##### 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,
    2010
  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
  þ o
  o þ
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o (Do not check if a smaller
    reporting company)
  Rule 12b-2 o þ
      Documents
    Incorporated by Reference




---



##### 





UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
  2010
    ANNUAL REPORT ON
    FORM 10-K
  TABLE OF
    CONTENTS
   
 PART IItem 1.

Business


4Item 1A.

Risk Factors


27Item 1B.

Unresolved Staff Comments


39Item 2.

Properties


39Item 3.

Legal Proceedings


40PART IIItem 5.

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


40Item 6.

Selected Financial Data


40Item 7.

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


42Item 7A.

Quantitative and Qualitative Disclosures about
    Market Risk


73Item 8.

Financial Statements and Supplementary Data


74Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


74Item 9A.

Controls and Procedures


74Item 9B.

Other Information


76PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


76Item 11.

Executive Compensation


79Item 12.

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


89Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


91Item 14.

Principal Accounting Fees and Services


93PART IVItem 15

Exhibits, Financial Statement Schedules


94EX-10.9EX-21.1EX-24.1EX-24.2EX-24.3EX-24.4EX-24.5EX-24.6EX-24.7EX-24.8EX-24.9EX-31.1EX-31.2EX-32.1EX-32.2   2




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##### Table of Contents



FORWARD
    LOOKING STATEMENTS
  Form 10-K, Form 10-K.
 3




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##### Table of Contents



PART I  Item 1.
    Business  General
  not-for-profit
    not-for-profit not-for-profit
    Form 10-K,
 4




---



##### Table of Contents



Available
    Information
  1-800-SEC-0330 http://www.sec.gov. http://www.uspi.com Form 10-K, Form 10-Q, Form 8-K Form 10-K.
  Industry
    Background
    United
    States
      not-for-profit not-for-profit not-for-profit
 5




---



##### Table of Contents



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.  Attract
    and retain top quality surgeons and other
    physicians
    Pursue
    strategic relationships with
    not-for-profit
    healthcare systems
  not-for-profit not-for-profit not-for-profit
  Expand
    our presence in existing markets
  not-for-profit
 6




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##### Table of Contents



Expand
    selectively in new markets
  not-for-profit
    
    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.    Enhance
    operating efficiencies
    Operations
  Operations
    in the United States
   7




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##### Table of Contents



not-for-profit
  day-to-day
    day-to-day
   8




---



##### Table of Contents



Strategic
    Relationships
  not-for-profit not-for-profit
    not-for-profit not-for-profit
  Operations
    in the United Kingdom
  on-site on-site
    on-site
 9




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##### Table of Contents



Case
    Mix
    Specialty

U.S.

U.K.Orthopedic


20
%


24
%Pain management


18



2Gynecology


3



7
(1)General surgery


5



14Ear, nose and throat


8



3Gastrointestinal


21



2Cosmetic surgery


3



15Ophthalmology


12



1Other


10



32Total


100
%


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

U.S.

U.K.Private insurance


60
%


67
%Self-pay


2



25Government


31
(1)


4Other


7



4Total


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 16%
    for Medicare and 2% for Medicaid. 10




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##### Table of Contents



not-for-profit
  Number ofFacilitiesHealthcare Systems

OperatedHealthcare System

Geographical Focus

with USPISingle Market Systems:Baylor Health Care System

Dallas/Fort Worth, Texas


27Centura Health

Colorado


4Cookeville Regional Medical Center

Middle Tennessee


1Covenant Health

Eastern Tennessee


2INTEGRIS Health

Oklahoma


2Kennedy Health System

New Jersey


1Legacy Health System

Portland, Oregon


2McLaren Health Care Corporation

Michigan


5Memorial Hermann Healthcare System

Houston, Texas


20Meridian Health System

New Jersey


5Mountain States Health Alliance

Northeast Tennessee


1North Kansas City Hospital

Kansas City, Missouri


3NorthShore University Health System

Chicago, Illinois


4Scripps Health

San Diego, California


1St. John Health System

Oklahoma


1St. Johns Mercy Healthcare

Missouri


1The Christ Hospital

Cincinnati, Ohio


1Williamson Medical Center

Franklin, Tennessee


1Multi-Market Systems:Adventist Health System:

12 states(a)


2Adventist Hinsdale Hospital

Hinsdale, IllinoisHuguley Memorial Medical Center

Fort Worth, TexasAscension Health:

19 states and D.C.(b)


19Carondelet Health System (2 facilities)

Blue Springs, MissouriSt. Thomas Health Services System (13 facilities)

Middle TennesseeSt. Vincent Health (1 facility)

IndianaSeton Healthcare Network (3 facilities)

Austin, TexasBon Secours Health System:

Seven 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 Health Partners:

Four states(d)


1Humility of Mary Health (1 facility)Catholic Healthcare West:

California, Arizona and Nevada


16Mercy Hospital of Folsom (1 facility)

Sacramento, CaliforniaMercy Medical Center (3 facilities)

Redding, CaliforniaMercy San Juan Medical Center (1 facility)

Roseville, CaliforniaSierra Nevada Memorial Hospital (1 facility)

Grass Valley, CaliforniaSt. Josephs Hospital and Medical Center (5 facilities) and
    Arizona Orthopedic Surgical Hospital (2 facilities)

Phoenix, Arizona 11




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##### Table of Contents



Number ofFacilitiesHealthcare Systems

OperatedHealthcare System

Geographical Focus

with USPISt. Josephs Medical Center (1 facility)

Stockton, CaliforniaSt. Rose Dominican Hospital (2 facilities)

Las Vegas, NevadaCHRISTUS Health:

Eight states(e)


4CHRISTUS Health Central Louisiana (1 facility)

Alexandria, LouisianaCHRISTUS Santa Rosa Health Corporation (1 facility)

San Antonio, TexasCHRISTUS Spohn Health System (2 facilities)

Corpus Christi, TexasProvidence Health System:

Five states(f)


2Providence Holy Cross Health Center

Santa Clarita, CaliforniaProvidence Holy Cross Medical Center

Mission Hills, CaliforniaSSM Healthcare:

Four states(g)SSM St. Clare Health System

St. Louis, Missouri


1Totals




132     (a)
    
    Colorado, Florida, Georgia, Illinois, Kansas, Kentucky,
    Missouri, North Carolina, Tennessee, Texas, West Virginia, and
    Wisconsin.(b)
    
    Alabama, Arkansas, Arizona, Connecticut, District of Columbia,
    Georgia Florida, Idaho, Illinois, Indiana, Kansas, Louisiana,
    Maryland, Michigan, Missouri, New York, Tennessee, Texas,
    Washington, and Wisconsin.(c)
    
    Florida, Kentucky, Maryland, New York, Pennsylvania, South
    Carolina, and Virginia(d)
    
    Kentucky, Ohio, Pennsylvania and Tennessee(e)
    
    Arkansas, Georgia, Louisiana, Oklahoma, Missouri, New Mexico,
    Texas, and Utah.(f)
    
    Alaska, California, Montana, Oregon, and Washington.(g)
    
    Illinois, Missouri, Oklahoma and Wisconsin.  Facilities
    Date of

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

USPIUnited StatesAtlantaEast West Surgery Center, Austell, Georgia


9/1/00
(2)


3



55
%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*

Medical Park Tower Surgery Center, Austin, Texas


8/27/10



5



33*

Northwest Surgery Center, Austin, Texas(1)


5/30/07



6



29Texan Surgery Center, Austin, Texas


6/1/03



3



55Chicago*

Hinsdale Surgical Center, Hinsdale, Illinois


5/1/06



4



21*

Same Day Surgery 25 East, Chicago, Illinois


10/15/04



4



45*

Same Day Surgery Elmwood Park, Elmwood Park, Illinois


10/15/04



3



33*

Same Day Surgery North Shore, Evanston, Illinois


10/15/04



2



36*

Same Day Surgery River North, Chicago, Illinois


10/15/04



4



34 12




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##### Table of Contents



Date of

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

USPICorpus Christi*

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


5/1/02



5



29*

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 Medical Center at Uptown, Dallas, Texas(3)


4/1/03



5



17*

Baylor Orthopedic and Spine Hospital at Arlington, Arlington,
    Texas(3)


2/22/10



6



25*

Baylor Surgicare at Bedford, Bedford, Texas(1)


12/18/98



5



32*

Baylor Surgicare at Carrollton, Carrollton, Texas


7/1/10



2



26*

Baylor Surgicare, Dallas, Texas(1)


6/1/99



6



34*

Baylor Surgicare at Denton, Denton, Texas(1)


2/1/99



4



25*

Baylor Surgicare at Garland, Garland, Texas


2/1/99



4



30*

Baylor Surgicare at Granbury, Granbury, Texas


2/1/09



4



26*

Baylor Surgicare at Grapevine, Grapevine, Texas


2/16/02



4



29*

Baylor Surgicare at Lewisville, Lewisville, Texas(1)


9/16/02



6



37*

Baylor Surgicare at Mansfield, Mansfield, Texas


5/1/10



5



26*

Baylor Surgicare at North Garland, Garland, Texas


5/1/05



6



26*

Baylor Surgicare at Plano, Plano, Texas


10/1/07



1



27*

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


5/3/04



6



34*

Bellaire Surgery Center, Fort Worth, Texas


10/15/02



4



25*

Doctors Surgery Center at Huguley, Burleson, Texas


2/14/06



3



26*

Heath Surgicare, Rockwall, Texas(1)


11/1/04



3



25*

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


10/20/03



5



9*

Lone Star Endoscopy, Keller, Texas


11/1/10



1



26*

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


12/18/98



8



35*

North Central Surgical Center, Dallas, Texas(3)


12/12/05



10



18*

North Texas Surgery Center, Dallas, Texas(1)


12/18/98



4



36Park Cities Surgery Center, Dallas, Texas(1)


6/9/03



4



55*

Physicians Surgical Center of Fort Worth, Fort Worth,
    Texas


7/13/04



4



25*

Rockwall Surgery Center, Rockwall, Texas


09/1/06



3



37Southwestern Surgery Center, Ennis, Texas(4)


11/1/10
(6)


3



*

Surgery Center of Arlington, Arlington, Texas(1)


2/1/99



6



26*

Tuscan Surgery Center at Las Colinas, Irving, Texas


12/1/10



1



26*

Valley View Surgery Center, Dallas, Texas


12/18/98



4



31Denver*

Crown Point Surgical Center, Parker, Colorado


10/1/08



4



43*

Harvard Park Surgery Center, Denver Colorado


1/1/09



3



30*

Summit View Surgery Center, Littleton, Colorado


1/1/09



3



33Houston*

Doctors Outpatient Surgicenter, Pasadena, Texas(1)


9/1/99



5



43*

Kingsland Surgery Center, Katy, Texas


12/31/08



4



28*

KSF Orthopaedic Surgery Center, Houston, Texas(1)


5/1/07



3



45*

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


9/1/07



6



25*

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


1/19/07



4



10*

Memorial Hermann Surgery Center  Memorial Village,
    Houston, Texas


12/1/2010



4



11*

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


9/1/04



5



10*

Memorial Hermann Surgery Center  Richmond, Richmond,
    Texas


12/31/09



2



26*

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



11*

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


1/17/07



5



17*

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


8/9/05



4



10*

Memorial Hermann Surgery Center  West Houston ,
    Houston, Texas


4/19/06
(5)


5



25*

Memorial Hermann Surgery Center  Woodlands Parkway,
    Houston Texas


12/31/10



4



28*

North Houston Endoscopy and Surgery, Houston, Texas


10/1/08



2



26 13




---



##### Table of Contents



Date of

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

USPI*

North Houston GI, Houston, Texas


10/1/08



1



28*

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


12/28/02



4



13*

TOPS Surgical Specialty Hospital, Houston, Texas(3)


7/1/99



7



45*

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


9/1/99



3



30Kansas City*

Briarcliff Surgery Center, Kansas City, Missouri


6/1/05



2



29*

Creekwood Surgery Center, Kansas City, Missouri(1)


7/29/98



4



38*

Liberty Surgery Center, Liberty, Missouri


6/1/05



2



30*

Saint Marys Surgical Center, Blue Springs, Missouri


5/1/05



4



27*

Midwest Physicians Surgery Center, Lees Summit Missouri


11/1/10
(6)


3



26KnoxvilleParkwest Surgery Center, Knoxville, Tennessee


7/26/01



5



22Physicians Surgery Center of Knoxville, Knoxville,
    Tennessee


1/1/08



6



26Las Vegas*

Durango Outpatient Surgery Center, Las Vegas, Nevada


12/9/08



4



33*

Parkway Surgery Center, Henderson, Nevada


8/3/98



5



29Los AngelesCoast Surgery Center of South Bay, Torrance, California(1)


12/18/01



3



24Pacific Endo-Surgical Center, Torrance, California


8/1/03



1



55*

San Fernando Valley Surgery Center, Mission Hills,
    California


11/1/04



4



26San Gabriel Valley Surgical Center, West Covina, California


11/16/01



3



48*

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


3/7/06



3



26The Center for Ambulatory Surgical Treatment, Los Angeles,
    California(1)


11/14/02



4



38Michigan*

Clarkston Surgery Center, Clarkston, Michigan


6/1/09



4



36*

Genesis Surgery Center, Lansing, Michigan


11/1/06



4



23*

Lansing Surgery Center, Lansing, Michigan


11/1/06



4



23*

McLaren ASC of Flint, Flint, Michigan


8/2/07



4



43*

Utica Surgery and Endoscopy Center, Utica, Michigan


4/1/07



3



33Nashville*

Baptist Ambulatory Surgery Center, Nashville, Tennessee


3/1/98
(2)


6



29*

Baptist Plaza Surgicare, Nashville, Tennessee


12/3/03



9



27*

Center for Spinal Surgery, Nashville, Tennessee(3)


12/31/08



6



20*

Eye Surgery Center of Nashville, Nashville, Tennessee


11/1/10
(6)


1



26*

Franklin Endoscopy Center, Franklin, Tennessee


11/1/10
(6)


2



26*

Lebanon Endoscopy Center, Lebanon, Tennessee


11/1/10
(6)


2



26*

Middle Tennessee Ambulatory Surgery Center, Murfreesboro,
    Tennessee


7/29/98



4



35*

Northridge Surgery Center, Nashville, Tennessee


4/19/06
(5)


5



31*

Patient Partners Surgery Center, Gallatin, Tennessee


11/1/10
(6)


2



13*

Physicians Pavilion Surgery Center, Smyrna, Tennessee


7/29/98



4



49*

Saint Thomas Surgicare, Nashville, Tennessee


7/15/02



5



30*

Tennessee Sports Medicine Surgery Center, Mt. Juliet, Tennessee


11/1/10
(6)


4



13*

Williamson Surgery Center, Franklin, Tennessee


11/1/10
(6)


3



20New Jersey*

Central Jersey Surgery Center, Eatontown, New Jersey


11/1/04



3



35*

Northern Monmouth Regional Surgery Center, Manalapan, New Jersey


7/10/06



4



39*

Select Surgical Center at Kennedy, Sewell, New Jersey


10/29/09



3



29*

Shore Outpatient Surgicenter, Lakewood, New Jersey


11/1/04



3



42*

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



24 14




---



##### Table of Contents



Date of

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

USPI*

Southwest Orthopaedic Ambulatory Surgery Center, Oklahoma City,
    Oklahoma


8/2/04



2



24Phoenix*

Arizona Orthopedic Surgical Hospital, Chandler, Arizona(3)


5/19/04



6



36*

Desert Ridge Outpatient Surgery Center, Phoenix, Arizona


3/30/07



4



33*

Metro Surgery Center, Phoenix, Arizona


4/19/06
(5)


4



83Physicians 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



29*

Surgery Center of Peoria, Peoria, Arizona


4/19/06
(5)


3



30*

Surgery Center of Scottsdale, Scottsdale, Arizona


4/19/06
(5)


4



29Surgery Center of Gilbert, Gilbert, Arizona


4/19/06
(5)


3



22*

Warner Outpatient Surgery Center, Chandler, Arizona


7/1/99



4



36Portland*

East Portland Surgical Center, Portland, Oregon


12/31/09



4



29*

Northwest Surgery Center, Portland, Oregon


12/1/08



3



26Redding*

Court Street Surgery Center, Redding, California


4/19/06
(5)


2



32*

Mercy Surgery Center, Redding, California


3/1/08



4



32*

Redding Surgery Center, Redding, California


4/19/06
(5)


2



32Sacramento*

Folsom Outpatient Surgery Center, Folsom, California


6/1/05



2



31*

Grass Valley Surgery Center, Grass Valley, California


7/1/10



2



23*

Roseville Surgery Center, Roseville, California


7/1/06



2



29San Antonio*

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


12/1/04



3



59San Antonio Endoscopy Center, San Antonio, Texas


5/1/05



1



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


1/1/06



2



60Chesterfield Surgery Center, Chesterfield, Missouri(1)


1/1/06



2



65Frontenac Surgery and Spine Care Center, Frontenac, Missouri(1)


5/1/07



2



40Gateway Endoscopy Center, St. Louis, Missouri


5/1/10



2



50Manchester Surgery Center, St. Louis, Missouri


2/1/07



3



62Mason Ridge Surgery Center, St. Louis, Missouri(1)


2/1/07



2



56Mid Rivers Surgery Center, Saint Peters, Missouri


1/1/06



2



64Old Tesson Surgery Center, St. Louis, Missouri


8/1/08



3



61Olive Surgery Center, St. Louis, Missouri


1/1/06



2



62Riverside Ambulatory Surgery Center, Florissant, Missouri


8/1/06



2



76South County Outpatient Endoscopy Services, St. Louis,
    Missouri


10/1/08



2



25*

SSM St. Clare Surgical Center, Fenton, Missouri


10/23/09



3



20*

St. Louis Surgical Center, Creve Coeur, Missouri(1)


4/1/10



7



20Sunset Hills Surgery Center, St. Louis, Missouri


1/1/06



2



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


8/1/06



2



66Twin Cities Ambulatory Surgery Center, St. Louis, Missouri


9/1/08



2



61Webster Surgery Center, Webster Groves, Missouri(1)


3/1/07



2



28Virginia*

Bon Secours Surgery Center at Harbour View, Suffolk, Virginia


11/12/07



6



21*

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


5/30/07



2



22*

Mary Immaculate Ambulatory Surgical Center, Newport News,
    Virginia


7/19/04



3



17*

Memorial Ambulatory Surgery Center, Mechanicsville, Virginia


12/30/05



5



17*

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


11/29/06



4



14Surgi-Center of Central Virginia, Fredericksburg, Virginia


11/29/01



4



76Additional Markets*

Beaumont Surgical Affiliates, Beaumont, Texas(1)


4/19/06
(5)


6



25Chico Surgery Center, Chico, California


4/19/06
(5)


3



80*

CHRISTUS Cabrini Surgery Center, Alexandria, Louisiana


6/22/07



4



23 15




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##### Table of Contents



Date of

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

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


12/4/98



4



99Destin Surgery Center, Destin, Florida


9/25/02



2



61*

Flatirons Surgery Center, Boulder, Colorado


12/1/10



3



32Great Plains Surgery Center, Lawton, Oklahoma


4/19/06
(5)


2



49Hope Square Surgical Center, Rancho Mirage, California


11/1/10
(6)


2



37Idaho Surgery Center, Caldwell, Idaho


4/19/06
(5)


3



22*

Memorial Surgery Center, Tulsa, Oklahoma


10/1/09



4



25*

Mountain Empire Surgery Center, Johnson City, Tennessee


2/20/00
(2)


4



18New Horizons Surgery Center, Marion, Ohio


4/19/06
(5)


2



11New Mexico Orthopaedic Surgery Center, Albuquerque, New Mexico


2/29/00
(2)


6



51Northeast Ohio Surgery Center, Cleveland, Ohio


4/19/06
(5)


3



49Physicians Surgery Center of Chattanooga, Chattanooga, Tennessee


11/1/10
(6)


4



51Reading Endoscopy Center, Wyomissing, Pennsylvania


11/1/10
(6)


2



51Reading Surgery Center, Wyomissing, Pennsylvania


7/1/04



3



57Redmond Surgery Center, Redmond, Oregon


4/19/06
(5)


2



69*

Scripps Encinitas Surgery Center, Encinitas, California


2/6/08



3



20*

St. Josephs Surgery Center, Stockton, California


2/1/09



6



5*

Surgery Center of Canfield, Canfield, Ohio(1)


4/19/06
(5)


3



26Surgery Center of Columbia, Columbia, Missouri(1)


8/1/06



2



59Surgery Center of Fort Lauderdale, Fort Lauderdale,
    Florida


11/1/04



4



51SurgiCenter of Baltimore, Owings Mills, Maryland


11/1/10
(6)


5



33*

Terre Haute Surgical Center, Terre Haute, Indiana


12/19/07



2



23Teton Outpatient Services, Jackson, Wyoming(1)


8/1/98
(2)


2



49*

The Christ Hospital Spine Surgery Center(1)


12/31/09



3



26Tri-City Orthopaedic Center, Richland, Washington(4)


4/19/06
(5)


2



17*

Tullahoma Surgery Center, Tullahoma, Tennessee


12/31/10



2



26*

Upper Cumberland Physician Surgery Center, Cookeville, Tennessee


11/1/10
(6)


2



10University Surgical Center, Winter Park, Florida


10/15/98



3



38Victoria Ambulatory Surgery Center, Victoria, Texas


4/19/06
(5)


2



59United KingdomParkside Hospital, Wimbledon


4/6/00



4



100Cancer Centre London, Wimbledon


8/1/03







76Holly House Hospital, Essex


4/6/00



3



100Highgate Private Clinic, Highgate


4/29/03



3



100     *
    
    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.(6)
    
    Indicates the date of our acquisition of HealthMark.       16




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##### Table of Contents



Acquisitions
    and Development
    Expected

Number ofHospital



Opening

OperatingFacility Location

Partner

Type

Date

RoomsDallas, Texas

Baylor

Hospital


Q111



6Murfreesboro, Tennessee

St. Thomas

Surgery center


Q111



2Phoenix, Arizona

CHW

Hospital


Q211



8Austin, Texas

Seton

Surgery center


Q211



4Jersey City, New Jersey

Liberty Health

Surgery center


Q211



3     Marketing
    Competition
       17




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Employees
    Professional
    and General Liability Insurance
    Government
    Regulation
  United
    States
  General
       18




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##### Table of Contents



19




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##### Table of Contents



Licensure
    and certificate-of-need regulations
            Medicare
    and Medicaid Participation in Short Stay Surgical
    Facilities
   20




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##### Table of Contents



10-year
  Federal
    Anti-Kickback Law
   21




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##### Table of Contents




    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.           22




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23




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##### Table of Contents



Federal
    Physician Self-Referral Law
        False and
    Other Improper Claims
     24




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##### 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. 25




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##### Table of Contents



EMTALA
   26




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##### Table of Contents



European
    Union and United Kingdom
          Item 1A.
    Risk
    Factors  You should carefully read the risks and uncertainties
    described below and the other information included 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.
 27




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##### Table of Contents



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 surgical facilities
    on favorable terms, are not successful in integrating operations
    of acquired surgical facilities, or are unable to manage growth,
    we may be unable to execute our acquisition and development
    strategy, which could limit our future growth.
       28




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##### Table of Contents



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 debt obligations.
      
