##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549Form 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, 2008
  Commission file
    No. 333-144337
 UNITED SURGICAL PARTNERS
    INTERNATIONAL, INC.
 (Exact name of Registrant as
    specified in its charter)
  Delaware(State of
    Incorporation)

75-2749762(I.R.S. Employer
    Identification No.)15305 Dallas Parkway, Suite 1600
    Addison, Texas(Address of principal
    executive offices)

75001(Zip
    Code)   (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-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.
    2008 ANNUAL REPORT ON
    FORM 10-K
    TABLE OF CONTENTS
   
 PART IItem 1.


Business


3Item 1A.


Risk Factors


26Item 1B.


Unresolved Staff Comments


39Item 2.


Properties


39Item 3.


Legal Proceedings


39Item 4.


Submission of Matters to a Vote of Security
    Holders


39PART IIItem 5.


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


39Item 6.


Selected Financial Data


40Item 7.


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


41Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


72Item 8.


Financial Statements and Supplementary Data


72Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


73Item 9A(T).


Controls and Procedures


73Item 9B.


Other Information


74PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


75Item 11.


Executive Compensation


77Item 12.


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


87Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


88Item 14.


Principal Accounting Fees and Services


91PART IVItem 15


Exhibits, Financial Statement Schedules


92EX-10.10EX-10.11EX-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.
 PART I  Item 1.
    Business  General
  not-for-profit
     3




---



##### Table of Contents



not-for-profit
  The
    Merger Transaction
    Form 10-K, period-to-period
  Available
    Information
  1-800-SEC-0330 http://www.sec.gov. http://www.unitedsurgical.com Form 10-K, Form 10-Q, Form 8-K Form 10-K.
  Industry
    Background
   4




---



##### Table of Contents



United
    States
      not-for-profit not-for-profit not-for-profit
  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
   5




---



##### Table of Contents



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
  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. 6




---



##### Table of Contents



Enhance
    operating efficiencies
    Recent
    Developments
  not-for-profit not-for-profit
  Operations
  Operations
    in the United States
  not-for-profit
 7




---



##### Table of Contents



day-to-day
    day-to-day
    Strategic
    Relationships
  not-for-profit not-for-profit
   8




---



##### Table of Contents



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




---



##### Table of Contents



Case
    Mix
    Specialty

U.S.


U.K.Orthopedic


22
%


24
%Pain management


19



2Gynecology


4



7
(1)General surgery


5



14Ear, nose and throat


8



3Gastrointestinal


18



2Cosmetic surgery


3



18Ophthalmology


11



2Other


10



28Total


100
%


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

U.S.


U.K.Private insurance


66
%


60
%Self-pay


3



28Government


26
(1)


8Other


5



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 11%
    for Medicare and 1% 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


21Centura Health

Colorado


1
(a)Covenant Health:

Eastern Tennessee


2INTEGRIS Health

Oklahoma


3Legacy Health System

Portland, Oregon


1McLaren Health Care Corporation

Michigan


4Memorial Hermann Healthcare System

Houston, Texas


16Meridian 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


1Multi-Market Systems:Adventist Health System:

10 states(b)


2Adventist Hinsdale Hospital

Hinsdale, IllinoisHuguley Memorial Medical Center

Fort Worth, TexasAscension Health:

17 states and D.C.(c)


11Carondelet Health System (1 facility)

Blue Springs, MissouriSt. Thomas Health Services System (7 facilities)

Middle TennesseeSt. Vincent Health (1 facility)

IndianaSeton Healthcare Network (2 facilities)

Austin, TexasBon Secours Health System:

Seven states(d)


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, VirginiaCalifornia, Arizona,Catholic Healthcare West:

Nevada


12Mercy Hospital of Folsom (1 facility)

Sacramento, CaliforniaMercy Medical Center (3 facilities)

Redding, CaliforniaMercy San Juan Medical Center (1 facility)

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

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

Phoenix, ArizonaSt. Rose Dominican Hospital (2 facilities)

Las Vegas, NevadaCHRISTUS Health:

Seven states(e)


5CHRISTUS Health Central Louisiana (1 facility)

Alexandria, LouisianaCHRISTUS Santa Rosa Health Corporation (2 facilities)

San Antonio, TexasCHRISTUS Spohn Health System (2 facilities)

Corpus Christi, TexasProvidence Health System:

Five western states(f)


2Providence Holy Cross Health Center

Santa Clarita, CaliforniaProvidence Holy Cross Medical Center

Mission Hills, CaliforniaTotals




99     (a)
    
    We acquired ownership in two additional facilities with Centura
    effective in January 2009. 11




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##### Table of Contents



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

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

USPIUnited StatesAtlantaEast West Surgery Center, Austell, Georgia


9/1/00
(2)


3



68
%Lawrenceville Surgery Center, Lawrenceville, Georgia


8/1/01



2



15Northwest Georgia Surgery Center, Marietta, Georgia


11/1/00
(2)


3



15Orthopaedic South Surgical Center, Morrow, Georgia


11/28/03



2



15Resurgens Surgical Center, Atlanta, Georgia


10/1/98
(2)


4



48Roswell Surgery Center, Roswell, Georgia


10/1/00
(2)


3



15Austin*

Cedar Park Surgery Center, Cedar Park, Texas


11/22/05



2



26*

Northwest Surgery Center, Austin, Texas(1)


5/30/07



6



33Texan Surgery Center, Austin, Texas


6/1/03



3



55Chicago*

Hinsdale Surgical Center, Hinsdale, Illinois


5/1/06



4



22*

Same Day Surgery 25 East, Chicago, Illinois


10/15/04



4



46*

Same Day Surgery Elmwood Park, Elmwood Park, Illinois


10/15/04



3



29*

Same Day Surgery North Shore, Evanston, Illinois


10/15/04



2



34*

Same Day Surgery River North, Chicago, Illinois


10/15/04



4



34ClevelandNortheast Ohio Surgery Center, Cleveland, Ohio


4/19/06
(5)


3



49The Surgery Center Pearl, Middleburg Heights, Ohio


1/28/08



2



50Corpus Christi*

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


5/1/02



5



30*

Shoreline Surgery Center, Corpus Christi, Texas


7/1/06



4



26Dallas/Fort Worth*

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


9/30/02



11



25*

Baylor Surgicare at Bedford, Bedford, Texas(1)


12/18/98



5



32*

Baylor Surgicare, Dallas, Texas(1)


6/1/99



6



31*

Baylor Surgicare at Denton, Denton, Texas(1)


2/1/99



4



25*

Baylor Surgicare at Garland, Garland, Texas


2/1/99



4



35*

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 Plano, Plano, Texas


10/1/07



1



29 12




---



##### Table of Contents



Date of

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

USPI*

Baylor Surgicare at North Garland, Garland, Texas


5/1/05



6



26*

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


5/3/04



6



33*

Bellaire Surgery Center, Fort Worth, Texas


10/15/02



4



25*

Doctors Surgery Center at Huguley, Burleson, Texas


2/14/06



3



25*

Heath Surgicare, Rockwall, Texas(1)


11/1/04



3



25*

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


10/20/03



5



9*

Mary Shiels Hospital, Dallas, Texas(3)


4/1/03



5



31*

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


12/18/98



8



31*

North Central Surgery Center, Dallas, Texas


12/12/05



5



16North Texas Surgery Center, Dallas, Texas(1)


12/18/98



4



59Park Cities Surgery Center, Dallas, Texas(1)


6/9/03



4



55*

Physicians Day Surgery Center, Dallas, Texas


10/12/00



4



31Physicians Surgical Center of Fort Worth, Fort Worth,
    Texas


7/13/04



4



28Physicians Surgical Center of Fort Worth  Campus
    II, Fort Worth, Texas


5/1/07



2



28*

Rockwall Surgery Center, Rockwall, Texas


09/1/06



3



39*

Surgery Center of Arlington, Arlington, Texas(1)


2/1/99



6



26*

Texas Surgery Center, Dallas, Texas(1)


6/1/99



4



31*

Valley View Surgery Center, Dallas, Texas


12/18/98



4



32Houston*

Doctors Outpatient Surgicenter, Pasadena, Texas(1)


9/1/99



5



46*

Kingsland Surgery Center, Katy, Texas


12/31/08



4



29*

KSF Orthopaedic Surgery Center, Houston, Texas(1)


5/1/07



3



48*

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


9/1/07



6



27*

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


1/19/07



4



10*

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


9/1/04



5



10*

Memorial Hermann Surgery Center  Red Oak, Houston,
    Texas(1)


4/19/06
(5)


5



26*

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


9/21/06



6



9*

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


9/21/06



4



10*

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


1/17/07



5



9*

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


8/9/05



4



11*

North Houston Endoscopy and Surgery, Houston, Texas


10/1/08



2



26*

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


12/28/02



4



13*

TOPS Surgical Specialty Hospital, Houston, Texas(3)


7/1/99



7



41*

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


9/1/99



3



35West Houston Ambulatory Surgical Associates, Houston, Texas


4/19/06
(5)


5



51Kansas City*

Briarcliff Surgery Center, Kansas City, Missouri


6/1/05



2



29*

Creekwood Surgery Center, Kansas City, Missouri(1)


7/29/98



4



36 13




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##### Table of Contents



Date of

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

USPI*

Liberty Surgery Center, Liberty, Missouri


6/1/05



2



30*

Saint Marys Surgical Center, Blue Springs, Missouri


5/1/05



4



21Knoxville*

Parkwest Surgery Center, Knoxville, Tennessee


7/26/01



5



22*

Physicians Surgery Center of Knoxville, Knoxville,
    Tennessee


1/1/08



6



26Lansing*

Genesis Surgery Center, Lansing, Michigan


11/1/06



4



22*

Lansing Surgery Center, Lansing, Michigan


11/1/06



4



22Las Vegas*

Durango Outpatient Surgery Center, Las Vegas, Nevada


12/9/08



4



30*

Parkway Surgery Center, Henderson, Nevada


8/3/98



5



28Los AngelesCoast Surgery Center of South Bay, Torrance, California(1)


12/18/01



3



24Pacific Endo-Surgical Center, Torrance, California


8/1/03



1



60*

San Fernando Valley Surgery Center, Mission Hills,
    California


11/1/04



4



32San Gabriel Valley Surgical Center, West Covina, California


11/16/01



3



51*

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


3/7/06



3



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


11/14/02



4



57Nashville*

Baptist Ambulatory Surgery Center, Nashville, Tennessee


3/1/98
(2)


6



25*

Baptist Plaza Surgicare, Nashville, Tennessee


12/3/03



9



21*

Center for Spinal Surgery, Nashville, Tennessee(3)


12/31/08



6



15*

Middle Tennessee Ambulatory Surgery Center, Murfreesboro,
    Tennessee


7/29/98



4



37*

Northridge Surgery Center, Nashville, Tennessee


4/19/06
(5)


5



29*

Physicians Pavilion Surgery Center, Smyrna, Tennessee


7/29/98



4



47*

Saint Thomas Surgicare, Nashville, Tennessee


7/15/02



5



20New Jersey*

Central Jersey Surgery Center, Eatontown, New Jersey


11/1/04



3



35*

Northern Monmouth Regional Surgery Center, Manalapan, New Jersey


7/10/06



4



35University SurgiCenter, East Brunswick, New Jersey


6/26/02



5



17*

Shore Outpatient Surgicenter, Lakewood, New Jersey


11/1/04



3



56*

Shrewsbury Surgery Center, Shrewsbury, New Jersey


4/1/99



4



14Suburban Endoscopy Services, Verona, New Jersey


4/19/06
(5)


2



51*

Toms River Surgery Center, Toms River, New Jersey


3/15/02



4



20Oklahoma City*

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


8/2/04



4



24*

Southwest Orthopaedic Ambulatory Surgery Center, Oklahoma City,
    Oklahoma


8/2/04



2



24 14




---



##### Table of Contents



Date of

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

USPI*

Specialists Surgery Center, Oklahoma City, Oklahoma(1)


3/27/02



3



25OrlandoSand Lake Surgery Center, Orlando, Florida


2/18/08



3



33University Surgical Center, Winter Park, Florida


10/15/98



3



40Phoenix*

Arizona Orthopedic Surgical Hospital, Chandler, Arizona(3)


5/19/04



6



35*

Desert Ridge Outpatient Surgery Center, Phoenix, Arizona


3/30/07



4



33Metro Surgery Center, Phoenix, Arizona


4/19/06
(5)


4



77Physicians Surgery Center of Tempe, Tempe, Arizona


4/19/06
(5)


2



10*

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


9/2/03



8



31Surgery Center of Peoria, Peoria, Arizona


4/19/06
(5)


3



55Surgery Center of Scottsdale, Scottsdale, Arizona


4/19/06
(5)


4



53Surgery Center of Gilbert, Gilbert, Arizona


4/19/06
(5)


