredecessorBalance, December 31, 2004


42,969


$
430


$
349,048


$
(320
)

$
(7,689
)

$
14,420


$
118,720


$
474,609Issuance of common stock and exercise of stock options


1,346



13



26,608



363



(10,454
)










16,530Repurchases of common stock


(32
)










(874
)














(874
)Amortization of deferred compensation


















4,015











4,015Net income


























47,294



47,294Foreign currency translation adjustments






















(9,975
)






(9,975
)Minimum pension liability adjustment, net of tax






















(549
)






(549
)Balance, December 31, 2005


44,283



443



375,656



(831
)


(14,128
)


3,896



166,014



531,050Reclassification of deferred compensation upon adoption of
    SFAS 123R










(14,128
)






14,128











Issuance of common stock and exercise of stock options


480



4



8,825



2,394















11,223Repurchases of common stock


(53
)










(1,672
)














(1,672
)Equity-based compensation










11,974



















11,974Net income


























34,246



34,246Foreign currency translation adjustments






















13,104







13,104Minimum pension liability adjustment, net of tax






















(434
)






(434
)Adjustment to initially apply SFAS 158, net of tax
    (Note 13)






















(217
)






(217
)Balance, December 31, 2006


44,710



447



382,327



(109
)






16,349



200,260



599,274Issuance of common stock and exercise of stock options


474



5



6,211



















6,216Repurchases of common stock


(71
)










(2,197
)














(2,197
)Equity-based compensation expense










17,100



















17,100Tax benefit related to increase in value of equity awards










15,822



















15,822Net loss


























(7,149
)


(7,149
)Foreign currency translation adjustments






















2,169







2,169Balance, April 18, 2007


45,113


$
452


$
421,460


$
(2,306
)

$



$
18,518


$
193,111


$
631,235SuccessorCapitalization of Successor company at April 19, 2007





$



$
791,856


$



$



$



$



$
791,856Expenses paid on behalf of USPI Group Holdings, Inc.










(7,862
)


















(7,862
)Additional investment by USPI Group Holdings, Inc.










13,477



















13,477Contribution related to equity award grants by USPI Group
    Holdings, Inc.










2,091



















2,091Net income


























8,729



8,729Foreign currency translation adjustments






















(1,646
)






(1,646
)Pension liability adjustment, net of tax






















161







161Balance, December 31, 2007





$



$
799,562


$



$



$
(1,485
)

$
8,729


$
806,806    F-8




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES



Consolidated
    Statements of Cash Flows  Successor



PredecessorPeriod from



Period fromApril 19 through



January 1December 31,



through April 18,


Years Ended December 31,2007



2007


2006


2005(In thousands)Cash flows from operating activities:Net income (loss)

$
8,729



$
(7,149
)

$
34,246


$
47,294Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Loss (earnings) from discontinued operations


2,293




276



5,852



(154
)Provision for doubtful accounts


7,769




3,324



9,943



9,177Depreciation and amortization


26,960




12,550



34,929



30,584Amortization of debt issue costs and discount


1,904




202



912



770Deferred income taxes


10,217




1,328



6,294



2,041Loss (gain) on sale of equity interests


737




(897
)






Loss on early retirement of debt







2,435



14,880



Equity in earnings of unconsolidated affiliates, net of
    distributions received


6,667




4,335



(4,104
)


(3,958
)Minority interests in income of consolidated subsidiaries, net
    of distributions paid


2,564




461



573



1,389Equity-based compensation


1,810




17,100



11,974



4,514Increases (decreases) in cash from changes in operating assets
    and liabilities, net of effects from purchases of new businesses:Patient receivables


(6,551
)



(973
)


(13,900
)


(10,041
)Other receivables


177




509



(4,055
)


9,134Inventories of supplies, prepaids and other assets


1,906




919



302



(912
)Accounts payable and other current liabilities


3,002




12,060



5,533



15,842Other long-term liabilities


(264
)



(1,394
)


1,443



6,165Tax benefit related to increase in value of equity awards







(15,822
)


(2,693
)


(4,814
)Net cash provided by operating activities


67,920




29,264



102,129



107,031Cash flows from investing activities:Purchases of new businesses and equity interests, net of cash
    received


(78,928
)



(26,705
)


(280,973
)


(60,473
)Proceeds from sales of businesses and equity interests


5,879




15,916



28,335



Purchases of property and equipment


(11,862
)



(6,247
)


(28,428
)


(30,653
)Returns of capital from unconsolidated affiliates


1,581




556



1,670



201(Increase) decrease in deposits and notes receivable


9,247




(9,084
)


59



(11,117
)Net cash used in investing activities


(74,083
)



(25,564
)


(279,337
)


(102,042
)Cash flows from financing activities:Proceeds from long-term debt, net of debt issuance costs


912,019




20,684



304,921



16,888Payments on long-term debt


(226,893
)



(7,442
)


(275,301
)


(17,932
)Proceeds from issuance of common stock







6,135



7,684



6,140Net equity contribution from USPI Group Holdings, Inc.


779,279












Tax benefit related to increase in value of equity awards







15,822



2,693



4,814Payments to repurchase common stock


(1,430,879
)











(Decrease) increase in cash held on behalf of unconsolidated
    affiliates


(23,342
)



13,895



41,161



23,541Expenses paid on behalf of USPI Group Holdings, Inc.


(7,862
)











Returns of capital to minority interest holders


(2,943
)



(957
)


(1,103
)


(1,389
)Net cash (used in) provided by financing activities


(621
)



48,137



80,055



32,062Cash flows of discontinued operations:Operating cash flows


420




(927
)


532



874Investing cash flows


2,718




(753
)


(2,809
)


(391
)Financing cash flows


(2,723
)



1,413



837



(484
)Net cash provided by (used in) discontinued operations


415




(267
)


(1,440
)


(1
)Effect of exchange rate changes on cash


(70
)



(113
)


(107
)


(77
)Net (decrease) increase in cash and cash equivalents


(6,439
)



51,457



(98,700
)


36,973Cash and cash equivalents at beginning of period


83,197




31,740



130,440



93,467Cash and cash equivalents at end of period

$
76,758



$
83,197


$
31,740


$
130,440Supplemental information:Interest paid, net of amounts capitalized

$
55,302



$
9,861


$
25,105


$
27,822Income taxes paid


4,690




1,909



17,799



17,553Non-cash transactions:Issuance of common stock to employees

$




$



$
30,455


$
10,609Assets acquired under capital lease obligations


7,279




1,677



5,277



4,086    F-9




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESNotes to Consolidated Financial StatementsDecember 31, 2007 and 2006
  (1)
    Summary
    of Significant Accounting Policies and Practices  (a)
    Description
    of Business              (b)
    Merger
    Transaction     F-10




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
      
    an investment of cash and rollover equity of USPI in the equity
    of Parent by Welsh Carson, management and other equity investors
    of approximately $785.0 million;
    borrowings by the Company of $430.0 million in new senior
    secured credit facilities;
    the issuance by the Company of $240.0 million in aggregate
    principal amount of
    87/8% senior
    subordinated notes, due 2017, and $200.0 million in
    aggregate principal amount of
    91/4%/10% senior
    subordinated toggle notes, due 2017;
    additional borrowings of £10.0 million (approximately
    $19.7 million) by Global, which was repatriated to the
    U.S.; and
    approximately $21.9 million of cash on hand.  Business Combinations
    Net cash and equity contribution from Holdings

$
791,856Proceeds from borrowings


889,700Cash on hand


21,922Expenses paid on behalf of Parent


(7,862
)Purchase price allocated

$
1,695,616Estimated fair value of net tangible assets acquired:Cash

$
63,497Patient receivables


58,435Other current assets


41,204Investments in affiliates


263,666Property and equipment


227,878Other assets


20,668Current liabilities


(108,596
)Due to affiliates


(90,260
)Long-term debt, excluding current portion


(131,158
)Deferred tax liability


(97,016
)Other long-term liabilities


(14,579
)Minority interests in consolidated subsidiaries


(84,635
)Net tangible assets acquired


149,104Capitalized debt issuance costs


29,012Intangible assets acquired


291,631Goodwill


1,225,869$
1,695,616  F-11




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    Years EndedDecember 31,2007


2006Net revenues

$
651,542


$
574,556Income from continuing operations


16,704



11,862     (c)
    Translation
    of Foreign Currencies    (d)
    Principles
    of Consolidation  Consolidation of Variable Interest Entities (as amended)
  (e)
    Use of
    Estimates    (f)
    Cash
    and Cash Equivalents   F-12




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (g)
    Inventories
    of Supplies    (h)
    Property
    and Equipment    (i)
    Intangible
    Assets    (j)
    Impairment
    of Long-lived Assets    (k)
    Fair
    Value of Financial Instruments    (l)
    Revenue
    Recognition   F-13




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    (m)
    Concentration
    of Credit Risk    (n)
    Investments
    and Equity in Earnings of Unconsolidated
    Affiliates    The
    Equity Method of Accounting for Investments in Common Stock
    (o)
    Income
    Taxes   F-14




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    (p)
    Equity-Based
    Compensation  Share-Based Payment Accounting for Stock Issued to Employees
    PredecessorYear EndedDecember 31,2005Net income:As reported

$
47,294Add: Total stock-based employee compensation expense included in
    reported net income, net of taxes


2,934Less: Total stock-based employee compensation expense determined
    under fair value based method for all awards, net of taxes


(6,015
)Pro forma

$
44,213     No. 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services.
  (q)
    Commitments
    and Contingencies   F-15




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (2)
    Discontinued
    Operations and Other Dispositions        Accounting for the Impairment or Disposal of
    Long-Lived
    Assets
    Successor



PredecessorPeriod from



Period fromApril 19



January 1through



through


Years EndedDecember 31,



April 18,


December 31,2007



2007


2006


2005Revenues

$
3,494



$
1,484


$
5,387


$
9,415Income (loss) from discontinued operations before income taxes

$
205



$
(423
)

$
(168
)

$
(2
)Income tax (expense) benefit


(72
)



147



59



1Earnings (loss) from discontinued operations

$
133



$
(276
)

$
(109
)

$
(1
)Loss on sale of discontinued operations before income taxes

$
(3,732
)


$



$
(7,396
)

$
(80
)Income tax benefit


1,306








1,653



235Net gain (loss) on sale of discontinued operations

$
(2,426
)


$



$
(5,743
)

$
155    F-16




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
          (3)
    Acquisitions
    and Equity Method Investments  buy-up
    Successor



PredecessorPeriod from



Period fromApril 19



January 1through



through


Year EndedDecember 31,



April 18,


December 31,2007



2007


2006Net revenues

$
458,851



$
204,818


$
603,431Income (loss) from continuing operations


12,190




(3,909
)