    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;
    makes us and our subsidiaries more vulnerable to increases in
    interest rates, as borrowings under our 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 our
    senior subordinated notes upon the occurrence of specified
    changes of control, 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; 29




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##### Table of Contents




    enter into agreements limiting subsidiary distributions;
    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;
    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 surgical
    facilities, our operating results could be adversely
    affected.
    We
    depend on our relationships with not-for-profit healthcare
    systems. If we are not able to maintain our relationships with
    these not-for-profit healthcare systems, or enter into new
    relationships, we may be unable to implement our business
    strategies successfully.
   30




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##### Table of Contents



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.
     31




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##### Table of Contents



Our
    surgical facilities face competition for patients from other
    health care providers.
  and/or
  Current
    economic conditions may adversely affect our financial condition
    and results of operations.
    Our
    United Kingdom operations are subject to unique risks, any of
    which, if they actually occur, could adversely affect our
    results.
    
    fluctuations in exchange rates;
    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;
    difficulties in staffing and managing geographically and
    culturally diverse, multinational operations;
    the economic conditions in the United Kingdom, which could
    adversely affect the ability or willingness of employers and
    individuals in these countries to purchase private health
    insurance; and
    a higher concentration of self-pay business than our
    U.S. facilities.    Our
    revenues may be reduced by changes in payment methods or rates
    under the Medicare or Medicaid programs.
   32




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##### Table of Contents



Efforts
    to regulate the construction, acquisition or expansion of
    healthcare facilities could prevent us from acquiring additional
    surgical facilities, 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.
      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; 33




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##### Table of Contents




    billing for services;
    handling of medication;
    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.
       34




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##### Table of Contents



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.
       35




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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.
     36




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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.    Healthcare
    reform has restricted our ability to operate our domestic
    surgical hospitals.
  The Acts provide, among other
    things:
    If we
    become subject to significant legal actions, we could be subject
    to substantial uninsured liabilities.
   37




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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 surgical
    facilities, and that responsibility may prevent us from acting
    solely in our own best interests or the interests of our
    stockholders.
   38




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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    Item 2.
    Properties   39




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##### Table of Contents



Item 3.
    Legal
    Proceedings   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Item 6.
    Selected
    Financial Data      40




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##### Table of Contents



Successor


PredecessorPeriod from


Period fromApril 19


January 1Year Ended

Year Ended

Year Ended

through


through

Years EndedDecember 31

December 31,

December 31,

December 31,


April 18,

December 31,2010

2009

2008

2007


2007

2006Consolidated Statement of Operations Data:Total revenues

$
576,665


$
593,475


$
615,098


$
435,699



$
185,169


$
553,290Equity in earnings of unconsolidated affiliates


69,916



61,771



47,042



23,867




9,906



31,568Operating expenses excluding depreciation and amortization


(406,266
)


(425,786
)


(431,731
)


(300,937
)



(156,227
)


(392,360
)Depreciation and amortization


(29,799
)


(31,165
)


(32,305
)


(23,765
)



(11,301
)


(32,319
)Operating income


210,516



198,295



198,104



134,864




27,547



160,179Other income (expense):Interest income


798



2,741



3,278



3,255




967



4,064Interest expense


(70,038
)


(70,353
)


(84,916
)


(67,553
)



(9,394
)


(32,457
)Loss on early retirement of debt



















(2,435
)


(14,880
)Other, net


708



373



32



72




(67
)


51Income from continuing operations before income taxes


141,984



131,056



116,498



70,638




16,618



116,957Income tax benefit (expense)


(32,328
)


879



(22,667
)


(14,588
)



(4,433
)


(22,661
)Income from continuing operations


109,656



131,935



93,831



56,050




12,185



94,296Earnings (loss) from discontinued operations, net of tax


(7,003
)


1,453



(1,179
)


(2,146
)



(786
)


(5,629
)Net income


102,653



133,388



92,652



53,904




11,399



88,667Less: Net income attributable to noncontrolling interests


(60,560
)


(63,722
)


(55,138
)


(45,175
)



(18,548
)


(54,421
)Net income attributable to USPIs common stockholders

$
42,093


$
69,666


$
37,514


$
8,729



$
(7,149
)

$
34,246Other Data:Number of facilities operated as of the end of period(a):Consolidated


58



60



62



61




64



60Equity method


130



109



102



94




85



81Management contract only


1




















Total


189



169



164



155




149



141Cash flows from operating activities

$
169,064


$
180,610


$
142,119


$
109,933



$
47,177


$
155,466  41




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##### Table of Contents



PredecessorSuccessor


As ofAs of December 31


December 31,2010

2009

2008

2007


2006Consolidated Balance Sheet Data:Working capital (deficit)

$
(100,249
)

$
(113,016
)

$
(38,838
)

$
(12,569
)


$
(41,834
)Cash and cash equivalents


60,253



34,890



49,435



76,758




31,740Total assets


2,372,739



2,325,392



2,268,163



2,277,393




1,231,856Total debt


1,069,826



1,071,528



1,097,947



1,098,062




347,330Noncontrolling interests  redeemable


81,668



63,865



51,961



52,769




49,261Total equity


821,151



798,003



806,217



837,100




622,844     (a)
    
    Not derived from audited financial statements.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation      Overview
         42




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##### Table of Contents



Critical
    Accounting Policies and Estimates
    Consolidation
    Accounting Standards Codification Consolidation
    Revenue
    Recognition and Accounts Receivable
  Revenue Recognition in Financial
    Statements
  
    Existence of persuasive evidence that an arrangement exists; 43




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##### Table of Contents




    Delivery has occurred or services have been rendered;
    The sellers price to the buyer is fixed or
    determinable; and
    Collectibility is reasonably assured.          Income
    Taxes
   44




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##### Table of Contents



Goodwill
    and Intangible Assets
    and/or
    Merger
    Transaction
   45




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##### Table of Contents



Acquisitions,
    Equity Investments and Development Projects
    Effective Date

Facility Location

AmountInvestmentsDecember 2010

Houston, Texas(1)

$
9.0 millionDecember 2010

Reading, Pennsylvania(2)


1.1 millionNovember 2010

Various(3)


31.1 millionOctober 2010

Houston, Texas(1)


2.4 millionMay 2010

St. Louis, Missouri(4)


4.6 millionTotal



$
48.2 million     (1)
    
    Acquisition of a controlling interest in and right to manage a
    surgical facility in which we previously had no involvement. The
    remainder of this facility is owned by a hospital partner and
    local physicians.(2)
    
    Acquisition of a controlling interest in a surgical facility in
    which we already held an ownership interest.(3)
    
    We acquired 100% of the equity interests in HealthMark Partners,
    Inc. (HealthMark), a privately-held, Nashville-based owner and
    operator of surgery centers. HealthMark holds an equity interest
    in 14 surgery centers, all of which are accounted for under the
    equity method. Eleven of these facilities are located in markets
    in which we already operate. Local physicians have ownership in
    all 14 facilities and by December 31, 2010 and
    January 31, 2011, hospital partners had invested in nine
    and ten of these facilities, respectively.(4)
    
    Acquisition of a controlling interest in and right to manage a
    surgical facility in which we previously had no involvement.
    This facility is jointly owned with local physicians. 46




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##### Table of Contents



Effective Date

Facility Location

AmountInvestmentsDecember 2010

Irving, Texas(1)

$
1.9 millionDecember 2010

Boulder, Colorado(2)


4.7 millionDecember 2010

Houston, Texas(2)


0.9 millionDecember 2010

Chattanooga, Tennessee(3)


2.6 millionDecember 2010

Kansas City, Missouri(4)


1.2 millionDecember 2010

Nashville, Tennessee(5)


13.4 millionNovember 2010

Keller, Texas(1)


4.6 millionJuly 2010

Carrollton, Texas(1)


0.8 millionJuly 2010

Sacramento, California(2)


1.5 millionMay 2010

Mansfield, Texas(1)


0.4 millionApril 2010

Destin, Florida(3)


1.3 millionApril 2010

St. Louis, Missouri(6)


0.4 million33.7 millionSales(7)December 2010

Phoenix, Arizona(8)


4.1 millionJune 2010

Cincinnati, Ohio(9)


7.9 millionVarious

Various(10)


0.4 million12.4 millionTotal



$
21.3 million     (1)
    
    Acquisition of the right to manage a surgical facility in which
    we previously had no involvement. Concurrent with this
    transaction, an unconsolidated investee that we jointly own with
    a hospital partner used cash on hand to acquire an equity
    interest in this facility, resulting in our having an indirect
    ownership interest in the facility. The remainder of this
    facility is owned by local physicians.(2)
    
    Acquisition of a noncontrolling interest in and right to manage
    a surgical facility in which we previously had no involvement.
    This facility is jointly owned with one of our hospital partners
    and local physicians.(3)
    
    Acquisition of an additional noncontrolling interest in a
    surgical facility in which we already held an investment. This
    facility is jointly owned with local physicians.(4)
    
    Acquisition of an additional noncontrolling interest in a
    surgical facility in which we already held an investment. This
    facility is jointly owned with one of our hospital partners and
    local physicians.(5)
    
    Acquisition of an additional noncontrolling interest in three
    surgical facilities in which we already held an investment and
    one surgical facility in which we already provided management
    services. These facilities are jointly owned with one of our
    hospital partners and local physicians.(6)
    
    Acquisition of a noncontrolling interest in a surgical facility
    in which we already provided management services. This facility
    is jointly owned with one of our hospital partners and local
    physicians.(7)
    
    Sale transactions not involving our surrendering control of the
    facility are described in this section. Transactions involving
    the sale of our entire interest in a facility or our
    surrendering control of a facility are described in
    Discontinued Operations and Other Dispositions. 47




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##### Table of Contents



(8)
    
    Sale of a portion of our equity ownership in two facilities to a
    hospital partner. The remainder of these facilities are owned by
    local physicians.(9)
    
    Sale of a portion of our equity ownership in one facility to a
    hospital partner. The remainder of this facility is owned by
    local physicians.(10)
    
    Represents the net receipt related to various other purchases
    and sales of equity interests and contributions of cash to
    equity method investees.          Effective Date

Facility Location

AmountInvestmentsDecember 2009

Cincinnati, Ohio(1)

$
17.7 millionDecember 2009

Portland, Oregon(2)


11.1 millionDecember 2009

Nashville, Tennessee(3)


6.1 millionSeptember 2009

Fort Worth, Texas(3)


1.2 millionJuly 2009

Fort Worth, Texas(3)


1.0 millionMay 2009

St. Louis, Missouri(4)


0.9 millionFebruary 2009

Fort Worth, Texas(2)


2.0 millionFebruary 2009

Stockton, California(2)


2.5 millionVarious

Various(5)


7.3 millionTotal




49.8 millionSales(6)December 2009

Dallas, Texas(7)


2.4 millionTotal



$
47.4 million     (1)
    
    Acquisition of a noncontrolling interest in and right to manage
    a surgical facility in which we previously had no involvement.
    This facility is jointly owned with local physicians. 48




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##### Table of Contents



(2)
    
    Acquisition of a noncontrolling interest in and right to manage
    a surgical facility in which we previously had no involvement.
    This facility is jointly owned with one of our hospital partners
    and local physicians.(3)
    
    Acquisition of additional ownership in one of our existing
    facilities.(4)
    
    Acquisition of the right to manage a surgical facility in which
    we previously had no involvement. We have a purchase option to
    acquire a 20% equity interest in the facility within one year,
    and after approximately three years, an option to purchase an
    additional 20% equity interest. We acquired ownership in April
    2010.(5)
    
    Represents the net purchase of additional ownership and equity
    contributions in various unconsolidated affiliates, including
    $3.4 million of investment in four de novos.(6)
    
    Sale transactions not involving our surrendering control of the
    facility are described in this section. Transactions involving
    the sale of our entire interest in a facility or our
    surrendering control of a facility are described in
    Discontinued Operations and Other Dispositions.(7)
    
    Sale of a portion of our noncontrolling interest in two
    facilities to a hospital partner. This hospital partner is a
    related party (Note 12). We retained a noncontrolling
    interest in these facilities and continue to operate them.        Effective Date

Facility Location

AmountDecember 2008

St. Louis, Missouri(1)

$
0.4 millionOctober 2008

St. Louis, Missouri(2)


1.9 millionSeptember 2008

St. Louis, Missouri(2)


15.8 millionSeptember 2008

St. Louis, Missouri(3)


18.0 millionAugust 2008

St. Louis, Missouri(2)


3.0 millionJune 2008

Dallas, Texas(4)


3.9 millionApril 2008

St. Louis, Missouri(5)


14.1 millionVarious

Various(6)


6.6 millionTotal



$
63.7 million     (1)
    
    We acquired additional ownership in one of our existing
    facilities.(2)
    
    We had no previous investment in this facility.(3)
    
    We acquired additional ownership in two of our existing
    facilities.(4)
    
    We purchased all of a healthcare systems ownership
    interest in an entity it co-owned with us. This entity has
    ownership in and manages five facilities in the
    Dallas/Fort Worth area. This holding company was already a
    subsidiary of our company and is now wholly owned by us.(5)
    
    We acquired additional ownership in three of our existing
    facilities.(6)
    
    Represents the purchase of additional ownership in various
    consolidated entities. 49




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##### Table of Contents



Effective Date

Facility Location

AmountInvestmentsDecember 2008

Nashville, Tennessee(1)

$
18.3 millionDecember 2008

Houston, Texas(1)


5.4 millionDecember 2008

Portland, Oregon(1)


5.7 millionDecember 2008

Denver, Colorado(2)


2.2 millionOctober 2008

Houston, Texas(1)


5.2 millionOctober 2008

Denver, Colorado(1)


2.1 millionJanuary 2008

Knoxville, Tennessee(1)


1.4 millionJanuary 2008

Las Vegas, Nevada(1)


1.1 million41.4 millionSalesApril 2008

Kansas City, Missouri(3)


3.6 millionVarious

Various(4)


2.2 million5.8 millionTotal



$
35.6 million     (1)
    
    Acquisition of a noncontrolling equity interest in and right to
    manage a surgical facility in which we previously had no
    involvement. This facility is jointly owned with one of our
    hospital partners and local physicians.(2)
    
    Acquisition of a noncontrolling equity interest in and right to
    manage two surgical facilities in which we previously had no
    involvement. These facilities are jointly owned with one of our
    hospital partners and local physicians. The purchase price was
    paid in December 2008 and our ownership became effective
    January 1, 2009.(3)
    
    A not-for-profit hospital partner obtained ownership in a
    facility.(4)
    
    Represents the net receipt related to various other purchases
    and sales of equity interests and contributions of cash to
    equity method investees.    Discontinued
    Operations and Other Dispositions
   50




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##### Table of Contents



Date

Facility Location

Proceeds


Gain (Loss)December 2010

Nashville, Tennessee

$
32.5 million


$
2.8 millionDecember 2010

Orlando, Florida






(2.0 million
)December 2010

Templeton, California(1)






(1.9 million
)December 2010

Houston, Texas(1)






(0.2 million
)Total



$
32.5 million


$
(1.3 million
)June 2008

Cleveland, Ohio

$
1.6 million


$
(1.0 million
)     (1)
    
    These investments were written down to estimated fair value less
    costs to sell at December 31, 2010, and were sold at
    amounts approximating these estimated values in February 2011.    Date

Facility Location

Proceeds (Costs)


LossDecember 2009

Oxnard, California

$
0.3 million


$
(0.3 million
)December 2009

Baton Rouge, Louisiana(1)


(5.1 million
)


(8.2 million
)September 2009

San Antonio, Texas






(2.6 million
)July 2009

Cleveland, Ohio(2)


1.0 million



February 2009

Las Cruces, New Mexico






February 2009

East Brunswick, New Jersey


0.7 million



(2.6 million
)Total



$
(3.1 million
)

$
(13.7 million
)July 2008

Manitowoc, Wisconsin

$
0.8 million


$
July 2008

Orlando, Florida


0.5 million



(0.4 million
)April 2008

Los Angeles, California






February 2008

Sarasota, Florida


0.5 million



Total



$
1.8 million


$
(0.4 million
)     (1)
    
    We paid $5.1 million to settle contingent liabilities in
    conjunction with the sale of this center. Such amount was
    expensed and included in Losses on deconsolidations,
    disposals and impairments in the accompanying consolidated
    statements of income.(2)
    
    We financed the entire purchase price with the buyer and have a
    security interest in the facilitys assets until the note
    is collected, which is due in 2011. As a result, we deferred the
    recognition of the gain, which is estimated at $0.6 million.      51




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##### Table of Contents



Date

Facility Location

Proceeds


Gain (Loss)December 2010

Phoenix, Arizona(1)

$
0.6 million


$
(1.5 million
)December 2010

Dallas, Texas(2)






1.6 millionTotal



$
0.6 million


$
0.1 millionDecember 2009

Dallas, Texas(3)

$
1.2 million


$
0.3 millionJuly 2009

Oklahoma City, Oklahoma(4)


0.2 million



0.1 millionMarch 2009

Phoenix, Arizona(5)


0.1 million



(8.2 million
)Total



$
1.5 million


$
(7.8 million
)July 2008

Beaumont, Texas

$
1.2 million


$
(0.5 million
)June 2008

Dallas, Texas(3)


2.3 million



(0.9 million
)June 2008

Houston, Texas(6)


0.6 million



March 2008

Redding, California(7)


1.7 million



Total



$
5.8 million


$
(1.4 million
)     (1)
    
    A hospital partner acquired a portion of our interest in this
    facility and shares control of it with us.(2)
    
    We previously controlled this facility but now shares control
    with physician partners due to a change in the entitys
    governing documents.(3)
    
    The hospital partner acquired a controlling interest from us in
    this transaction. Additionally, this hospital partner is a
    related party (Note 12).(4)
    
    We and the other owners of a facility consolidated by us agreed
    to merge the facility into another entity in which we hold an
    investment accounted for under the equity method.(5)
    
    A controlling interest in an entity was sold to a hospital
    partner. The hospital partner already had a 49% ownership
    interest in this entity, which owns and manages two surgical
    facilities, and through the transaction acquired an additional
    1.1% interest. The $8.2 million loss was primarily related
    to the revaluation of our remaining investment in the entity to
    fair value.(6)
    