3



21*

Warner Outpatient Surgery Center, Chandler, Arizona


7/1/99



4



28Redding*

Court Street Surgery Center, Redding, California


4/19/06
(5)


2



31*

Mercy Surgery Center, Redding, California


3/1/08



4



31*

Redding Surgery Center, Redding, California


4/19/06
(5)


2



31Richmond*

Memorial Ambulatory Surgery Center, Mechanicsville, Virginia


12/30/05



5



23*

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


11/29/06



4



20Sacramento*

Folsom Outpatient Surgery Center, Folsom, California


6/1/05



2



33*

Roseville Surgery Center, Roseville, California


7/1/06



2



31San Antonio*

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


12/1/04



3



59*

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


5/3/04



5



31San Antonio Endoscopy Center, San Antonio, Texas


5/1/05



1



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


1/1/06



2



64Chesterfield Surgery Center, Chesterfield, Missouri(1)


1/1/06



2



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


5/1/07



2



32Manchester Surgery Center, St. Louis, Missouri


2/1/07



3



66Mason Ridge Surgery Center, St. Louis, Missouri(1)


2/1/07



2



57Mid Rivers Surgery Center, Saint Peters, Missouri


1/1/06



2



66Old Tesson Surgery Center, St. Louis, Missouri


8/1/08



3



63Olive Surgery Center, St. Louis, Missouri


1/1/06



2



62Riverside Ambulatory Surgery Center, Florissant, Missouri


8/1/06



2



65South County Outpatient Endoscopy Services, St. Louis,
    Missouri


10/1/08



2



25Sunset 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



65 15




---



##### Table of Contents



Date of

NumberAcquisition

of

Percentageor

Operating

Owned byFacility

Affiliation

Rooms

USPIWebster Surgery Center, Webster Groves, Missouri(1)


3/1/07



2



30Additional MarketsAustintown Ambulatory Surgery Center, Austintown, Ohio


4/12/02



5



65*

Beaumont Surgical Affiliates, Beaumont, Texas(1)


4/19/06
(5)


6



25*

Bon Secours Surgery Center at Harbour View, Suffolk, Virginia


11/12/07



6



19*

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


5/30/07



2



30Chico Surgery Center, Chico, California


4/19/06
(5)


3



89*

CHRISTUS Cabrini Surgery Center, Alexandria, Louisiana


6/22/07



4



25*

Crown Point Surgical Center, Parker, Colorado


10/1/08



4



40Day-Op Center of Long Island, Mineola, New York(4)


12/4/98



4



99Destin Surgery Center, Destin, Florida


9/25/02



2



30Great Plains Surgery Center, Lawton, Oklahoma


4/19/06
(5)


2



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


10/11/05



4



30Idaho Surgery Center, Caldwell, Idaho


4/19/06
(5)


3



19*

Mary Immaculate Ambulatory Surgical Center, Newport News,
    Virginia


7/19/04



3



16*

McLaren ASC of Flint, Flint, Michigan


8/2/07



4



43*

Mountain Empire Surgery Center, Johnson City, Tennessee


2/20/00
(2)


4



18New Horizons Surgery Center, Marion, Ohio


4/19/06
(5)


2



10New Mexico Orthopaedic Surgery Center, Albuquerque, New Mexico


2/29/00
(2)


6



51*

Northwest Surgery Center, Portland, Oregon


12/1/08



3



27Reading Surgery Center, Spring Township, Pennsylvania


7/1/04



3



57Redmond Surgery Center, Redmond, Oregon


4/19/06
(5)


2



65*

Saint Johns Outpatient Surgery Center, Oxnard, California


12/5/05



4



34*

Scripps Encinitas Surgery Center, Encinitas, California


2/6/08



3



18Surgi-Center of Central Virginia, Fredericksburg, Virginia


11/29/01



4



80Surgery Center of Canfield, Canfield, Ohio(1)


4/19/06
(5)


3



23Surgery Center of Columbia, Columbia, Missouri(1)


8/1/06



2



61Surgery Center of Fort Lauderdale, Fort Lauderdale,
    Florida


11/1/04



4



70Templeton Surgery Center, Templeton, California


1/20/07



2



65*

Terre Haute Surgical Center, Terre Haute, Indiana


12/19/07



2



34Teton Outpatient Services, Jackson, Wyoming(1)


8/1/98
(2)


2



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


4/19/06
(5)


2



20Tulsa Outpatient Surgery Center, Tulsa, Oklahoma


11/1/04



4



30*

Utica Surgery and Endoscopy Center, Utica, Michigan


4/1/07



3



33Victoria Ambulatory Surgery Center, Victoria, Texas


4/19/06
(5)


2



59United KingdomParkside Hospital, Wimbledon


4/6/00



4



100Holly House Hospital, Essex


4/6/00



3



100Highgate Private Clinic, Highgate


4/29/03



3



100  16




---



##### Table of Contents



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


Number ofHospital



Opening


OperatingFacility Location

Partner

Type

Date


RoomsSt. Louis, Missouri

SSM

Surgery Center


Q309



3Turnersville, New Jersey

Kennedy

Surgery Center


Q309



3Clarkston (Detroit), Michigan

McLaren

Surgery Center


Q209



4Arlington, Texas

Baylor

Hospital


Q110



6     Marketing
    Competition
   17




---



##### Table of Contents



not-for-profit
      Employees
    Professional
    and General Liability Insurance
    Government
    Regulation
  United
    States
  General
   18




---



##### Table of Contents



Licensure
    and
    certificate-of-need
    regulations
         19




---



##### Table of Contents



Medicare
    and Medicaid Participation in Short Stay Surgical
    Facilities
           20




---



##### Table of Contents



Federal
    Anti-Kickback Law
    
    referring patients for services or items payable under a federal
    healthcare program, including Medicare or Medicaid, or
    purchasing, leasing or ordering, or arranging for or
    recommending purchasing, leasing or ordering, any good,
    facility, service or item for which payment may be made in whole
    or in part by a federal healthcare program.       21




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22




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##### Table of Contents



Federal
    Physician Self-Referral Law
       23




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##### Table of Contents



False and
    Other Improper Claims
        State
    Anti-Kickback and Physician Self-Referral Laws
    self-referral
 24




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##### Table of Contents



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



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.
  We
    depend on payments from third party payors, including government
    healthcare programs. If these payments are reduced, our revenue
    will decrease.
   26




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##### Table of Contents



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.
        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; 27




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##### Table of Contents




    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;
    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; 28




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##### Table of Contents




    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 strategic
    alliances with these
    not-for-profit
    healthcare systems, or enter into new alliances, we may be
    unable to implement our business strategies
    successfully.
  not-for-profit not-for-profit not-for-profit not-for-profit not-for-profit not-for-profit
 29




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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.
    not-for-profit not-for-profit
  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.
    Our
    surgical facilities face competition for patients from other
    health care providers.
  not-for-profit and/or
 30




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##### Table of Contents



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; and
    the possibility of an economic downturn in the United Kingdom,
    which could adversely affect the ability or willingness of
    employers and individuals in these countries to purchase private
    health insurance.    Our
    revenues may be reduced by changes in payment methods or rates
    under the Medicare or Medicaid programs.
    Efforts
    to regulate the construction, acquisition or expansion of
    healthcare facilities could prevent us from acquiring additional
    surgical facilities, renovating our existing facilities or
    expanding the breadth of services we offer.
   31




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##### Table of Contents



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;
    billing for services;
    maintenance and protection of records; and
    environmental protection.     32




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##### Table of Contents



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.
         33




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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.
        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.   34




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##### Table of Contents



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.
      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.   35




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##### Table of Contents



Future
    legislation could restrict our ability to operate our domestic
    surgical hospitals.
           36




---



##### Table of Contents



If we
    become subject to significant legal actions, we could be subject
    to substantial uninsured liabilities.
    If we
    are unable to effectively compete for physicians, strategic
    relationships, acquisitions and managed care contracts, our
    business could be adversely affected.
  not-for-profit
  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.
     37




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##### Table of Contents



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.
    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.
     38




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##### Table of Contents



Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities   39




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##### Table of Contents



Item 6.
    Selected
    Financial Data      Successor



PredecessorPeriod from



Period fromApril 19



January 1Year Ended


through



throughDecember 31,


December 31,



April 18,


Years Ended December 31,2008


2007



2007


2006


2005


2004Consolidated Statement of Operations Data:Total revenues

$
642,223


$
452,488



$
191,355


$
567,374


$
458,569


$
372,324Equity in earnings of unconsolidated affiliates


47,042



23,867




9,906



31,568



23,998



18,626Operating expenses excluding depreciation and amortization


(452,752
)


(313,921
)



(162,497
)


(405,467
)


(318,482
)


(259,050
)Depreciation and amortization


(36,757
)


(26,688
)



(12,426
)


(34,516
)


(30,203
)


(26,038
)Operating income


199,756



135,746




26,338



158,959



133,882



105,862Other income (expense):Interest income


3,228



3,208




933



4,067



4,455



1,591Interest expense


(85,649
)


(67,862
)



(9,521
)


(32,604
)


(27,391
)


(26,344
)Loss on early retirement of debt











(2,435
)


(14,880
)






(1,635
)Other, net


(1,790
)


(442
)



798



1,773



532



247Income before minority interests


115,545



70,650




16,113



117,315



111,478



79,721Minority interests in income of consolidated subsidiaries


(55,134
)


(45,120
)



(18,866
)


(54,632
)


(38,405
)


(30,125
)Income tax expense


(22,334
)


(14,611
)



(4,145
)


(22,712
)


(26,089
)


(17,595
)Income (loss) from continuing operations


38,077



10,919




(6,898
)


39,971



46,984



32,001Income (loss) from discontinued operations, net of tax


(563
)


(2,190
)



(251
)


(5,725
)


310



54,174Net income (loss)

$
37,514


$
8,729



$
(7,149
)

$
34,246


$
47,294


$
86,175Other Data:Number of facilities operated as of the end of period(a)


164



155




149



141



99



87Cash flows from operating activities

$
91,210


$
67,358



$
29,099


$
101,475


$
107,031


$
80,558   Successor



PredecessorAs of December 31,



As of December 31,2008


2007



2006


2005


2004Consolidated Balance Sheet Data:Working capital (deficit)

$
(38,838
)

$
(12,569
)


$
(41,834
)

$
90,946


$
87,178Cash and cash equivalents


49,435



76,758




31,740



130,440



93,467Total assets


2,268,163



2,277,393




1,231,856



1,028,841



922,304Total debt


1,097,947



1,098,062




347,330



286,486



288,485Total stockholders equity


764,137



806,806




599,274



531,050



474,609     (a)
    
    Not derived from audited financial statements. 40




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation    Overview
  not-for-profit
  not-for-profit
      Critical
    Accounting Policies and Estimates
    Consolidation
   41




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##### Table of Contents



Consolidation of Variable Interest Entities (as amended)
    Revenue
    Recognition and Accounts Receivable
  Revenue Recognition in Financial
    Statements
  
    Existence of persuasive evidence that an arrangement exists;
    Delivery has occurred or services have been rendered;
    The sellers price to the buyer is fixed or
    determinable; and
    Collectibility is reasonably assured.     42




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##### Table of Contents



Income
    Taxes
    Goodwill
    and Intangible Assets
  Accounting for Goodwill
    and Intangible Assets
  and/or
 43




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##### Table of Contents



Merger
    Transaction
        
    an investment of cash and rollover equity in the equity of
    Parent by Welsh Carson, management and other equity investors of
    approximately $785.0 million;
    borrowings by the Company of $430.0 million in new senior
    secured credit facilities;
    the issuance by the Company of $240.0 million in aggregate
    principal amount of
    87/8% senior
    subordinated notes, due 2017, and $200.0 million in
    aggregate principal amount of
    91/4%/10% senior
    subordinated toggle notes, due 2017;
    additional borrowings of £10.0 million (approximately
    $19.7 million) by Global Healthcare Partners Limited, which
    was repatriated to the U.S.; and
    approximately $21.9 million of cash on hand.  Acquisitions,
    Equity Investments and Development Projects
    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  44




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##### Table of Contents



(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.    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 million   SalesApril 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.   45




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##### Table of Contents



Effective Date

Facility Location

AmountSeptember 2007

St. Louis, Missouri(1)

$
34.3 millionMay 2007

Houston, Texas(2)


9.0 millionMay 2007

St. Louis, Missouri(2)


28.7 millionMarch 2007

St. Louis, Missouri(2)


7.3 millionFebruary 2007

St. Louis, Missouri(3)


15.9 millionTotal



$
95.2 million     (1)
    
    We acquired additional ownership in five of our existing
    facilities.(2)
    
    We had no previous investment in this facility.(3)
    
    We had no previous investment in these two facilities.    Investments
  Effective Date