46,780  F-17




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
        
    Investment of $5.7 million in a company jointly operated
    with one of the Companys not-for-profit hospital partners,
    which the investee used to acquire ownership in a surgical
    hospital in the Houston, Texas area;
    Receipt of $0.5 million from a not-for-profit hospital
    partner that obtained additional ownership in one of our
    facilities in the Oklahoma City, Oklahoma area; and
    Net payment of approximately $1.3 million related to other
    purchases and sales of equity interests and contributions of
    cash to equity method investees.    
    Receipt of $9.8 million from a not-for-profit hospital
    partner that obtained additional ownership in certain of the
    Companys surgical facilities in the Chicago, Illinois area;
    Investment of $1.5 million in a joint venture with one of
    the Companys not-for-profit hospital partners, which the
    joint venture used to acquire ownership in a surgery center in
    the Detroit, Michigan area; and
    Net payment of approximately $2.0 million related to other
    purchases and sales of equity interests and contributions of
    cash to equity method investees.   F-18




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    Combined2007


2006


2005Unconsolidated facilities operated at year-end


93



80



57Income statement information:Revenues

$
788,813


$
610,160


$
443,292Equity in earnings of unconsolidated affiliates


118



224



27Operating expenses:Salaries, benefits, and other employee costs


207,154



150,625



109,734Medical services and supplies


166,229



125,981



86,573Other operating expenses


203,841



150,108



111,140Depreciation and amortization


41,057



29,884



20,287Total operating expenses


618,281



456,598



327,734Operating income


170,650



153,786



115,585Interest expense, net


(20,501
)


(14,400
)


(10,560
)Other


1,843



282



772Income before income taxes

$
151,992


$
139,668


$
105,797Balance sheet information:Current assets

$
186,518


$
164,715


$
119,461Noncurrent assets


399,479



271,447



203,463Current liabilities


117,276



87,944



65,487Noncurrent liabilities


291,311



175,119



112,926   Form 10-K
  (4)
    Other
    Receivables   F-19




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (5)
    Property
    and Equipment    Estimated

Successor



PredecessorUseful Lives

2007



2006Land



$
28,596



$
27,289Buildings and leasehold improvements

7-50 years


123,902




230,221Equipment

3-12 years


91,385




190,226Furniture and fixtures

4-20 years


7,540




10,988Construction in progress




1,471




2,090252,894




460,814Less accumulated depreciation




(23,855
)



(160,985
)Net property and equipment



$
229,039



$
299,829     Successor



Predecessor2007



2006Land and buildings

$
31,363



$
34,847Equipment and furniture


9,494




15,98140,857




50,828Less accumulated amortization


(2,570
)



(11,023
)Net property and equipment under capital leases

$
38,287



$
39,805     (6)
    Goodwill
    and Intangible Assets  Accounting for Goodwill
    and Other Intangible Assets
    Successor



Predecessor2007



2006Goodwill

$
1,274,979



$
511,603Other intangible assets


315,841




109,661Total

$
1,590,820



$
621,264  F-20




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    United


UnitedStates


Kingdom


TotalPredecessorBalance at December 31, 2005

$
313,735


$
24,535


$
338,270Additions


189,608







189,608Disposals


(19,698
)






(19,698
)Other






3,423



3,423Balance at December 31, 2006


483,645



27,958



511,603Additions


23,410







23,410Disposals


(8,197
)






(8,197
)Other






593



593Balance at April 18, 2007

$
498,858


$
28,551


$
527,409SuccessorApril 19, 2007, beginning balance resulting from Merger

$
960,281


$
265,588


$
1,225,869Additions


75,448







75,448Disposals


(24,536
)






(24,536
)Other






(1,802
)


(1,802
)Balance at December 31, 2007

$
1,011,193


$
263,786


$
1,274,979        F-21




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    SuccessorDecember 31, 2007GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite Useful LivesManagement and other service contracts

$
24,357


$
(2,159
)

$
22,198Other


29,914



(1,935
)


27,979Total

$
54,271


$
(4,094
)

$
50,177Indefinite Useful LivesManagement contracts










265,664Total intangible assets









$
315,841   PredecessorDecember 31, 2006GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite Useful LivesManagement and other service contracts

$
32,856


$
(13,179
)

$
19,677Other


4,134



(1,267
)


2,867Total

$
36,990


$
(14,446
)

$
22,544Indefinite Useful LivesManagement contracts










86,425Other










692Total










87,117Total intangible assets









$
109,661    F-22




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    2008

$
5,8572009


5,9932010


5,6102011


5,8422012


6,095   (7)
    Long-term
    Debt    Successor



Predecessor2007



2006Senior secured credit facility

$
490,275



$
Term loan facility (Term B)







199,000U.K. senior credit agreement


83,519




70,139Senior subordinated notes


440,000




Notes payable to financial institutions


37,238




33,170Capital lease obligations (Note 8)


47,030




45,021Total long-term debt


1,098,062




347,330Less current portion


(25,311
)



(26,373
)Long-term debt, less current portion

$
1,072,751



$
320,957   Successor
    Borrowings
    (a)
    Senior
    secured credit facility  buy-up
 F-23




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
        (b)
    Senior
    subordinated notes  7 8 1 4 payment-in-kind 1 4
  7 8 1 4
    (c)
    United
    Kingdom borrowings   F-24




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
        (d)
    Other
    Long-term Debt        Predecessor
    Borrowings
  (e)
    Lines
    of Credit     F-25




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
      (f)
    Term
    Loan Facility (Term B)        (g)
    Subordinated
    Debt     F-26




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (8)
    Leases      Capital


OperatingLeases


LeasesYear ending December 31,2008

$
9,002


$
14,1932009


8,734



11,5952010


7,905



9,5232011


7,044



7,8972012


6,157



5,785Thereafter


45,330



15,604Total minimum lease payments


84,172


$
64,597Amount representing interest


(37,142
)Present value of minimum lease payments

$
47,030     (9)
    Related
    Party Transactions     F-27




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
        (10)
    Income
    Taxes    Successor



PredecessorPeriod from



Period fromApril 19



January 1through



throughDecember 31,



April 18,2007



2007


2006


2005Domestic

$
15,264



$
(6,677
)

$
53,460


$
62,191Foreign


10,424




3,962



9,418



11,122$
25,688



$
(2,715
)

$
62,878


$
73,313     Successor

Current


Deferred


TotalPeriod from April 19 through December 31, 2007:U.S. federal

$
(345
)

$
10,276


$
9,931State and local


1,334







1,334Foreign


3,460



(59
)


3,401Net income tax expense

$
4,449


$
10,217


$
14,666   F-28




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Predecessor

Current


Deferred


TotalPeriod from January 1 through April 18, 2007:U.S. federal

$



$
1,529


$
1,529State and local


1,302



(23
)


1,279Foreign


1,528



(178
)


1,350Net income tax expense

$
2,830


$
1,328


$
4,158   Predecessor

Current


Deferred


TotalYear ended December 31, 2006:U.S. federal

$
10,853


$
7,791


$
18,644State and local


2,902



(441
)


2,461Foreign


2,731



(1,056
)


1,675Net income tax expense

$
16,486


$
6,294


$
22,780   Predecessor

Current


Deferred


TotalYear ended December 31, 2005:U.S. federal

$
18,713


$
2,407


$
21,120State and local


2,213



206



2,419Foreign


3,206



(572
)


2,634Net income tax expense

$
24,132


$
2,041


$
26,173     Successor



PredecessorPeriod from



Period fromApril 19



January 1through



through


Year EndedDecember 31,



April 18,


December 31,2007



2007


2006


2005Computed expected tax expense (benefit)

$
8,991



$
(950
)

$
22,007


$
25,659Increase (reduction) in income taxes resulting from:Differences between U.S. financial reporting and foreign
    statutory reporting


381




200



(1,007
)


(603
)State tax expense, net of federal benefit


874




824



1,445



1,550Removal of foreign tax rate differential


(628
)



(237
)


(614
)


(656
)Transaction costs


(453
)



2,250







Valuation allowance


5,121




1,323







Other


380




748



949



223Total

$
14,666



$
4,158


$
22,780


$
26,173  F-29




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31,2007



2006Successor



PredecessorDeferred tax assets:Net operating loss carryforwards

$
16,139



$
8,862Accrued expenses


10,340




12,527Bad debts/reserves


7,135




4,171Capitalized costs and other


4,208




738Total deferred tax assets


37,822




26,298Valuation allowance


(37,822
)



(2,460
)Total deferred tax assets, net

$




$
23,838Deferred tax liabilities:Basis difference of acquisitions

$
105,425



$
45,735Accelerated depreciation


3,730




5,560Capitalized interest and other


259




561Total deferred tax liabilities

$
109,414



$
51,856         Accounting for Uncertainty
    in Income Taxes  an interpretation of FASB Statement
    No. 109
 F-30




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    (11)
    Equity-Based
    Compensation  Share-Based
    Payment
        Successor



PredecessorPeriod from



Period fromApril 19



January 1through



through


Year EndedDecember 31,



April 18,


December 31,2007



2007


2006


2005Equity in earnings of unconsolidated affiliates

$




$
20


$
78


$
Salaries, benefits and other employee costs


308




959



2,941



General and administrative expenses


643




16,144



9,034



4,514Other operating expenses


859












Minority interests in income of consolidated subsidiaries







(23
)


(79
)


Expense before income tax benefit


1,810




17,100



11,974



4,514Income tax benefit


(192
)



(5,366
)


(3,684
)


(1,580
)Total equity-based compensation expense, net of tax

$
1,618



$
11,734


$
8,290


$
2,934  F-31




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    Successor



PredecessorPeriod from



Period fromApril 19



January 1through



through


Year EndedDecember 31,



April 18,


December 31,2007



2007


2006


2005Share awards(1)

$
773



$
13,202


$
9,423


$
4,514Stock options(2)


178




3,797



2,253



Warrants


859












ESPP(2)







101



298



Expense before income tax benefit


1,810




17,100



11,974



4,514Income tax benefit


(192
)



(5,366
)


(3,684
)


(1,580
)Total equity-based compensation expense, net of tax

$
1,618



$
11,734


$
8,290


$
2,934     (1)
    
    Included in the Companys consolidated statements of
    operations for all periods.(2)
    
    Included in the Companys consolidated statement of
    operations beginning January 1, 2006, reflecting the
    Companys adoption of SFAS 123R. ESPP amounts are net
    of reimbursements by other owners of the Companys
    investees. The ESPP was terminated subsequent to the Merger.     F-32




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Stock
    Options  Successor
    SuccessorPeriod fromApril 19throughDecember 31,2007Assumptions:Expected life in years