    Because we are considered the primary beneficiary of this
    entity, we consolidate the entity, and continue to consolidate
    the facilitys operating results. The sales price of
    $0.6 million was paid in the form of a note receivable from
    the buyer.(7)
    
    We sold a controlling interest in two facilities and received a
    noncontrolling interest in a third facility in Redding.  Sources
    of Revenue
    
    net patient service revenues 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 or we are the primary
    beneficiary;
    management and contract service revenues, 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 eliminated in consolidation. 52




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##### Table of Contents



Years Ended December 31,2010

2009

2008Net patient service revenues


88
%


88
%


90
%Management and contract service revenues


11



10



9Other revenues


1



2



1Total revenues


100
%


100
%


100
%       Years Ended December 31,2010


2009


2008Management of surgical facilities

$
53,934


$
46,438


$
40,100Contract services provided to other healthcare providers


10,904



11,888



12,927Total management and contract service revenues

$
64,838


$
58,326


$
53,027     Years Ended December 31,2010

2009

2008United States


82
%


82
%


80
%United Kingdom


18



18



20Total


100
%


100
%


100
%    53




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##### Table of Contents



Results
    of Operations
    Years Ended December 31,USPI

2010

2009

2008Total revenues


100.0
%


100.0
%


100.0
%Equity in earnings of unconsolidated affiliates


12.1



10.4



7.6Operating expenses, excluding depreciation and amortization


(70.5
)


(71.7
)


(70.2
)Depreciation and amortization


(5.1
)


(5.3
)


(5.2
)Operating income


36.5



33.4



32.2Interest and other expense, net


(11.9
)


(11.3
)


(13.3
)Income from continuing operations before income taxes


24.6



22.1



18.9Income tax benefit (expense)


(5.6
)


0.1



(3.7
)Income from continuing operations


19.0



22.2



15.2Earnings (loss) from discontinued operations, net of tax


(1.2
)


0.2



(0.1
)Net income


17.8



22.4



15.1Less: Net income attributable to noncontrolling interests


(10.5
)


(10.7
)


(9.0
)Net income attributable to USPIs common stockholder


7.3
%


11.7
%


6.1
%     Years Ended December 31,USPIs Unconsolidated Affiliates

2010

2009

2008Revenues


100.0
%


100.0
%


100.0
%Operating expenses, excluding depreciation and amortization


(69.7
)


(69.6
)


(70.6
)Depreciation and amortization


(4.2
)


(4.3
)


(4.8
)Operating income


26.1



26.1



24.6Interest expense, net


(1.9
)


(2.1
)


(2.4
)Other, net






0.4



Income before income taxes


24.2



24.4



22.2Income tax expense


(0.6
)


(0.6
)


(0.6
)Net income


23.6
%


23.8
%


21.6
%   Executive
    Summary
     54




---



##### Table of Contents



2010


2009Losses on deconsolidations, disposals and impairments(1)

$
10.1


$
29.2Expense related to previous acquisition and facility purchase
    option


6.0



Acquisition costs


3.3



VAT assessment(2)


1.0



(1.0
)Total impact on operating income

$
20.4


$
28.2     (1)
    
    Of the 2010 amount, $3.7 million is classified within
    equity in earnings of unconsolidated affiliates.(2)
    
    U.K. taxing authority awarded us a value-added tax refund in
    2009 but reversed its position in 2010. We are appealing the
    decision.     55




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##### Table of Contents



Our
    Business and Key Measures
    
    our share of each facilitys net income, which is computed
    by multiplying the facilitys net income times the
    percentage of each facilitys equity interests owned by
    us; and
    management services revenues, computed as a percentage of each
    facilitys net revenues (often net of bad debt expense).        
    equity in earnings of unconsolidated affiliates: our share of
    the net income of each facility, which is based on the
    facilities net income and the percentage of the
    facilitys outstanding equity interests owned by
    us; and
    management and administrative services revenues: income we earn
    in exchange for managing the day-to-day operations of each
    facility, usually quantified as a percentage of each
    facilitys net revenues less bad debt expense.    
    The results of operations of USPIs unconsolidated
    affiliates
    USPIs average ownership share in the facilities we
    operate; and
    Facility operating indicators, such as systemwide revenue
    growth, same store revenue growth, and same store operating
    margins 56




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##### Table of Contents



Our
    Consolidated and Unconsolidated Results
    Year Ended December 31,2010


2009


Variance to Prior YearUSPI As





USPI As





USPI AsReported





Reported





ReportedUnder


Unconsolidated


Under


Unconsolidated


Under


UnconsolidatedGAAP


Affiliates


GAAP


Affiliates


GAAP


AffiliatesRevenues:Net patient service revenues

$
504,765


$
1,322,393


$
523,899


$
1,171,242


$
(19,134
)

$
151,151Management and contract service revenues


64,838







58,326







6,512



Other income


7,062



6,648



11,250



6,872



(4,188
)


(224
)Total revenues


576,665



1,329,041



593,475



1,178,114



(16,810
)


150,927Equity in earnings of unconsolidated affiliates


69,916







61,771







8,145



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


156,213



309,698



160,278



277,053



(4,065
)


32,645Medical services and supplies


97,940



310,770



99,510



271,663



(1,570
)


39,107Other operating expenses


99,075



273,649



89,347



243,241



9,728



30,408General and administrative expenses


38,202







38,769







(567
)


Provision for doubtful accounts


8,458



31,396



8,720



28,528



(262
)


2,868Losses on deconsolidations, disposals and impairments


6,378



1,025



29,162



(7
)


(22,784
)


1,032Depreciation and amortization


29,799



55,216



31,165



50,251



(1,366
)


4,965Total operating expenses


436,065



981,754



456,951



870,729



(20,886
)


111,025Operating income


210,516



347,287



198,295



307,385



12,221



39,902Interest income


798



378



2,741



456



(1,943
)


(78
)Interest expense


(70,038
)


(26,008
)


(70,353
)


(24,850
)


315



(1,158
)Other, net


708



(200
)


373



4,572



335



(4,772
)Total other expense, net


(68,532
)


(25,830
)


(67,239
)


(19,822
)


(1,293
)


(6,008
)Income from continuing operations before income taxes


141,984



321,457



131,056



287,563



10,928



33,894Income tax (expense) benefit


(32,328
)


(7,562
)


879



(6,860
)


(33,207
)


(702
)Income from continuing operations


109,656



313,895



131,935



280,703



(22,279
)


33,192Earnings (loss) from discontinued operations, net


(7,003
)






1,453







(8,456
)


Net income


102,653


$
313,895



133,388


$
280,703



(30,735
)

$
33,192Less: Net income attributable to noncontrolling interests


(60,560
)






(63,722
)






3,162Net income attributable to USPI

$
42,093






$
69,666






$
(27,573
)USPIs equity in earnings of unconsolidated affiliates





$
69,916






$
61,771






$
8,145   57




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##### Table of Contents



Year Ended December 31,2009


2008


Variance to Prior YearUSPI As





USPI As





USPI AsReported





Reported





ReportedUnder


Unconsolidated


Under


Unconsolidated


Under


UnconsolidatedGAAP


Affiliates


GAAP


Affiliates


GAAP


AffiliatesRevenues:Net patient service revenues

$
523,899


$
1,171,242


$
554,350


$
996,315


$
(30,451
)

$
174,927Management and contract service revenues


58,326







53,027







5,299



Other income


11,250



6,872



7,721



6,066



3,529



806Total revenues


593,475



1,178,114



615,098



1,002,381



(21,623
)


175,733Equity in earnings of unconsolidated affiliates


61,771







47,042



13



14,729



(13
)Operating expenses:Salaries, benefits, and other employee costs


160,278



277,053



170,805



246,739



(10,527
)


30,314Medical services and supplies


99,510



271,663



109,739



211,781



(10,229
)


59,882Other operating expenses


89,347



243,241



101,846



218,337



(12,499
)


24,904General and administrative expenses


38,769







40,155







(1,386
)


Provision for doubtful accounts


8,720



28,528



7,359



29,497



1,361



(969
)Losses on deconsolidations, disposals and impairments


29,162



(7
)


1,827



1,161



27,335



(1,168
)Depreciation and amortization


31,165



50,251



32,305



48,722



(1,140
)


1,529Total operating expenses


456,951



870,729



464,036



756,237



(7,085
)


114,492Operating income


198,295



307,385



198,104



246,157



191



61,228Interest income


2,741



456



3,278



1,687



(537
)


(1,231
)Interest expense


(70,353
)


(24,850
)


(84,916
)


(25,788
)


14,563



938Other


373



4,572



32



225



341



4,347Total other expense, net


(67,239
)


(19,822
)


(81,606
)


(23,876
)


14,367



4,054Income from continuing operations before income taxes


131,056



287,563



116,498



222,281



14,558



65,282Income tax benefit (expense)


879



(6,860
)


(22,667
)


(5,566
)


23,546



(1,294
)Income from continuing operations


131,935



280,703



93,831



216,715



38,104



63,988Earnings (loss) from discontinued operations


1,453







(1,179
)






2,632



Net income


133,388


$
280,703



92,652


$
216,715



40,736


$
63,988Less: Net income attributable to noncontrolling interests


(63,722
)






(55,138
)






(8,584
)Net income attributable to USPI

$
69,666






$
37,514






$
32,152USPIs equity in earnings of unconsolidated affiliates





$
61,771






$
47,042


$



$
14,729     Years Ended December 31,2010

2009

2008Long-term debt of USPIs unconsolidated facilities

$
330,578


$
271,781


$
273,438USPIs equity in earnings of unconsolidated affiliates


69,916



61,771



47,042USPIs imputed weighted average ownership percentage based
    on affiliates pretax income(1)


21.7
%


21.5
%


21.2
%USPIs imputed weighted average ownership percentage based
    on affiliates debt(2)


23.8
%


25.4
%


25.0
%Unconsolidated facilities operated at period end


130



109



101  58




---



##### Table of Contents



(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 USPIs involvement in
    unconsolidated affiliates.(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 is a
    non-GAAP measure but management believes it provides further
    useful information about USPIs involvement in
    unconsolidated affiliates.  Form 10-K
      Our
    Ownership Interests in the Facilities We Operate
    Year Ended

Year Ended

Year EndedDecember 31,

December 31,

December 31,2010

2009

2008Unconsolidated facilities(1)


21.7
%


21.5
%


21.2
%Consolidated facilities(2)


46.7
%


48.1
%


48.8
%Total(3)


28.2
%


29.4
%


30.2
%     (1)
    
    Computed for unconsolidated facilities by dividing (a) our
    total equity in earnings of unconsolidated affiliates by
    (b) the aggregate net income of U.S. surgical facilities we
    account for under the equity method.(2)
    
    Computed for consolidated facilities by dividing (a) the
    aggregate net income of U.S. surgical facilities we operate less
    our total minority interests in income of consolidated
    subsidiaries by (b) the aggregate net income of our
    consolidated U.S. surgical facilities.(3)
    
    Computed in total by dividing our share of the facilities
    net income, defined as the sum of (a) in footnotes
    (1) and (2), by the aggregate net income of our U.S.
    surgical facilities, defined as the sum of (b) in footnotes
    (1) and (2).   59




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##### Table of Contents



Revenues
    Year EndedDecember 31, 2010USPI asReported Under


UnconsolidatedGAAP


AffiliatesTotal revenues, year ended December 31, 2009

$
593,475


$
1,178,114Add: revenue from acquired facilities


8,070



45,909Less: revenue of disposed facilities






(12,169
)Less: revenue of deconsolidated facilities


(14,571
)


14,571Impact of exchange rate


(1,199
)


Adjusted base year


585,775



1,226,425(Decrease) increase from operations


(9,366
)


97,093Non-facility based revenue


256



5,523Total revenues, year ended December 31, 2010

$
576,665


$
1,329,041    60




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##### Table of Contents



Facility
    Growth
        Years Ended December 31,2010

2009

2008United States facilities:Net revenue


5
%


8
%


11
%Surgical cases



%


2
%


2
%Net revenue per case(1)


5
%


5
%


9
%United Kingdom facilities:Adjusted admissions


(5
)%


(5
)%


9
%Net revenue using actual exchange rates


(2
)%


(14
)%


3
%Net revenue using constant exchange rates(2)


(1
)%


2
%


11
%All same store facilities:Net revenue using actual exchange rates


5
%


6
%


10
%     (1)
    
    Our overall domestic same store growth in net revenue per case
    for 2010 was favorably impacted by the 10% growth at our
    thirteen 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. The net revenue per
    case growth at our ambulatory surgery centers was 2% during
    2010. The favorable impact, in the first quarter of 2008, of our
    collecting amounts related to past patient services in
    conjunction with our finalizing a new contract with a major
    payor has been excluded from 2008 growth rates as it relates to
    dates of service prior to January 1, 2008. The revenue
    reductions related to two similar, but adverse, adjustments in
    the second quarter of 2008 were excluded for similar reasons, as
    was the unfavorable impact of such an amount which arose during
    the second quarter of 2009. 61




---



##### Table of Contents



(2)
    
    Calculated using constant exchange rates for all 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
        2010

2009

2008United States facilities(1):With a hospital partner


132



109



99Without a hospital partner


53



56



62Total U.S. facilities


185



165



161United Kingdom facilities


4



4



3Total facilities operated


189



169



164Change from prior year-end:De novo (newly constructed)


2



4



4Acquisition


25



7



10Disposals(2)


(7
)


(6
)


(5
)Total increase in number of facilities


20



5



9     (1)
    
    At December 31, 2010, physicians own a portion of all of
    these facilities.(2)
    
    During 2010, we merged two of our Dallas-area surgery centers
    into one location, and also merged two of our Ohio surgery
    centers into one location. We sold our ownership interests in a
    facility in Orlando, Florida and are classifying a facility in
    Templeton, California and Houston, Texas as held for sale at
    December 31, 2010 (sold in February 2011). During 2009, we
    sold our ownership interests in facilities in East Brunswick,
    New Jersey; Cleveland, Ohio; San Antonio, Texas; Baton
    Rouge, Louisiana; and Oxnard, California. We also merged one of
    our surgery centers into one of our surgical hospitals in
    Oklahoma. During 2008, we sold ownership interests in facilities
    in Sarasota, Florida; Los Angeles, California; Cleveland, Ohio;
    Manitowoc, Wisconsin; and Las Cruces, New Mexico.  Facility
    Operating Margins
   62




---



##### Table of Contents



Year Ended December 31,2010

2009

2008United States facilities:With a hospital partner


(40
) bps


340
bps


170
bpsWithout a hospital partner


(120
)


20



(260
)Total U.S. facilities(2)


(60
)


250



10United Kingdom facilities(3)


(110
) bps


(160
) bps


80
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)
    
    The favorable impact, in the first quarter of 2008, of our
    collecting amounts related to past patient services in
    conjunction with our finalizing a new contract with a major
    payor has been excluded from these growth rates as it relates to
    dates of service prior to January 1, 2008. The revenue
    reductions related to two similar, but adverse, adjustments in
    the second quarter of 2008 were excluded for similar reasons, as
    was the unfavorable impact of such an amount which arose during
    the second quarter of 2009.(3)
    
    Calculated using constant exchange rates for all 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. In addition, The
    $1.0 million unfavorable impact of a payment of value-added
    tax in the first quarter of 2010 has been excluded from U.K.
    same store facility operating margins. The favorable impact of
    this value-added tax recorded in the second quarter of 2009 was
    also excluded.  Year
    Ended December 31, 2010 Compared to Year Ended
    December 31, 2009
   63




---



##### Table of Contents



Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
   64




---



##### Table of Contents



65




---



##### Table of Contents



Liquidity
    and Capital Resources
  Years Ended December 31,2010

2009

2008Net cash provided by operating activities

$
169,064


$
180,610


$
142,119Net cash used in investing activities


(72,040
)


(85,829
)


(100,863
)Net cash used in financing activities


(73,999
)


(111,247
)


(70,168
)   Overview
    Operating
    Activities
    follow-up and/or
 66




---



##### Table of Contents



Investing
    Activities
    Acquisitions
    and Sales
    Effective Date

Facility Location

AmountInvestmentsDecember 2010

Houston, Texas

$
9.0 millionDecember 2010

Reading, Pennsylvania


1.1 millionDecember 2010

Irving, Texas


1.9 millionDecember 2010

Boulder, Colorado


4.7 millionDecember 2010

Houston, Texas


0.9 millionDecember 2010

Chattanooga, Tennessee


2.6 millionDecember 2010

Kansas City, Missouri


1.2 millionDecember 2010

Nashville, Tennessee


13.4 millionNovember 2010

Various (HealthMark)


31.1 millionNovember 2010

Keller, Texas


4.6 millionOctober 2010

Houston, Texas


2.4 millionJuly 2010

Carrollton, Texas


0.8 millionJuly 2010

Sacramento, California


1.5 millionMay 2010

St. Louis, Missouri


4.6 millionMay 2010

Mansfield, Texas


0.4 millionApril 2010

Destin, Florida


1.3 millionApril 2010

St. Louis, Missouri


0.4 millionVarious

Various


1.8 million83.7 millionSalesDecember 2010

Nashville, Tennessee


32.5 millionDecember 2010

Phoenix, Arizona


4.7 millionJune 2010

Cincinnati, Ohio


7.9 millionVarious

Various


5.3 million50.4 millionTotal



$
33.3 million  67




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##### Table of Contents



Property
    and Equipment/Facilities under Development
          Financing
    Activities
     68




---



##### Table of Contents



Dividend
    Payment
    Debt
  Senior
    secured credit facility
        Senior
    subordinated notes
  7 8 1 4 payment-in-kind
 69




---



##### Table of Contents



1 4
  United
    Kingdom borrowings
        Purchases
    and Sales of Noncontrolling Interests
   70




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##### 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:Senior secured credit facility(1)

$
533,445


$
5,265


$
35,530


$
492,650


$
Senior subordinated notes, due 2017(1)


240,000















240,000Senior subordinated toggle notes, due 2017(1)


197,515















197,515U.K. credit facility(1)


49,981



7,797



42,184







Other debt at operating subsidiaries(1)


22,347



5,275



8,004



3,550



5,518Interest on long-term debt obligations(2)


326,410



62,450



121,640



85,496



56,824Capitalized lease obligations(3)


43,089



6,549



10,850



6,001



19,689Operating lease obligations


72,255



13,651



22,170



13,986



22,448Total contractual cash obligations

$
1,485,042


$
100,987


$
240,378


$
601,683


$
541,994     (1)
    
    Scheduled principal payments.(2)
    
    Represents interest due on long-term debt obligations. For
    variable rate debt, the interest is calculated using the
    December 31, 2010 rates applicable to each debt instrument
    and also gives effect to the interest rate swaps designated in a
    cash flow hedging relationship against portions of the U.K.
    credit facility and the senior secured credit facility in the
    U.S.(3)
    
    Includes principal and interest.  Debt at
    Operating Subsidiaries
       71




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
      Related
    Party Transactions
     72




---



##### Table of Contents



Date

Facility Location

Proceeds


Gain (Loss)December 2009

Dallas, Texas(1)

$
1.2 million


$
0.3 millionDecember 2009

Fort Worth, Texas(2)


2.4 million



0.1 millionTotal



$
3.6 million


$
0.4 millionJune 2008

Dallas, Texas(3)

$
2.3 million


$
(0.9 million
)     (1)
    
    Baylor acquired a controlling interest in a facility from us,
    which transferred control of the facility from us to Baylor.(2)
    
    Baylor acquired a controlling interest in two facilities. We
    continue to account for these facilities under the equity method
    of accounting.(3)
    
    Baylor acquired an additional ownership interest in a facility
    it already co-owned with us and local physicians, which
    transferred control of the facility from us to Baylor.          Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk     73




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##### 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,
 74




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##### Table of Contents



Form 10-K.
  Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f).
    
    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
  
    HealthMark Partners, Inc.
    USP Denver, Inc. (Investment in Flatirons Surgery Center, LLC)
    USP Houston, Inc. (Investments in Memorial Hermann
    Endoscopy & Surgery Center North Houston, LLC;
    Memorial Hermann Surgery Center Woodlands Parkway, LLC and
    Memorial Hermann Surgery Center Memorial City, LLC)
    USP Gateway, Inc.
    USP North Texas, Inc. (Investments in Metrocrest Surgery Center,
    LP; Baylor Surgicare of Duncanville, LLC; Tuscan Surgery Center
    at Las Colinas, LLC; and Lone Star Endoscopy, LLC)
    USP Sacramento, Inc. (Investment in Grass Valley Outpatient
    Surgery Center, LP)     75




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##### Table of Contents



Limitations
    on the Effectiveness of Controls
    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


64


Chairman of the BoardWilliam H. Wilcox


59


President, Chief Executive Officer and DirectorBrett P. Brodnax


46


Executive Vice President and Chief Development OfficerMark A. Kopser


46


Executive Vice President and Chief Financial OfficerNiels P. Vernegaard


54


Executive Vice President and Chief Operating OfficerPhilip A. Spencer


41


Senior Vice President, Business DevelopmentJoel T. Allison


63


DirectorMichael E. Donovan


34


DirectorJohn C. Garrett, M.D.