Facility Location

AmountSeptember 2007

Houston, Texas(1)

$
5.7 millionApril 2007

Detroit, Michigan(1)


1.5 millionVarious

Various(2)


3.3 million10.5 millionSalesJanuary 2007

Chicago, Illinois


9.8 millionAugust 2007

Oklahoma City, Oklahoma


0.5 million10.3 millionTotal



$
0.2 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)
    
    Represents the net payment of approximately $3.3 million
    related to other purchases and sales of equity interests and
    contributions of cash to equity method investees.   46




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##### Table of Contents



Effective Date

Facility Location

AmountSeptember 2006

Rockwall, Texas(1)

$
10.9 millionAugust 2006

St. Louis, Missouri(2)


16.6 millionJuly 2006

Corpus Christi, Texas(1)


3.8 millionApril 2006

Various(3)


193.1 millionJanuary 2006

St. Louis, Missouri(4)


50.6 millionTotal



$
275.0 million     (1)
    
    We had no previous investment in this facility.(2)
    
    We had no previous investment in these three facilities.(3)
    
    We acquired 100% of the equity interests of Surgis, Inc. a
    privately-held, Nashville-based owner and operator of surgery
    centers. We also assumed approximately $15.6 million of
    debt and other liabilities owed by subsidiaries of Surgis.
    Surgis operated 24 surgery centers and had three additional
    facilities under construction, all of which have opened. We sold
    our interests in a total of four Surgis facilities in 2006 and
    2007.(4)
    
    We had no previous investment in these five facilities. We paid
    $8.3 million of the purchase price in December 2005.    Investments
  Effective Date

Facility Location

AmountJuly 2006

Sacramento, California(1)

$
4.1 millionNovember 2006

Lansing, Michigan(1)


3.7 millionVarious

Various(2)


6.5 million14.3 millionSalesDecember 2006

Spain(3)


19.8 millionTotal



$
5.5 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)
    
    Includes the payment of $3.1 million to sellers based on
    certain financial targets or objectives being met for acquired
    facilities or based upon the resolution of certain contingencies
    and $3.3 million representing the net payment related to
    other purchases and sales of equity interests and contributions
    of cash to equity method investees.(3)
    
    Represents the final payment from the buyers of our Spanish
    operations, which we sold in 2004.   47




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##### Table of Contents



Discontinued
    Operations and Other Dispositions
    Date

Facility Location

Proceeds


Gain (Loss)July 2008

Manitowoc, Wisconsin(1)

$
0.8 million


$
July 2008

Orlando, Florida(1)


0.5 million



(0.4 million
)June 2008

Cleveland, Ohio(2)


1.6 million



(1.0 million
)April 2008

Los Angeles, California(1)






February 2008

Sarasota, Florida(1)


0.5 million



Total



$
3.4 million


$
(1.4 million
)December 2007

Houston, Texas(2)

$



$
(0.6 million
)December 2007

Decatur, Alabama(2)


0.3 million



(2.2 million
)November 2007

Canton, Mississippi(2)






(0.9 million
)September 2007

Atlanta, Georgia(1)


1.8 million



0.5 millionSeptember 2007

Baltimore, Maryland(1)






(1.2 million
)Total



$
2.1 million


$
(4.4 million
)October 2006

Ocean Springs, Mississippi(1)

$
2.0 million


$
August 2006

Phoenix, Arizona(1)


1.3 million



March 2006

Lyndhurst, Ohio(2)


0.4 million



(7.4 million
)February 2006

Chicago, Illinois(1)






Total



$
3.7 million


$
(7.4 million
)     (1)
    
    Because these investments were accounted for under the equity
    method, the results of operations of these facilities are not
    reported as discontinued operations. The gain (loss) on the
    disposal of these facilities is recorded in other income
    (expense) in the accompanying consolidated statements of
    operations.(2)
    
    In accordance with the requirements of Statement of Financial
    Accounting Standards (SFAS) No. 144, Accounting for the
    Impairment or Disposal of Long-Lived Assets, we have
    reclassified our historical results of operations to remove the
    operations of these facilities from the our revenues and
    expenses on the accompanying consolidated statements of
    operations, collapsing the income (loss) related to these
    facilities operations and the our disposal of them into a
    single line, Loss from discontinued operations, net of
    tax.    Date

Facility Location

Proceeds


Gain (Loss)July 2008

Beaumont, Texas

$
1.2 million


$
(0.5 million
)June 2008

Dallas, Texas(1)


2.3 million



(0.9 million
)June 2008

Houston, Texas(2)


0.6 million



March 2008

Redding, California(3)


1.7 million



Total



$
5.8 million


$
(1.4 million
)July 2007

Dallas, Texas(4)

$
3.7 million


$
April 2007

Corpus Christi, Texas(5)


6.1 million



0.9 millionTotal



$
9.8 million


$
0.9 millionJuly 2006

Fort Worth, Texas(1)

$
4.8 million



     (1)
    
    The hospital partner already had an ownership interest in the
    facility and acquired a controlling interest from us in this
    transaction. Additionally, this hospital partner is a related
    party (Note 10). 48




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##### Table of Contents



(2)
    
    Because we are considered the primary beneficiary of this entity
    under FASB Interpretation No. 46, Consolidation of
    Variable Interest Entities (as amended), 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.(3)
    
    We sold a controlling interest in two facilities and gained a
    noncontrolling interest in a third facility in Redding.(4)
    
    The hospital partner already had an ownership interest in these
    two facilities and acquired a controlling interest from us in
    this transaction. Additionally, this hospital partner is a
    related party (Note 10).(5)
    
    We sold a controlling interest in two facilities.  Combination
    of Operating Results
    Predecessor


Successor


CombinedPeriod from


Period from


Year EndedJanuary 1 through


April 19 through


December 31,April 18, 2007


December 31, 2007


2007Revenues:Net patient service revenues

$
170,598


$
402,433


$
573,031Management and contract service revenues


19,142



46,503



65,645Other revenues


1,615



3,552



5,167Total revenues


191,355



452,488



643,843Equity in earnings of unconsolidated affiliates


9,906



23,867



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


53,871



125,648



179,519Medical services and supplies


34,308



77,006



111,314Other operating expenses


31,744



74,335



106,079General and administrative expenses


39,277



29,340



68,617Provision for doubtful accounts


3,297



7,592



10,889Depreciation and amortization


12,426



26,688



39,114Total operating expenses


174,923



340,609



515,532Operating income


26,338



135,746



162,084Interest income


933



3,208



4,141Interest expense


(9,521
)


(67,862
)


(77,383
)Loss on early retirement of debt


(2,435
)






(2,435
)Other, net


798



(442
)


356Total other expense, net


(10,225
)


(65,096
)


(75,321
)Income before minority interests


16,113



70,650



86,763Minority interests in income of consolidated subsidiaries


(18,866
)


(45,120
)


(63,986
)Income (loss) from continuing operations before income taxes


(2,753
)


25,530



22,777Income tax expense


(4,145
)


(14,611
)


(18,756
)Income (loss) from continuing operations


(6,898
)


10,919



4,021Loss from discontinued operations, net of tax


(251
)


(2,190
)


(2,441
)Net income (loss)

$
(7,149
)

$
8,729


$
1,580  49




---



##### Table of Contents



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;
    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 eliminate in consolidation.    Years Ended December 31,Combined2008


2007


2006Net patient service revenues


88
%


89
%


90
%Management and contract service revenues


11



10



9Other revenues


1



1



1Total revenues


100
%


100
%


100
%         Years Ended December 31,Combined2008


2007


2006Management of surgical facilities

$
40,100


$
34,161


$
26,623Contract services provided to physicians, hospitals and related
    entities


32,870



31,484



25,614Total management and contract service revenues

$
72,970


$
65,645


$
52,237     Years Ended December 31,Combined2008


2007


2006United States


81
%


82
%


83
%United Kingdom


19



18



17Total


100
%


100
%


100
%  50




---



##### Table of Contents



Equity in
    Earnings of Unconsolidated Affiliates
    Years Ended December 31,2008


2007


2006Revenues

$
991,566


$
788,931


$
610,384Operating expenses:Salaries, benefits, and other employee costs


245,277



207,154



150,625Medical services and supplies


210,874



166,229



125,981Other operating expenses


246,185



203,841



150,108Depreciation and amortization


48,722



41,057



29,884Total operating expenses


751,058



618,281



456,598Operating income


240,508



170,650



153,786Interest expense, net


(24,107
)


(20,501
)


(14,400
)Other, net


2,962



1,843



282Income before income taxes

$
219,363


$
151,992


$
139,668Long-term debt

$
273,438


$
278,417


$
169,304USPIs equity in earnings of unconsolidated affiliates


47,042



33,773



31,568USPIs imputed weighted average ownership percentage based
    on affiliates pretax income(1)


21.4
%


22.2
%


22.6
%USPIs imputed weighted average ownership percentage based
    on affiliates debt(2)


25.0
%


26.9
%


29.2
%Unconsolidated facilities operated at period end


101



93



80     (1)
    
    Our weighted average percentage ownership in our unconsolidated
    affiliates is calculated as USPIs equity in earnings of
    unconsolidated affiliates divided by the total net income of
    unconsolidated affiliates for each respective period. This is a
    non-GAAP measure but management believes it provides further
    useful information about its involvement in equity method
    investments.(2)
    
    Our weighted average percentage ownership in our unconsolidated
    affiliates is calculated as the total debt of each
    unconsolidated affiliate, multiplied by the percentage ownership
    USPI held in the affiliate as of the end of each respective
    period, divided by the total debt of all of the unconsolidated
    affiliates as of the end of each 51




---



##### Table of Contents



respective period. This percentage is lower at December 31,
    2007 as compared to prior period as a result of our largest U.S.
    facility, in which we own a 25% interest, borrowing to finance a
    major expansion during 2007. This is a non-GAAP measure but
    management believes it provides further useful information about
    its involvement in equity method investments.  Form 10-K
  Results
    of Operations
    Years Ended December 31,Combined2008


2007


2006Total revenues


100
%


100.0
%


100.0
%Equity in earnings of unconsolidated affiliates


7.3



5.2



5.6Operating expenses, excluding depreciation and amortization


(70.5
)


(74.0
)


(71.5
)Depreciation and amortization


(5.7
)


(6.0
)


(6.1
)Operating income


31.1



25.2



28.0Minority interests in income of consolidated subsidiaries


(8.6
)


(9.9
)


(9.6
)Interest and other expense, net


(13.1
)


(11.7
)


(7.4
)Income from continuing operations before income taxes


9.4



3.6



11.0Income tax expense


(3.5
)


(2.9
)


(4.0
)Income from continuing operations


5.9



0.7



7.0Loss from discontinued operations, net of tax


(0.1
)


(0.4
)


(1.0
)Net income


5.8
%


0.3
%


6.0
%   Executive
    Summary
        not-for-profit
 52




---



##### Table of Contents



Systemwide
    Operating Results
  not-for-profit
    
    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; and
    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. 53




---



##### Table of Contents



Year Ended December 31,2008



2007USPI as












CombinedUSPI


Unconsolidated


Consolidation


Reported



USPI


Unconsolidated


Consolidation


USPI asSystem-Wide(1)


Affiliates(2)


Adjustments


Under GAAP



System-Wide(1)


Affiliates(2)


Adjustments


Adjusted(7)Revenues:Net patient service revenues

$
1,558,760


$
(997,228
)

$



$
561,532



$
1,366,154


$
(793,123
)

$



$
573,031Management and administrative services revenues


32,960







40,010
(3)


72,970




31,552







34,093
(3)


65,645Other income


9,890



(2,169
)






7,721




7,203



(2,036
)






5,167Total revenues


1,601,610



(999,397
)


40,010



642,223




1,404,909



(795,159
)


34,093



643,843Equity in earnings (loss) of unconsolidated affiliates


13



(13
)


47,042
(4)


47,042




117



(117
)


33,773
(4)


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


431,943



(247,072
)






184,871




387,915



(208,396
)






179,519Medical services and supplies


324,472



(211,973
)






112,499




278,359



(167,045
)






111,314Other operating expenses


286,243



(218,594
)


40,010
(3)


107,659




255,109



(183,123
)


34,093
(3)


106,079General and administrative expenses


40,155











40,155




43,245











43,245Provision for doubtful accounts


37,093



(29,525
)






7,568




33,082



(22,193
)






10,889Depreciation and amortization


85,526



(48,769
)






36,757




80,130



(41,016
)






39,114Total operating expenses


1,205,432



(755,933
)


40,010



489,509




1,077,840



(621,773
)


34,093



490,160Operating income (loss)


396,191



(243,477
)


47,042



199,756




327,186



(173,503
)


33,773



187,456Interest income


4,915



(1,687
)






3,228




6,969



(2,828
)