4.82Risk-free interest rates


4.47
%Dividend yield


0.0
%Volatility


45.16
%Weighted average grant-date fair value

$
0.25     WeightedWeighted


AverageAverage


Remaining


AggregateSuccessor

Number of


Exercise


Contractual


IntrinsicStock Options

Shares (000)


Price


Life (Years)


Value ($000)Granted on April 19, 2007


4,222


$
0.32



8.00


$
549Additional grants














Exercised














Forfeited or expired


(302
)


0.32







Outstanding at December 31, 2007


3,920


$
0.32



7.11


$
2,666Exercisable at December 31, 2007





$







$
   Share
    Awards  Successor
     F-33




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
      WeightedAverageSuccessor

Number of


Grant-DateNonvested Shares

Shares (000)


Fair ValueGranted on April 19, 2007


13,250


$
0.45Additional grants


320



1.00Converted / vested






Forfeited






Nonvested at December 31, 2007


13,570


$
0.46   Warrants 
    Successor
    Stock
    Options and Share Awards  Predecessor
    PredecessorYears Ended December 31,2006

2005Assumptions:Expected life in years

3.75

3.00Risk-free interest rates

4.3%-5.0%

3.7%Dividend yield

0.0%

0.0%Volatility

30.0%

30.0%Weighted average grant-date fair value

$9.52

$7.74  F-34




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
          Employee
    Stock Purchase Plan  Predecessor
   F-35




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    PredecessorPeriodfromJanuary 1throughApril 18,

Years Ended December 31,2007

2006

2005Expected life in years

0.25

0.25

0.50Weighted average interest rate

5.1%

4.2-5.1%

2.6-3.4%Dividend yield

0.0%

0.0%

0.0%Volatility

30.0%

30.0%

30.0%Grant-date fair value per share

$6.05

$5.25-7.56

$8.42-9.97   (12)
    Segment
    Disclosures  Disclosures About Segments of an Enterprise and Related
    Information
  United


UnitedSuccessor

States


Kingdom


TotalPeriod from April 19 through December 31, 2007Net patient service revenue

$
323,550


$
84,373


$
407,923Other revenue


50,055







50,055Total revenues

$
373,605


$
84,373


$
457,978Depreciation and amortization

$
21,863


$
5,097


$
26,960Operating income


121,000



14,925



135,925Net interest expense


(60,193
)


(4,472
)


(64,665
)Income tax expense


(11,265
)


(3,401
)


(14,666
)Total assets


1,906,471



370,922



2,277,393Capital expenditures


13,802



5,339



19,141   F-36




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  United


UnitedPredecessor

States


Kingdom


TotalPeriod from January 1 through April 18, 2007Net patient service revenue

$
139,074


$
33,733


$
172,807Other revenue


20,757







20,757Total revenues

$
159,831


$
33,733


$
193,564Depreciation and amortization

$
9,611


$
2,939


$
12,550Operating income


20,964



5,409



26,373Net interest expense


(7,154
)


(1,438
)


(8,592
)Income tax expense


(2,808
)


(1,350
)


(4,158
)Total assets


1,114,429



209,279



1,323,708Capital expenditures


5,299



2,625



7,924   United


UnitedPredecessor

States


Kingdom


TotalYear Ended December 31, 2006Net patient service revenue

$
418,525


$
95,994


$
514,519Other revenue


60,037







60,037Total revenues

$
478,562


$
95,994


$
574,556Depreciation and amortization

$
26,766


$
8,163


$
34,929Operating income


145,595



13,584



159,179Net interest expense


(25,200
)


(3,357
)


(28,557
)Income tax expense


(21,105
)


(1,675
)


(22,780
)Total assets


1,027,243



204,613



1,231,856Capital expenditures


22,589



11,116



33,705   United


UnitedPredecessor

States


Kingdom


TotalYear Ended December 31, 2005Net patient service revenue

$
338,986


$
89,466


$
428,452Other revenue


36,874







36,874Total revenues

$
375,860


$
89,466


$
465,326Depreciation and amortization

$
23,392


$
7,192


$
30,584Operating income


119,534



14,634



134,168Net interest expense


(20,217
)


(2,731
)


(22,948
)Income tax expense


(23,539
)


(2,634
)


(26,173
)Total assets


833,476



195,365



1,028,841Capital expenditures


13,897



20,842



34,739  F-37




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (13)
    Commitments
    and Contingencies  (a)
    Financial
    Guarantees    Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others
  (b)
    Litigation      (c)
    Self
    Insurance and Professional Liability Claims    (d)
    Employee
    Benefit Plans   F-38




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
      (e)
    Employment
    Agreements        (14)
    Subsequent
    Events   F-39




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
      (15)
    Condensed
    Consolidating Financial Statements    7 8 1 4 S-4
 F-40




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Balance Sheets:
  Non-Participating


Consolidation


ConsolidatedSuccessor as of December 31, 2007

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
66,665


$
10,093


$



$
76,758Patient receivables, net






59,796



(239
)


59,557Other receivables


26,616



43,019



(60,661
)


8,974Inventories of supplies






9,597



(102
)


9,495Prepaids and other current assets


17,696



2,473



(113
)


20,056Total current assets


110,977



124,978



(61,115
)


174,840Property and equipment, net


15,452



212,149



1,438



229,039Investments in affiliates


951,129



1,565



(685,337
)


267,357Goodwill and intangible assets, net


834,711



378,619



377,490



1,590,820Other assets


93,703



1,102



(79,468
)


15,337Total assets

$
2,005,972


$
718,413


$
(446,992
)

$
2,277,393Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
1,607


$
21,535


$
(160
)

$
22,982Accrued expenses and other


152,649



46,282



(59,815
)


139,116Current portion of long-term debt


3,787



22,831



(1,307
)


25,311Total current liabilities


158,043



90,648



(61,282
)


187,409Long-term debt, less current portion


926,519



156,725



(10,493
)


1,072,751Other long-term liabilities


114,604



14,054



(1,294
)


127,364Minority interests






14,061



69,002



83,063Stockholders equity


806,806



442,925



(442,925
)


806,806Total liabilities and stockholders equity

$
2,005,972


$
718,413


$
(446,992
)

$
2,277,393   F-41




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Non-participating


Consolidation


ConsolidatedPredecessor as of December 31, 2006

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
23,934


$
7,806


$



$
31,740Patient receivables, net


116



58,409







58,525Other receivables


42,096



39,442



(64,565
)


16,973Inventories of supplies






9,108







9,108Prepaids and other current assets


24,410



3,152



(60
)


27,502Total current assets


90,556



117,917



(64,625
)


143,848Property and equipment, net


19,357



280,367



105



299,829Investments in affiliates


279,465



922



(121,888
)


158,499Goodwill and intangible assets, net


515,589



126,253



(20,578
)


621,264Other assets


86,709



1,477



(79,770
)


8,416Total assets

$
991,676


$
526,936


$
(286,756
)

$
1,231,856Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
2,887


$
21,685


$
(136
)

$
24,436Accrued expenses and other


148,517



41,607



(55,251
)


134,873Current portion of long-term debt


1,533



30,445



(5,605
)


26,373Total current liabilities


152,937



93,737



(60,992
)


185,682Long-term debt, less current portion


197,819



137,412



(14,274
)


320,957Other long-term liabilities


41,646



12,336



(869
)


53,113Minority interests






15,084



57,746



72,830Stockholders equity


599,274



268,367



(268,367
)


599,274Total liabilities and stockholders equity

$
991,676


$
526,936


$
(286,756
)

$
1,231,856  F-42




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Operations:
  Non-Participating


Consolidation


ConsolidatedPeriod from April 19 through December 31,
    2007  Successor

Guarantors


Investees


Adjustments


TotalRevenues

$
63,009


$
416,174


$
(21,205
)

$
457,978Equity in earnings of unconsolidated affiliates


71,193



833



(48,159
)


23,867Operating expenses, excluding depreciation and amortization


52,233



287,920



(21,193
)


318,960Depreciation and amortization


5,287



21,050



623



26,960Operating income


76,682



108,037



(48,794
)


135,925Interest expense, net


(55,180
)


(9,485
)






(64,665
)Other income (expense)


(574
)


177



(45
)


(442
)Income before minority interests


20,928



98,729



(48,839
)


70,818Minority interests in income of consolidated subsidiaries






(7,628
)


(37,502
)


(45,130
)Income from continuing operations before income taxes


20,928



91,101



(86,341
)


25,688Income tax expense


(9,906
)


(4,936
)


176



(14,666
)Income from continuing operations


11,022



86,165



(86,165
)


11,022Loss from discontinued operations, net of tax


(2,293
)










(2,293
)Net income

$
8,729


$
86,165


$
(86,165
)

$
8,729   Non-Participating


Consolidation


ConsolidatedPeriod from January 1 through April 18,
    2007  Predecessor

Guarantors


Investees


Adjustments


TotalRevenues

$
26,636


$
175,784


$
(8,856
)

$
193,564Equity in earnings of unconsolidated affiliates


28,229



158



(18,481
)


9,906Operating expenses, excluding depreciation and amortization


51,269



122,121



(8,843
)


164,547Depreciation and amortization


2,220



9,531



799



12,550Operating income


1,376



44,290



(19,293
)


26,373Interest expense, net


(4,995
)


(3,597
)






(8,592
)Loss on early retirement of debt














Other income (expense)


(1,518
)


(718
)


599



(1,637
)Income (loss) before minority interests


(5,137
)


39,975



(18,694
)


16,144Minority interests in income of consolidated subsidiaries






(4,536
)


(14,323
)


(18,859
)Income (loss) from continuing operations before income taxes


(5,137
)


35,439



(33,017
)


(2,715
)Income tax (expense) benefit


(1,736
)


(2,602
)


180



(4,158
)Income (loss) from continuing operations


(6,873
)


32,837



(32,837
)


(6,873
)Loss from discontinued operations, net of tax


(276
)










(276
)Net income (loss)

$
(7,149
)

$
32,837


$
(32,837
)

$
(7,149
)  F-43




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2006  Predecessor

Guarantors


Investees


Adjustments


TotalRevenues

$
84,921


$
516,164


$
(26,529
)

$
574,556Equity in earnings of unconsolidated affiliates


93,587



2,209



(64,228
)


31,568Operating expenses, excluding depreciation and amortization


80,279



358,621



(26,884
)


412,016Depreciation and amortization


8,310



26,591



28



34,929Operating income


89,919



133,161



(63,901
)


159,179Interest expense, net


(17,217
)


(11,340
)






(28,557
)Other income (expense)


(13,017
)


230



(315
)


(13,102
)Income before minority interests


59,685



122,051



(64,216
)


117,520Minority interests in income of consolidated subsidiaries






(15,363
)


(39,279
)


(54,642
)Income from continuing operations before income taxes


59,685



106,688



(103,495
)