68


DirectorD. Scott Mackesy


42


DirectorJames Ken Newman


67


DirectorBoone Powell, Jr.


74


DirectorPaul B. Queally


46


DirectorRaymond A. Ranelli


63


Director  76




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##### Table of Contents



Donald E. Steen
  William H. Wilcox
  Brett P. Brodnax
  Mark A. Kopser
  Niels P. Vernegaard
  Philip A. Spencer
  Joel T. Allison
  Michael E. Donovan
  John C. Garrett, M.D.
 77




---



##### Table of Contents



D. Scott Mackesy
  James Ken Newman
  Boone Powell, Jr.
  Paul B. Queally
  Raymond A. Ranelli
  Audit
    Committee Financial Expert
    Nominations
    for the Board of Directors
   78




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##### Table of Contents



Section 16(a)
    Beneficial Ownership Reporting Compliance
    Code of
    Ethics
    Item 11.
    Executive
    Compensation  Overview
      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.   79




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##### Table of Contents



Compensation
    Components
    Base
    Salary
    Annual
    Bonus
      Long-Term
    Equity Incentives
   80




---



##### Table of Contents



Termination
    Based Compensation
    Other
    Benefits and Perquisites
      Compensation
    Committee Report
  Regulation S-K Form 10-K.
    
 81




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##### Table of Contents



Summary
    Compensation Table for 2010
    Change inNonqualifiedNon-Equity

DeferredStock

Option

Incentive Plan

Compensation

All OtherName and Principal Position

Year

Salary

Bonus

Awards(1)

Awards(1)

Compensation

Earnings

Compensation

TotalWilliam H. Wilcox


2010


$
600,000


$
150,000
(2)

$



$







$
147,624


$
273,866
(3)

$
1,171,490President, Chief


2009



600,000



750,000
(2)














243,982



264,350
(3)


1,858,332Executive Officer and


2008



600,000



540,000
(4)














(129,167
)


251,275
(3)


1,262,108DirectorBrett P. Brodnax


2010



384,000



96,000
(5)














78,887



40,860
(3)


599,747Executive Vice President


2009



384,000



288,000
(5)














129,867



38,050
(3)


839,917and Chief Development


2008



379,167



230,000
(5)














(100,590
)


32,702
(3)


541,279OfficerMark A. Kopser


2010



358,000



89,500
(2)














39,159



38,591
(3)


525,250Executive Vice President


2009



358,000



268,500
(2)














81,803



35,546
(3)


743,849and Chief Financial


2008



353,000



205,917
(2)














(92,177
)


29,238
(3)


495,978OfficerPhilip A. Spencer


2010



325,000



81,250
(2)














3,505



23,600
(3)


433,355Senior Vice President,


2009



139,167



104,375



380,000















2,505
(3)


626,047Business Development


2008































Niels P. Vernegaard


2010



428,000



107,000
(2)














74,782



119,700
(3)


729,482Executive Vice President


2009



428,000



321,000
(2)














91,422



116,039
(3)


956,461and Chief Operating


2008



421,333



245,778
(2)














22,187



110,592
(3)


799,890Officer     (1)
    
    We account for the cost of stock-based compensation awarded
    under the 2007 Equity Incentive Plan adopted by our Parent under
    which the cost of equity awards to employees is measured by the
    aggregate grant date fair value of the awards on their grant
    date calculated in accordance with the FASBs Accounting
    StandardsCodification Topic 718. No forfeitures occurred
    during 2008, 2009 or 2010. The stock awards issued to
    Mr. Spencer in August 2009 were valued at $0.76 per share
    equal to the fair value per share of common stock as determined
    by the compensation committee. Assumptions used in calculation
    of these amounts are included in Note 14 to our
    consolidated audited financial statements for the fiscal year
    ended December 31, 2010, included in this Annual Report on
    Form 10-K.(2)
    
    Ninety percent of the amount shown was paid in cash and ten
    percent was deferred at our named executive officers
    election pursuant to USPIs Deferred Compensation Plan (the
    DCP). 82




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##### Table of Contents



(3)
    
    Includes discretionary contributions to the named executive
    officers DCP and matching contributions to the named
    executive officers DCP and 401(k) accounts as follows:  Discretionary

Matching

MatchingContribution

Contribution

Contributionto DCP

401(k)

DCPMr. Wilcox2010

$
200,000


$
7,350


$
66,5162009


200,000



7,350



57,0002008


200,000



6,900



44,375Mr. Brodnax2010






7,350



33,5102009






7,350



30,7002008






6,900



25,433Mr. Kopser2010






7,350



31,2412009






7,350



28,1962008






6,900



24,024Mr. Spencer2010






7,350



16,2502009






2,505



2008










Mr. Vernegaard2010


75,000



7,350



37,3502009


75,000



7,350



33,6892008


75,000



6,900



28,692   (4)
    
    Seventy-five percent of the amount shown was paid in cash and
    twenty-five percent was deferred at Mr. Wilcoxs
    election pursuant to the DCP.(5)
    
    Fifty percent of the amount shown was paid in cash and fifty
    percent was deferred at Mr. Brodnaxs election
    pursuant to the DCP.  Grant of
    Plan-Based Awards
    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(2)William H. Wilcox


2,968,750
(3)

$
5,492,188495,536
(4)


916,742Brett P. Brodnax


1,187,500
(3)


2,196,875275,853
(4)


510,328Mark A. Kopser


1,062,500
(3)


1,965,625220,683
(4)


408,264Philip A. Spencer


375,000
(5)


693,750



Niels P. Vernegaard


1,062,500
(3)


1,965,625245,203
(4)


453,626  83




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##### Table of Contents



(1)
    
    Upon consummation of the merger, our named executive officers
    received new stock awards under the 2007 Equity Incentive Plan.(2)
    
    Because there is no active trading market for our common stock,
    we rely on members of the compensation committee and Welsh
    Carson to determine in good faith the fair value of our common
    stock. As of December 31, 2010, this value was determined
    to be $1.85 per share of common stock. Neither USPI, USPI
    Holdings, Inc. nor USPI Group Holdings, Inc. has any class of
    equity securities registered under Section 12 of the
    Exchange Act.(3)
    
    The restrictions with respect to 20% of such shares will lapse
    on April 19, 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.(4)
    
    The restrictions with respect to such shares will lapse upon a
    change of 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%.(5)
    
    The restrictions with respect to 33% of such shares will lapse
    on April 19, 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.  Option
    Exercises and Stock Values
    Option Awards

Stock AwardsNumber of



Number ofShares

Value

Shares

ValueAcquired on

Realized on

Acquired on

RealizedName

Exercise

Exercise

Vesting

on Vesting(1)William H. Wilcox


N/A


$




593,750


$
961,875Brett P. Brodnax


N/A







237,500



384,750Mark A. Kopser


N/A







212,500



344,250Philip A. Spencer


N/A







125,000



202,500Niels P. Vernegaard


N/A







212,500



344,250     (1)
    
    Because there is no active trading market for our common stock,
    we rely on members of the compensation committee and Welsh
    Carson to determine in good faith the fair value of our common
    stock. As of April 19, 2010, this value was determined to
    be $1.62 per share of common stock. Neither USPI, USPI Holdings,
    Inc. nor USPI Group Holdings, Inc. has any class of equity
    securities registered under Section 12 of the Exchange Act.  Restricted
    Stock and Option Plan
     84




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##### Table of Contents



Nonqualified
    Deferred Compensation
    2010 Activity

AggregateAggregate

Balance atExecutive

USPI

Aggregate

Withdrawals/

December 31,Name

Contribution

Contribution

Earnings

Distributions

2010William H. Wilcox

$
133,031


$
266,516


$
147,624


$
600,033


$
2,554,397Brett P. Brodnax


181,500



33,510



78,887



230,246



725,530Mark A. Kopser


62,482



31,241



39,159



130,840



375,969Philip A. Spencer


32,500



16,250



3,505







52,255Niels P. Vernegaard


74,699



112,350



74,782







1,015,544   Deferred
    Compensation Plan
   85




---



##### Table of Contents



Employment
    Arrangements and Agreements
       86




---



##### Table of Contents



87




---



##### 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

$
1,200,000
(5)

$
150,000


$
13,464
(5)

$
6,408,930Brett P. Brodnax


384,000
(6)


96,000



6,432
(6)


2,707,203Mark A. Kopser


358,000
(6)


89,500



8,388
(6)


2,373,889Philip A. Spencer


514,583
(7)


257,292



18,620
(7)


693,750Niels P. Vernegaard


428,000
(6)


107,000



8,388
(6)


2,419,251     (1)
    
    Amounts are based on the bonus amount paid with respect to 2010.(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 $1.85 per share. Because there is no active trading
    market for our common stock, we rely on members of the
    compensation committee and Welsh Carson to determine in good
    faith the fair value of our common stock. As of
    December 31, 2010, this value was determined to be $1.85
    per share of common stock. Neither USPI, USPI Holdings, Inc. nor
    USPI Group Holdings, Inc. has any class of equity securities
    registered under Section 12 of the Exchange Act.(5)
    
    Amounts to be paid over twenty-four months.(6)
    
    Amounts to be paid over twelve months.(7)
    
    Amounts to be paid over nineteen months.  Director
    Compensation
   88




---



##### Table of Contents



2010
    Non-Employee Director Compensation Table
  Fees Earned or

Stock

All OtherName

Paid in Cash

Awards

Compensation

TotalJoel T. Allison

$



$



$



$
John C. Garrett, M.D.


39,750











39,750James Ken Newman


39,750











39,750Boone Powell, Jr.


33,750











33,750Raymond A. Ranelli


59,750











59,750   Compensation
    Risk Assessment
      Compensation
    Committee Interlocks and Insider Participation
    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   89




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##### Table of Contents



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



86.4
%


17,326,775



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


22,183,099



14.0
%


2,816,901



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


26,619,718



16.8
%


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



*Philip A. Spencer(11)


500,000



*







*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)


95,448



*



7,435



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


16,380,659



10.3
%


411,673



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 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. 90




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##### Table of Contents



(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 500,000 common shares which are subject to restrictions
    on transfer set forth in a restricted stock award agreement
    entered into at the time of initial employment with USPI.(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    Arrangements
    with Our Investors
   91




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##### Table of Contents



Stockholders
    Agreement
    Management
    Agreement
  out-of-pocket
  Other
    Arrangements with Directors and Executive Officers
  Restricted
    Stock and Option Plan
    Employment
    Agreements
    Other
    Arrangements
      Date

Facility Location


Proceeds


GainDecember 2009


Dallas, Texas(1
)

$
1.2 million


$
0.3 millionDecember 2009


Fort Worth, Texas(2
)


2.4 million



0.1 millionTotal





$
3.6 million


$
0.4 million     (1)
    
    Baylor acquired a controlling interest in a facility from us,
    which transferred control of the facility to Baylor.(2)
    
    Baylor acquired a controlling interest in two facilities. We
    continue to account for these facilities under the equity method
    of accounting.   92




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##### Table of Contents



Regulation S-X.
        ITEM 14.
    Principal
    Accounting Fees and Services    Description of Fees

2010


2009Audit Fees(1)

$
1,489,640


$
1,331,900Audit Related Fees(2)






41,995Tax Fees(3)






All Other Fees(4)


332,250



198,000$
1,821,890


$
1,571,895     (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,
    audits of subsidiaries, 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, 2010 and 2009.(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 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 and due
    diligence procedures on potential acquisitions.   93




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##### Table of Contents



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


F-3Consolidated Statements of income


F-4Consolidated Statements of Comprehensive Income
    (Loss)


F-5Consolidated Statements of Changes in Equity


F-6Consolidated Statements of Cash Flows


F-7Notes to Consolidated Financial Statements


F-8(2) Financial Statement Schedule 
    Schedule II


S-1(3) 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:Report of PricewaterhouseCoopers LLP, Independent
    Auditors


3Consolidated Balance Sheets as of June 30,
    2010 and 2009


4Consolidated Statements of Income for the years
    ended June 30, 2010 and 2009


5Consolidated Statements of Changes in Equity for
    the years ended June 30, 2010 and 2009


6Consolidated Statements of Cash Flows for the
    years ended June 30, 2010 and 2009


7Notes to Consolidated Financial Statements


8Report of PricewaterhouseCoopers LLP, Independent
    Auditors


23Report of Ernst & Young LLP,
    Independent Auditors


24Consolidated Balance Sheets as of June 30,
    2009 and 2008


25Consolidated Statements of Income for the years
    ended June 30, 2009 and 2008


26Consolidated Statements of Members Equity
    for the years ended June 30, 2009 and 2008


27Consolidated Statements of Cash Flows for the
    years ended June 30, 2009 and 2008


28Notes to Consolidated Financial Statements


29(4) Exhibits


IV-1  94




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##### Table of Contents



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




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##### Table of Contents





Report of
    Independent Registered Public Accounting Firm
     Internal Control  Integrated
    Framework Managements Report on Internal Control
    over Financial Reporting.
        Internal Control 
    Integrated Framework
    
    HealthMark Partners, Inc.
    USP Denver, Inc. (Investment in Flatirons Surgery Center, LLC)
    USP Houston, Inc. (Investments in Memorial Hermann
    Endoscopy & Surgery Center North Houston, LLC;
    Memorial Hermann Surgery Center Woodlands Parkway, LLC and
    Memorial Hermann Surgery Center Memorial City, LLC)
    USP Gateway, Inc.
    USP North Texas, Inc. (Investments in Metrocrest Surgery Center,
    LP; Baylor Surgicare of Duncanville, LLC; Tuscan Surgery Center
    at Las Colinas, LLC; and Lone Star Endoscopy, LLC)
    USP Sacramento, Inc. (Investment in Grass Valley Outpatient
    Surgery Center, LP)    KPMG
    LLP
    F-2




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##### Table of Contents





UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Balance Sheets
    December 31, 2010 and 2009  2010


2009(In thousands,except share amounts)ASSETSCash and cash equivalents (Note 1)

$
60,253


$
34,890Accounts receivable, net of allowance for doubtful accounts of
    $7,481 and $8,160, respectively


50,082



54,237Other receivables (Note 6)


15,242



15,246Inventories of supplies


9,191



8,789Deferred tax asset, net (Note 13)


14,961



16,400Prepaids and other current assets


14,682



14,382Total current assets


164,411



143,944Property and equipment, net (Note 7)


202,260



198,506Investments in unconsolidated affiliates (Note 3)


393,561



355,499Goodwill (Note 8)


1,268,663



1,279,291Intangible assets, net (Note 8)


319,213



322,896Other assets


24,631



25,256Total assets

$
2,372,739


$
2,325,392LIABILITIES AND EQUITYAccounts payable

$
23,488


$
23,475Accrued salaries and benefits


26,153



33,015Due to affiliates


116,104



129,296Accrued interest


8,714



8,784Current portion of long-term debt (Note 9)


22,386



23,337Other current liabilities


67,815



39,053Total current liabilities


264,660



256,960Long-term debt, less current portion (Note 9)


1,047,440



1,048,191Other long-term liabilities


26,615



32,466Deferred tax liability, net (Note 13)


131,205



125,907Total liabilities


1,469,920



1,463,524Noncontrolling interests  redeemable (Note 4)


81,668



63,865Commitments and contingencies (Notes 4 and 16)Equity (Note 14):United Surgical Partners International, Inc. (USPI)
    stockholders equity:Common stock, $0.01 par value; 100 shares authorized,
    issued and outstanding






Additional paid-in capital


784,573



789,505Accumulated other comprehensive loss, net of tax


(66,351
)


(58,845
)Retained earnings


68,535



27,292Total USPI stockholders equity


786,757



757,952Noncontrolling interests  nonredeemable (Note 4)


34,394



40,051Total equity


821,151



798,003Total liabilities and equity

$
2,372,739


$
2,325,392    F-3




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Statements of Income  Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2010


2009


2008(In thousands)Revenues:Net patient service revenues

$
504,765


$
523,899


$
554,350Management and contract service revenues


64,838



58,326



53,027Other revenues


7,062



11,250



7,721Total revenues


576,665



593,475



615,098Equity in earnings of unconsolidated affiliates


69,916



61,771



47,042Operating expenses:Salaries, benefits, and other employee costs


156,213



160,278



170,805Medical services and supplies


97,940



99,510



109,739Other operating expenses


99,075



89,347



101,846General and administrative expenses


38,202



38,769



40,155Provision for doubtful accounts


8,458



8,720



7,359Losses on deconsolidations, disposals and impairments
    (Notes 2 and 8)


6,378



29,162



1,827Depreciation and amortization


29,799



31,165



32,305Total operating expenses


436,065



456,951



464,036Operating income


210,516



198,295



198,104Interest income


798



2,741



3,278Interest expense


(70,038
)


(70,353
)


(84,916
)Other, net


708



373



32Total other expense, net


(68,532
)


(67,239
)


(81,606
)Income from continuing operations before income taxes


141,984



131,056



116,498Income tax benefit (expense) (Note 13)


(32,328
)


879



(22,667
)Income from continuing operations


109,656



131,935



93,831Discontinued operations, net of tax (Note 2):Income (loss) from discontinued operations


(221
)


1,453



(554
)Loss on disposal of discontinued operations


(6,782
)






(625
)Total earnings (loss) from discontinued operations


(7,003
)


1,453



(1,179
)Net income


102,653



133,388



92,652Less: Net income attributable to noncontrolling interests


(60,560
)


(63,722
)


(55,138
)Net income attributable to USPIs common stockholder

$
42,093


$
69,666


$
37,514Amounts attributable to USPIs common stockholder:Income from continuing operations, net of tax

$
49,123


$
68,023


$
38,488Earnings (loss) from discontinued operations, net of tax


(7,030
)


1,643



(974
)Net income attributable to USPIs common stockholder

$
42,093


$
69,666


$
37,514    F-4




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Statements of Comprehensive Income
    (Loss)  Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2010


2009


2008(In thousands)Net income

$
102,653


$
133,388


$
92,652Other comprehensive income (loss):Foreign currency translation adjustments


(11,638
)


21,967



(71,790
)Unrealized gain (loss) on interest rate swaps, net of tax


3,408



3,894



(10,051
)Pension adjustments, net of tax


724



(698
)


(682
)Total other comprehensive income (loss)


(7,506
)


25,163



(82,523
)Comprehensive income


95,147



158,551



10,129Less: Comprehensive income attributable to noncontrolling
    interests


(60,560
)


(63,722
)


(55,138
)Comprehensive income (loss) attributable to USPIs common
    stockholder

$
34,587


$
94,829


$
(45,009
)    F-5




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Statements of Changes in
    Equity  USPI Common StockholderAccumulatedAdditional


Other





NoncontrollingComprehensive


Outstanding





Paid-in


Comprehensive


Retained


Interests Total


Income (Loss)


Shares


Par Value


Capital


Income (Loss)


Earnings


Nonredeemable(In thousands, except share amounts)Balance, December 31, 2007

$
837,100







100


$



$
799,562


$
(1,485
)

$
8,729


$
30,294Distributions to noncontrolling interests


(5,112
)


























(5,112
)Purchases and sales of noncontrolling interests, net and other


14,359



























14,359Contribution related to equity award grants by USPI Group
    Holdings, Inc.


2,340















2,340











Comprehensive income (loss):Net income


40,053


$
37,514



















37,514



2,539Other comprehensive loss:Foreign currency translation adjustments


(71,790
)


(71,790
)














(71,790
)






Unrealized loss on interest rate swaps, net of tax


(10,051
)


(10,051
)














(10,051
)






Pension liability adjustment, net of tax


(682
)


(682
)














(682
)






Other comprehensive loss


(82,523
)


(82,523
)






















Comprehensive loss


(42,470
)

$
(45,009
)






















2,539Balance, December 31, 2008


806,217







100







801,902



(84,008
)


46,243



42,080Distributions to noncontrolling interests


(5,749
)


























(5,749
)Purchases of noncontrolling interests


(3,814
)














(8,411
)










4,597Sales of noncontrolling interests


(6,062
)














(5,922
)










(140
)Deconsolidation of subsidiaries


(6,682
)


























(6,682
)Payment of common stock dividend


(88,617
)






















(88,617
)


Contribution related to equity award grants by USPI Group
    Holdings, Inc. and other


1,936















1,936











Comprehensive income (loss):Net income


75,611


$
69,666



















69,666



5,945Other comprehensive income:Foreign currency translation adjustments


21,967



21,967















21,967







Unrealized gain on interest rate swaps, net of tax


3,894



3,894















3,894







Pension liability adjustment, net of tax


(698
)


(698
)














(698
)






Other comprehensive income


25,163



25,163























Comprehensive income


100,774


$
94,829























5,945Balance, December 31, 2009


798,003







100







789,505



(58,845
)


27,292



40,051Distributions to noncontrolling interests


(5,710
)


























(5,710
)Purchases of noncontrolling interests


(123
)














(452
)










329Sales of noncontrolling interests


(6,096
)














(6,774
)










678Deconsolidation of subsidiaries


(6,621
)


























(6,621
)Contribution related to equity award grants by USPI Group
    Holdings, Inc. and other


2,294















2,294











Dividend to USPI Holdings, Inc/USPI Group Holdings, Inc.