4,141Interest expense


(111,452
)


25,803







(85,649
)



(100,701
)


23,318







(77,383
)Other, net


1,172



(2,962
)






(1,790
)



2,199



(1,843
)






356Total other expenses, net


(105,365
)


21,154







(84,211
)



(91,533
)


18,647







(72,886
)Income (loss) before minority interests


290,826



(222,323
)


47,042



115,545




235,653



(154,856
)


33,773



114,570Minority interests in (income) loss of consolidated subsidiaries


(224,850
)






169,716
(5)


(55,134
)



(179,494
)






115,508
(5)


(63,986
)Income (loss) from continuing operations before income taxes


65,976



(222,323
)


216,758



60,411




56,159



(154,856
)


149,281



50,584Income tax expense


(27,899
)


5,565







(22,334
)



(31,857
)


5,575







(26,282
)Income (loss) from continuing operations(6)

$
38,077


$
(216,758
)

$
216,758


$
38,077



$
24,302


$
(149,281
)

$
149,281


$
24,302   54




---



##### Table of Contents



Year Ended December 31, 2006USPI


Unconsolidated


Consolidation


USPI asSystem-Wide(1)


Affiliates(2)


Adjustments


Adjusted(7)Revenues:Net patient service revenues

$
1,120,630


$
(613,289
)

$



$
507,341Management and administrative services revenues


25,613







26,624
(3)


52,237Other income


8,885



(1,089
)






7,796Total revenues


1,155,128



(614,378
)


26,624



567,374Equity in earnings (loss) of unconsolidated affiliates


224



(224
)


31,568
(4)


31,568Operating expenses:Salaries, benefits and other employee costs


310,073



(151,397
)






158,676Medical services and supplies


228,455



(126,555
)






101,900Other operating expenses


205,218



(135,669
)


26,624
(3)


96,173General and administrative expenses


38,338











38,338Provision for doubtful accounts


25,454



(15,562
)






9,892Depreciation and amortization


64,400



(29,884
)






34,516Total operating expenses


871,938



(459,067
)


26,624



439,495Operating income (loss)


283,414



(155,535
)


31,568



159,447Interest income


5,908



(1,841
)






4,067Interest expense


(48,845
)


16,241







(32,604
)Loss on early retirement of debt


(14,880
)










(14,880
)Other, net


2,054



(281
)






1,773Total other expenses, net


(55,763
)


14,119







(41,644
)Income (loss) before minority interests


227,651



(141,416
)


31,568



117,803Minority interests in (income) loss of consolidated subsidiaries


(163,358
)






108,726
(5)


(54,632
)Income (loss) from continuing operations before income taxes


64,293



(141,416
)


140,2941



63,171Income tax expense


(23,961
)


1,122







(22,839
)Income (loss) from continuing operations(6)

$
40,332


$
(140,294
)

$
140,294


$
40,332     (1)
    
    Our systemwide statements of operations treat all of our
    facilities as though they were consolidated subsidiaries. Our
    consolidated systemwide statement of operations is not a measure
    defined under GAAP because it includes the revenues and expenses
    of entities we do not control and thus do not consolidate for
    financial reporting purposes under GAAP. We believe that
    systemwide revenues, expenses, and operating margins are
    important to understanding our business, since these measures
    include the health of the unconsolidated operating entities that
    comprise over 60% of our facilities. For example, these
    facilities growth in revenues directly affects our
    earnings in the form of management fees we earn for operating
    the facilities, as well as indicating the degree to which we are
    growing revenues and leveraging costs at these facilities, which
    are the key drivers of our net income. Our definition of
    systemwide statement of operations may differ materially from
    similarly titled measures of other companies. Our systemwide net
    income is the same as our net income reported under GAAP.(2)
    
    Subtracts the aggregated revenues and expenses of our
    unconsolidated affiliates and one facility in which we hold no
    ownership but operate under a management contract. 55




---



##### Table of Contents



(3)
    
    Our systemwide statements of operations include consolidation
    entries that eliminate management fee revenues (on USPIs
    financial records) and expenses (on the facilities
    financial records). Under GAAP, these consolidation entries need
    to be removed with respect to amounts charged to unconsolidated
    affiliates, as under GAAP these are not intercompany
    transactions with consolidated subsidiaries.(4)
    
    Records our share of the net income of our unconsolidated
    affiliates.(5)
    
    Our systemwide statement of operations includes minority
    interest expense for the portion of investees earnings not
    owned by us. Under GAAP, there is no minority interest expense
    recorded with respect to unconsolidated affiliates.(6)
    
    As the net impact of items (2) through (5) is zero,
    systemwide income from continuing operations equals the income
    from continuing operations that we report under GAAP.(7)
    
    As discussed earlier in this document (see Combination of
    Operating Results), the acquisition of our company on
    April 19, 2007 has required us to divide our operating
    results into Predecessor periods (prior to
    April 19, 2007) and Successor periods
    (April 19, 2007 and after). While factors such as our
    increased debt and related interest expense make the Predecessor
    and Successor periods not comparable, we believe combining these
    periods is the most meaningful way of comparing our operating
    results for the year ended December 31, 2008 to the year
    ended December 31, 2007. In addition, for purposes of this
    table, we have eliminated expenses we incurred in 2007 as a
    result of the merger. The following summarizes the impact of
    these merger-related expenses on our consolidated statement of
    operations for the combined year ended December 31, 2007,
    reconciling the amounts reported on a combined basis (see
    Combination of Operating Results) to the combined as
    adjusted amounts reported in the table above:  MergerRelated


CombinedCombined


Expenses


as AdjustedGeneral and administrative expenses

$
68,617


$
(25,372
)

$
43,245Operating income


162,084



25,372



187,456Loss on early retirement of debt


(2,435
)


2,435



Income before minority interests


86,763



27,807



114,570Income from continuing operations before income taxes


22,777



27,807



50,584Income tax expense


(18,756
)


(7,526
)


(26,282
)Income from continuing operations


4,021



20,281



24,302     USPI


MergerAs Reported


RelatedUnder GAAP


Expenses


As AdjustedGeneral and administrative expenses

$
38,826


$
(488
)

$
38,338Operating income


158,959



488



159,447Income before minority interests


117,315



488



117,803Income from continuing operations before income taxes


62,683



488



63,171Income tax expense


(22,712
)


(127
)


(22,839
)Income from continuing operations


39,971



361



40,332   Our
    Ownership Share of Systemwide Results
   56




---



##### Table of Contents



Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2008


2007


2006Equity method facilities(1)


21.4
%


22.2
%


22.6
%Consolidated facilities(2)


48.8
%


46.5
%


49.8
%Total(3)


30.5
%


32.9
%


34.5
%     (1)
    
    Computed for equity method 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).  not-for-profit not-for-profit
  Revenues
       57




---



##### Table of Contents



ramp-up
    Years Ended December 31,Combined2008


2007


2006United States facilities:Net revenue


11
%


10
%


9
%Surgical cases


2
%


6
%


7
%Net revenue per case(1)


9
%


3
%


2
%United Kingdom facilities:Adjusted admissions


9
%


8
%


(1
)%Net revenue using actual exchange rates


3
%


23
%


7
%Net revenue using constant exchange rates(2)


11
%


13
%


6
%All same store facilities:Net revenue using actual exchange rates


10
%


11
%


9
%     (1)
    
    Our overall domestic same store growth in net revenue per case
    for each year was favorably impacted by the growth at our twelve
    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. We acquired ownership
    interests in an additional hospital on December 31, 2008.
    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, settlements in
    the second quarter of 2008 were excluded for similar reasons.(2)
    
    Calculated using 2008 exchange rates for both periods. Although
    this computation represents a non-GAAP measure, we believe that
    using a constant currency translation rate more accurately
    reflects the trend of the business.  Joint
    Ventures with
    Not-for-Profit
    Hospitals
   58




---



##### Table of Contents



not-for-profit
    2008


2007


2006United States facilities(1):With a hospital partner


99



91



78Without a hospital partner


62



61



60Total U.S. facilities


161



152



138United Kingdom facilities


3



3



3Total facilities operated


164



155



141Change from prior year-end:De novo (newly constructed)


4



11



8Acquisition


10



9



38Disposals(2)


(5
)


(6
)


(4
)Total increase in number of facilities


9



14



42     (1)
    
    At December 31, 2008, physicians own a portion of all of
    these facilities.(2)
    
    During 2008, we sold ownership interests in facilities in
    Sarasota, Florida; Los Angeles, California; Cleveland, Ohio;
    Manitowoc, Wisconsin; and Las Cruces, New Mexico. During 2007,
    we sold our ownership interests in facilities in Canton,
    Mississippi; Atlanta, Georgia; Baltimore, Maryland; Houston,
    Texas and Decatur, Alabama. Additionally, we ceased operating a
    facility effective October 1, 2007 although we continued to
    hold an ownership interest until we sold it in July 2008. During
    2006, we sold our ownership interests in facilities in
    Lyndhurst, Ohio and Chicago, Illinois. We also disposed of
    Surgis interests in two of its facilities, one in Phoenix,
    Arizona, the other in Ocean Springs, Mississippi.  Facility
    Operating Margins
    ramp-up
  not-for-profit
 59




---



##### Table of Contents



ramp-up not-for-profit
  year-over-year
  Year Ended December 31,Combined2008


2007


2006United States facilities:With a hospital partner


170
bps


(210
) bps


(50
) bpsWithout a hospital partner


(260
)


40



(50
)Total U.S. facilities


10



(140
)


(50
)United Kingdom facilities(2)


80
bps


300
bps


(205
) bps     (1)
    
    Operating margin is calculated as operating income divided by
    total revenues. This table aggregates all of the same store
    facilities we operate using 100% of their results. This does not
    represent the overall margin for USPIs operations in
    either the U.S. or U.K. because we have a variety of ownership
    levels in the facilities we operate, and facilities open for
    less than a year are excluded from same store calculations.(2)
    
    Calculated using 2008 exchange rates for both periods. Although
    this computation represents a non-GAAP measure, we believe that
    using a constant translation rate more accurately reflects the
    trend of the business.  Year
    Ended December 31, 2008 compared to Combined Year Ended
    December 31, 2007
    not-for-profit
   60




---



##### Table of Contents



61




---



##### Table of Contents



Combined
    Year Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
                 62




---



##### Table of Contents



Liquidity
    and Capital Resources
  Years Ended December 31,Combined2008


2007


2006Net cash provided by operating activities

$
91,210


$
96,457


$
101,475Net cash used in investing activities


(127,767
)


(99,433
)


(278,897
)Net cash provided by financing activities


9,234



47,631



80,157   Overview
    Operating
    Activities
     63




---



##### Table of Contents



follow-up and/or
    Investing
    Activities
   64




---



##### Table of Contents



Acquisitions
    and Sales
    Effective Date

Facility Location

AmountInvestmentsDecember 2008

St. Louis, Missouri

$
0.4 millionDecember 2008

Nashville, Tennessee


18.3 millionDecember 2008

Houston, Texas


5.4 millionDecember 2008

Portland, Oregon


5.7 millionDecember 2008

Denver, Colorado


2.2 millionOctober 2008

Houston, Texas


5.2 millionOctober 2008

Denver, Colorado


2.1 millionOctober 2008

St. Louis, Missouri


1.9 millionSeptember 2008

St. Louis, Missouri


15.8 millionSeptember 2008

St. Louis, Missouri


18.0 millionAugust 2008

St. Louis, Missouri


3.0 millionJune 2008

Dallas, Texas


3.9 millionApril 2008

St. Louis, Missouri


14.1 millionJanuary 2008

Knoxville, Tennessee


1.4 millionJanuary 2008

Las Vegas, Nevada


1.1 millionVarious

Various


6.6 million$
105.1 millionSalesJuly 2008

Manitowoc, Wisconsin


0.8 millionJuly 2008

Orlando, Florida


0.5 millionJuly 2008

Beaumont, Texas


1.2 millionJune 2008

Dallas, Texas


2.3 millionJune 2008

Cleveland, Ohio


1.6 millionApril 2008

Kansas City, Missouri


3.6 millionMarch 2008

Redding, California


1.7 millionFebruary 2008

Sarasota, Florida


0.5 millionVarious

Various


2.2 million14.4 millionTotal



$
90.7 million      65




---



##### Table of Contents



Property
    and Equipment/Facilities under Development
          Financing
    Activities
     66




---



##### Table of Contents



Debt
  Senior
    secured credit facility
  sub-facility, sub-facility; buy-up buy-up
      Senior
    subordinated notes
  7 8 1 4 payment-in-kind 1 4
 67




---



##### Table of Contents



United
    Kingdom borrowings
        Equity
    Contribution from USPI Group Holdings, Inc. and Payments to
    Repurchase Stock
    Stock
    Option and Stock Purchase Plans
   68