62,878Income tax expense


(19,587
)


(3,269
)


76



(22,780
)Income from continuing operations


40,098



103,419



(103,419
)


40,098Loss from discontinued operations, net of tax


(5,852
)










(5,852
)Net income

$
34,246


$
103,419


$
(103,419
)

$
34,246   Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2005  Predecessor

Guarantors


Investees


Adjustments


TotalRevenues

$
69,410


$
417,992


$
(22,076
)

$
465,326Equity in earnings of unconsolidated affiliates


77,636



1,015



(54,653
)


23,998Operating expenses, excluding depreciation and amortization


55,769



291,804



(23,001
)


324,572Depreciation and amortization


9,189



21,395







30,584Operating income


82,088



105,808



(53,728
)


134,168Interest expense, net


(12,645
)


(10,305
)


2



(22,948
)Other income (expense)


964



(119
)


(312
)


533Income before minority interests


70,407



95,384



(54,038
)


111,753Minority interests in income of consolidated subsidiaries






(16,259
)


(22,181
)


(38,440
)Income from continuing operations before income taxes


70,407



79,125



(76,219
)


73,313Income tax expense


(23,267
)


(2,767
)


(139
)


(26,173
)Income from continuing operations


47,140



76,358



(76,358
)


47,140Loss from discontinued operations, net of tax


154











154Net income

$
47,294


$
76,358


$
(76,358
)

$
47,294  F-44




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Comprehensive Income
    (Loss):
  Non-participating


Consolidation


ConsolidatedPeriod from April 19 through December 31,
    2007  Successor

Loan Parties


Investees


Adjustments


TotalNet income (loss)

$
8,729


$
86,165


$
(86,165
)

$
8,729Other comprehensive income:Foreign currency translation adjustments


(1,646
)


(1,646
)


1,646



(1,646
)Pension adjustments, net of tax


161



161



(161
)


161Other comprehensive income (loss)


(1,485
)


(1,485
)


1,485



(1,485
)Comprehensive income (loss)

$
7,244


$
84,680


$
(84,680
)

$
7,244   Non-participating


Consolidation


ConsolidatedPeriod from January 1 through April 18,
    2007  Predecessor

Loan Parties


Investees


Adjustments


TotalNet income (loss)

$
(7,149
)

$
32,837


$
(32,837
)

$
(7,149
)Other comprehensive income:Foreign currency translation adjustments


2,169



2,169



(2,169
)


2,169Comprehensive income (loss)

$
(4,980
)

$
35,006


$
(35,006
)

$
(4,980
)   Non-participating


Consolidation


ConsolidatedYear Ended December 31, 2006  Predecessor

Loan Parties


Investees


Adjustments


TotalNet income (loss)

$
34,246


$
103,419


$
(103,419
)

$
34,246Other comprehensive income:Foreign currency translation adjustments


13,104



13,104



(13,104
)


13,104Pension adjustments, net of tax


(434
)


(434
)


434



(434
)Other comprehensive income (loss)


12,670



12,670



(12,670
)


12,670Comprehensive income (loss)

$
46,916


$
116,089


$
(116,089
)

$
46,916  F-45




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Stockholders Equity:
  Nonparticipating


Consolidation


ConsolidatedLoan Parties


Investees


Adjustments


TotalPredecessorBalance, December 31, 2005

$
531,050


$
256,239


$
(256,239
)

$
531,050Net income (loss)


34,246



103,419



(103,419
)


34,246Equity-based compensation expense


11,974











11,974Acquisitions and contributions






29,595



(29,595
)


Disposals/deconsolidations






(8,764
)


8,764



Distributions






(124,575
)


124,575



Foreign currency translation and pension adjustments


12,453



12,453



(12,453
)


12,453Stock issuances and related tax benefit


9,551











9,551Balance, December 31, 2006


599,274



268,367



(268,367
)


599,274Net income (loss)


(7,149
)


32,837



(32,837
)


(7,149
)Equity-based compensation expense


17,100











17,100Acquisitions and contributions






35,703



(35,703
)


Disposals/deconsolidations






(3,628
)


3,628



Distributions






(55,096
)


55,096



Foreign currency translation and pension adjustments


2,169



2,169



(2,169
)


2,169Stock issuances and related tax benefit


19,841











19,841Balance, April 18, 2007

$
631,235


$
280,352


$
(280,352
)

$
631,235   Nonparticipating


Consolidation


ConsolidatedLoan Parties


Investees


Adjustments


TotalSuccessorBalance, April 19, 2007

$



$



$



$
Net equity contribution from USPI Group Holdings, Inc.


783,994



448,081



(448,081
)


783,994Net income


8,729



86,165



(86,165
)


8,729Contribution related to equity award grants by USPI Group
    Holdings, Inc.


2,091











2,091Additional equity contribution from USPI Group Holdings,
    Inc.


13,477











13,477Acquisitions and contributions






9,871



(9,871
)


Disposals/deconsolidations






(8,192
)


8,192



Distributions






(91,515
)


91,515



Foreign currency translation and pension adjustments


(1,485
)


(1,485
)


1,485



(1,485
)Balance, December 31, 2007

$
806,806


$
442,925


$
(442,925
)

$
806,806  F-46




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Cash Flows:
  Non-Participating


Consolidation


ConsolidatedPeriod from April 19 through December 31,
    2007  Successor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
8,729


$
86,165


$
(86,165
)

$
8,729Loss from discontinued operations


2,293











2,293Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


24,463



34,858



(2,423
)


56,898Net cash provided by (used in) operating activities


35,485



121,023



(88,588
)


67,920Cash flows from investing activities:Purchases of property and equipment, net


(3,733
)


(8,129
)






(11,862
)Purchases and sales of new businesses and equity interests, net


(73,049
)










(73,049
)Other items


18,968



12,104



(20,244
)


10,828Net cash (used in) provided by investing activities


(57,814
)


3,975



(20,244
)


(74,083
)Cash flows from financing activities:Long-term borrowings, net


703,031



(20,170
)


2,265



685,126Net equity contributions from USPI Group Holdings, Inc.


779,279











779,279Payments to repurchase common stock


(1,430,879
)










(1,430,879
)Other items


(43,308
)


(97,406
)


106,567



(34,147
)Net cash provided by (used in) financing activities


8,123



(117,576
)


108,832



(621
)Net cash provided by discontinued operations


415











415Effect of exchange rate changes on cash






(70
)






(70
)Net increase (decrease) in cash


(13,791
)


7,352







(6,439
)Cash at the beginning of the period


80,456



2,741







83,197Cash at the end of the period

$
66,665


$
10,093


$



$
76,758   F-47




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Non-Participating


Consolidation


ConsolidatedPeriod from January 1 through April 18,
    2007  Predecessor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
(7,149
)

$
32,837


$
(32,837
)

$
(7,149
)Loss from discontinued operations


276











276Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


38,117



19,322



(21,302
)


36,137Net cash provided by (used in) operating activities


31,244



52,159



(54,139
)


29,264Cash flows from investing activities:Purchases of property and equipment, net


(576
)


(5,671
)






(6,247
)Purchases and sales of new businesses and equity interests, net


(10,789
)










(10,789
)Other items


(6,354
)


(6,547
)


4,373



(8,528
)Net cash provided by (used in) investing activities


(17,719
)


(12,218
)


4,373



(25,564
)Cash flows from financing activities:Long-term borrowings, net


(511
)


9,670



4,083



13,242Proceeds from issuance of common stock


6,135











6,135Change in cash held on behalf of unconsolidated affiliates


21,819



532



(8,456
)


13,895Other items


15,821



(55,095
)


54,139



14,865Net cash provided by (used in) financing activities


43,264



(44,893
)


49,766



48,137Net cash used in discontinued operations


(267
)










(267
)Effect of exchange rate changes on cash






(113
)






(113
)Net increase (decrease) in cash


56,522



(5,065
)






51,457Cash at the beginning of the period


23,934



7,806







31,740Cash at the end of the period

$
80,456


$
2,741


$



$
83,197   F-48




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2006  Predecessor

Guarantor


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
34,246


$
103,419


$
(103,419
)

$
34,246Earnings from discontinued operations


5,852











5,852Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


41,453



40,623



(20,045
)


62,031Net cash provided by (used in) operating activities


81,551



144,042



(123,464
)


102,129Cash flows from investing activities:Purchases of property and equipment, net


(3,838
)


(24,590
)






(28,428
)Purchases of new businesses and equity interests, net


(261,734
)


9,096







(252,638
)Other items


2,798



6,490



(7,559
)


1,729Net cash used in investing activities


(262,774
)


(9,004
)


(7,559
)


(279,337
)Cash flows from financing activities:Long-term borrowings, net


38,925



(10,162
)


857



29,620Proceeds from issuance of common stock


7,684











7,684Other items


37,364



(124,779
)


130,166



42,751Net cash provided by (used in) financing activities


83,973



(134,941
)


131,023



80,055Net cash used in discontinued operations


(1,440
)










(1,440
)Effect of exchange rate changes on cash






(107
)






(107
)Net increase (decrease) in cash


(98,690
)


(10
)






(98,700
)Cash at the beginning of the period


122,624



7,816







130,440Cash at the end of the period

$
23,934


$
7,806


$



$
31,740   F-49




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2005  Predecessor

Guarantor


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
47,294


$
76,358


$
(76,358
)

$
47,294Earnings from discontinued operations


(154
)










(154
)Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


19,821



43,253



(3,183
)


59,891Net cash provided by (used in) operating activities


66,961



119,611



(79,541
)


107,031Cash flows from investing activities:Purchases of property and equipment, net


(2,606
)


(28,047
)






(30,653
)Purchases of new businesses and equity interests, net


(60,473
)










(60,473
)Other items


(12,164
)


(11,714
)


12,962



(10,916
)Net cash used in investing activities


(75,243
)


(39,761
)


12,962



(102,042
)Cash flows from financing activities:Long-term borrowings, net


(2,126
)


1,016



66



(1,044
)Proceeds from issuance of common stock


6,140











6,140Other items


41,858



(81,405
)


66,513



26,966Net cash provided by (used in) financing activities


45,872



(80,389
)


66,579



32,062Net cash used in discontinued operations


(1
)










(1
)Effect of exchange rate changes on cash






(77
)






(77
)Net increase (decrease) in cash


37,589



(616
)






36,973Cash at the beginning of the period


85,035



8,432







93,467Cash at the end of the period

$
122,624


$
7,816


$



$
130,440   (16)
    New
    Accounting Pronouncements  Fair Value Measurement
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities, Including an amendment of FASB Statement
    No. 115
 F-50




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  (17)
    Selected
    Quarterly Financial Data (Unaudited)  Predecessor