(850
)






















(850
)


Comprehensive income (loss):Net income


47,760


$
42,093



















42,093



5,667Other comprehensive income:Foreign currency translation adjustments


(11,638
)


(11,638
)














(11,638
)






Unrealized gain on interest rate swaps, net of tax


3,408



3,408















3,408







Pension liability adjustment, net of tax


724



724















724







Other comprehensive loss


(7,506
)


(7,506
)






















Comprehensive income


40,254


$
34,587























5,667Balance, December 31, 2010

$
821,151







100


$



$
784,573


$
(66,351
)

$
68,535


$
34,394    F-6




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Statements of Cash Flows  Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2010


2009


2008(In thousands)Cash flows from operating activities:Net income

$
102,653


$
133,388


$
92,652Adjustments to reconcile net income to net cash provided by
    operating activities:Loss (income) from discontinued operations


7,003



(1,453
)


1,179Provision for doubtful accounts


8,458



8,720



7,359Depreciation and amortization


29,799



31,165



32,305Amortization of debt issue costs and discount


3,348



3,337



2,860Deferred income taxes


8,290



(10,401
)


14,214Loss on deconsolidations, disposals and impairments


6,378



29,162



1,827Equity in earnings of unconsolidated affiliates, net of
    distributions received


1,265



(6,951
)


(8,591
)Equity-based compensation


1,694



1,695



1,785Increases (decreases) in cash from changes in operating assets
    and liabilities, net of effects from purchases of new businesses:Accounts receivable


(5,416
)


(7,780
)


(9,332
)Other receivables


(3,304
)


(1,491
)


(8,347
)Inventories of supplies, prepaids and other assets


4,386



(3,607
)


7,921Accounts payable and other current liabilities


1,545



2,561



7,157Other long-term liabilities


2,965



2,265



(870
)Net cash provided by operating activities


169,064



180,610



142,119Cash flows from investing activities:Purchases of new businesses and equity interests, net of cash
    received


(83,676
)


(59,549
)


(76,450
)Proceeds from sales of businesses and equity interests, net


50,377



22



12,151Purchases of property and equipment


(40,035
)


(29,704
)


(30,689
)Returns of capital from unconsolidated affiliates


1,193



2,894



3,039Decrease (increase) in deposits and notes receivable


101



508



(8,914
)Net cash used in investing activities


(72,040
)


(85,829
)


(100,863
)Cash flows from financing activities:Proceeds from long-term debt, net of debt issuance costs


38,974



5,600



45,090Payments on long-term debt


(40,126
)


(25,670
)


(26,914
)Net equity contribution from USPI Group Holdings, Inc.


72



(39
)


40(Purchases) sales of noncontrolling interests, net


1,086



(2,067
)


(26,430
)Payment of common stock dividend


(850
)


(88,617
)


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


(14,166
)


63,101



(5,440
)Distributions to noncontrolling interests


(58,989
)


(63,555
)


(56,514
)Net cash used in financing activities


(73,999
)


(111,247
)


(70,168
)Cash flows of discontinued operations:Operating cash flows


4,339



4,602



3,627Investing cash flows


(1,471
)


(2,099
)


(550
)Financing cash flows


(699
)


(778
)


(1,439
)Net cash provided by discontinued operations


2,169



1,725



1,638Effect of exchange rate changes on cash


169



196



(49
)Net (decrease) increase in cash and cash equivalents


25,363



(14,545
)


(27,323
)Cash and cash equivalents at beginning of period


34,890



49,435



76,758Cash and cash equivalents at end of period

$
60,253


$
34,890


$
49,435Supplemental information:Interest paid, net of amounts capitalized

$
69,331


$
70,920


$
86,025Income taxes (refund received) paid, net


16,955



8,060



(1,906
)Non-cash transactions:Assets acquired under capital lease obligations

$
13,481


$
2,985


$
1,966Receipt of note receivable for sale of noncontrolling interest










601    F-7




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
 Notes to
    Consolidated Financial Statements
    December 31, 2010, 2009 and 2008  (1)
    Summary
    of Significant Accounting Policies and Practices  (a)
    Description
    of Business  not-for-profit not-for-profit
            (b)
    Translation
    of Foreign Currencies    (c)
    Principles
    of Consolidation   F-8




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
      (d)
    Use of
    Estimates    (e)
    Cash
    and Cash Equivalents      (f)
    Inventories
    of Supplies    (g)
    Property
    and Equipment    (h)
    Goodwill
    and Intangible Assets   F-9




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    (i)
    Impairment
    of Long-lived Assets    (j)
    Fair
    Value Measurements      (k)
    Derivative
    Instruments and Hedging Activities    (l)
    Revenue
    Recognition     F-10




---



##### 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    other-than-temporary
    (o)
    Income
    Taxes    (p)
    Equity-Based
    Compensation   F-11




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (q)
    Commitments
    and Contingencies    (2)
    Discontinued
    Operations and Other Dispositions      Date

Facility Location

Proceeds


Gain (Loss)December 2010

Nashville, Tennessee(1)

$
32.5 million


$
2.8 millionDecember 2010

Orlando, Florida






(2.0 million
)December 2010

Templeton, California(2)






(1.9 million
)December 2010

Houston, Texas(2)






(0.2 million
)Total



$
32.5 million


$
(1.3 million
)June 2008

Cleveland, Ohio

$
1.6 million


$
(1.0 million
)     (1)
    
    The Company sold an endoscopy service business that was based in
    Nashville, Tennessee.(2)
    
    These investments were written down to estimated fair value less
    costs to sell at December 31, 2010, and were sold at
    amounts approximating these estimated values in February 2011.
    The assets and liabilities of these entities were not material.    Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2010


2009


2008Revenues

$
29,180


$
28,889


$
30,234Income (loss) from discontinued operations before income taxes

$
(340
)

$
2,235


$
(853
)Income tax (expense) benefit


119



(782
)


299Income (loss) from discontinued operations

$
(221
)

$
1,453


$
(554
)Loss on disposal of discontinued operations before income taxes

$
(1,332
)

$



$
(963
)Income tax (expense) benefit


(5,450
)






338Total loss from disposal of discontinued operations

$
(6,782
)

$



$
(625
)  F-12




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##### Table of Contents



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

Facility Location

Proceeds (Costs)


LossDecember 2009

Oxnard, California

$
0.3 million


$
(0.3 million
)December 2009

Baton Rouge, Louisiana(1)


(5.1 million
)


(8.2 million
)September 2009

San Antonio, Texas






(2.6 million
)July 2009

Cleveland, Ohio(2)


1.0 million



February 2009

Las Cruces, New Mexico






February 2009

East Brunswick, New Jersey


0.7 million



(2.6 million
)Total



$
(3.1 million
)

$
(13.7 million
)July 2008

Manitowoc, Wisconsin

$
0.8 million


$
July 2008

Orlando, Florida


0.5 million



(0.4 million
)April 2008

Los Angeles, California






February 2008

Sarasota, Florida


0.5 million



Total



$
1.8 million


$
(0.4 million
)     (1)
    
    The Company paid $5.1 million to settle contingent
    liabilities in conjunction with the sale of this center. Such
    amount was expensed and included in Losses on
    deconsolidations, disposals and impairments in the
    accompanying consolidated statements of income.(2)
    
    The Company financed the entire purchase price with the buyer
    and has a security interest in the facilitys assets until
    the note is collected, which is due in 2011. As a result, the
    Company deferred the recognition of the gain, which is estimated
    at $0.6 million.   F-13




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##### Table of Contents



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

Facility Location

Proceeds


Gain (Loss)December 2010

Phoenix, Arizona(1)

$
0.6 million


$
(1.5 million)December 2010

Dallas, Texas(2)






1.6 millionTotal



$
0.6 million


$
0.1 millionDecember 2009

Dallas, Texas(3)

$
1.2 million


$
0.3 millionJuly 2009

Oklahoma City, Oklahoma(4)


0.2 million



0.1 millionMarch 2009

Phoenix, Arizona(5)


0.1 million



(8.2) millionTotal



$
1.5 million


$
(7.8 million)July 2008

Beaumont, Texas

$
1.2 million


$
(0.5 million)June 2008

Dallas, Texas(6)


2.3 million



(0.9 million)June 2008

Houston, Texas(7)


0.6 million



March 2008

Redding, California(8)


1.7 million



Total



$
5.8 million


$
(1.4 million)     (1)
    
    A hospital partner acquired a portion of the Companys
    interest in this facility and shares control of the facility
    with the Company.(2)
    
    The Company previously controlled this facility but now shares
    control with physicians due to a change in the entitys
    governing documents.(3)
    
    A controlling interest in a facility was sold to a hospital
    partner as part of the Companys strategy for partnering
    with this hospital system. The Company recorded a net gain of
    $0.3 million on the sale and deconsolidation of the
    facility. The gain is comprised of a $1.4 million gain
    related to the remeasurement of the Companys retained
    interest to fair value, offset by a loss of $1.1 million,
    the amount by which the carrying value of the investment
    exceeded the proceeds received. This hospital system is a
    related party (Note 12).(4)
    
    The Company and other owners of a facility consolidated by the
    Company agreed to merge the facility into another entity in
    which the Company holds an investment accounted for under the
    equity method. The Company recorded a gain of $0.1 million
    on the sale and deconsolidation of the facility.(5)
    
    A controlling interest in an entity was sold to a hospital
    partner as part of the Companys strategy for partnering
    with this hospital system. The hospital partner already had a
    49% ownership interest in this entity, which owns and manages
    two surgical facilities, and through the transaction acquired an
    additional 1.1% interest. The $8.2 million loss was
    primarily related to the revaluation of the Companys
    remaining investment in the entity to fair value.(6)
    
    The hospital partner already had an ownership interest in the
    facility and acquired a controlling interest from the Company in
    this transaction. Additionally, this hospital partner is a
    related party (Note 12).(7)
    
    Because the Company is considered the primary beneficiary of
    this entity, the Company consolidates the entity to which it
    transferred its interest in the facility, and accordingly
    continues to consolidate the facilitys operating results.
    The sales price of $0.6 million was paid in the form of a
    note receivable from the buyer.(8)
    
    The Company sold a controlling interest in two facilities and
    received a noncontrolling interest in a third facility in
    Redding. F-14




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (3)
    Business
    Combinations and Investments in Unconsolidated
    Affiliates      Effective Date

Facility Location

AmountInvestmentsMay 2010

St. Louis, Missouri(1)

$
4.6 millionOctober 2010

Houston, Texas(2)


2.4 millionNovember 2010

Various(3)


31.1 millionDecember 2010

Houston, Texas(2)


9.0 millionDecember 2010

Reading, Pennsylvania(4)


1.1 millionTotal



$
48.2 million     (1)
    
    Acquisition of a noncontrolling interest in and right to manage
    a surgical facility in which the Company previously had no
    involvement. This facility is jointly owned with local
    physicians.(2)
    
    Acquisition of a controlling interest in and right to manage a
    surgical facility in which the Company previously had no
    involvement. The remainder of this facility is owned by a
    hospital partner and local physicians.(3)
    
    As further discussed below, the Company acquired 100% of the
    equity interests in HealthMark Partners, Inc. (HealthMark).
    HealthMark has an equity investment in 14 surgery centers. Local
    physicians have ownership in all 14 facilities and by
    December 31, 2010 and January 31, 2011, hospital
    partners had invested in nine and ten of these facilities,
    respectively.(4)
    
    Acquisition of a controlling interest in a surgical facility in
    which the Company already held an ownership interest. The
    Companys original ownership was acquired in the HealthMark
    acquisition.   F-15




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##### Table of Contents



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





$
31,072Estimated fair value of net tangible assets acquired:Cash





$
4,280Other current assets






26Investments in affiliates






12,140Property and equipment






344Current liabilities






(1,431
)Long term liabilities






(153
)Net tangible assets acquired






15,206Intangible assets acquired






6,559Goodwill






9,307Total purchase price





$
31,072      F-16




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    2010


2009


2008Unconsolidated facilities operated at year-end


130



109



101Income statement information:Revenues

$
1,329,041


$
1,178,114


$
1,002,394Operating expenses:Salaries, benefits, and other employee costs


309,698



277,053



246,739Medical services and supplies


310,770



271,663



211,781Other operating expenses


305,045



271,769



247,834Loss (gain) on asset disposals, net


1,025



(7
)


1,161Depreciation and amortization


55,216



50,251



48,722Total operating expenses


981,754



870,729



756,237Operating income


347,287



307,385



246,157Interest expense, net


(25,630
)


(24,394
)


(24,101
)Other, net


(200
)


4,572



225Income before income taxes

$
321,457


$
287,563


$
222,281Balance sheet information:Current assets

$
303,627


$
264,944


$
236,108Noncurrent assets


495,765



412,977



403,956Current liabilities


177,909



152,081



138,199Noncurrent liabilities


343,007



283,951



288,429   Form 10-K
     F-17




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##### Table of Contents



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

Facility Location

AmountInvestmentsDecember 2010

Nashville, Tennessee(1)

$
13.4 millionDecember 2010

Boulder, Colorado(2)


4.7 millionDecember 2010

Chattanooga, Tennessee(3)


2.6 millionDecember 2010

Irving, Texas(4)


1.9 millionDecember 2010

Kansas City, Missouri(5)


1.2 millionDecember 2010

Houston, Texas(2)


0.9 millionNovember 2010

Keller, Texas(4)


4.6 millionJuly 2010

Sacramento, California(2)


1.5 millionJuly 2010

Carrollton, Texas(4)


0.8 millionMay 2010

Mansfield, Texas(4)


0.4 millionApril 2010

Destin, Florida(3)


1.3 millionApril 2010

St. Louis, Missouri(6)


0.4 million33.7 millionSalesDecember 2010

Phoenix, Arizona(7)


4.1 millionJune 2010

Cincinnati, Ohio(8)


7.9 millionVarious

Various(9)


0.4 million12.4 millionTotal



$
21.3 million     (1)
    
    Acquisition of an additional noncontrolling interest in three
    surgical facilities in which the Company already held an
    investment and one surgical facility in which the Company
    already provided management services. These facilities are
    jointly owned with one of the Companys hospital partners
    and local physicians.(2)
    
    Acquisition of a noncontrolling interest in and right to manage
    a surgical facility in which the Company previously had no
    involvement. This facility is jointly owned with one of the
    Companys hospital partners and local physicians.(3)
    
    Acquisition of an additional noncontrolling interest in a
    surgical facility in which the Company already held an
    investment. This facility is jointly owned with local physicians.(4)
    
    Acquisition of the right to manage a surgical facility in which
    the Company previously had no involvement. Concurrent with this
    transaction, an unconsolidated investee that the Company jointly
    owns with a hospital partner used cash on hand to acquire an
    equity interest in this facility, resulting in the Company
    having an indirect ownership interest in the facility. The
    remainder of this facility is owned by local physicians.(5)
    
    Acquisition of an additional noncontrolling interest in a
    surgical facility in which the Company already held an
    investment. This facility is jointly owned with one of the
    Companys hospital partners and local physicians.(6)
    
    Acquisition of a noncontrolling interest in a surgical facility
    in which the Company already provided management services. This
    facility is jointly owned with one of the Companys
    hospital partners and local physicians. F-18




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
   (7)
    
    Sale of a portion of the Companys equity ownership in two
    facilities to a hospital partner. The remainder of these
    facilities are owned by local physicians. The Company recorded a
    loss of $1.2 million related to this sale, which is
    classified in Losses on deconsolidations, disposals and
    impairments on the accompanying consolidated statements of
    income.(8)
    
    Sale of a portion of the Companys equity ownership in one
    facility to a hospital partner. The remainder of this facility
    is owned by local physicians. The Company recorded a loss of
    $0.2 million related to this sale, which is classified in
    Losses on deconsolidations, disposals and
    impairments on the accompanying consolidated statements of
    income.(9)
    
    Represents the net receipt related to various other purchases
    and sales of equity interests and contributions of cash to
    equity method investees.  (4)
    Noncontrolling
    Interests      Year Ended


Year EndedDecember 31,


December 31,2010


2009Net income attributable to USPIs common stockholder

$
42,093


$
69,666Transfers to the noncontrolling interests:Decrease in USPIs additional paid-in capital for sales of
    subsidiaries equity interests


(6,774
)


(5,922
)Decrease in USPIs additional paid-in capital for purchases
    of subsidiaries equity interests


(452
)


(8,411
)Net transfers to noncontrolling interests


(7,226
)


(14,333
)Change in equity from net income attributable to USPI and
    transfers to noncontrolling interests

$
34,867


$
55,333  F-19




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##### Table of Contents



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

$
52,769Net income attributable to noncontrolling interests


52,599Distributions to noncontrolling interests


(51,401
)Purchases of noncontrolling interests


(7,446
)Sales of noncontrolling interests


8,928Deconsolidation of noncontrolling interests and other


(3,488
)Balance, December 31, 2008


51,961Net income attributable to noncontrolling interests


57,777Distributions to noncontrolling interests


(57,807
)Purchases of noncontrolling interests


(2,519
)Sales of noncontrolling interests


12,403Deconsolidation of noncontrolling interests and other


2,050Balance, December 31, 2009


63,865Net income attributable to noncontrolling interests


54,893Distributions to noncontrolling interests


(53,485
)Purchases of noncontrolling interests


(2,180
)Sales of noncontrolling interests


9,984Deconsolidation of noncontrolling interests and other


8,591Balance, December 31, 2010

$
81,668   (5)
    Other
    Investments     F-20




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
        (6)
    Other
    Receivables   F-21




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (7)
    Property
    and Equipment    EstimatedUseful Lives


2010


2009Land





$
29,379


$
34,259Buildings and leasehold improvements


7-50 years



135,631



118,669Equipment


3-12 years



113,135



106,091Furniture and fixtures


4-20 years



10,137



9,526Construction in progress






7,248



7,676295,530



276,221Accumulated depreciation






(93,270
)


(77,715
)Net property and equipment





$
202,260


$
198,506     2010


2009Land and buildings

$
16,955


$
21,037Equipment and furniture


15,666



10,76932,621



31,806Accumulated amortization


(10,450
)


(8,258
)Net property and equipment under capital leases

$
22,171


$
23,548   (8)
    Goodwill
    and Intangible Assets     F-22




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##### Table of Contents



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


UnitedStates


Kingdom


TotalBalance at December 31, 2008

$
1,075,609


$
194,678


$
1,270,287Additions


4,047







4,047Disposals


(15,517
)






(15,517
)Other






20,474



20,474Balance at December 31, 2009


1,064,139



215,152



1,279,291Additions


27,474







27,474Disposals


(27,820
)






(27,820
)Other






(10,282
)


(10,282
)Balance at December 31, 2010

$
1,063,793


$
204,870


$
1,268,663         December 31, 2010GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite Useful LivesManagement and other service contracts

$
17,242


$
(7,856
)

$
9,386Other


30,405



(11,580
)


18,825Total

$
47,647


$
(19,436
)

$
28,211Indefinite Useful LivesManagement contracts










291,002Total intangible assets









$
319,213   F-23




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  December 31, 2009GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite Useful LivesManagement and other service contracts

$
26,605


$
(8,500
)

$
18,105Other


30,401



(8,262
)


22,139Total

$
57,006


$
(16,762
)

$
40,244Indefinite Useful LivesManagement contracts










282,652Total intangible assets









$
322,896       2011

$
5,5632012


5,7032013


5,5562014


4,2702015


3,887   (9)
    Long-term
    Debt    2010


2009Senior secured credit facility

$
533,445


$
518,710U.K. senior credit agreement


49,981



59,966Senior subordinated notes


437,515



437,515Notes payable to financial institutions


22,347



25,045Capital lease obligations (Note 11)


26,538



30,292Total long-term debt


1,069,826



1,071,528Current portion


(22,386
)