---



##### Table of Contents



Contractual
    Cash Obligations
    Payments Due by PeriodWithin


Years


Years


BeyondContractual Cash Obligations

Total


1 Year


2 and 3


4 and 5


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

$
620,599


$
24,767


$
49,098


$
48,518


$
498,216Senior subordinated notes, due 2017


419,275



21,300



42,600



42,600



312,775Senior subordinated toggle notes, due 2017


355,708



18,500



37,000



37,000



263,208Amended and restated U.K. credit facility


73,454



9,237



19,475



44,742



Other debt at operating subsidiaries


42,120



10,660



18,455



6,451



6,554Capitalized lease obligations


76,174



9,269



16,759



12,057



38,089Operating lease obligations


73,919



15,248



24,539



15,019



19,113Total contractual cash obligations

$
1,661,249


$
108,981


$
207,926


$
206,387


$
1,137,955     (1)
    
    Amounts shown for long-term debt obligations and capital lease
    obligations include the associated interest. For variable rate
    debt, the interest is calculated using the December 31,
    2008 rates applicable to each debt instrument and also gives
    effect to the interest rate swap designated in a cash flow
    hedging relationship against portions of the U.K. credit
    facility and Term B facility in the U.S.  Debt at
    Operating Subsidiaries
       69




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
  not-for-profit
    Related
    Party Transactions
       70




---



##### Table of Contents



New
    Accounting Pronouncements
  Business Combinations
  Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133
  No. 142-3, Determination of the Useful Life of Intangible Assets FSP 142-3 Goodwill and Other Intangible
    Assets FSP 142-3 Business Combinations FSP 142-3 FSP 142-3
  No. 08-6, Equity Method Investment Accounting Considerations (EITF 08-6). EITF 08-6 EITF 08-6 EITF 08-6
 71




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##### Table of Contents



Employers Disclosures about Postretirement Benefit Plan
    Assets Employers
    Disclosures about Pensions and Other Postretirement Benefits,
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  variable-to-fixed
            Item 8.
    Financial
    Statements and Supplementary Data  Form 10-K.
 72




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Form 10-K, Form 10-K.
  Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f).
    
    Pertain to the maintenance of records that in reasonable detail,
    accurately and fairly reflect the transactions and dispositions
    of our assets.
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with U.S. generally accepted accounting
    principles, and that our receipts and expenditures are being
    made only in accordance with authorizations of our management
    and board of directors; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.  Internal Control  Integrated
    Framework
  
    USP Knoxville, Inc.
    USP Portland, Inc.
    USP St. Louis, Inc.
    USP Festus, Inc.
    USP Mattis, Inc. 73




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##### Table of Contents




    USP Denver, Inc.
    USP San Diego, Inc.
    USP Houston, Inc. (Investment in Memorial Hermann Endoscopy and
    Surgery Center North Houston LLC and Kingsland Surgery Center)
    USP Tennessee, Inc. (Investment in Baptist Womens Health
    Center, LLC)
    USP Sacramento, Inc. (Investment in Mercy Surgery Center)  10-K 10-K.
  Limitations
    on the Effectiveness of Controls
    Changes
    in Internal Control Over Financial Reporting
    Item 9B.
    Other
    Information   74




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##### Table of Contents



PART III  ITEM 10.
    Directors,
    Executive Officers and Corporate Governance  Directors
    and Executive Officers
    Name

Age

Position(s)Donald E. Steen


62


Chairman of the BoardWilliam H. Wilcox


57


President, Chief Executive Officer and DirectorBrett P. Brodnax


44


Executive Vice President and Chief Development OfficerMark A. Kopser


44


Executive Vice President and Chief Financial OfficerNiels P. Vernegaard


52


Executive Vice President and Chief Operating OfficerJohn J. Wellik


47


Senior Vice President, Accounting and Administration, and
    SecretaryJoel T. Allison


61


DirectorMichael E. Donovan


32


DirectorJohn C. Garrett, M.D.


66


DirectorD. Scott Mackesy


40


DirectorJames Ken Newman


65


DirectorBoone Powell, Jr.


72


DirectorPaul B. Queally


44


DirectorRaymond A. Ranelli


61


Director   Donald E. Steen
  William H. Wilcox
  Brett P. Brodnax
 75




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##### Table of Contents



Mark A. Kopser
  Niels P. Vernegaard
  John J. Wellik
  Joel T. Allison
  Michael E. Donovan
  John C. Garrett, M.D.
  D. Scott Mackesy
  James Ken Newman
  Boone Powell, Jr.
  Paul B. Queally Co-President
  Raymond A. Ranelli
 76




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##### Table of Contents



Audit
    Committee Financial Expert
    Nominations
    for the Board of Directors
    Section 16(a)
    Beneficial Ownership Reporting Compliance
    Code of
    Ethics
    Item 11.
    Executive
    Compensation  Overview
      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; 77




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##### Table of Contents




    align the interests of our executive officers and stockholders
    by motivating executive officers to increase stockholder
    value; and
    provide a compensation package that recognizes individual
    contributions as well as overall business results.    Compensation
    Components
    Base
    Salary
    Annual
    Bonus
    Long-Term
    Equity Incentives
   78




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##### Table of Contents



Termination
    Based Compensation
    Perquisites
    Other
    Benefits
    Compensation
    Committee Report
  Regulation S-K Form 10-K.
       Summary
    Compensation Table for 2008
    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


2008


$
600,000


$
540,000
(2)

$
401,605


$







$
(129,167
)

$
251,275
(3)

$
1,663,713President, Chief Executive


2007



575,000



287,500
(4)


280,903











195,436



250,739
(3)


1,589,578Officer and Director


2006



566,667



308,810
(5)


2,745,090











86,361



250,235
(3)


3,957,163Brett P. Brodnax


2008



379,167



230,000
(6)


160,642











(100,590
)


32,702
(3)


701,921Executive Vice President


2007



365,000



136,875
(7)


112,361











49,850



30,823
(3)


694,909and Chief Development Officer


2006



346,250



123,661
(5)


1,525,050











26,440



29,575
(3)


2,050,976Mark A. Kopser


2008



353,000



205,917
(7)


143,732











(92,177
)


30,924
(3)


641,396Executive Vice President


2007



340,000



127,500
(7)


100,534











37,264



29,238
(3)


634,536and Chief Financial Officer


2006



327,500



116,964
(5)


1,220,040











13,295



28,303
(3)


1,706,102John J. Wellik


2008



257,333



128,500
(7)


16,910











(78,692
)


23,472
(3)


347,523Senior Vice President,


2007



247,000



74,100
(7)


11,828











25,243



22,138
(3)


380,309Accounting and Administration, and Secretary


2006



237,000



67,714
(5)


406,680











14,734



21,304
(3)


747,432Niels P. Vernegaard


2008



421,333



245,778
(7)


143,732











22,187



110,592
(3)


943,622Executive Vice President


2007



406,667



152,500
(7)


100,534











25,634



106,250
(3)


791,585and Chief Operating Officer


2006



233,333



83,333
(4)


1,870,800



473,000







2,995



236,900
(3)(8)


2,900,361  79




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##### Table of Contents



(1)
    
    We account for the cost of stock-based compensation awarded
    under our 2001 Equity-Based Compensation Plan and the 2007
    Equity Incentive Plan adopted by our Parent in accordance with
    the Financial Accounting Standards Board Statement of Financial
    Accounting Standards No. 123 (revised 2004) Share
    Based Payment (SFAS 123R), under which the cost
    of equity awards to employees is measured by the fair value of
    the awards on their grant date and is recognized over the
    vesting periods of the awards, whether or not the awards had any
    intrinsic value during the period. The 2001 Equity-Based
    Compensation Plan was cancelled in connection with the merger.
    Amounts shown in the table above reflect the dollar amount
    recognized for financial statement reporting purposes for 2006,
    2007 and 2008 in accordance with SFAS 123R of awards
    granted under the 2001 Equity-Based Compensation Plan and the
    2007 Equity Incentive Plan and thus may include amounts from
    awards granted in prior years. No forfeitures occurred during
    2006, 2007 or 2008. All 2001 Equity-Based Compensation Plan
    awards are based on the closing market price of our common stock
    on the date of grant. The 2007 Equity Incentive Plan awards are
    valued at $0.32 per share which we determined with the
    assistance of a third party valuation firm as the value of our
    Parents common stock on the date of grant. Assumptions
    used in calculation of these amounts are included in
    Note 12 to our consolidated audited financial statements
    for the fiscal year ended December 31, 2006, included in
    our Annual Report on
    Form 10-K
    filed with the Securities and Exchange Commission
    (SEC) on February 28, 2007; and in Note 12
    to our consolidated audited financial statements for the fiscal
    year ended December 31, 2008, included in this Annual
    Report on
    Form 10-K.(2)
    
    Seventy-five percent of the amount shown was paid in cash and
    twenty-five percent was deferred at Mr. Wilcoxs
    election pursuant to USPIs Deferred Compensation Plan (the
    DCP).(3)
    
    Includes discretionary contributions to the named executive
    officers DCP and matching contributions to the named
    executive officers 401(k) and DCP accounts as follows:  Discretionary


Matching


MatchingContribution


Contribution


Contributionto DCP


401(k)


DCPMr. Wilcox2008

$
200,000


$
6,900


$
44,3752007


200,000



6,548



44,1912006


200,000



6,461



43,774Mr. Brodnax2008






6,900



25,8022007






6,390



24,4332006






6,079



23,496Mr. Kopser2008






6,900



24,0242007






6,390



22,8482006






6,079



22,224Mr. Wellik2008






6,900



16,5722007






6,402



15,7362006






6,068



15,236Mr. Vernegaard2008


75,000



6,900



28,6922007


75,000



6,750



24,5002006


75,000



2,625



10,000   (4)
    
    Sixty-five percent of the amount shown was paid in cash and
    thirty-five percent was deferred at our named executive
    officers election pursuant to the DCP.(5)
    
    Forty percent of the amount shown was paid in cash and sixty
    percent was deferred at our named officers election
    pursuant to the DCP.(6)
    
    Fifty percent of the amount shown was paid in cash and fifty
    percent was deferred at Mr. Brodnaxs election
    pursuant to the DCP. 80




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##### Table of Contents



(7)
    
    Ninety percent of the amount shown was paid in cash and ten
    percent was deferred at our named executive officers
    election pursuant to the DCP.(8)
    
    Also includes relocation expenses of $149,275 paid by USPI on
    behalf of Mr. Vernegaard.  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


4,156,250
(3)

$
8,229,375495,536
(4)


981,161Brett P. Brodnax


1,662,500
(3)


3,291,750275,853
(4)


546,189Mark A. Kopser


1,487,500
(3)


2,945,250220,683
(4)


436,952John J. Wellik


175,000
(3)


346,50073,561
(4)


145,651Niels P. Vernegaard


1,487,500
(3)


2,945,250245,203
(4)


485,502     (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, 2008, this value was determined
    to be $1.98 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 14.29% of such shares will
    lapse on April 19 of each of 2009, 2010 and 2011. The
    restrictions with respect to the remaining shares will lapse on
    April 19, 2015; provided however, that such restrictions
    may lapse sooner if certain internal rate of return targets are
    met.(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%. 81




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##### Table of Contents



Option
    Exercises and Stock Values
    Option Awards


Stock AwardsNumber of





Number ofShares


Value


Shares


ValueAcquired


Realized


Acquired on


RealizedName

on Exercise


on Exercise


Vesting


on Vesting(1)William H. Wilcox


N/A


$




593,750


$
593,750Brett P. Brodnax


N/A







237,500



237,500Mark A. Kopser


N/A







212,500



212,500John J. Wellik


N/A







25,000



25,000Niels P. Vernegaard


N/A







212,500



212,500     (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, 2008, this value was determined to
    be $1.00 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
           82




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##### Table of Contents



Nonqualified
    Deferred Compensation
    AggregateAggregate


Balance atExecutive


USPI


Aggregate


Withdrawals/


December 31,Name

Contribution


Contribution


Earnings


Distributions


2008William H. Wilcox

$
160,625


$
244,375


$
(129,167
)

$



$
2,003,342Brett P. Brodnax


70,563



25,802



(100,590
)






384,585Mark A. Kopser


48,050



24,024



(92,177
)


55,486



229,386John J. Wellik


33,143



16,572



(78,692
)






192,486Niels P. Vernegaard


57,383



103,692



22,186







486,224   Deferred
    Compensation Plan
         83




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##### Table of Contents



Employment
    Arrangements and Agreements
             84




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##### 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)

$
540,000


$
14,352
(5)

$
9,210,536Brett P. Brodnax


384,000
(6)


230,000



6,876
(6)


3,837,939Mark A. Kopser


358,000
(6)


205,917



8,004
(6)


3,382,202John J. Wellik


261,000
(6)


128,500



8,004
(6)


492,151Niels P. Vernegaard


428,000
(6)


245,778



8,004
(6)


3,430,752     (1)
    
    Amounts are based on the bonus amount paid with respect to 2008.(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 $1.98 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, 2008, this value was 85




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##### Table of Contents



determined to be $1.98 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.  Director
    Compensation
      2008
    Non-Employee Director Compensation Table
  Fees Earned or


Stock


All OtherName

Paid in Cash


Awards


Compensation


TotalJoel T. Allison

$



$







$
John C. Garrett, M.D.