Successor



Predecessor2007 Quarters



2006 QuartersApril 1



April 19through



throughFirst


April 18



June 30


Third


Fourth



First


Second


Third


FourthNet revenues

$
161,771


$
31,793



$
132,822


$
156,575


$
168,581



$
126,831


$
149,378


$
143,666


$
154,681Income (loss) from continuing operations


8,896



(15,769
)



4,374



(32
)


6,680




11,571



13,042



2,192



13,293    F-51




---



##### Table of Contents



(2)
    Financial
    Statement Schedule  Form 10-K:
  F-52




---



##### Table of Contents



SCHEDULE II:
    VALUATION AND QUALIFYING ACCOUNTS
  Allowance
    for Doubtful Accounts
  Balance at


Additions Charged to:








Balance atBeginning of


Costs and


Other





Other


End ofPeriod


Expenses


Accounts


Deductions(2)


Items(3)


Period(In thousands)Year ended December 31, 2005(1)

$
7,277



9,518







(13,637
)


3,498


$
6,656Year ended December 31, 2006(1)


6,656



10,100







(8,530
)


1,729



9,955Period from January 1 through April 18, 2007
    (Predecessor)(1)


9,955



3,324







(2,269
)


383



11,393Period from April 19 through December 31, 2007
    (Successor)(1)


11,393



7,769







(7,946
)


1,505



12,721   Valuation
    allowance for deferred tax assets
  Balance at


Additions Charged to:








Balance atBeginning of


Costs and


Other





Other


End ofPeriod


Expenses


Accounts(4)


Deductions(2)


Items(3)


PeriodYear ended December 31, 2005

$



$



$



$



$



$
Year ended December 31, 2006


















2,460



2,460Period from January 1 through April 18, 2007
    (Predecessor)(1)


2,460



1,323















3,783Period from April 19 through December 31, 2007
    (Successor)(1)


3,783



5,121



28,918











37,822     (1)
    
    Includes amounts related to companies disposed of in 2006 and
    2007.(2)
    
    Accounts written off.(3)
    
    Primarily beginning balances for purchased businesses.(4)
    
    Recorded to goodwill in conjunction with the merger on
    April 19, 2007   S-1




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
  Consolidated
    Financial StatementsYear Ended June 30, 2007 and Six Months Ended
    June 30, 2006 
    (With Independent Auditors Report Thereon)
  1




---



##### Table of Contents



Report of
    Independent Auditors            Ernst
    & Young LLP
 
 2




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
 Consolidated
    Balance Sheets  June 30,2007


2006ASSETSCurrent assets:Cash

$
6,285,079


$
8,437,559Patient receivables, net of allowance for doubtful accounts of
    $6,383,717 and $3,817,527 at June 30, 2007 and 2006,
    respectively


29,292,533



20,388,416Due from affiliate (note 9)


35,605,498



25,310,228Inventories of supplies


5,376,034



3,826,730Current portion of notes receivable (note 6)


388,928



360,910Prepaid and other current assets


1,204,112



889,039Total current assets


78,152,184



59,212,882Property and equipment, net (note 2)


135,570,797



67,927,445Investments in unconsolidated affiliates (note 4)


1,316,339



1,592,880Goodwill and intangible assets, net (notes 4 and 5)


93,515,925



71,059,112Notes receivable, less current portion (note 6)


949,396



5,460,871Other


1,164,304



1,574,384Total assets

$
310,668,945


$
206,827,574LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Accounts payable

$
13,595,214


$
6,546,656Accrued expenses and other


9,736,364



9,948,016Due to affiliates (notes 6 and 9)


2,199,392



2,054,472Current portion of long-term obligations (note 7)


7,767,096



5,268,557Total current liabilities


33,298,066



23,817,701Long-term obligations (note 7)


109,908,324



45,928,764Other liabilities


7,325,833



6,554,719Total liabilities


150,532,223



76,301,184Minority interests (note 4)


25,701,959



22,211,842Commitments and contingencies (notes 3, 7, 8, and 10)Members equity (note 3)


134,434,763



108,314,548Total liabilities and members equity

$
310,668,945


$
206,827,574    3




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIESConsolidated Statements of Income
  Year Ended


Six MonthsJune 30,


Ended June 30,2007


2006Revenues:Net patient service revenue

$
259,716,347


$
97,054,202Management and royalty fee income (note 9)


600,000



300,000Other income


119,451



43,432Total revenues


260,435,798



97,397,634Equity in earnings of unconsolidated affiliates


686,372



503,306Operating expenses:Salaries, benefits, and other employee costs


57,051,254



21,389,146Medical services and supplies


58,972,428



19,897,400Management and royalty fees (note 9)


11,656,497



4,252,477Professional fees


1,314,082



267,903Other operating expenses


38,917,762



16,677,859Provision for doubtful accounts


8,197,418



2,189,256Depreciation and amortization


13,417,811



4,764,091Total operating expenses


189,527,252



69,438,132Operating income


71,594,918



28,462,808Interest expense


(7,584,751
)


(2,743,402
)Interest income (note 9)


2,199,426



839,081Other expense, net


(85,283
)


(11,223
)Income before minority interests and income tax


66,124,310



26,547,264Minority interests in income of consolidated subsidiaries


(31,711,272
)


(12,609,642
)Income before income taxes


34,413,038



13,937,622Income tax


(903,342
)


Net income

$
33,509,696


$
13,937,622    4




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIESConsolidated Statements of Members EquityYear Ended June 30, 2007 and Six Months Ended June 30,
    2006
  Contributed Capital


Retained EarningsUSP


Baylor


USP


Baylor


TotalBalance, January 1, 2006

$
35,888,661


$
36,032,503


$
19,150,489


$
19,227,244


$
110,298,897Net income










6,954,873



6,982,749



13,937,622Distributions of earnings










(7,945,064
)


(7,976,907
)


(15,921,971
)Balance, June 30, 2006


35,888,661



36,032,503



18,160,298



18,233,086



108,314,548Net income










16,721,338



16,788,358



33,509,696Contributions of capital


11,168,863



8,590,086











19,758,949Distributions of earnings










(13,547,066
)


(13,601,364
)


(27,148,430
)Transfer of equity in accordance with L.L.C. agreement


(1,309,177
)


1,309,177











Balance, June 30, 2007

$
45,748,347


$
45,931,766


$
21,334,570


$
21,420,080


$
134,434,763    5




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
 Consolidated
    Statements of Cash Flows  Year Ended


Six MonthsJune 30,


Ended June 30,2007


2006Cash flows from operating activities:Net income

$
33,509,696


$
13,937,622Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for doubtful accounts


8,197,418



2,189,256Depreciation and amortization


13,417,811



4,764,091Amortization of debt issue costs


71,625



10,068Equity in earnings of unconsolidated affiliates, net of
    distributions received


201,221



(179,369
)Minority interests in income of consolidated subsidiaries, net
    of distributions paid


2,199,302



(646,171
)Changes in operating assets and liabilities, net of acquisitions
    Patient receivables


(13,008,376
)


(1,155,399
)Due from (to) affiliates, net


(229,022
)


176,767Inventories of supplies, prepaids, and other assets


(1,249,313
)


(218,771
)Accounts payable and accrued expenses


6,111,500



(690,911
)Net cash provided by operating activities


49,221,862



18,187,183Cash flows from investing activities:Purchases of equity interests, net of cash received


(4,427,615
)


(345,943
)Sales of equity interests


1,417,136



3,098,980Purchases of property and equipment


(18,009,917
)


(5,185,814
)Sales of property and equipment


27,347



37,748Cash collections on notes receivable from affiliates


360,910



170,584Change in cash management balances with affiliate


(7,889,964
)


(940,793
)Net cash used in investing activities


(28,522,103
)


(3,165,238
)Cash flows from financing activities:Proceeds from long-term debt


11,215,318



406,620Payments on long-term obligations


(6,416,985
)


(2,289,425
)Returns of capital to minority interest holders


(502,142
)


Distributions to Company members


(27,148,430
)


(15,921,971
)Net cash used in financing activities


(22,852,239
)


(17,804,776
)Decrease in cash


(2,152,480
)


(2,782,831
)Cash, beginning of period


8,437,559



11,220,390Cash, end of period

$
6,285,079


$
8,437,559Supplemental information:Cash paid for interest

$
7,463,407


$
2,906,564Noncash transactions:Noncash settlement of note receivable (note 4)


4,135,215



Noncash assets contributed by Members (note 3)


19,758,949



Asset acquired under capital leases


49,816,688



655,822    6




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes
    to Consolidated Financial Statements
 June 30,
    2007 and 2006
  (1)
    Summary
    of Significant Accounting Policies  (a)
    Description
    of Business          (b)
    Basis
    of Accounting    (c)
    Principles
    of Consolidation    (d)
    Use of
    Estimates   7




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (e)
    New
    Accounting Pronouncement      (f)
    Cash
    Equivalents    (g)
    Inventories
    of Supplies    (h)
    Property
    and Equipment    (i)
    Investments
    in Unconsolidated Affiliates   8




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (j)
    Intangible
    Assets and Goodwill    (k)
    Impairment
    of Long-Lived Assets and Long-Lived Assets to Be Disposed
    Of    (l)
    Fair
    Value of Financial Instruments    (m)
    Revenue
    Recognition      (n) Equity
    in Earnings of Unconsolidated Affiliates
   9




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (o)
    Income
    Taxes      (p)
    Commitments
    and Contingencies    (q)
    Factors
    Affecting Comparability    (2)
    Property
    and Equipment    EstimatedUseful Lives


2007


2006Buildings and leasehold improvements


5-25 years


$
96,034,308


$
38,494,705Equipment


3-15 years



56,563,126



36,465,447Furniture and fixtures


5-15 years



3,858,383



3,489,732Construction in progress






3,250,788



1,059,267159,706,605



79,509,151Less accumulated depreciation and amortization






(24,135,808
)


(11,581,706
)Net property and equipment





$
135,570,797


$
67,927,445     2007


2006Buildings

$
82,434,546


$
24,636,190Equipment and furniture


13,001,066



9,823,50895,435,612



34,459,698Less accumulated amortization


(8,483,264
)


(3,638,275
)Net property and equipment under capital leases

$
86,952,348


$
30,821,423  10




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (3)
    Capital
    Contributions by Members    Ownership


Net Assets


EffectiveInvestee

Percentage


Contributed


DateFort Worth Surgicare Partners, Ltd. (Fort Worth)


50.1
%

$
19,670,959



July 1, 2006MCSH Real Estate Investment, Ltd. (MCSH)


2.0
%


87,990



July 1, 2006         THVG FortWorth, L.P.Current assets

$
7,014,902Property and equipment


12,642,825Investments in unconsolidated affiliates


87,990Goodwill


18,319,919Other noncurrent assets


211,920Total assets acquired


38,277,556Current liabilities


5,292,979Long-term debt


11,837,885Other noncurrent liabilities


42,096Total liabilities assumed


17,172,960Minority interests payable


1,345,647Net assets acquired

$
19,758,949  11




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (4)
    Investments
    in Subsidiaries and Unconsolidated Affiliates    Percentage OwnedJune 30,


June 30,Legal Name

Facility

City

2007


2006Consolidated subsidiaries(1):Bellaire Outpatient Surgery Center, L.L.P.