(23,337
)Long-term debt, less current portion

$
1,047,440


$
1,048,191   (a)
    Senior
    secured credit facility  sub-facility,
 F-24




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  sub-facility;
          (b)
    Senior
    subordinated notes  7 8 1 4 payment-in-kind 1 4
 F-25




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (c)
    United
    Kingdom borrowings        (d)
    Other
    Long-term Debt       F-26




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (10)
    Interest
    Rate Swaps             F-27




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    (11)
    Leases      Capital


OperatingLeases


LeasesYear ending December 31,2011

$
6,549


$
13,6512012


6,472



12,1472013


4,378



10,0232014


3,216



7,7862015


2,785



6,200Thereafter


19,689



22,448Total minimum lease payments


43,089


$
72,255Amount representing interest


(16,551
)Present value of minimum lease payments

$
26,538     (12)
    Related
    Party Transactions   F-28




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##### Table of Contents



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

Facility Location

Proceeds


Gain (Loss)December 2009

Dallas, Texas(1)

$
1.2 million


$
0.3 millionDecember 2009

Fort Worth, Texas(2)


2.4 million



0.1 millionTotal



$
3.6 million


$
0.4 millionJune 2008

Dallas, Texas(3)

$
2.3 million


$
(0.9 million
)     (1)
    
    Baylor acquired a controlling interest in a facility from the
    Company, which transferred control of the facility to Baylor.(2)
    
    Baylor acquired a controlling interest in two facilities. The
    Company continues to account for these facilities under the
    equity method of accounting.(3)
    
    Baylor acquired an additional ownership interest in a facility
    it already co-owned with the Company and local physicians, which
    transferred control of the facility from the Company to Baylor.         F-29




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (13)
    Income
    Taxes    2010


2009


2008Domestic

$
129,174


$
112,508


$
96,259Foreign


12,810



18,548



20,239$
141,984


$
131,056


$
116,498     Current


Deferred


TotalYear ended December 31, 2010:U.S. federal

$
17,024


$
7,726


$
24,750State and local


3,880



627



4,507Foreign


3,134



(63
)


3,071Net income tax expense

$
24,038


$
8,290


$
32,328   Current


Deferred


TotalYear ended December 31, 2009:U.S. federal

$
1,260


$
(9,859
)

$
(8,599
)State and local


3,144







3,144Foreign


5,118



(542
)


4,576Net income tax expense (benefit)

$
9,522


$
(10,401
)

$
(879
)   Current


Deferred


TotalYear ended December 31, 2008:U.S. federal

$
43


$
14,156


$
14,199State and local


3,020







3,020Foreign


5,390



58



5,448Net income tax expense

$
8,453


$
14,214


$
22,667  F-30




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##### Table of Contents



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


Year Ended


Year EndedDecember 31,


December 31,


December 31,2010


2009


2008Computed expected tax expense

$
49,694


$
45,870


$
40,778Increase (reduction) in income taxes resulting from:Book income of consolidated entities attributable to
    noncontrolling interests


(21,195
)


(22,303
)


(19,298
)Differences between U.S. financial reporting and foreign
    statutory reporting


(218
)


(152
)


23State tax expense, net of federal benefit


2,979



1,824



1,963Removal of foreign tax rate differential


(982
)


(1,211
)


(1,227
)Nondeductible goodwill


1,366



6,338



Valuation allowance






(31,193
)


(223
)Other


684



(52
)


651Total

$
32,328


$
(879
)

$
22,667     December 31,2010


2009Deferred tax assets:Net operating loss and other tax carryforwards

$
8,276


$
4,413Accrued expenses


11,687



10,730Bad debts/reserves


3,334



3,741Interest rate swaps


1,359



3,091Capitalized costs and other


1,605



2,983Total deferred tax assets


26,261



24,958Valuation allowance


(685
)


(3,283
)Total deferred tax assets, net

$
25,576


$
21,675Deferred tax liabilities:Basis difference of acquisitions

$
139,362


$
128,474Accelerated depreciation


1,126



1,826Capitalized interest and other


1,332



882Total deferred tax liabilities

$
141,820


$
131,182    F-31




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
          (14)
    Equity
    and Equity-Based Compensation       F-32




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##### Table of Contents



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


Year Ended


Year EndedDecember 31,


December 31,


December 31,2010


2009


2008Salaries, benefits and other employee costs

$
566


$
548


$
471General and administrative expenses


1,128



1,016



978Other operating expenses






131



336Discontinued operations


474



256



512Expense before income tax benefit


2,168



1,951



2,297Income tax benefit


(494
)


(389
)


(463
)Total equity-based compensation expense, net of tax

$
1,674


$
1,562


$
1,834     Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2010


2009


2008Share awards

$
1,331


$
1,215


$
1,150Stock options


837



605



811Warrants






131



336Expense before income tax benefit


2,168



1,951



2,297Income tax benefit


(494
)


(389
)


(463
)Total equity-based compensation expense, net of tax

$
1,674


$
1,562


$
1,834       Stock
    Options
   F-33




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##### Table of Contents



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

Year Ended

Year EndedDecember 31,

December 31,

December 31,2010

2009

2008Assumptions:Expected life in years


4.82



4.82



4.82Risk-free interest rates


1.35-2.59
%


2.09
%


2.37-2.75
%Dividend yield


0.0
%


0.0
%


0.0
%Volatility


45.16
%


45.16
%


45.16
%Weighted average grant-date fair value

$
0.65


$
0.37


$
0.55     WeightedWeighted

AverageAverage

Remaining

AggregateSuccessor

Number of

Exercise

Contractual

IntrinsicStock Options

Shares (000)

Price

Life (Years)

Value ($000)Outstanding at January 1, 2010


4,562


$
0.59



5.7


$
3,051Additional grants


479



1.62







Exercised


(137
)


0.38







Forfeited or expired


(229
)


1.17







Outstanding at December 31, 2010


4,675


$
0.68



4.9


$
5,480Exercisable at December 31, 2010


2,789


$
0.49



4.5


$
3,784   Share
    Awards
     F-34




---



##### 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 ValueNonvested at January 1, 2010


10,598


$
0.47Additional grants


200



1.62Vested


(1,861
)


0.49Forfeited






Nonvested at December 31, 2010


8,937


$
0.49     Warrants
  not-for-profit 1 2
     F-35




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (15)
    Segment
    Disclosures    United


UnitedStates


Kingdom


TotalYear Ended December 31, 2010Net patient service revenues

$
402,049


$
102,716


$
504,765Other revenues


71,900







71,900Total revenues

$
473,949


$
102,716


$
576,665Depreciation and amortization

$
22,493


$
7,306


$
29,799Operating income


194,610



15,906



210,516Net interest expense


(66,144
)


(3,096
)


(69,240
)Income tax expense


(29,257
)


(3,071
)


(32,328
)Total assets


2,051,144



321,595



2,372,739Capital expenditures


31,149



22,367



53,516   United


UnitedStates


Kingdom


TotalYear Ended December 31, 2009Net patient service revenues

$
418,802


$
105,097


$
523,899Other revenues


69,576







69,576Total revenues

$
488,378


$
105,097


$
593,475Depreciation and amortization

$
24,432


$
6,733


$
31,165Operating income


178,176



20,119



198,295Net interest expense


(66,041
)


(1,571
)


(67,612
)Income tax benefit (expense)


5,455



(4,576
)


879Total assets


2,000,087



325,305



2,325,392Capital expenditures


20,296



12,393



32,689   F-36




---



##### Table of Contents



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


UnitedStates


Kingdom


TotalYear Ended December 31, 2008Net patient service revenues

$
432,319


$
122,031


$
554,350Other revenues


60,748







60,748Total revenues

$
493,067


$
122,031


$
615,098Depreciation and amortization

$
25,480


$
6,825


$
32,305Operating income


172,642



25,462



198,104Net interest expense


(76,465
)


(5,173
)


(81,638
)Income tax expense


(17,215
)


(5,452
)


(22,667
)Total assets


1,983,676



284,487



2,268,163Capital expenditures


15,772



16,883



32,655   (16)
    Commitments
    and Contingencies  (a)
    Financial
    Guarantees      (b)
    Litigation    (c)
    Self
    Insurance and Professional Liability Claims   F-37




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    (d)
    Employee
    Benefit Plans          (e)
    Employment
    Agreements   F-38




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
      (18)
    Subsequent
    Events    (19)
    Condensed
    Consolidating Financial Statements    7 8 1 4 Form S-4
 F-39




---



##### Table of Contents



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


Consolidation


ConsolidatedAs of December 31, 2010

Guarantors


Investees


Adjustments


TotalASSETSCurrent assets:Cash and cash equivalents

$
60,186


$
67


$



$
60,253Accounts receivable, net






50,082







50,082Other receivables


27,313



45,146



(57,217
)


15,242Inventories of supplies


685



8,506







9,191Prepaids and other current assets


27,477



2,166







29,643Total current assets


115,661



105,967



(57,217
)


164,411Property and equipment, net


24,343



177,803



114



202,260Investments in affiliates


1,010,592







(617,031
)


393,561Goodwill and intangible assets, net


904,108



342,777



340,991



1,587,876Other assets


91,151



2,602



(69,122
)


24,631Total assets

$
2,145,855


$
629,149


$
(402,265
)

$
2,372,739LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
1,684


$
21,804


$



$
23,488Accrued expenses and other


236,835



37,868



(55,917
)


218,786Current portion of long-term debt


4,932



19,751



(2,297
)


22,386Total current liabilities


243,451



79,423



(58,214
)


264,660Long-term debt, less current portion


966,999



82,732



(2,291
)


1,047,440Other long-term liabilities


148,648



9,692



(520
)


157,820Parents equity


786,757



432,261



(432,261
)


786,757Noncontrolling interests






25,041



91,021



116,062Total liabilities and equity

$
2,145,855


$
629,149


$
(402,265
)

$
2,372,739   F-40




---



##### Table of Contents



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


Consolidation


ConsolidatedAs of December 31, 2009

Guarantors


Investees


Adjustments


TotalASSETSCurrent assets:Cash and cash equivalents

$
27,430


$
7,460


$



$
34,890Accounts receivable, net






54,202



35



54,237Other receivables


46,975



45,776



(77,505
)


15,246Inventories of supplies


428



8,361







8,789Prepaids and other current assets


26,264



4,518







30,782Total current assets


101,097



120,317



(77,470
)


143,944Property and equipment, net


16,197



181,857



452



198,506Investments in affiliates


1,027,814







(672,315
)


355,499Goodwill and intangible assets, net


857,802



353,212



391,173



1,602,187Other assets


96,205



2,213



(73,162
)


25,256Total assets

$
2,099,115


$
657,599


$
(431,322
)

$
2,325,392LIABILITIES AND EQUITYCurrent liabilities:Accounts payable

$
1,396


$
22,079


$



$
23,475Accrued expenses and other


235,904



50,200



(75,956
)


210,148Current portion of long-term debt


5,480



20,116



(2,259
)


23,337Total current liabilities


242,780



92,395



(78,215
)


256,960Long-term debt, less current portion


952,311



118,892



(23,012
)


1,048,191Other long-term liabilities


146,072



13,122



(821
)


158,373Parents equity


757,952



412,362



(412,362
)


757,952Noncontrolling interests






20,828



83,088



103,916Total liabilities and equity

$
2,099,115


$
657,599


$
(431,322
)

$
2,325,392  F-41




---



##### Table of Contents



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


Consolidation


ConsolidatedYear Ended December 31, 2010

Guarantors


Investees


Adjustments


TotalRevenues

$
97,463


$
501,505


$
(22,303
)

$
576,665Equity in earnings of unconsolidated affiliates


132,846



2,116



(65,046
)


69,916Operating expenses, excluding depreciation and amortization


86,521



342,690



(22,945
)


406,266Depreciation and amortization


7,249



22,346



204



29,799Operating income


136,539



138,585



(64,608
)


210,516Interest expense, net


(61,205
)


(7,945
)


(90
)


(69,240
)Other income (expense), net


708











708Income from continuing operations before income taxes


76,042



130,640



(64,698
)


141,984Income tax expense


(26,946
)


(5,382
)






(32,328
)Income from continuing operations


49,096



125,258



(64,698
)


109,656Loss from discontinued operations, net of tax


(7,003
)


(533
)


533



(7,003
)Net income


42,093



124,725



(64,165
)


102,653Less: Net income attributable to noncontrolling interests






(12,879
)


(47,681
)


(60,560
)Net income attributable to Parent

$
42,093


$
111,846


$
(111,846
)

$
42,093   F-42




---



##### Table of Contents



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


Consolidation


ConsolidatedYear Ended December 31, 2009

Guarantors


Investees


Adjustments


TotalRevenues

$
96,861


$
519,293


$
(22,679
)

$
593,475Equity in earnings of unconsolidated affiliates


133,230



2,413



(73,872
)


61,771Operating expenses, excluding depreciation and amortization


101,711



346,489



(22,414
)


425,786Depreciation and amortization


7,380



23,409



376



31,165Operating income


121,000



151,808



(74,513
)


198,295Interest expense, net


(60,386
)


(7,221
)


(5
)


(67,612
)Other income (expense), net


384



(11
)






373Income from continuing operations before income taxes


60,998



144,576



(74,518
)


131,056Income tax benefit (expense)


7,215



(6,336
)






879Income from continuing operations


68,213



138,240



(74,518
)


131,935Earnings from discontinued operations, net of tax


1,453



996



(996
)


1,453Net income


69,666



139,236



(75,514
)


133,388Less: Net income attributable to noncontrolling interests






(11,128
)


(52,594
)


(63,722
)Net income attributable to Parent

$
69,666


$
128,108


$
(128,108
)

$
69,666   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, 2008

Guarantors


Investees


Adjustments


TotalRevenues

$
93,595


$
545,428


$
(23,925
)

$
615,098Equity in earnings of unconsolidated affiliates


114,656



2,465



(70,079
)


47,042Operating expenses, excluding depreciation and amortization


77,594



377,753



(23,616
)


431,731Depreciation and amortization


6,993



24,772



540



32,305Operating income


123,664



145,368



(70,928
)


198,104Interest expense, net


(70,024
)


(11,710
)


96



(81,638
)Other income (expense), net


7



25







32Income from continuing operations before income taxes


53,647



133,683



(70,832
)


116,498Income tax expense


(14,954
)


(7,717
)


4



(22,667
)Income from continuing operations


38,693



125,966



(70,828
)


93,831Loss from discontinued operations, net of tax


(1,179
)


(1,140
)


1,140



(1,179
)Net income


37,514



124,826



(69,688
)


92,652Less: Net income attributable to noncontrolling interests






(6,960
)


(48,178
)


(55,138
)Net income attributable to Parent

$
37,514


$
117,866


$
(117,866
)

$
37,514   Condensed
    Consolidating Statements of Comprehensive Income
    (Loss):
  Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2010

Guarantors


Investees


Adjustments


TotalNet income

$
42,093


$
124,725


$
(64,165
)

$
102,653Other comprehensive income:Foreign currency translation adjustments


(11,638
)


(11,638
)


11,638



(11,638
)Unrealized gain on interest rate swaps, net of tax


3,408



780



(780
)


3,408Pension adjustments, net of tax


724



724



(724
)


724Total other comprehensive income


(7,506
)


(10,134
)


10,134



(7,506
)Comprehensive income


34,587



114,591



(54,031
)


95,147Less: Comprehensive income attributable to noncontrolling
    interests






(12,879
)


(47,681
)


(60,560
)Comprehensive income attributable to Parent

$
34,587


$
101,712


$
(101,712
)

$
34,587   F-44




---



##### Table of Contents



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


Consolidation


ConsolidatedYear Ended December 31, 2009

Guarantors


Investees


Adjustments


TotalNet income

$
69,666


$
139,236


$
(75,514
)

$
133,388Other comprehensive income:Foreign currency translation adjustments


21,967



21,967



(21,967
)


21,967Unrealized gain on interest rate swaps, net of tax


3,894



108



(108
)


3,894Pension adjustments, net of tax


(698
)


(698
)


698



(698
)Total other comprehensive income


25,163



21,377



(21,377
)


25,163Comprehensive income


94,829



160,613



(96,891
)


158,551Less: Comprehensive income attributable to noncontrolling
    interests






(11,128
)


(52,594
)


(63,722
)Comprehensive income attributable to Parent

$
94,829


$
149,485


$
(149,485
)

$
94,829   Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2008

Guarantor


Investees


Adjustments


TotalNet income

$
37,514


$
124,826


$
(69,688
)

$
92,652Other comprehensive income:Foreign currency translation adjustments


(71,790
)


(71,790
)


71,790



(71,790
)Unrealized loss on interest rate swaps, net of tax


(10,051
)


(1,280
)


1,280



(10,051
)Pension adjustments, net of tax


(682
)


(682
)


682



(682
)Total other comprehensive loss


(82,523
)


(73,752
)


73,752



(82,523
)Comprehensive income (loss)


(45,009
)


51,074



4,064



10,129Less: Comprehensive income (loss) attributable to noncontrolling
    interests






(6,960
)


(48,178
)


(55,138
)Comprehensive income (loss) attributable to Parent

$
(45,009
)

$
44,114


$
(44,114
)

$
(45,009
)  F-45




---



##### Table of Contents



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


Consolidation


ConsolidatedGuarantors


Investees


Adjustments


TotalBalance, December 31, 2008

$
764,137


$
371,335


$
(371,335
)

$
764,137Net income


69,666



139,236



(75,514
)


133,388Net income attributable to noncontrolling interests






(11,128
)


(52,594
)


(63,722
)Contribution related to equity award grants by USPI Group
    Holdings, Inc.


1,937



282



(282
)


1,937Acquisitions and contributions


(9,536
)


26,410



(26,410
)


(9,536
)Disposals and deconsolidations


(4,798
)


(17,259
)


17,259



(4,798
)Distributions






(117,890
)


117,890



Dividend on common stock


(88,617
)










(88,617
)Foreign currency translation and other


25,163



21,376



(21,376
)


25,163Balance, December 31, 2009


757,952



412,362



(412,362
)


757,952Net income


42,093



124,725



(64,165
)


102,653Net income attributable to noncontrolling interests






(12,879
)


(47,681
)


(60,560
)Contribution related to equity award grants by USPI Group
    Holdings, Inc.