38,000



10,238







48,238James Ken Newman


45,500



10,238







55,738Boone Powell, Jr.


35,000



10,934







45,934Raymond A. Ranelli


63,000



10,238







73,238   Compensation
    Committee Interlocks and Insider Participation
   86




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##### Table of Contents



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


Percent ofCommon


Percent of


Preferred


OutstandingShares


Outstanding


Shares


ParticipatingBeneficially


Common


Beneficially


PreferredName of Beneficial Owner(1)

Owned


Shares


Owned


SharesWelsh, Carson, Anderson & Stowe(2)


136,448,356



86.6
%


17,326,775



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


22,183,099



14.1
%


2,816,901



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


26,619,718



16.9
%


3,380,282



18.8
%Silvertech Investment PTE Ltd(5)


8,873,239



5.6
%


1,126,761



6.3
%Donald E. Steen(6)


1,421,127



*



78,873



*William H. Wilcox(7)


6,488,790



4.1
%


157,746



*Brett P. Brodnax(8)


2,388,811



1.5
%


27,042



*Mark A. Kopser(9)


2,364,345



1.5
%


56,338



*Niels P. Vernegaard(10)


2,007,194



1.3
%


7,872



*John J. Wellik(11)


317,927



*



5,634



*Joel T. Allison














Michael E. Donovan(12)(13)


40,000



*







John C. Garrett, M.D.(13)


173,095



*



16,901



*D. Scott Mackesy(12)(13)


40,000



*







James K. Newman(13)


217,463



*



22,535



*Boone Powell, Jr.(13)


111,001



*



9,016



*Paul B. Queally (12)(14)


215,457



*



22,281



*Raymond A. Ranelli(13)


91,462



*



6,535



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


15,876,672



10.1
%


410,773



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. 87




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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 273,561 common shares which are subject to restrictions
    on transfer set forth in a restricted stock award agreement
    entered into at the time of the consummation of the merger.(12)
    
    Does not include (A) 54,671,610 common shares or 6,942,423
    participating preferred shares owned by Welsh Carson, or
    (B) 25,200 common shares or 3,200 participating preferred
    shares owned by WCAS Management Corporation. Messrs Queally,
    Mackesy and Donovan, as general partners of WCAS X Associates
    LLC, the sole general partner of Welsh Carson, and officers of
    WCAS Management Corporation, may be deemed to beneficially own
    the shares beneficially owned by Welsh Carson and WCAS
    Management Corporation. Each of Messrs Queally, Mackesy and
    Donovan disclaims beneficial ownership of such shares. The
    principal executive offices of Messrs Queally, Mackesy and
    Donovan are located at 320 Park Avenue, Suite 2500,
    New York, New York 10022.(13)
    
    Includes 40,000 common shares which are subject to restrictions
    on transfer set forth in a restricted stock award agreement.(14)
    
    Includes (A) an aggregate 3,090 common shares and 393
    preferred shares owned by certain trusts established for the
    benefit of Mr. Queallys children for which, in each
    case, Mr. Queally acts as a trustee and has voting and
    investment power over such shares and (B) 40,000 common
    shares which are subject to restrictions on transfer set forth
    in a restricted stock awards agreement.(15)
    
    Does not include (A) 54,671,610 common shares or 6,942,423
    participating preferred shares owned by Welsh Carson, or
    (B) 25,200 common shares or 3,200 participating preferred
    shares owned by WCAS Management Corporation. Includes an
    aggregate 12,361,836 common shares which are subject to
    restrictions on transfer set forth in restricted stock award
    agreements entered into at the time of the consummation of the
    merger.  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence   88




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##### Table of Contents



Arrangements
    with Our Investors
    Stockholders
    Agreement
    Management
    Agreement
  out-of-pocket
  Other
    Arrangements with Directors and Executive Officers
  Restricted
    Stock and Option Plan
    Employment
    Agreements
    Other
    Arrangements
       89




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##### Table of Contents



Regulation S-X.
       90




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##### Table of Contents



ITEM 14.
    Principal
    Accounting Fees and Services    Description of Fees

2008


2007Audit Fees(1)

$
1,340,500


$
1,819,144Audit Related Fees(2)






140,000Tax Fees(3)






All Other Fees(4)


155,000



130,480$
1,495,500


$
2,089,624     (1)
    
    Audit Fees. Includes fees billed for professional services
    rendered for the audit of our annual financial statements
    included in our
    Form 10-K,
    reviews of our quarterly financial statements included in
    Forms 10-Q,
    reviews of our other filings with the SEC, and other research
    work necessary to comply with generally accepted accounting
    standards for the years ended December 31, 2008 and 2007.(2)
    
    Audit Related Fees. Includes fees billed for assurance and
    related services that are reasonably related to the performance
    of the audit or review of our financial statements and are not
    reported under Audit Fees. These services include
    issuance of consents and other accounting and reporting
    consultations.(3)
    
    Tax Fees. Includes fees billed for tax compliance, tax advice,
    and tax planning.(4)
    
    All Other Fees. Includes fees billed for assistance with
    preparation of Medicare cost reports.   91




---



##### 



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-2Consolidated Statements of Operations


F-3Consolidated Statements of Comprehensive Income
    (loss)


F-4Consolidated Statements of Stockholders
    Equity


F-5Consolidated Statements of Cash Flows


F-6Notes to Consolidated Financial Statements


F-72. Financial Statement Schedule 
    Schedule II


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


2Consolidated Balance Sheets as of June 30,
    2008 and 2007


3Consolidated Statements of Income for the year
    ended June 30, 2008 and 2007


4Consolidated Statements of Members Equity
    for the year ended June 30, 2008 and 2007


5Consolidated Statements of Cash Flows for the
    year ended June 30, 2008 and 2007


6Notes to the Consolidated Financial Statements


7Independent Auditors Report


20Consolidated Balance Sheets as of June 30,
    2007 and 2006


21Consolidated Statements of Income for the year
    ended June 30, 2007 and the six months ended June 30,
    2006


22Consolidated Statements of Members Equity
    for the year ended June 30, 2007 and the six months ended
    June 30, 2006


23Consolidated Statements of Cash Flows for the
    year ended June 30, 2007 and the six months ended
    June 30, 2006


24Notes to the Consolidated Financial Statements


25Unaudited Consolidated Balance Sheets as of December 31,
    2005 and 2004


37Unaudited Consolidated Statements of Income for the years ended
    December 31, 2005 and 2004


38Unaudited Consolidated Statements of Members Equity for
    the years ended December 31, 2005 and 2004


39Unaudited Consolidated Statements of Cash Flows for the years
    ended December 31, 2005 and 2004


40Unaudited Notes to Consolidated Financial Statements


41   92




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm               F-1




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Balance Sheets
    December 31, 2008 and 2007
  2008


2007(In thousands, except share amounts)ASSETSCash and cash equivalents

$
49,435


$
76,758Accounts receivable, net of allowance for doubtful accounts of
    $11,544 and $12,721, respectively


57,213



59,557Other receivables (Note 4)


17,070



8,974Inventories of supplies


9,079



9,495Prepaids and other current assets


11,735



20,056Total current assets


144,532



174,840Property and equipment, net (Note 5)


201,824



229,039Investments in affiliates (Note 3)


307,771



267,357Goodwill (Note 6)


1,270,287



1,274,979Intangible assets, net (Note 6)


318,852



315,841Other assets


24,897



15,337Total assets

$
2,268,163


$
2,277,393LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable

$
22,194


$
22,982Accrued salaries and benefits


27,241



24,671Due to affiliates


57,237



62,500Accrued interest


9,336



13,436Current portion of long-term debt (Note 7)


24,488



25,311Other current liabilities


42,874



38,509Total current liabilities


183,370



187,409Long-term debt, less current portion (Note 7)


1,073,459



1,072,751Other long-term liabilities


27,517



17,950Deferred tax liability, net


125,639



109,414Total liabilities


1,409,985



1,387,524Minority interests (Note 3)


94,041



83,063Commitments and contingencies (Notes 9 and 14)Stockholders equity (Note 12)Common stock, $0.01 par value; 100 shares authorized,
    issued and outstanding at December 31, 2008 and 2007Additional paid-in capital


801,902



799,562Accumulated other comprehensive loss, net of tax


(84,008
)


(1,485
)Retained earnings


46,243



8,729Total stockholders equity


764,137



806,806Total liabilities and stockholders equity

$
2,268,163


$
2,277,393    F-2




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Statements of Operations
  Successor



PredecessorPeriod from



Period fromApril 19



January 1Year Ended


through



through


Year EndedDecember 31,


December 31,



April 18,


December 31,2008


2007



2007


2006(In thousands)Revenues:Net patient service revenues

$
561,532


$
402,433



$
170,598


$
507,341Management and contract service revenues


72,970



46,503




19,142



52,237Other revenues


7,721



3,552




1,615



7,796Total revenues


642,223



452,488




191,355



567,374Equity in earnings of unconsolidated affiliates


47,042



23,867




9,906



31,568Operating expenses:Salaries, benefits, and other employee costs


184,871



125,648




53,871



158,676Medical services and supplies


112,499



77,006




34,308



101,900Other operating expenses


107,659



74,335




31,744



96,173General and administrative expenses


40,155



29,340




39,277



38,826Provision for doubtful accounts


7,568



7,592




3,297



9,892Depreciation and amortization


36,757



26,688




12,426



34,516Total operating expenses


489,509



340,609




174,923



439,983Operating income


199,756



135,746




26,338



158,959Interest income


3,228



3,208




933



4,067Interest expense


(85,649
)


(67,862
)



(9,521
)


(32,604
)Loss on early retirement of debt











(2,435
)


(14,880
)Other, net


(1,790
)


(442
)



798



1,773Total other expense, net


(84,211
)


(65,096
)



(10,225
)


(41,644
)Income from continuing operations before minority interests


115,545



70,650




16,113



117,315Minority interests in income of consolidated subsidiaries


(55,134
)


(45,120
)



(18,866
)


(54,632
)Income (loss) from continuing operations before income taxes


60,411



25,530




(2,753
)


62,683Income tax expense


(22,334
)


(14,611
)



(4,145
)


(22,712
)Income (loss) from continuing operations


38,077



10,919




(6,898
)


39,971Discontinued operations, net of tax (Note 2):Income (loss) from discontinued operations


62



236




(251
)


18Net loss on disposal of discontinued operations


(625
)


(2,426
)







(5,743
)Total loss from discontinued operations


(563
)


(2,190
)



(251
)


(5,725
)Net income (loss)

$
37,514


$
8,729



$
(7,149
)

$
34,246    F-3




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Statements of Comprehensive Income
    (loss)
  Successor



PredecessorPeriod from



Period fromApril 19



January 1Year Ended


through



through


Year EndedDecember 31,


December 31,



April 18,


December 31,2008


2007



2007


2006(In thousands)Net income (loss):

$
37,514


$
8,729



$
(7,149
)

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


(71,790
)


(1,646
)



2,169



13,104Unrealized loss on interest rate swaps, net of tax


(10,051
)











Pension adjustments, net of tax


(682
)


161








(434
)Other comprehensive income (loss)


(82,523
)


(1,485
)



2,169



12,670Comprehensive income (loss)

$
(45,009
)

$
7,244



$
(4,980
)

$
46,916    F-4




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESConsolidated Statements of Stockholders
    Equity
  AccumulatedCommon Stock


Additional








OtherOutstanding





Paid-in


Treasury


Deferred


Comprehensive


RetainedShares


Par Value


Capital


Stock


Compensation


Income (Loss)


Earnings


Total(In thousands)PredecessorBalance, December 31, 2005


44,283


$
443


$
375,656


$
(831
)

$
(14,128
)

$
3,896


$
166,014


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










(14,128
)






14,128











Issuance of common stock and exercise of stock options


480



4



8,825



2,394















11,223Repurchases of common stock


(53
)










(1,672
)














(1,672
)Equity-based compensation










11,974



















11,974Net income


























34,246



34,246Foreign currency translation adjustments






















13,104







13,104Pension liability adjustment, net of tax






















(434
)






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






















(217
)






(217
)Balance, December 31, 2006


44,710



447



382,327



(109
)






16,349



200,260



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


474



5



6,211



















6,216Repurchases of common stock


(71
)










(2,197
)














(2,197
)Equity-based compensation expense










17,100



















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










15,822



















15,822Net loss


























(7,149
)


(7,149
)Foreign currency translation adjustments






















2,169







2,169Balance, April 18, 2007


45,113


$
452


$
421,460


$
(2,306
)

$



$
18,518


$
193,111


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





$



$
791,856


$



$



$



$



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










(7,862
)


















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










13,477



















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










2,091



















2,091Net income


























8,729



8,729Foreign currency translation adjustments






















(1,646
)






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






















161







161Balance, December 31, 2007





$



$
799,562


$



$



$
(1,485
)

$
8,729


$
806,806Contribution related to equity award grants by USPI Group
    Holdings, Inc.