Bellaire Surgery Center

Fort Worth


50.1
%


50.1
%Dallas Surgical Partners, L.L.P.

Baylor Surgicare

Dallas


50.1



50.1Dallas Surgical Partners, L.L.P.

Texas Surgery Center

Dallas


50.1



50.1Dallas Surgical Partners, L.L.P.

Physicians Day Surgery Center

Dallas


50.1



50.1Denton Surgicare Partners, Ltd.

Baylor Surgicare at Denton

Denton


50.1



50.1Frisco Medical Center, L.L.P.

Baylor Medical Center at Frisco

Frisco


50.1



50.1Garland Surgicare Partners, Ltd.

Baylor Surgicare at Garland

Garland


50.1



50.1Grapevine Surgicare Partners, Ltd.

Baylor Surgicare at Grapevine

Grapevine


50.1



50.1Lewisville Surgicare Partners, Ltd.

Baylor Surgicare at Lewisville

Lewisville


51.1



50.1MSH Partners, L.P.

Mary Shiels Hospital

Dallas


50.1



50.1North Central Surgical Center, L.L.P.

North Central Surgery Center

Dallas


25.5



25.5North Garland Surgery Center, L.L.P.

North Garland Surgery Center

Garland


51.1



50.1Rockwall/Heath Surgery Center, L.L.P.

Baylor Surgicare at Heath

Heath


50.1



59.5Trophy Club Medical Center, L.P.

Trophy Club Medical Center

Fort Worth


50.1



50.1Valley View Surgicare Partners, Ltd.

Baylor Surgicare at Valley View

Dallas


50.1



50.1Fort Worth Surgicare Partners, Ltd.

Baylor Surgical Hospital of Fort Worth

Fort Worth


50.1



Unconsolidated affiliates:Denton Surgicare Real Estate, Ltd.

n/a

n/a


49.0
%


49.0
%Irving-Coppell Surgical Hospital, L.L.P.

Irving-Coppell Surgical Hospital

Irving


17.8



18.6MCSH Real Estate Investors, Ltd.

n/a

n/a


2.0



     (1)
    
    List includes holding companies, which are wholly owned by the
    Company and hold the Companys investments in the
    Facilities.   12




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    
    Net proceeds received in the six months ended June 30, 2006
    of $2,970,000 from sales of noncontrolling interests in Frisco
    Medical Center, L.L.P (Frisco). These sales were made through a
    private offering, the proceeds of which were used to fund an
    expansion of the Frisco facility.
    Payments made of $345,943 and proceeds received of $128,980 for
    the six months ended June 30, 2006 and payments made of
    $845,150 and proceeds received of $1,417,136 for the year ended
    June 30, 2007 related to other transactions, primarily
    purchases and sales of individual partnership units with
    physicians who invest in the facilities.  (5)
    Goodwill
    and Intangible Assets    2007


2006Goodwill

$
92,331,722


$
69,803,284Other intangible assets


1,184,203



1,255,828Total

$
93,515,925


$
71,059,112     Balance, June 30, 2006

$
69,803,284Additions:Contribution of Fort Worth and MCSH (note 3)


18,319,919Trophy Club purchase price finalization (note 4)


4,159,180Other


49,339Balance, June 30, 2007

$
92,331,722    13




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    June 30, 2007Gross Carrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Debt issue costs

$
79,061


$
(44,858
)

$
34,203Indefinite useful lives:Management contracts










1,150,000Total intangible assets









$
1,184,203   June 30, 2006Gross Carrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Debt issue costs

$
185,602


$
(79,774
)

$
105,828Indefinite useful lives:Management contracts










1,150,000Total intangible assets









$
1,255,828     (6)
    Notes
    Receivable     14




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (7)
    Long Term
    Obligations    2007


2006Capital lease obligations (note 8)

$
90,668,885


$
38,050,108Notes payable to financial institutions


27,006,535



13,147,213Total long-term obligations


117,675,420



51,197,321Less current portion


(7,767,096
)


(5,268,557
)Long-term obligations, less current portion

$
109,908,324


$
45,928,764     2008

$
7,767,0962009


8,525,7642010


6,231,5142011


5,169,5472012


4,235,513Thereafter


85,745,986Total long-term obligations

$
117,675,420       (8)
    Leases   15




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Capital


OperatingLeases


LeasesYear ending June 30:2008

$
11,166,782


$
8,162,3652009


11,431,169



8,195,6892010


11,053,539



7,060,7422011


10,939,133



6,961,4282012


11,253,326



6,976,941Thereafter


180,850,433



77,253,862Total minimum lease payments

$
236,694,382


$
114,611,027Amount representing interest


(146,025,497
)Present value of minimum lease payments

$
90,668,885     (9)
    Related-Party
    Transactions         16




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (10)
    Commitments
    and Contingencies  (a)
    Financial
    Guarantees    (b)
    North
    Central Facility Expansion    (c)
    Litigation
    and Professional Liability Claims    (11)
    Subsequent
    Events       17




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES Consolidated
    Financial Statements
    (Unaudited)
    December 31, 2005 and 2004
  18




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIESConsolidated Balance SheetsDecember 31, 2005 and 2004
  2005


2004(Unaudited)


(Unaudited)ASSETSCurrent assets:Cash

$
11,220,390



14,657Patient receivables, net of allowance for doubtful accounts of
    $3,601,765 and $6,006, respectively


21,422,273



107,591Due from affiliates (note 9)


24,369,435



12,504,707Inventories of supplies


3,929,899



17,587Current portion of notes receivable (note 6)


347,667



220,000Other


721,911



7,401Total current assets


62,011,575



12,871,943Property and equipment, net (note 2)


66,887,648



2,080,505Investments in unconsolidated affiliates (note 4)


1,137,728



13,341,696Goodwill and intangible assets, net (note 5)


67,472,871



3,292,200Notes receivable, less current portion (note 6)


5,484,370



3,324,032Other


1,579,901



5,000Total assets

$
204,574,093



34,915,376LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Accounts payable

$
7,696,820



151,495Accrued expenses and other


6,331,597



64,991Due to affiliates


1,877,705



2,112,497Current portion of long-term debt (note 7)


4,823,547



118,753Total current liabilities


20,729,669



2,447,736Long-term debt (note 7)


47,653,957



896,247Other liabilities


6,100,186



Total liabilities


74,483,812



3,343,983Minority interests (note 4)


19,791,384



404,695Commitments and contingencies (notes 7, 8, and 10)Members equity (note 3)


110,298,897



31,166,698Total liabilities and members equity

$
204,574,093



34,915,376    19




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIESConsolidated Statements of IncomeYears ended December 31, 2005 and 2004
  2005


2004(Unaudited)


(Unaudited)Revenues:Net patient service revenue

$
157,714,790



200,187Management and royalty fee income


610,400



4,533,515Other income


85,457



Total revenues


158,410,647



4,733,702Equity in earnings of unconsolidated affiliates


310,780



14,806,904Operating expenses:Salaries, benefits, and other employee costs


34,979,213



253,733Medical services and supplies


29,417,676



37,317Management and royalty fees


6,608,049



4,545,165Professional fees


1,234,060



316,716Other operating expenses


24,666,955



475,168Provision for doubtful accounts


3,718,343



6,006Depreciation and amortization


7,215,344



19,125Total operating expenses


107,839,640



5,653,230Operating income:


50,881,787



13,887,376Interest expense


(5,147,836
)


(19,340
)Interest income (note 9)


1,149,601



514,731Other income


1,249



Income before minority interests


46,884,801



14,382,767Minority interests in (income) loss of consolidated subsidiaries


(22,703,422
)


237,954Income before state franchise taxes


24,181,379



14,620,721State franchise tax expense


(154,598
)


(29,873
)Net income

$
24,026,781



14,590,848    20




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIESConsolidated Statements of Members EquityYears ended December 31, 2005 and 2004
    (Unaudited)
  Contributed Capital


Retained EarningsUSP


Baylor


USP


Baylor


TotalBalance, December 31, 2003

$
3,006,361



3,006,361



7,531,564



7,531,564



21,075,850Net income










7,295,424



7,295,424



14,590,848Distributions of earnings










(2,250,000
)


(2,250,000
)


(4,500,000
)Balance, December 31, 2004


3,006,361



3,006,361



12,576,988



12,576,988



31,166,698Net income










11,989,364



12,037,417



24,026,781Transfer of membership interests


(6,013
)


6,013



(25,154
)


25,154



Contributions of capital


35,419,158



30,489,284











65,908,442Distributions of earnings










(5,390,709
)


(5,412,315
)


(10,803,024
)Transfer of equity in accordance with L.L.C. agreement


(2,530,845
)


2,530,845











Balance, December 31, 2005

$
35,888,661



36,032,503



19,150,489



19,227,244



110,298,897    21




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIESConsolidated Statements of Cash FlowsYears ended December 31, 2005 and 2004
  2005


2004(Unaudited)


(Unaudited)(Revised - note 1)Cash flows from operating activities:Net income

$
24,026,781



14,590,848Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for doubtful accounts


3,718,343



6,006Depreciation and amortization


7,215,344



19,125Amortization of debt issue costs


12,140



Equity in earnings of unconsolidated affiliates, net of
    distributions received


3,096,250



(2,651,571
)Minority interest in income (loss) of consolidated subsidiaries,
    net of distributions paid


5,887,220



(237,954
)Changes in operating assets and liabilities:Patient receivables


(7,275,705
)


(113,597
)Due from affiliates, net


649,427



(373,808
)Inventories of supplies, prepaids, and other assets


(192,217
)


(47,629
)Accounts payable and accrued expenses


5,737,163



187,486Net cash provided by operating activities


42,874,746



11,378,906Cash flows from investing activities:Purchases of equity interests, net of cash received


(19,535,329
)


(941,235
)Sales of equity interests


3,097,520



247,000Purchases of property and equipment


(9,728,631
)


(2,099,630
)Cash collections on notes receivable from affiliates


110,442



886,424Returns of capital from unconsolidated affiliates


120,978



Change in cash invested with affiliate


(15,026,497
)


(7,473,372
)Net cash used in investing activities


(40,961,517
)