2,294



527



(527
)


2,294Acquisitions and contributions


(452
)


36,090



(36,090
)


(452
)Disposals and deconsolidations


(6,774
)


(5,857
)


5,857



(6,774
)Distributions






(112,573
)


112,573



Dividend on common stock


(850
)










(850
)Foreign currency translation and other


(7,506
)


(10,134
)


10,134



(7,506
)Balance, December 31, 2010

$
786,757


$
432,261


$
(432,261
)

$
786,757  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


ConsolidatedYear Ended December 31, 2010

Guarantor


Investees


Adjustments


TotalCash flows from operating activities:Net income

$
42,093


$
124,725


$
(64,165
)

$
102,653Loss on discontinued operations


7,003



533



(533
)


7,003Changes in operating and intercompany assets and liabilities and
    noncash items included in net income


17,222



31,072



11,114



59,408Net cash provided by (used in) operating activities


66,318



156,330



(53,584
)


169,064Cash flows from investing activities:Purchases of property and equipment, net


(5,437
)


(34,598
)






(40,035
)Purchases of new businesses and equity interests, net


(21,698
)


(11,601
)






(33,299
)Other items, net


(9,306
)


(2,350
)


12,950



1,294Net cash used in investing activities


(36,441
)


(48,549
)


12,950



(72,040
)Cash flows from financing activities:Long-term borrowings, net


14,735



(20,400
)


4,513



(1,152
)Purchases and sales of noncontrolling interests, net


737



349







1,086Distributions to noncontrolling interests






(112,573
)


53,584



(58,989
)Dividend payment on common stock


(850
)










(850
)Decrease in cash held on behalf of noncontrolling interest
    holders and other


(11,743
)


15,112



(17,463
)


(14,094
)Net cash provided by (used in) financing activities


2,879



(117,512
)


40,634



(73,999
)Net cash provided by discontinued operations






2,169







2,169Effect of exchange rate changes on cash






169







169Net increase (decrease) in cash


32,756



(7,393
)






25,363Cash at the beginning of the period


27,430



7,460







34,890Cash at the end of the period

$
60,186


$
67


$



$
60,253   F-47




---



##### Table of Contents



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


Consolidation


ConsolidatedYear Ended December 31, 2009

Guarantor


Investees


Adjustments


TotalCash flows from operating activities:Net income

$
69,666


$
139,236


$
(75,514
)

$
133,388Income from discontinued operations


(1,453
)


(996
)


996



(1,453
)Changes in operating and intercompany assets and liabilities and
    noncash items included in net income


(1,582
)


30,074



20,183



48,675Net cash provided by (used in) operating activities


66,631



168,314



(54,335
)


180,610Cash flows from investing activities:Purchases of property and equipment, net


(5,139
)


(24,565
)






(29,704
)Purchases of new businesses and equity interests, net


(57,625
)


(11,816
)


9,914



(59,527
)Other items, net


3,837



(10,668
)


10,233



3,402Net cash used in investing activities


(58,927
)


(47,049
)


20,147



(85,829
)Cash flows from financing activities:Long-term borrowings, net


(2,750
)


(18,905
)


1,585



(20,070
)Purchases and sales of noncontrolling interests, net


(4,662
)


2,595







(2,067
)Distributions to noncontrolling interests






(117,890
)


54,335



(63,555
)Dividend payment on common stock


(88,617
)










(88,617
)Increase in cash held on behalf of noncontrolling interest
    holders and other


73,730



11,064



(21,732
)


63,062Net cash used in financing activities


(22,299
)


(123,136
)


34,188



(111,247
)Net cash provided by discontinued operations






1,725







1,725Effect of exchange rate changes on cash






196







196Net increase (decrease) in cash


(14,595
)


50







(14,545
)Cash at the beginning of the period


42,025



7,410







49,435Cash at the end of the period

$
27,430


$
7,460


$



$
34,890   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, 2008

Guarantor


Investees


Adjustments


TotalCash flows from operating activities:Net income

$
37,514


$
124,826


$
(69,688
)

$
92,652Loss on discontinued operations


1,179



1,140



(1,140
)


1,179Changes in operating and intercompany assets and liabilities and
    noncash items included in net income


11,739



24,196



12,353



48,288Net cash provided by operating activities


50,432



150,162



(58,475
)


142,119Cash flows from investing activities:Purchases of property and equipment, net


(4,189
)


(26,500
)






(30,689
)Purchases of new businesses and equity interests, net


(64,192
)


(107
)






(64,299
)Other items, net


(5,202
)


(3,084
)


2,411



(5,875
)Net cash used in investing activities


(73,583
)


(29,691
)


2,411



(100,863
)Cash flows from financing activities:Long-term borrowings, net


28,700



(12,051
)


1,527



18,176Purchases and sales of noncontrolling interests, net


(26,430
)










(26,430
)Distributions to noncontrolling interests






(113,462
)


56,948



(56,514
)Other items, net


(3,759
)


770



(2,411
)


(5,400
)Net cash provided by (used in) financing activities


(1,489
)


(124,743
)


56,064



(70,168
)Net cash provided by discontinued operations






1,638







1,638Effect of exchange rate changes on cash






(49
)






(49
)Net decrease in cash


(24,640
)


(2,683
)






(27,323
)Cash at the beginning of the period


66,665



10,093







76,758Cash at the end of the period

$
42,025


$
7,410


$



$
49,435  F-49




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
  (22)
    Selected
    Quarterly Financial Data (Unaudited)  2010 QuartersFirst

Second

Third

FourthNet revenues

$
137,871


$
143,190


$
141,392


$
154,212Income from continuing operations


25,442



30,697



25,875



27,642Net income attributable to noncontrolling interests


(13,635
)


(15,135
)


(14,309
)


(17,481
)Net income attributable to USPIs common stockholder


12,011



15,887



11,848



2,347   2009 QuartersFirst

Second

Third

FourthNet revenues

$
150,178


$
149,305


$
145,025


$
148,967Income from continuing operations


21,402



32,522



53,254



24,757Net income attributable to noncontrolling interests


(16,295
)


(16,105
)


(14,807
)


(16,515
)Net income attributable to USPIs common stockholder


5,687



16,752



38,704



8,523    F-50




---



##### Table of Contents



(2)
    Financial
    Statement Schedule  Form 10-K:
    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, 2008(1)

$
12,721


$
7,568


$



$
(9,063
)

$
318


$
11,544Year ended December 31, 2009(1)


11,544



8,958







(10,149
)


(2,193
)


8,160Year ended December 31, 2010(1)


8,160



8,458







(8,742
)


(395
)


7,481   Valuation
    allowance for deferred tax assets
  Balance at

Additions Charged to:





Balance atBeginning of

Costs and

Other



Other

End ofPeriod

Expenses

Accounts(4)

Deductions(5)

Items

Period(In thousands)Year ended December 31, 2008

$
37,822


$
1,332


$
(596
)

$



$



$
38,558Year ended December 31, 2009


38,558











(31,193
)


(4,082
)


3,283Year ended December 31, 2010


3,283















(2,598
)


685     (1)
    
    Includes amounts related to companies disposed of in 2008
    through 2010.(2)
    
    Accounts written off.(3)
    
    Primarily beginning balances for purchased businesses and
    entities that were deconsolidated.(4)
    
    Recorded to goodwill(5)
    
    Reversal of deferred tax asset allowance (Note 13),
    recorded as a reduction of income tax expense.   S-1




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIESConsolidated Financial Statements
    Years Ended June 30, 2010 and 2009
    (With Independent Auditors Report Thereon)
  1




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
    CONSOLIDATED FINANCIAL STATEMENTS
    YEARS ENDED JUNE 30, 2010 AND 2009
    CONTENTS
  Report of PricewaterhouseCoopers LLP,
    Independent Auditors


3Audited Financial StatementsConsolidated Balance Sheets


4Consolidated Statements of Income


5Consolidated Statements of Changes in Equity


6Consolidated Statements of Cash Flows


7Notes to Consolidated Financial Statements


8  2




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##### Table of Contents



REPORT OF
    PRICEWATERHOUSECOOPERS LLP, INDEPENDENT AUDITORS          December 8,
    2010
 3




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C AND SUBSIDIARIES



CONSOLIDATED
    BALANCE SHEETS 

JUNE 30,
    2010 AND 2009  2010


2009(In thousands)ASSETSCURRENT ASSETS:Cash

$
522


$
8,315Patient receivables, net of allowance for doubtful accounts of
    $12,560 and $9,097 at June 30, 2010 and 2009, respectively


48,468



41,489Due from affiliate (Note 9)


43,709



70,370Supplies


8,903



7,570Prepaid and other current assets


2,096



2,120Total current assets


103,698



129,864PROPERTY AND EQUIPMENT, net (Note 2)


170,428



141,603OTHER LONG-TERM ASSETS:Investments in unconsolidated affiliates (Note 4)


1,871



1,687Goodwill and intangible assets, net (Note 6)


143,915



137,303Other


1,051



633Total assets

$
420,963


$
411,090LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIES:Accounts payable

$
16,335


$
13,063Accrued expenses and other


16,504



14,316Due to affiliates (Note 9)






3,119Current portion of long-term obligations (Note 7)


12,887



12,856Total current liabilities


45,726



43,354LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION (Note 7)


142,709



120,357OTHER LIABILITIES


14,540



13,376Total liabilities


202,975



177,087NONCONTROLLING INTERESTS  REDEEMABLE


30,352



24,400COMMITMENTS AND CONTINGENCIES (Notes 7, 8, 9 and 10)EQUITY:Members equity


172,091



194,591Noncontrolling interests  nonredeemable


15,545



15,012Total equity


187,636



209,603Total liabilities and equity

$
420,963


$
411,090    4




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF INCOME

FOR
    THE YEARS ENDED JUNE 30, 2010 AND 2009  2010


2009(In thousands)REVENUES:Net patient service revenue

$
478,973


$
424,071Management and royalty fee income (Note 9)


600



588Other income


517



532Total revenues


480,090



425,191EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES (Note 4)


1,100



977OPERATING EXPENSES:Salaries, benefits, and other employee costs


102,498



92,664Medical services and supplies


120,017



98,270Management and royalty fees (Note 9)


19,181



17,021Professional fees


3,348



3,880Other operating expenses


65,665



59,491Provision for doubtful accounts


15,283



12,420Depreciation and amortization


19,635



18,898Total operating expenses


345,627



302,644Operating income


135,563



123,524NONOPERATING INCOME (EXPENSES):Interest expense


(13,680
)


(13,251
)Interest income (Note 9)


338



640Other income (expense), net


31



(252
)Income before income taxes


122,252



110,661INCOME TAXES


(3,009
)


(2,888
)Net income


119,243



107,773NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 
    Redeemable


(57,886
)


(52,871
)NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 
    Nonredeemable


(4,444
)


(3,889
)Net income attributable to the Company

$
56,913


$
51,013    5




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF CHANGES IN EQUITY

FOR THE
    YEARS ENDED JUNE 30, 2010 AND 2009  NoncontrollingMembers Equity


Interests Total


USP


BHS


BUMC


Total


Nonredeemable(In thousands)Balance at June 30, 2008

$
174,532


$
79,798


$
1,760


$
78,360


$
159,918


$
14,614Net income


54,902



25,434



604



24,975



51,013



3,889Distributions to members


(19,934
)


(8,132
)


(222
)


(7,986
)


(16,340
)


(3,594
)Purchase of noncontrolling interests


353



















353Sale of noncontrolling interests


(250
)


















(250
)Assign remaining BHS 1.1% interest in THVG to BUMC, effective
    June 30, 2009










(2,142
)


2,142







Balance at June 30, 2009


209,603



97,100







97,491



194,591



15,012Net income


61,357



28,400







28,513



56,913



4,444Distributions to members


(87,059
)


(41,368
)






(41,534
)


(82,902
)


(4,157
)Contributions


4,766



2,238







2,247



4,485



281Purchase of noncontrolling interests


495



(95
)






(96
)


(191
)


686Sales of noncontrolling interests


(1,526
)


(402
)






(403
)


(805
)


(721
)Balance at June 30, 2010

$
187,636


$
85,873


$



$
86,218


$
172,091


$
15,545    6




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED JUNE 30, 2010 AND
    2009  2010


2009(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
119,243


$
107,773Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for doubtful accounts


15,283



12,420Depreciation and amortization


19,635



18,898Amortization of debt issue costs


5



4Equity in earnings of unconsolidated affiliates, net of
    distributions received


(183
)


(94
)Changes in operating assets and liabilities, net of effects from
    purchases of new businesses:Patient receivables


(20,815
)


(7,988
)Due to affiliates, net


(3,119
)


(97
)Supplies, prepaids, and other assets


(835
)


(437
)Accounts payable and accrued expenses


2,829



(3,829
)Net cash provided by operating activities


132,043



126,650CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of new businesses and equity interests, net of cash
    received of $1,506 and $1,758 for 2010 and 2009, respectively


1,506



46Sale of equity interests






25Purchases of property and equipment


(16,842
)


(6,611
)Sales of property and equipment


100



45Change in deposits and notes receivables


43



Change in cash management balances with affiliate


26,229



(39,661
)Net cash provided by (used in) investing activities


11,036



(46,156
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term debt

$
9,988


$
3,534Payments on long-term obligations


(17,703
)


(13,164
)Distributions to noncontrolling interest owners


(61,361
)


(53,158
)Purchases of noncontrolling interests


(1,838
)


(1,348
)Sales of noncontrolling interests


2,944



4,770Distributions to members


(82,902
)


(16,340
)Net cash used in financing activities


(150,872
)


(75,706
)(DECREASE) INCREASE IN CASH


(7,793
)


4,788CASH, beginning of period


8,315



3,527CASH, end of period

$
522


$
8,315SUPPLEMENTAL INFORMATION:Cash paid for interest

$
13,397


$
13,441Cash paid for income taxes


2,816



2,365Noncash transactions:Noncash assets contributed by Members (Note 3)


4,766



Assets acquired under capital leases


25,339



2,675    7




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES



Notes to
    Consolidated Financial Statements

FOR THE
    YEARS ENDED JUNE 30, 2010 AND 2009  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Description
    of Business
          Basis of
    Accounting
    Principles
    of Consolidation
    Use of
    Estimates
   8




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Recently
    Adopted Accounting Pronouncements
  Business Combinations Noncontrolling Interests in
    Consolidated Financial Statements, an Amendment of ARB
    No. 51 Accounting Standards
    Codification Business Combinations Consolidations
      Before ASC 810

ASC 810Changes in Cash Flow Classification:Distributions of earnings paid to noncontrolling interests


Operating



FinancingAcquisitions or sales of equity interests in consolidated
    subsidiaries, no change of control


Investing



FinancingNo Change in Cash Flow Classification:Distributions of earnings received from unconsolidated affiliates


Operating



OperatingReturns of capital paid to noncontrolling interests


Financing



FinancingReturns of capital received from unconsolidated affiliates


Investing



InvestingSales of equity interests in consolidated subsidiaries resulting
    in a change of control


Investing



InvestingAcquisitions or sales of equity interests in unconsolidated
    affiliates, no change of control


Investing



InvestingAcquisitions of equity interests in unconsolidated affiliates,
    resulting in change of control


Investing



InvestingBusiness combinations with no previous ownership by THVG


Investing



Investing  9




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    June 30, 2009Consolidated Balance SheetTotal equity as previously reported

$
194,591Reclassification of nonredeemable noncontrolling interests to
    equity as required by ASC 810


15,012Total equity as adjusted for ASC 810

$
209,603Consolidated Statement of Cash FlowsNet cash provided by operating activities as previously recorded

$
73,765Reclassification of distributions to noncontrolling interests to
    financing activities


52,885Net cash provided by operating activities as adjusted for
    ASC 810

$
126,650Net cash used in investing activities as previously reported

$
(42,734
)Reclassification of purchases and sales of noncontrolling
    interests to financing activities


(3,422
)Net cash used in investing activities as adjusted for
    ASC 810

$
(46,156
)Net cash used in financing activities as previously reported

$
(26,244
)Reclassifications of distributions to noncontrolling from
    interests from operating activities


(52,885
)Reclassifications of purchases and sales of noncontrolling
    interests from investing activities


3,423Net cash used in financing activities as adjusted for
    ASC 810

$
(75,706
)       Cash
    Equivalents
   10




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Patient
    Receivables
    2010

2009Commercial and managed care providers


64
%


65
%Government-related programs


18
%


16
%Self-pay patients


18
%


19
%100
%


100
%     Supplies
    Property
    and Equipment
    Investments
    in Unconsolidated Affiliates
   11




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Intangible
    Assets and Goodwill
    Impairment
    of Long-Lived Assets
    Fair
    Value of Financial Instruments
      Revenue
    Recognition
       12




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Equity in
    Earnings of Unconsolidated Affiliates
    Income
    Taxes
      Income
    Taxes
    Commitments
    and Contingencies
   13




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  2.
    PROPERTY
    AND EQUIPMENT    EstimatedUseful Lives


2010


2009Land





$
612


$
Buildings and leasehold improvements


5-25 years



145,242



114,414Equipment


3-15 years



80,515



70,405Furniture and fixtures


5-15 years



12,730



10,190Construction in progress






3,441



1,536242,540



196,545Less accumulated depreciation and amortization






(72,112
)


(54,942
)Net property and equipment





$
170,428


$
141,603     2010


2009Buildings

$
105,186


$
81,271Equipment and furniture


14,773



16,591119,959



97,862Less accumulated amortization


(23,893
)


(20,584
)Net property and equipment under capital leases

$
96,066


$
77,278   3.
    CAPITAL
    CONTRIBUTIONS BY MEMBERS    Ownership

Net AssetsInvestee

Percentage

Contributed

Effective DateDeSoto Surgicare Partners, Ltd. (DeSoto)


50.1
%

$
1,684


December 1, 2009Physicians Surgical Center of Fort Worth, L.L.P. (FW
    Physicians)


50.13
%


3,082


December 31, 2009      14




---



##### Table of Contents



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


FW PhysiciansCurrent assets

$
649


$
1,732Property and equipment


2,678



2,180Goodwill  Parent


402



2,547Goodwill  Noncontrolling interests






372Other noncurrent asset


3



Total assets acquired


3,732



6,831Current liabilities


1,154



1,556Long-term debt


178



250Total liabilities assumed


1,332



1,806Noncontrolling interests


716



1,943Net assets acquired

$
1,684


$
3,082   4.
    INVESTMENTS
    IN SUBSIDIARIES AND UNCONSOLIDATED AFFILIATES    Percentage OwnedJune 30,

June 30,Legal Name

Facility

City

2010

2009Consolidated subsidiaries(1):Bellaire Outpatient Surgery Center, L.L.P.

Bellaire Surgery Center

Fort Worth


50.1
%


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

Baylor Surgicare

Dallas


62.6



62.6Dallas Surgical Partners, L.L.C.

Texas Surgery Center

Dallas


62.6



62.6Dallas Surgical Partners, L.L.C.

Physicians Day Surgery Center

Dallas


62.6



62.6Denton Surgicare Partners, Ltd.

Baylor Surgicare at Denton

Denton


50.1



50.1Frisco Medical Center, L.L.P.

Baylor Medical Center at Frisco

Frisco


50.3



50.1Garland Surgicare Partners, Ltd.

Baylor Surgicare at Garland

Garland


50.1



50.1Grapevine Surgicare Partners, Ltd.

Baylor Surgicare at Grapevine

Grapevine


50.1



50.3Lewisville Surgicare Partners, Ltd.

Baylor Surgicare at Lewisville

Lewisville


52.4



53.1MSH Partners, L.L.C.

Mary Shiels Hospital

Dallas


31.7



42.4North Central Surgical Center, L.L.P.

North Central Surgery Center

Dallas


32.2



32.2North Garland Surgery Center, L.L.P.

North Garland Surgery Center

Garland


51.6



52.4Rockwall/Heath Surgery Center, L.L.P.

Baylor Surgicare at Heath

Heath


50.2



50.1Trophy Club Medical Center, L.P.

Trophy Club Medical Center

Fort Worth


51.2



52.5Valley 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



50.2Arlington Surgicare Partners, Ltd.

Surgery Center of Arlington

Arlington


50.1



50.1Rockwall Ambulatory Surgery Center, L.L.P.

Rockwall Surgery Center

Rockwall


50.1



50.1Baylor Surgicare at Plano, L.L.C.

Baylor Surgicare at Plano

Plano


50.1



50.1Metroplex Surgicare Partners, Ltd.

Metroplex Surgicare

Bedford


50.1



50.1Arlington Orthopedic and Spine Hospitals, LLC

Arlington Hospital

Arlington


50.1



50.1Baylor Surgicare at Granbury, LLC

Granbury Surgical Plaza

Granbury


51.8



50.6Physicians Center of Fort Worth, L.L.P.

Baylor Surgicare at Fort Worth I & II

Fort Worth


50.1



DeSoto Surgicare, Ltd.

North Texas Surgery Center

Desoto


50.1



Baylor Surgicare at Mansfield, L.L.C.

Baylor Surgicare at Mansfield

Mansfield


51.0



Unconsolidated affiliates:Denton Surgicare Real Estate, Ltd.

(2)

n/a


49.0



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

Irving-Coppell Surgical Hospital

Irving


18.3



8.3MCSH Real Estate Investors, Ltd.