2,340



















2,340Net income


























37,514



37,514Foreign currency translation adjustments






















(71,790
)






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






















(10,051
)






(10,051
)Pension liability adjustment, net of tax






















(682
)






(682
)Balance, December 31, 2008





$



$
801,902


$



$



$
(84,008
)

$
46,243


$
764,137    F-5




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##### Table of Contents



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



PredecessorPeriod from



Period fromApril 19



January 1Year Ended


through



through


Year EndedDecember 31,


December 31,



April 18,


December 31,2008


2007



2007


2006(In thousands)Cash flows from operating activities:Net income (loss)

$
37,514


$
8,729



$
(7,149
)

$
34,246Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Loss from discontinued operations


563



2,190




251



5,725Provision for doubtful accounts


7,568



7,592




3,297



9,892Depreciation and amortization


36,757



26,688




12,426



34,516Amortization of debt issue costs and discount


2,860



1,904




202



912Deferred income taxes


13,860



10,162




1,315



6,294Loss (gain) on sale of equity interests


1,863



737




(897
)


Loss on impairment of intangible asset


831












Loss on early retirement of debt











2,435



14,880Equity in earnings of unconsolidated affiliates, net of
    distributions received


(8,591
)


6,667




4,335



(4,104
)Minority interests in income of consolidated subsidiaries, net
    of distributions paid


751



2,554




468



563Equity-based compensation


2,297



1,810




17,100



11,974Increases (decreases) in cash from changes in operating assets
    and liabilities, net of effects from purchases of new businesses:Accounts receivable


(9,579
)


(6,551
)



(973
)


(13,992
)Other receivables


(9,976
)


177




509



(4,006
)Inventories of supplies, prepaids and other assets


7,859



1,906




919



269Accounts payable and other current liabilities


7,256



3,002




12,060



5,556Other long-term liabilities


(623
)


(209
)



(1,377
)


1,443Tax benefit related to increase in value of equity awards











(15,822
)


(2,693
)Net cash provided by operating activities


91,210



67,358




29,099



101,475Cash flows from investing activities:Purchases of new businesses and equity interests, net of cash
    received


(105,080
)


(78,928
)



(26,705
)


(280,973
)Proceeds from sales of businesses and equity interests


14,351



5,879




15,916



28,467Purchases of property and equipment


(31,163
)


(11,723
)



(6,172
)


(28,222
)Returns of capital from unconsolidated affiliates


3,039



1,581




556



1,772(Increase) decrease in deposits and notes receivable


(8,914
)


9,247




(9,084
)


59Net cash used in investing activities


(127,767
)


(73,944
)



(25,489
)


(278,897
)Cash flows from financing activities:Proceeds from long-term debt, net of debt issuance costs


45,090



912,019




20,684



304,922Payments on long-term debt


(28,318
)


(226,827
)



(7,424
)


(275,200
)Proceeds from issuance of common stock











6,135



7,684Net equity contribution from USPI Group Holdings, Inc.


40



779,279








Tax benefit related to increase in value of equity awards











15,822



2,693Payments to repurchase common stock






(1,430,879
)







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


(5,441
)


(23,342
)



13,895



41,161Expenses paid on behalf of USPI Group Holdings, Inc.






(7,862
)







Returns of capital to minority interest holders


(2,137
)


(2,926
)



(943
)


(1,103
)Net cash (used in) provided by financing activities


9,234



(538
)



48,169



80,157Cash flows of discontinued operations:Operating cash flows


159



982




(761
)


1,187Investing cash flows


(76
)


2,579




(827
)


(3,250
)Financing cash flows


(34
)


(2,806
)



1,379



735Net cash provided by (used in) discontinued operations


49



755




(209
)


(1,328
)Effect of exchange rate changes on cash


(49
)


(70
)



(113
)


(107
)Net (decrease) increase in cash and cash equivalents


(27,323
)


(6,439
)



51,457



(98,700
)Cash and cash equivalents at beginning of period


76,758



83,197




31,740



130,440Cash and cash equivalents at end of period

$
49,435


$
76,758



$
83,197


$
31,740Supplemental information:Interest paid, net of amounts capitalized

$
86,758


$
55,302



$
9,861


$
25,105Income taxes (refund received) paid, net


(1,906
)


4,690




1,909



17,799Non-cash transactions:Predecessor rollover equity

$



$
18,192



$



$
Issuance of common stock to employees















30,455Assets acquired under capital lease obligations


1,966



7,279




1,677



5,277Receipt of note receivable for sale of minority interest


601












    F-6




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIESNotes to Consolidated Financial StatementsDecember 31, 2008 and 2007
  (1)
    Summary
    of Significant Accounting Policies and Practices  (a)
    Description
    of Business            (b)
    Merger
    Transaction   F-7




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    
    an investment of cash and rollover equity of USPI in the equity
    of Parent by Welsh Carson, management and other equity investors
    of approximately $785.0 million;
    borrowings by the Company of $430.0 million in new senior
    secured credit facilities;
    the issuance by the Company of $240.0 million in aggregate
    principal amount of
    87/8% senior
    subordinated notes, due 2017, and $200.0 million in
    aggregate principal amount of
    91/4%/10% senior
    subordinated toggle notes, due 2017;
    additional borrowings of £10.0 million (approximately
    $19.7 million) by Global, which was repatriated to the
    U.S.; and
    approximately $21.9 million of cash on hand.  Business Combinations
 F-8




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    Net cash and equity contribution from Holdings

$
791,856Proceeds from borrowings


889,700Cash on hand


21,922Expenses paid on behalf of Parent


(7,862
)Purchase price allocated

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

$
63,497Accounts receivable


58,435Other current assets


41,204Investments in affiliates


263,666Property and equipment


227,878Other assets


20,668Current liabilities


(108,596
)Due to affiliates


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


(131,158
)Deferred tax liability


(97,016
)Other long-term liabilities


(14,579
)Minority interests in consolidated subsidiaries


(84,635
)Net tangible assets acquired


149,104Capitalized debt issuance costs


29,012Intangible assets acquired


291,631Goodwill


1,225,869$
1,695,616     Year EndedDecember 31,2007Net revenues

$
643,843Income from continuing operations


16,576     (c)
    Translation
    of Foreign Currencies   F-9




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    (d)
    Principles
    of Consolidation    Consolidation of Variable Interest Entities (as amended)
  (e)
    Use of
    Estimates    (f)
    Cash
    and Cash Equivalents      (g)
    Inventories
    of Supplies   F-10




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  (h)
    Property
    and Equipment    (i)
    Goodwill
    and Intangible Assets    (j)
    Impairment
    of Long-lived Assets    (k)
    Fair
    Value Measurements  Fair Value Measurements
    (l)
    Derivative
    Instruments and Hedging Activities  Accounting for Derivative Instruments and Hedging
    Activities
 F-11




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    (m)
    Revenue
    Recognition      (n)
    Concentration
    of Credit Risk    (o)
    Investments
    and Equity in Earnings of Unconsolidated
    Affiliates    The
    Equity Method of Accounting for Investments in Common Stock
 F-12




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    (p)
    Income
    Taxes    (q)
    Equity-Based
    Compensation  Share-Based Payment
  No. 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services.
  (r)
    Commitments
    and Contingencies   F-13




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  (2)
    Discontinued
    Operations and Other Dispositions    Date

Facility Location

Proceeds


Gain (Loss)July 2008

Manitowoc, Wisconsin(1)

$
0.8 million


$
July 2008

Orlando, Florida(1)


0.5 million



(0.4 million
)June 2008

Cleveland, Ohio(2)


1.6 million



(1.0 million
)April 2008

Los Angeles, California(1)






February 2008

Sarasota, Florida(1)


0.5 million



Total



$
3.4 million


$
(1.4 million
)December 2007

Houston, Texas(2)

$



$
(0.6 million
)December 2007

Decatur, Alabama(2)


0.3 million



(2.2 million
)November 2007

Canton, Mississippi(2)






(0.9 million
)September 2007

Atlanta, Georgia(1)


1.8 million



0.5 millionSeptember 2007

Baltimore, Maryland(1)






(1.2 million
)Total



$
2.1 million


$
(4.4 million
)October 2006

Ocean Springs, Mississippi(1)

$
2.0 million


$
August 2006

Phoenix, Arizona(1)


1.3 million



March 2006

Lyndhurst, Ohio(2)


0.4 million



(7.4 million
)February 2006

Chicago, Illinois(1)






Total



$
3.7 million


$
(7.4 million
)     (1)
    
    Because these investments were accounted for under the equity
    method, the results of operations of these facilities are not
    reported as discontinued operations. The gain (loss) on the
    disposal of these facilities is recorded in other income
    (expense) in the accompanying consolidated statements of
    operations. F-14




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
   (2)
    
    In accordance with the requirements of Statement of Financial
    Accounting Standards (SFAS) No. 144, Accounting for the
    Impairment or Disposal of Long-Lived Assets, the Company has
    reclassified its historical results of operations to remove the
    operations of these facilities from the its revenues and
    expenses on the accompanying consolidated statements of
    operations, collapsing the income (loss) related to these
    facilities operations and the Companys disposal of
    them into a single line, Income (loss) from discontinued
    operations The table below summarizes certain amounts
    related to the Companys discontinued operations for the
    periods presented (in thousands).  Successor



PredecessorPeriod from



Period fromApril 19



January 1Year Ended


through



through


Year EndedDecember 31,


December 31,



April 18,


December 31,2008


2007



2007


2006Revenues

$
3,108


$
8,984



$
3,693


$
12,569Income (loss) from discontinued operations before income taxes

$
95


$
363



$
(386
)

$
28Income tax (expense) benefit


(33
)


(127
)



135



(10
)Income (loss) from discontinued operations

$
62


$
236



$
(251
)

$
18Loss on sale of discontinued operations before income taxes

$
(963
)

$
(3,732
)


$



$
(7,396
)Income tax benefit


338



1,306








1,653Net loss on sale of discontinued operations

$
(625
)

$
(2,426
)


$



$
(5,743
)     Date

Facility Location

Proceeds


Gain (Loss)July 2008

Beaumont, Texas

$
1.2 million


$
(0.5 million
)June 2008

Dallas, Texas(1)


2.3 million



(0.9 million
)June 2008

Houston, Texas(2)


0.6 million



March 2008

Redding, California(3)


1.7 million



Total



$
5.8 million


$
(1.4 million
)July 2007

Dallas, Texas(4)

$
3.7 million


$
April 2007

Corpus Christi, Texas(5)


6.1 million



0.9 millionTotal



$
9.8 million


$
0.9 millionJuly 2006

Fort Worth, Texas(1)

$
4.8 million



     (1)
    
    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 10). F-15




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
   (2)
    
    Because the Company is considered the primary beneficiary of
    this entity under FASB Interpretation No. 46,
    Consolidation of Variable Interest Entities (as amended),
    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.(3)
    
    The Company sold a controlling interest in two facilities and
    gained a noncontrolling interest in a third facility in Redding.(4)
    
    The hospital partner already had an ownership interest in these
    two facilities and acquired a controlling interest from the
    Company in this transaction. Additionally, this hospital partner
    is a related party (Note 10).(5)
    
    The Company sold a controlling interest in two facilities to a
    hospital partner.  (3)
    Acquisitions
    and Equity Method Investments    Effective Date

Facility Location

Purchase PriceDecember 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 millionTotal



$
57.1 million     (1)
    
    The Company acquired additional ownership in one of its existing
    facilities.(2)
    
    The Company had no previous investment in this facility.(3)
    
    The Company acquired additional ownership in two of its existing
    facilities.(4)
    
    The Company purchased all of a healthcare systems
    ownership interest in an entity it co-owned with the Company.
    This entity has ownership in and manages five facilities in the
    Dallas/Fort Worth area. This holding company was already a
    subsidiary of the Company and is now wholly owned by the Company.(5)
    
    The Company acquired additional ownership in three of its
    existing facilities. F-16