(9,380,813
)Cash flows from financing activities:Proceeds from long-term debt


2,246,831



1,015,000Payments on long-term debt


(5,973,205
)


Capital contributions by Company members


23,821,902



Distributions to Company members


(10,803,024
)


(4,500,000
)Net cash provided by (used in) financing activities


9,292,504



(3,485,000
)Increase (decrease) in cash


11,205,733



(1,486,907
)Cash, beginning of year


14,657



1,501,564Cash, end of year

$
11,220,390



14,657Supplemental information:Cash paid for interest

$
5,182,372



19,340Noncash transactions:Noncash assets contributed by Company members


42,086,540



Equity investment contribution due to an affiliate






2,012,500    22




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIESNotes to Consolidated Financial
    Statements  (Unaudited)December 31, 2005 and 2004
  (1)
    Summary
    of Significant Accounting Policies  (a)
    Description
    of Business            (b)
    Basis
    of Accounting    (c)
    Principles
    of Consolidation   23




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
  (d)
    Use of
    Estimates    (e)
    Revisions
    to Cash Flow Statement        Year Ended December 31, 2004Net Cash Provided by (Used in)Operating


Investing


Financingactivities


activities


activitiesPreviously reported

$
(776,427
)


(9,380,813
)


8,670,333Distributions received from equity method investees


12,155,333







(12,155,333
)As revised

$
11,378,906



(9,380,813
)


(3,485,000
)   (f)
    Cash
    Equivalents    (g)
    Inventories
    of Supplies    (h)
    Property
    and Equipment   24




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
    (i)
    Investments
    in Unconsolidated Affiliates    (j)
    Intangible
    Assets    (k)
    Impairment
    of Long-Lived Assets and Long-Lived Assets to Be Disposed
    Of    (l)
    Revenue
    Recognition     25




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
    (m)
    Income
    Taxes    (n)
    Commitments
    and Contingencies    (2)
    Property
    and Equipment    EstimatedUseful Lives


2005


2004Buildings and leasehold improvements


5-25 years


$
35,971,823



90,779Equipment


3-15 years



35,218,904



1,948,995Furniture and fixtures


5-15 years



2,929,154



59,85674,119,881



2,099,630Less accumulated depreciation






(7,232,233
)


(19,125
)Net property and equipment





$
66,887,648



2,080,505     2005


2004Buildings

$
24,633,431



Equipment and furniture


9,267,182



33,900,613



Less accumulated depreciation


(2,080,018
)


Net property and equipment under capital leases

$
31,820,595



   (3)
    Capital
    Contributions by Members   26




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
    Ownership


Net assetsInvestee

Percentage


Contributed


Effective DateLewisville Surgicare Partners, Ltd.
    (Lewisville)


50.1
%

$
28,557,006


May 1, 2005Trophy Club Medical Center, L.P.
    (Trophy Club)


50.1
%


4,767,170


July 1, 2005Garland Surgicare Partners, Ltd. (Garland)


50.1
%


4,600,883


August 1, 2005Valley View Surgicare Partners, Ltd.
    (Valley View)


50.1
%


4,161,481


January 1, 2005     per-unit
 27




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
  (4)
    Investments
    in Subsidiaries and Unconsolidated Affiliates    Percentage owned by THVGas of December 31Legal name

Facility

City

2005


2004Consolidated subsidiaries(1):Bellaire Outpatient Surgery Center, L.L.P.

Bellaire Surgery Center

Fort Worth


50.1
%


40.7
%Dallas Surgical Partners, L.L.P.

Baylor Surgicare

Dallas


50.1



40.4Dallas Surgical Partners, L.L.P.

Texas Surgery Center

Dallas


50.1



40.4Dallas Surgical Partners, L.L.P.

Physicians Day Surgery Center

Dallas


50.1



40.4Denton Surgicare Partners, Ltd.

Baylor Surgicare at Denton

Denton


50.1



42.7Frisco Medical Center, L.L.P.

Baylor Medical Center at Frisco

Frisco


50.1



40.0Garland Surgicare Partners, Ltd.

Premier Ambulatory Surgery Center of Garland

Garland


50.1



Grapevine Surgicare Partners, Ltd.

Baylor Surgicare at Grapevine

Grapevine


50.1



21.2Lewisville Surgicare Partners, Ltd.

Baylor Surgicare at Lewisville

Lewisville


50.1



MSH Partners, L.P.

Mary Shiels Hospital

Dallas


50.1



40.4North Central Surgical Center, L.L.P.

North Central Surgery Center

Dallas


51.4



50.0North Garland Surgery Center, L.L.P.

North Garland Surgery Center

Garland


50.1



25.0Rockwall/Heath Surgery Center, L.L.P.

Heath Surgicare

Heath


59.5



55.5Trophy Club Medical Center, L.P.

Trophy Club Medical Center

Fort Worth


50.1



Valley View Surgicare Partners, Ltd.

Valley View Surgery Center

Dallas


50.1



Unconsolidated affiliates:Denton Surgicare Real Estate, Ltd.

n/a

n/a


49.0
%


49.0
%Irving-Coppell Surgical Hospital, L.L.P.

Irving-Coppell Surgical Hospital

Irving


14.5



19.0     (1)
    
    List excludes holding companies, which are wholly owned by the
    Company and hold the Companys investments in the
    facilities.   28




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
    Purchase




Ownership PercentageInvestee

Price


Effective Date

Before


Acquired


AfterFrisco Medical Center, L.L.P.

$
8,800,736


January 1, 2005


40.0
%


10.1
%


50.1
%Grapevine Surgicare Partners, Ltd.


7,199,011


January 1, 2005


21.2



28.9



50.1University Surgical Partners, L.L.P.


6,092,110


January 1, 2005


40.4



9.7



50.1Bellaire Outpatient Surgery Center, L.L.P.


931,882


January 1, 2005


40.7



9.4



50.1Denton Surgicare Partners, Ltd.


798,163


January 1, 2005


42.7



7.4



50.1North Garland Surgery Center, L.L.P.


429,660


June 1, 2005


25.0



25.1



50.1Acquired cash


(4,951,859
)Net cash paid for Buyups

$
19,299,703     Grapevine


UniversityFrisco Medical


Surgicare


SurgicalCenter, L.L.P.


Partners, Ltd.


Partners, L.L.P.Current assets

$
9,231,896



1,484,263



6,644,549Property and equipment


22,482,946



6,341,540



6,187,437Investments in unconsolidated affiliates(1)


(3,015,111
)


(129,072
)


(2,467,116
)Notes receivable from unconsolidated affiliates(2)


(1,252,316
)






(91,455
)Goodwill


8,117,475



6,909,782



7,094,253Other noncurrent assets


1,223,491



15,999



37,641Total assets acquired


36,788,381



14,622,512



17,405,309Current liabilities


6,129,145



1,127,795



3,421,544Long-term debt


18,174,891



5,879,075



3,379,391Other noncurrent liabilities










Total liabilities assumed


24,304,036



7,006,870



6,800,935Minority interests payable


3,683,609



416,631



4,512,264Net assets acquired

$
8,800,736



7,199,011



6,092,110     (1)
    
    The Company previously held an equity method investment in this
    entity.(2)
    
    The Companys note receivable from this entity eliminates
    in consolidation as a result of the Company acquiring a
    controlling interest in this entity.     29




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
      
    Net proceeds of $2,720,647 from sales of noncontrolling
    interests in North Central Surgical Center, L.L.P. The North
    Central facility opened in December 2005.
    Net proceeds of $141,247 related to other transactions,
    primarily purchases and sales individual partnership units with
    physicians who invest in the facilities.  (5)
    Goodwill
    and Intangible Assets    December 312005


2004Goodwill

$
66,206,975



2,142,200Other intangible assets


1,265,896



1,150,000Total

$
67,472,871



3,292,200     Balance, December 31, 2004

$
2,142,200Additions:Contributions (note 3)


40,274,826Buyups (note 4)


23,734,016Other


55,933Balance, December 31, 2005

$
66,206,975    30




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
    December 31, 2005GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Other

$
185,602



(69,706
)


115,896Indefinite useful lives:Management contracts










1,150,000Total intangible assets









$
1,265,896   December 31, 2004GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Other

$








Indefinite useful lives:Management contracts










1,150,000Total intangible assets









$
1,150,000       (6)
    Notes
    Receivable     31




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
  (7)
    Long-Term
    Debt    2005


2004Capital lease obligations

$
38,661,268



Notes payable to financial institutions


13,816,236



1,015,000Total long-term debt


52,477,504



1,015,000Less current portion


(4,823,547
)


(118,753
)Long-term debt, less current portion

$
47,653,957



896,247         (8)
    Leases      Capital


OperatingLeases


LeasesYear ending December 31:2006

$
6,490,243



6,171,6832007


6,395,936



6,032,3152008


6,399,958



5,642,2502009


6,425,802



4,644,8482010


5,187,572



3,854,531Thereafter


49,774,407



56,721,807Total minimum lease payments


80,673,918


$
83,067,434Amount representing interest


(42,012,650
)Present value of minimum lease payments

$
38,661,268    32




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
   (9)
    Related-Party
    Transactions          
 (10)
    Commitments and Contingencies  (a)
    Financial
    Guarantees    (b)
    Litigation
    and Professional Liability Claims   33




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##### Table of Contents



Exhibits :
  ExhibitNumber

Description2
.1

Agreement and Plan of Merger dated as of January 27, 2006,
    by and among United Surgical Partners International, Inc., Peak
    ASC Acquisition Corp. and Surgis, Inc. (previously filed as
    Exhibit 10.1 to the Companys Current Report on From
    8-K filed
    with the Commission on January 31, 2006 and incorporated
    herein by reference).(1)2
.2

Agreement and Plan of Merger, dated as of January 7, 2007,
    by and among the Company, UNCN Holdings, Inc. and UNCN
    Acquisition Corp. (previously filed as Exhibit 2.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Commission on January 8, 2007 and
    incorporated herein by reference).(1)3
.1

Amended and Restated Certificate of Incorporation (previously
    filed as an exhibit to the Companys Registration Statement
    on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)3
.2

Amended and Restated Bylaws (previously filed as an exhibit to
    the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)4
.1

Indenture governing
    87/8% Senior
    Subordinated Note due 2017 and
    91/4%/10% Senior
    Subordinated Toggle Note due 2017, among the Company, the
    Guarantors named therein and U.S. Bank National Association, as
    trustee. (previously filed as an exhibit to the Companys
    Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)4
.2

Form of
    87/8% Senior
    Subordinated Note due 2017 and
    91/4%/10% Senior
    Subordinate Toggle Note due 2017 (previously filed as an exhibit
    to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)4
.3