(2)

n/a


2.0



2.0  15




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (1)
    
    List excludes holding companies, which are wholly owned by the
    Company and hold the Companys investments in the
    Facilities.(2)
    
    These entities are not surgical facilities and do not have
    ownership in any surgical facilities.        2010


2009Mansfield


Granbury Surgical PlazaCurrent assets

$
1,066


$
2,454Property and equipment


1,305



2,847Goodwill  parent


1,705



3,916Goodwill  noncontrolling interests


1,638



Long-term assets






14Total assets acquired


5,714



9,231Current liabilities


2,202



882Long-term liabilities


950



1,776Long-term debt


2,562



5,768Total liabilities assumed


5,714



8,426Net assets acquired

$



$
805         5.
    NONCONTROLLING
    INTERESTS   16




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Year EndedJune 30,2010Net income attributable to the Company

$
56,913Transfers to the noncontrolling interests:Decrease in the Companys equity for losses incurred
    related to sales of subsidiaries equity interests


(805
)Decrease in the Companys equity for losses incurred
    related to purchases of subsidiaries equity interests


(192
)Net transfers to noncontrolling interests


(997
)Change in equity from net income attributable to the Company and
    transfers to noncontrolling interests

$
55,916     Balance, June 30, 2008

$
15,296Net income attributable to noncontrolling interests


52,870Distributions to noncontrolling interests


(49,564
)Purchases of noncontrolling interests


(1,701
)Sales of noncontrolling interests


4,990Noncontrolling interests attributable to business combinations


2,509Balance, June 30, 2009


24,400Net income attributable to noncontrolling interests


57,886Distributions to noncontrolling interests


(57,204
)Purchases of noncontrolling interests


(1,860
)Sales of noncontrolling interests


4,471Noncontrolling interests attributable to business combinations


2,659Balance, June 30, 2010

$
30,352  17




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  6.
    GOODWILL
    AND INTANGIBLE ASSETS    2010


2009Goodwill  parent

$
140,707


$
136,119Goodwill  noncontrolling interests


2,010



Other intangible assets


1,198



1,184Total

$
143,915


$
137,303     NoncontrollingParent


InterestsBalance, June 30, 2008

$
130,137


$
Additions:Acquisition of Granbury


3,916



Purchase of additional interests in USPD


1,121



Additional contribution from BHS for the Metroplex acquisition


107



Other


838



Balance, June 30, 2009


136,119



Additions:Contribution of DeSoto


402



Contribution of FW Physicians


2,547



372Acquisition of Mansfield


1,705



1,638Other


(66
)


Balance, June 30, 2010

$
140,707


$
2,010      18




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    June 30, 2010Gross Carrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Debt issue costs

$
104


$
(55
)

$
49Indefinite useful lives:Management contracts


1,149







1,149Total intangible assets

$
1,253


$
(55
)

$
1,198   June 30, 2009Gross Carrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Debt issue costs

$
84


$
(50
)

$
34Indefinite useful lives:Management contracts


1,150







1,150Total intangible assets

$
1,234


$
(50
)

$
1,184     7.
    LONG-TERM
    OBLIGATIONS    2010


2009Capital lease obligations (Note 8)

$
114,422


$
91,679Notes payable to financial institutions


41,174



41,534Total long-term obligations


155,596



133,213Less current portion


(12,887
)


(12,856
)Long-term obligations, less current portion

$
142,709


$
120,357     2011

$
9,7502012


9,8102013


7,0622014


5,2192015


3,279Thereafter


6,054Total long-term obligations

$
41,174    19




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    8.
    LEASES      Capital


OperatingLeases


LeasesYear ending June 30:2011

$
15,276


$
12,9922012


14,936



12,6492013


14,536



11,0602014


14,192



10,3772015


14,506



10,435Thereafter


180,738



78,524Total minimum lease payments


254,184


$
136,037Amount representing interest


(139,760
)Total principal payments

$
114,424     9.
    RELATED-PARTY
    TRANSACTIONS       20




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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  Financial
    Guarantees
    Litigation
    and Professional Liability Claims
    11.
    SUBSEQUENT
    EVENTS       21




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Consolidated
    Financial Statements
    Years Ended June 30, 2009 and 2008
    (With Independent Auditors Reports Thereon)
  22




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##### Table of Contents



REPORT OF
    PRICEWATERHOUSECOOPERS LLP, INDEPENDENT AUDITORS         PricewaterhouseCoopers
    LLP
   23




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##### Table of Contents



Report of
    Ernst & Young LLP, Independent Auditors           
    24




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
 CONSOLIDATED
    BALANCE SHEETS
    JUNE 30, 2009 AND 2008  2009


2008(In thousands)ASSETSCURRENT ASSETS:Cash

$
8,315


$
3,527Patient receivables, net of allowance for doubtful accounts of
    $9,097 and $10,448 at June 30, 2009 and 2008, respectively


41,489



45,417Due from affiliate (Note 8)


70,370



30,676Supplies


7,570



7,337Prepaid and other current assets


2,120



1,728Total current assets


129,864



88,685PROPERTY AND EQUIPMENT, net (Note 2)


141,603



148,411OTHER LONG-TERM ASSETS:Investments in unconsolidated affiliates (Note 4)


1,687



1,618Goodwill and intangible assets, net (Note 5)


137,303



131,319Other


633



652Total assets

$
411,090


$
370,685LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIES:Accounts payable

$
13,063


$
18,013Accrued expenses and other


14,316



13,687Due to affiliates (Note 8)


3,119



3,216Current portion of long-term obligations (Note 6)


12,856



12,057Total current liabilities


43,354



46,973LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION (Note 6)


120,357



123,646OTHER LIABILITIES


13,376



10,238Total liabilities


177,087



180,857MINORITY INTERESTS


39,412



29,910COMMITMENTS AND CONTINGENCIES(Notes 7, 8, and 9)MEMBERS EQUITY (Note 3)


194,591



159,918Total liabilities and members equity

$
411,090


$
370,685  25




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF INCOME
    FOR THE YEARS ENDED JUNE 30, 2009 AND 2008  2009


2008(In thousands)REVENUES:Net patient service revenue

$
424,071


$
348,203Management and royalty fee income (note 8)


588



600Other income


532



469Total revenues


425,191



349,272EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES (note 4)


977



1,059OPERATING EXPENSES:Salaries, benefits, and other employee costs


92,664



82,316Medical services and supplies


98,270



78,203Management and royalty fees (note 8)


17,021



14,546Professional fees


3,880



5,714Other operating expenses


59,491



52,434Provision for doubtful accounts


12,420



13,646Depreciation and amortization


18,898



17,706Total operating expenses


302,644



264,565Operating income


123,524



85,766NONOPERATING EXPENSES:Interest expense


(13,251
)


(13,570
)Interest income (note 8)


640



1,445Other expense, net


(252
)


(61
)Income before minority interests and income taxes


110,661



73,580MINORITY INTERESTS IN INCOME OF CONSOLIDATED SUBSIDIARIES


(56,760
)


(34,341
)Income before income taxes


53,901



39,239INCOME TAXES


(2,888
)


(3,673
)Net income

$
51,013


$
35,566  26




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF MEMBERS EQUITY
    FOR THE YEARS ENDED JUNE 30, 2009 AND 2008  Contributed Capital


Retained EarningsUSP


BHS


BUMC


USP


BHS


BUMC


Total(In thousands)Balance at June 30, 2007

$
45,748


$
45,932


$



$
21,335


$
21,420


$



$
134,435Net income














17,747



17,819







35,566Contributions


14,381



7,457



4,092















25,930Distributions to members














(17,971
)


(18,042
)






(36,013
)Assign BUMC 49% of BHS 50.1% interest in THVG, effective
    June 30, 2008






(52,983
)


52,983







(20,731
)


20,731



Transfer of equity in accordance with L.L.C. agreement


(1,442
)


888



554















Balance at June 30, 2008


58,687



1,294



57,629



21,111



466



20,731



159,918Net income














25,434



604



24,975



51,013Distributions to members






(43
)






(8,132
)


(179
)


(7,986
)


(16,340
)Assign remaining BHS 1.1% interest in THVG to BUMC, effective
    June 30, 2009






(1,251
)


1,251







(891
)


891



Balance at June 30, 2009

$
58,687


$



$
58,880


$
38,413


$



$
38,611


$
194,591  27




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS
    FOR THE YEARS ENDED JUNE 30, 2009 AND 2008  2009


2008(In thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
51,013


$
35,566Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for doubtful accounts


12,420



13,646Depreciation and amortization


18,898



17,706Amortization of debt issue costs


3



3Equity in earnings of unconsolidated affiliates, net of
    distributions received


(94
)


(230
)Minority interests in income of consolidated subsidiaries, net
    of distributions paid


3,875



2,280Changes in operating assets and liabilities, net of acquisitionsPatient receivables


(7,988
)


(26,173
)Due from (to) affiliates, net


(97
)


743Supplies, prepaids, and other assets


(437
)


(1,704
)Accounts payable and accrued expenses


(3,828
)


4,295Net cash provided by operating activities


73,765



46,132CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of new businesses and equity interests, net of cash
    received of $1,762 and $291 for 2009 and 2008, respectively


(5,554
)


(9,476
)Sale of equity interests


9,048



952Purchases of property and equipment


(6,612
)


(18,301
)Sales of property and equipment


45



26Cash collections on notes receivable from affiliates






1,338Change in cash management balances with affiliate


(39,660
)


7,692Net cash used in investing activities


(42,733
)


(17,769
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term debt

$
3,534


$
19,798Payments on long-term obligations


(13,164
)


(14,089
)Returns of capital to minority interest holders


(274
)


(817
)Distributions to Company members


(16,340
)


(36,013
)Net cash used in financing activities


(26,244
)


(31,121
)INCREASE (DECREASE) IN CASH


4,788



(2,758
)CASH, beginning of period


3,527



6,285CASH, end of period

$
8,315


$
3,527SUPPLEMENTAL INFORMATION:Cash paid for interest

$
13,441


$
12,814Cash paid for income taxes


2,365



2,375Noncash transactions:Noncash assets contributed by Members (note 3)






25,930Asset acquired under capital leases


2,675



1,840  28




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
 Notes to
    Consolidated Financial Statements
    FOR THE YEARS ENDED JUNE 30, 2009 AND 2008  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Description
    of Business
          Basis of
    Accounting
    Principles
    of Consolidation
   29




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##### Table of Contents



Use of
    Estimates
    Recently
    Adopted Accounting Pronouncements
  Fair Value Measurements,
  The Fair Value Option
    for Financial Assets and Financial Liabilities
  Subsequent Events,
  Recently
    Issued Accounting Pronouncements
  Business
    Combinations
  Non-controlling
    Interests in Consolidated Financial Statements  an
    amendment of ARB No. 51,
 30




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##### Table of Contents



Accounting
    for Transfers of Financial Assets, an amendment of FASB
    Statement No. 140, Amendments to FASB
    Interpretation No. 46(R),
  The FASB Accounting Standards
    CodificationTM TM
  Cash
    Equivalents
    Patient
    Receivables
    2009

2008Commercial and managed care providers


65
%


69
%Government-related programs


16
%


18
%Self-pay patients


19
%


13
%100
%


100
%     Supplies
   31




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##### Table of Contents



Property
    and Equipment
    Investments
    in Unconsolidated Affiliates
    Intangible
    Assets and Goodwill
    Impairment
    of Long-Lived Assets
    Fair
    Value of Financial Instruments
     32




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##### Table of Contents



Revenue
    Recognition
              Equity in
    Earnings of Unconsolidated Affiliates
    Income
    Taxes
      Accounting for
    Uncertainty in Income Taxes- an interpretation of FASB Statement
    No. 109, Accounting for Income Taxes Accounting
    for Contingencies
   33




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##### Table of Contents



Commitments
    and Contingencies
    2.
    PROPERTY
    AND EQUIPMENT    EstimatedUseful Lives


2009


2008Buildings and leasehold improvements


5-25 years


$
114,414


$
110,629Equipment


3-15 years



70,405



68,405Furniture and fixtures


5-15 years



10,190



8,880Construction in progress






1,536



124196,545



188,038Less accumulated depreciation and amortization






(54,942
)


(39,627
)Net property and equipment





$
141,603


$
148,411     2009


2008Buildings

$
81,271


$
81,112Equipment and furniture


16,591



16,16397,862



97,275Less accumulated amortization


(20,584
)


(15,823
)Net property and equipment under capital leases

$
77,278


$
81,452   3.
    CAPITAL
    CONTRIBUTIONS BY MEMBERS      Ownership

Net AssetsInvestee

Percentage

Contributed

Effective DateArlington Surgicare Partners, Ltd. (Arlington)


50.1
%

$
12,683


July 1, 2007Rockwall Ambulatory Surgery Center, L.L.P. (Rockwall)


50.1
%


3,766


July 1, 2007Metroplex Surgicare Partners, Ltd. (Metroplex)


50.1
%


9,438


June 30, 2008    34




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##### Table of Contents



Arlington


Rockwall


MetroplexCurrent assets

$
2,955


$
1,250


$
2,002Property and equipment


4,196



805



1,436Goodwill


11,912



8,254



8,424Other noncurrent assets


164



20



25Total assets acquired


19,227



10,329



11,887Current liabilities


2,360



905



1,172Long-term debt


3,412



5,606



267Other noncurrent liabilities






8



Total liabilities assumed


5,772



6,519



1,439Minority interests


772



44



1,010Net assets acquired

$
12,683


$
3,766


$
9,438  35




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##### Table of Contents



4.
    INVESTMENTS
    IN SUBSIDIARIES AND UNCONSOLIDATED AFFILIATES    Percentage OwnedJune 30,

June 30,Legal Name

Facility

City

2009

2008Consolidated 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


62.6



56.9Dallas Surgical Partners, L.L.P.

Texas Surgery Center

Dallas


62.6



56.9Dallas Surgical Partners, L.L.P.

Physicians Day Surgery Center

Dallas


62.6



56.9Denton 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


50.3



50.1Lewisville Surgicare Partners, Ltd.

Baylor Surgicare at Lewisville

Lewisville


53.1



52.8MSH Partners, L.P.

Mary Shiels Hospital

Dallas


42.4



56.9North Central Surgical Center, L.L.P.

North Central Surgery Center

Dallas


32.2



28.9North Garland Surgery Center, L.L.P.

North Garland Surgery Center

Garland


52.4



52.4Rockwall/Heath Surgery Center, L.L.P.

Baylor Surgicare at Heath

Heath


50.1



50.1Trophy Club Medical Center, L.P.

Trophy Club Medical Center

Fort Worth


52.5



50.5Valley View Surgicare Partners, Ltd.

Baylor Surgicare at Valley View

Dallas


50.1



50.1Baylor Surgical Hospital of Fort Worth Surgicare Partners,
    Ltd.

Fort Worth

Fort Worth


50.2



50.1Arlington Surgicare Partners, Ltd.

Surgery Center of Arlington

Arlington


50.1



50.1Rockwall Ambulatory Surgery Center, L.L.P.

Rockwall Surgery Center

Rockwall


50.1



50.1Baylor Surgicare at Plano, L.L.C.

Baylor Surgicare at Plano

Plano


50.1



50.1Metroplex Surgicare Partners, Ltd.

Metroplex Surgicare

Bedford


50.1



50.1Arlington Orthopedic and Spine Hospitals, LLC

Arlington Hospital

Arlington


50.1



50.1Baylor Surgicare at Granbury, LLC

Granbury Surgical Plaza

Granbury


50.6



Unconsolidated affiliates:Denton Surgicare Real Estate, Ltd.

(2)

n/a


49.0



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

Irving-Coppell Surgical Hospital

Irving


18.3



18.4MCSH Real Estate Investors, Ltd.

(2)

n/a


2.0



2.0     (1)
    
    List excludes holding companies, which are wholly owned by the
    Company and hold the Companys investments in the
    Facilities.(2)
    
    These entities are not surgical facilities and do not have
    ownership in any surgical facilities.    
    Net payments made for the year ended June 30, 2008 for the
    purchase of additional interests in University Surgical Partners
    of Dallas, L. L. P. (USPD) totaling approximately $3,774,000.
    USPD consists of the following facilities: Baylor Surgicare,
    Texas Surgery Center, and Physicians Day Surgery Center.
    Net proceeds received for the year ended June 20, 3009 from
    sales of additional interests in MSH Partners, L.P. (Mary Shiels
    Hospital) totaling approximately $1,983,000.
    Payments made of $3,579,000 and proceeds received of $5,306,000
    for the year ended June 30, 2009, and payments made of
    $1,538,000 and proceeds received of $952,000 for the year ended
    June 30, 2008, related 36




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##### Table of Contents



to other transactions, primarily purchases and sales of
    individual partnership units with physicians who invest in the
    facilities.      Granbury Surgical PlazaCurrent assets

$
2,454Property and equipment


2,847Goodwill


3,916Long-term assets


14Total assets acquired


9,231Current liabilities


882Long-term liabilities


1,776Long-term debt


5,768Total liabilities assumed


8,426Net assets acquired

$
805     5.
    GOODWILL
    AND INTANGIBLE ASSETS    2009


2008Goodwill

$
136,119


$
130,137Other intangible assets


1,184



1,182Total

$
137,303


$
131,319  37




---



##### Table of Contents



Balance, July 1, 2007

$
92,332Additions:Contribution of Arlington (note 3)


11,912Contribution of Rockwall (note 3)


8,254Contribution of Metroplex (note 3)


8,317Acquisition of Plano


4,299Purchase of additional interests in USPD


3,360Other


1,663Balance, June 30, 2008


130,137Additions:Acquisition of Granbury


3,916Purchase of additional interests in USPD


1,121Additional contribution from BHS for the Metroplex acquisition


107Other


838Balance, June 30, 2009

$
136,119       June 30, 2009Gross Carrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Debt issue costs

$
84


$
(50
)

$
34Indefinite useful lives:Management contracts


1,150







1,150Total intangible assets

$
1,234


$
(50
)

$
1,184   June 30, 2008Gross Carrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Debt issue costs

$
79


$
(47
)

$
32Indefinite useful lives:Management contracts


1,150







1,150Total intangible assets

$
1,229


$
(47
)

$
1,182    38




---



##### Table of Contents



6.
    LONG TERM
    OBLIGATIONS    2009


2008Capital lease obligations (Note 7)

$
91,679


$
92,044Notes payable to financial institutions


41,534



43,659Total long-term obligations


133,213



135,703Less current portion


(12,856
)


(12,057
)Long-term obligations, less current portion

$
120,357


$
123,646     2010





$
10,0152011






9,6672012






8,7512013






4,3682014






3,103Thereafter






5,630Total long-term obligations





$
41,534       7.
    LEASES      Capital


OperatingLeases


LeasesYear ending June 30:2010

$
13,069


$
10,2722011


12,517



8,9962012


12,124



8,9252013


11,922



8,2592014


11,671



8,007Thereafter


151,961



74,057Total minimum lease payments


213,264


$
118,516Amount representing interest


(121,585
)Total principal payments

$
91,679  39




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##### Table of Contents



8.
    RELATED-PARTY
    TRANSACTIONS          9.
    COMMITMENTS
    AND CONTINGENCIES  Financial
    Guarantees
    Litigation
    and Professional Liability Claims
   40




---



##### Table of Contents



10.
    SUBSEQUENT
    EVENTS     41




---



##### Table of Contents



(4) 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
    Form 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 Exhibit 3.1(A) 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
    Exhibit 3.1(B) 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)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.(1)10
.2

Amendment No. 1 to that certain Credit Agreement dated as
    of April 19, 2007, among United Surgical Partners
    International, Inc., USPI Holdings, Inc., 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 Current Report on
    Form 8-K
    filed with the Commission on August 4, 2009 and
    incorporated herein by reference).(1)10
.3

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.(1)10
.4

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
.5

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
.6

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
.7

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
.8

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
.9

Employment Agreement, dated as of April 21, 2009, by and
    between the Company and Philip A. Spencer.(2)(3)10
.10

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
.11

First Amendment to the USPI Group Holdings, Inc. 2007 Equity
    Incentive Plan (previously filed as an exhibit to the
    Companys Current Report on
    Form 10-K
    filed with the Commission on February 26, 2009 and
    incorporated herein by reference).(1)(3)10
.12

Amended and Restated Deferred Compensation Plan (previously
    filed as an exhibit to the Companys Current Report on
    Form 10-K
    filed with the Commission on February 26, 2009 and
    incorporated herein by reference).(1)(3)10
.13

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 25, 2011/s/  William
    H. WilcoxWilliam
    H. Wilcox

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

February 25, 2011/s/  Mark
    A. KopserMark
    A. Kopser

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

February 25, 2011/s/  J.
    Anthony MartinJ.
    Anthony Martin

Vice President, Corporate Controller And Chief Accounting
    Officer (Principal Accounting Officer)

February 25, 2011*Joel
    T. Allison

Director

February 25, 2011*Michael
    E. Donovan

Director

February 25, 2011*John
    C. Garrett, M.D.

Director

February 25, 2011*D.
    Scott Mackesy

Director

February 25, 2011*James
    Ken Newman

Director

February 25, 2011*Boone
    Powell, Jr.

Director

February 25, 2011 IV-3




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##### Table of Contents



Signature

Title

Date*Paul
    B. Queally

Director

February 25, 2011*Raymond
    A. Ranelli

Director

February 25, 2011     *
    
    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
   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
    Form 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 Exhibit 3.1(A) 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
    Exhibit 3.1(B) 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)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.(1)10
.2

Amendment No. 1 to that certain Credit Agreement dated as
    of April 19, 2007, among United Surgical Partners
    International, Inc., USPI Holdings, Inc., 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 Current Report on
    Form 8-K
    filed with the Commission on August 4, 2009 and
    incorporated herein by reference).(1)10
.3

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.(1)10
.4

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
.5

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
.6

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
.7

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
.8

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
.9

Employment Agreement, dated as of April 21, 2009, by and
    between the Company and Philip A. Spencer.(2)(3)10
.10

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-5




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##### Table of Contents



ExhibitNumber

Description10
.11

First Amendment to the USPI Group Holdings, Inc. 2007 Equity
    Incentive Plan (previously filed as an exhibit to the
    Companys Current Report on
    Form 10-K
    filed with the Commission on February 26, 2009 and
    incorporated herein by reference).(1)(3)10
.12

Amended and Restated Deferred Compensation Plan (previously
    filed as an exhibit to the Companys Current Report on
    Form 10-K
    filed with the Commission on February 26, 2009 and
    incorporated herein by reference).(1)(3)10
.13

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