Registration Rights Agreement, dated April 19, 2007, among
    USPI Holdings, Inc., the Company, the Guarantors named therein,
    Citigroup Global Markets Inc. and Lehman Brothers inc., as
    Representatives for the Initial Purchasers (previously filed as
    an exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)10
.1

Credit Agreement, dated as of April 19, 2007, among USPI
    Holdings, Inc., the Company, as Borrower, the Lenders party
    thereto, Citibank, N.A., as Administrative Agent and Collateral
    Agent, Lehman Brothers, Inc., as Syndication Agent, and Bear
    Stearns Corporate Lending., Inc. and UBS Securities LLC, as
    Co-Documentation Agents (previously filed as an exhibit to the
    Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)10
.2

Guarantee and Collateral Agreement, dated as of April 19,
    2007, among USPI Holdings, Inc., the Company, the subsidiaries
    of the Company identified therein and Citibank, N.A., as
    Collateral Agent (previously filed as an exhibit to the
    Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)10
.3

Employment Agreement, dated as of April 19, 2007, by and
    between the Company and Donald E. Steen (previously filed as an
    exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.4

Employment Agreement, dated as of April 19, 2007, by and
    between the Company and William H. Wilcox (previously filed as
    an exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.5

Employment Agreement dated as of April 19, 2007 by and
    between the Company and Brett P. Brodnax (previously filed as an
    exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.6

Employment Agreement dated as of April 19, 2007 by and
    between the Company and Niels P. Vernegaard (previously filed as
    an exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.7

Employment Agreement dated as of April 19, 2007 by and
    between the Company and Mark A. Kopser (previously filed as an
    exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.8

Employment Agreement dated as of April 19, 2007 by and
    between the Company and John J. Wellik (previously filed as an
    exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.9

USPI Group Holdings, Inc. 2007 Equity Incentive Plan (previously
    filed as an exhibit to the Companys Quarterly Report on
    Form 10-Q
    (No. 333-144337)
    and incorporated herein by reference).(1)(3) IV-1




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##### Table of Contents



ExhibitNumber

Description10
.10

Deferred Compensation Plan, effective as of January 1, 2005
    (previously filed as Exhibit 99.1 to the Companys
    Current Report on
    Form 8-K
    filed on January 6, 2005 and incorporated herein by
    reference).(1)(3)10
.11

First Amendment to the Deferred Compensation Plan (previously
    filed as an exhibit to the Companys Registration Statement
    on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.12

Form of Indemnification Agreement between United Surgical
    Partners International, Inc. and its directors and officers
    (previously filed as an exhibit to Amendment No. 1 to the
    Companys Registration Statement on
    Form S-1
    (No. 333-55442)
    and incorporated herein by reference). (1)(3)21
.1

List of the Companys subsidiaries.(2)24
.1

Power of Attorney  Donald E. Steen(2)24
.2

Power of Attorney  Joel T. Allison(2)24
.3

Power of Attorney  Michael E. Donovan(2)24
.4

Power of Attorney  John C. Garrett, M.D.(2)24
.5

Power of Attorney  D. Scott Mackesy(2)24
.6

Power of Attorney  James Ken Newman(2)24
.7

Power of Attorney  Boone Powell, Jr.(2)24
.8

Power of Attorney  Paul. B. Queally(2)24
.9

Power of Attorney  Raymond A. Ranelli(2)31
.1

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(2)31
.2

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(2)32
.1

Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002(2)32
.2

Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002(2)     (1)
    
    Previously filed.(2)
    
    Filed herewith.(3)
    
    Management contract or compensatory plan or arrangement in which
    a director or executive officer participates. IV-2




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##### Table of Contents



SIGNATURES
    United Surgical Partners
    International, Inc.
  By:
    /s/  William
    H. Wilcox   President, Chief Executive Officer and
 Director
      Signature

Title

Date*Donald
    E. Steen

Chairman of the Board

February 28, 2008/s/  William
    H. WilcoxWilliam
    H. Wilcox

President, Chief Executive Officer and Director (Principal
    Executive Officer)

February 28, 2008/s/  Mark
    A. KopserMark
    A. Kopser

Executive Vice President and
    Chief Financial Officer
    (Principal Financial Officer)

February 28, 2008/s/  John
    J. WellikJohn
    J. Wellik

Senior Vice President, Accounting and Administration, and
    Secretary
    (Principal Accounting Officer)

February 28, 2008*Joel
    T. Allison

Director

February 28, 2008*Michael
    E. Donovan

Director

February 28, 2008*John
    C. Garrett, M.D.

Director

February 28, 2008*D.
    Scott Mackesy

Director

February 28, 2008*James
    Ken Newman

Director

February 28, 2008*Boone
    Powell, Jr.

Director

February 28, 2008*Paul
    B. Queally

Director

February 28, 2008 IV-3




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##### Table of Contents



Signature

Title

Date*Raymond
    A. Ranelli

Director

February 28, 2008     *
    
    John J. Wellik, by signing his name hereto, does hereby sign
    this Annual Report on
    Form 10-K
    on behalf of each of the above-named directors and officers of
    the Company on the date indicated below, pursuant to powers of
    attorney executed by each of such directors and officers and
    contemporaneously filed herewith with the Commission.    By:
    /s/  John
    J. Wellik   Attorney-in-fact
    Supplemental Information to be Furnished With Reports Filed
    Pursuant to Section 15(d) of the Act by Registrants Which
    Have Not Registered Securities Pursuant to Section 12 of
    the Act
  Form 10-K, Form 10-K,
 IV-4




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##### Table of Contents



INDEX TO
    EXHIBITS
  ExhibitNumber

Description2
.1

Agreement and Plan of Merger dated as of January 27, 2006,
    by and among United Surgical Partners International, Inc., Peak
    ASC Acquisition Corp. and Surgis, Inc. (previously filed as
    Exhibit 10.1 to the Companys Current Report on From
    8-K filed
    with the Commission on January 31, 2006 and incorporated
    herein by reference).(1)2
.2

Agreement and Plan of Merger, dated as of January 7, 2007,
    by and among the Company, UNCN Holdings, Inc. and UNCN
    Acquisition Corp. (previously filed as Exhibit 2.1 to the
    Companys Current Report on
    Form 8-K
    filed with the Commission on January 8, 2007 and
    incorporated herein by reference).(1)3
.1

Second Amended and Restated Certificate of Incorporation
    (previously filed as Exhibit 3.1 to Amendment No. 4 to
    the Companys Registration Statement on
    Form S-1
    (No. 333-55442)
    and incorporated herein by reference).(1)3
.2

Amended and Restated Bylaws (previously filed as
    Exhibit 3.2 to the Companys Registration Statement on
    Form S-3
    (No. 333-99309)
    and incorporated herein by reference).(1)4
.1

Form of Common Stock Certificate (previously filed as
    Exhibit 4.1 to Amendment No. 4 to the Companys
    Registration Statement on
    Form S-1
    (No. 333-
    55442) and incorporated herein by reference).(1)4
.2

Rights Agreement between the Company and First Union National
    Bank as Rights Agent dated June 13, 2001 (previously filed
    as Exhibit 4.1 to the Companys
    Form 8-A
    filed with the Commission on June 13, 2001 and incorporated
    herein by reference).(1)4
.3

First Amendment to Rights Agreement, dated January 7, 2007,
    by and between the Company and American Stock
    Transfer & Trust Company, as successor to First
    Union National Bank, as Rights Agent (previously filed as
    Exhibit 4.1 to the Companys Current Report on
    Form 8-K
    filed with the Commission on January 8, 2007 and
    incorporated herein by reference).(1)10
.1

Credit Agreement, dated as of April 19, 2007, among USPI
    Holdings, Inc., the Company, as Borrower, the Lenders party
    thereto, Citibank, N.A., as Administrative Agent and Collateral
    Agent, Lehman Brothers, Inc., as Syndication Agent, and Bear
    Stearns Corporate Lending., Inc. and UBS Securities LLC, as
    Co-Documentation Agents (previously filed as an exhibit to the
    Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)10
.2

Guarantee and Collateral Agreement, dated as of April 19,
    2007, among USPI Holdings, Inc., the Company, the subsidiaries
    of the Company identified therein and Citibank, N.A., as
    Collateral Agent (previously filed as an exhibit to the
    Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)10
.3

Employment Agreement, dated as of April 19, 2007, by and
    between the Company and Donald E. Steen (previously filed as an
    exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.4

Employment Agreement, dated as of April 19, 2007, by and
    between the Company and William H. Wilcox (previously filed as
    an exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.5

Employment Agreement dated as of April 19, 2007 by and
    between the Company and Brett P. Brodnax (previously filed as an
    exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.6

Employment Agreement dated as of April 19, 2007 by and
    between the Company and Niels P. Vernegaard (previously filed as
    an exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.7

Employment Agreement dated as of April 19, 2007 by and
    between the Company and Mark A. Kopser (previously filed as an
    exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.8

Employment Agreement dated as of April 19, 2007 by and
    between the Company and John J. Wellik (previously filed as an
    exhibit to the Companys Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3) IV-5




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##### Table of Contents



ExhibitNumber

Description10
.9

USPI Group Holdings, Inc. 2007 Equity Incentive Plan (previously
    filed as an exhibit to the Companys Quarterly Report on
    Form 10-Q
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.10

Deferred Compensation Plan, effective as of January 1, 2005
    (previously filed as Exhibit 99.1 to the Companys
    Current Report on
    Form 8-K
    filed on January 6, 2005 and incorporated herein by
    reference).(1)(3)10
.11

First Amendment to the Deferred Compensation Plan (previously
    filed as an exhibit to the Companys Registration Statement
    on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)(3)10
.12

Form of Indemnification Agreement between United Surgical
    Partners International, Inc. and its directors and officers
    (previously filed as an exhibit to Amendment No. 1 to the
    Companys Registration Statement on
    Form S-1
    (No. 333-55442)
    and incorporated herein by reference).(1)(3)21
.1

List of the Companys subsidiaries.(2)24
.1

Power of Attorney Donald E. Steen(2)24
.2

Power of Attorney  Joel T. Allison(2)24
.3

Power of Attorney  Michael E. Donovan(2)24
.4

Power of Attorney  John C. Garrett, M.D.(2)24
.5

Power of Attorney D. Scott Mackesy(2)24
.6

Power of Attorney  James Ken Newman(2)24
.7

Power of Attorney  Boone Powell, Jr.(2)24
.8

Power of Attorney  Paul. B. Queally(2)24
.9

Power of Attorney  Raymond A. Ranelli(2)31
.1

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(2)31
.2

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(2)32
.1

Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002(2)32
.2

Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002(2)     (1)
    
    Previously filed.(2)
    
    Filed herewith.(3)
    
    Management contract or compensatory plan or arrangement in which
    a director or executive officer participates. IV-6