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
     Successor



PredecessorPeriod from



Period fromApril 19



January 1Year Ended


through



throughDecember 31,


December 31,



April 18,2008


2007



2007Net revenues

$
652,217


$
461,423



$
194,490Income (loss) from continuing operations


41,607



15,302




(5,452
)           
    Receipt of $3.6 million from a not-for-profit hospital
    partner that obtained additional ownership in a facility in the
    Kansas City, Missouri area;
    Investment of $18.3 million in a surgical hospital in
    Nashville, Tennessee, jointly owned with one of the
    Companys not-for-profit hospital partners;
    Investment of $10.6 million in a company jointly operated
    with one of the Companys hospital partners, which the
    joint venture used to acquire ownership in two surgical
    facilities in Houston, Texas;
    Investment of $5.7 million in a joint venture with one of
    the Companys not-for-profit hospital partners, which the
    joint venture used to acquire ownership in a surgical facility
    in Portland, Oregon;
    Investment of $4.3 million in a joint venture with one of
    the Companys not-for-profit hospital partners, which the
    joint venture used to acquire ownership in three surgical
    facilities in Denver, Colorado;
    Investment of $1.4 million in a surgical facility in
    Knoxville, Tennessee, jointly owned with one of the
    Companys not-for-profit hospital partners;
    Investment of $1.1 million in a joint venture with one of
    the Companys not-for-profit hospital partners which the
    joint venture used to acquire ownership in facility in the Las
    Vegas, Nevada, area; F-17




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
   
    Net receipt of approximately $2.2 million related to
    various other purchases and sales of equity interests and
    contributions of cash to equity method investees.    2008


2007


2006Unconsolidated facilities operated at year-end


101



93



80Income statement information:Revenues

$
991,566


$
788,931


$
610,384Operating expenses:Salaries, benefits, and other employee costs


245,277



207,154



150,625Medical services and supplies


210,874



166,229



125,981Other operating expenses


246,185



203,841



150,108Depreciation and amortization


48,722



41,057



29,884Total operating expenses


751,058



618,281



456,598Operating income


240,508



170,650



153,786Interest expense, net


(24,107
)


(20,501
)


(14,400
)Other


2,962



1,843



282Income before income taxes

$
219,363


$
151,992


$
139,668Balance sheet information:Current assets

$
234,535


$
186,518


$
164,715Noncurrent assets


403,956



399,479



271,447Current liabilities


137,929



117,276



87,944Noncurrent liabilities


288,286



291,311



175,119   Form 10-K
  (4)
    Other
    Receivables   F-18




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  (5)
    Property
    and Equipment    EstimatedUseful Lives


2008


2007Land





$
29,089


$
28,596Buildings and leasehold improvements


7-50 years



119,814



123,902Equipment


3-12 years



94,743



91,385Furniture and fixtures


4-20 years



8,977



7,540Construction in progress






1,028



1,471253,651



252,894Less accumulated depreciation






(51,827
)


(23,855
)Net property and equipment





$
201,824


$
229,039     2008


2007Land and buildings

$
32,728


$
31,363Equipment and furniture


10,251



9,49442,979



40,857Less accumulated amortization


(7,322
)


(2,570
)Net property and equipment under capital leases

$
35,657


$
38,287   (6)
    Goodwill
    and Intangible Assets  Accounting for Goodwill and Other Intangible Assets
 F-19




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    United


UnitedStates


Kingdom


TotalPredecessorBalance at December 31, 2006

$
483,645


$
27,958


$
511,603Additions


23,410







23,410Disposals


(8,197
)






(8,197
)Other






593



593Balance at April 18, 2007

$
498,858


$
28,551


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

$
960,281


$
265,588


$
1,225,869Additions


75,448







75,448Disposals


(24,536
)






(24,536
)Other






(1,802
)


(1,802
)Balance at December 31, 2007


1,011,193



263,786



1,274,979Additions


82,784



216



83,000Disposals


(18,368
)






(18,368
)Other






(69,324
)


(69,324
)Balance at December 31, 2008

$
1,075,609


$
194,678


$
1,270,287        F-20




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    December 31, 2008GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite Useful LivesManagement and other service contracts

$
24,618


$
(5,210
)

$
19,408Other


29,947



(4,857
)


25,090Total

$
54,565


$
(10,067
)

$
44,498Indefinite Useful LivesManagement contracts










274,354Total intangible assets









$
318,852   December 31, 2007GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite Useful LivesManagement and other service contracts

$
24,357


$
(2,159
)

$
22,198Other


29,914



(1,935
)


27,979Total

$
54,271


$
(4,094
)

$
50,177Indefinite Useful LivesManagement contracts










265,664Total intangible assets









$
315,841       2009

$
6,1352010


5,7082011


5,9402012


6,1742013


6,066  F-21




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  (7)
    Long-term
    Debt    2008


2007Senior secured credit facility

$
518,975


$
490,275U.K. senior credit agreement


59,252



83,519Senior subordinated notes


440,000



440,000Notes payable to financial institutions


35,366



37,238Capital lease obligations (Note 9)


44,354



47,030Total long-term debt


1,097,947



1,098,062Less current portion


(24,488
)


(25,311
)Long-term debt, less current portion

$
1,073,459


$
1,072,751   (a)
    Senior
    secured credit facility  buy-up buy-up
     F-22




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
        (b)
    Senior
    subordinated notes  7 8 1 4 payment-in-kind 1 4
  7 8 1 4 %/10% senior
  (c)
    United
    Kingdom borrowings     F-23




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
        (d)
    Other
    Long-term Debt        (8)
    Interest
    Rate Swaps     F-24




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
              (9)
    Leases   F-25




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    Capital


OperatingLeases


LeasesYear ending December 31,2009

$
9,269


$
15,2482010


8,958



13,4442011


7,801



11,0952012


6,662



8,4602013


5,395



6,559Thereafter


38,089



19,113Total minimum lease payments


76,174


$
73,919Amount representing interest


(31,820
)Present value of minimum lease payments

$
44,354     (10)
    Related
    Party Transactions     F-26




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
          (11)
    Income
    Taxes    Successor



PredecessorPeriod from



Period fromApril 19



January 1through



throughDecember 31,



April 18,2008


2007



2007


2006Domestic

$
40,172


$
15,106



$
(6,715
)

$
53,265Foreign


20,239



10,424




3,962



9,418$
60,411


$
25,530



$
(2,753
)

$
62,683     Successor

Current


Deferred


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

$
44


$
13,819


$
13,863State and local


3,020







3,020Foreign


5,410



41



5,451Net income tax expense

$
8,474


$
13,860


$
22,334   F-27




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Successor

Current


Deferred


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

$
(345
)

$
10,221


$
9,876State and local


1,334







1,334Foreign


3,460



(59
)


3,401Net income tax expense

$
4,449


$
10,162


$
14,611   Predecessor

Current


Deferred


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

$



$
1,516


$
1,516State and local


1,302



(23
)


1,279Foreign


1,528



(178
)


1,350Net income tax expense

$
2,830


$
1,315


$
4,145   Predecessor

Current


Deferred


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

$
10,785


$
7,791


$
18,576State and local


2,902



(441
)


2,461Foreign


2,731



(1,056
)


1,675Net income tax expense

$
16,418


$
6,294


$
22,712  F-28




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    Successor



PredecessorPeriod from



Period fromApril 19



January 1Year Ended


through



through


Year EndedDecember 31,


December 31,



April 18,


December 31,2008


2007



2007


2006Computed expected tax expense (benefit)

$
21,144


$
8,936



$
(963
)

$
21,939Increase (reduction) in income taxes resulting from:Differences between U.S. financial reporting and foreign
    statutory reporting


23



381




200



(1,007
)State tax expense, net of federal benefit


1,963



874




824



1,445Removal of foreign tax rate differential


(1,224
)


(628
)



(237
)


(614
)Transaction costs






(453
)



2,250



Valuation allowance


(223
)


5,121




1,323



Other


651



380




748



949Total

$
22,334


$
14,611



$
4,145


$
22,712     December 31,2008


2007Deferred tax assets:Net operating loss and other tax carryforwards

$
17,009


$
16,139Accrued expenses


11,433



10,340Bad debts/reserves


8,064



7,135Capitalized costs and other


2,052



4,208Total deferred tax assets


38,558



37,822Valuation allowance


(38,558
)


(37,822
)Total deferred tax assets, net

$



$
Deferred tax liabilities:Basis difference of acquisitions

$
122,582


$
105,425Accelerated depreciation


2,850



3,730Capitalized interest and other


207



259Total deferred tax liabilities

$
125,639


$
109,414    F-29




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
        Accounting for Uncertainty
    in Income Taxes  an interpretation of FASB Statement
    No. 109
  (12)
    Equity-Based
    Compensation     F-30




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
        Successor



PredecessorPeriod from



Period fromApril 19



January 1Year Ended


through



through


Year EndedDecember 31,


December 31,



April 18,


December 312008


2007



2007


2006Salaries, benefits and other employee costs

$
983


$
308



$
959


$
2,941General and administrative expenses


978



643




16,144



9,034Other operating expenses


336



859








Equity in earnings of unconsolidated affiliates











20



78Minority interests in income of consolidated subsidiaries











(23
)


(79
)Expense before income tax benefit


2,297



1,810




17,100



11,974Income tax benefit(1)


(463
)


(192
)



(5,366
)


(3,684
)Total equity-based compensation expense, net of tax

$
1,834


$
1,618



$
11,734


$
8,290     Successor



PredecessorPeriod from



Period fromApril 19



January 1Year Ended


through



through


Year EndedDecember 31,


December 31,



April 18,


December 312008


2007



2007


2006Share awards

$
1,150


$
773



$
13,202


$
9,423Stock options


811



178




3,797



2,253Warrants


336



859








ESPP(2)











101



298Expense before income tax benefit


2,297



1,810




17,100



11,974Income tax benefit(1)


(463
)


(192
)



(5,366
)


(3,684
)Total equity-based compensation expense, net of tax

$
1,834


$
1,618



$
11,734


$
8,290     (1)
    
    There is a tax benefit related to portions of the Companys
    equity-based compensation. However, the realizability of this
    and other deductions is affected by the Company generating net
    operating losses in its overall U.S. tax computations since the
    merger. As the Company does not consider it more likely than not
    that F-31




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  these losses will be used to offset future taxable income, the
    Successors overall tax computations include a full
    valuation allowance against its U.S. net operating loss
    carryforwards and other deferred tax assets.(2)
    
    ESPP amounts are net of reimbursements by other owners of the
    Companys investees. The ESPP was terminated subsequent to
    the merger.      Stock
    Options  Successor
    Period fromApril 19Year Ended


throughDecember 31,


December 31,2008


2007Assumptions:Expected life in years


4.82



4.82Risk-free interest rates


2.37-2.75
%


4.47
%Dividend yield


0.0
%


0.0
%Volatility


45.16
%


45.16
%Weighted average grant-date fair value

$
0.55


$
0.25  F-32




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    WeightedWeighted


AverageAverage


Remaining


AggregateSuccessor

Number of


Exercise


Contractual


IntrinsicStock Options

Shares (000)


Price


Life (Years)


Value ($000)Outstanding at January 1, 2008


3,920


$
0.32



7.11


$
2,666Additional grants


1,110



1.32







Exercised


(63
)


0.32







Forfeited or expired


(615
)


0.37







Outstanding at December 31, 2008


4,352


$
0.57



6.50


$
6,141Exercisable at December 31, 2008


830


$
0.32



6.15


$
1,378   Share
    Awards  Successor
        WeightedAverageSuccessor

Number of


Grant-DateNonvested Shares

Shares (000)


Fair ValueNonvested at January 1, 2008


13,570


$
0.46Additional grants






Vested


(1,736
)


0.48Forfeited






Nonvested at December 31, 2008


11,834


$
0.46    F-33




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Warrants 
    Successor
      Stock
    Options and Share Awards  Predecessor
    Year EndedDecember 31,2006Assumptions:Expected life in years


3.75Risk-free interest rates


4.3%-5.0
%Dividend yield


0.0
%Volatility


30.0
%$
9.52    F-34




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
        Employee
    Stock Purchase Plan  Predecessor
      PredecessorPeriod fromJanuary 1through


Year EndedApril 18,


December 31,2007


2006Expected life in years


0.25



0.25Weighted average interest rate


5.1
%


4.2-5.1
%Dividend yield


0.0
%


0.0
%Volatility


30.0
%


30.0
%Grant-date fair value per share

$
6.05


$
5.25-7.56  F-35




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  (13)
    Segment
    Disclosures  Disclosures About Segments of an Enterprise and Related
    Information
  United


UnitedSuccessor

States


Kingdom


TotalYear Ended December 31, 2008Net patient service revenues

$
439,501


$
122,031


$
561,532Other revenues


80,691







80,691Total revenues

$
520,192


$
122,031


$
642,223Depreciation and amortization

$
29,932


$
6,825


$
36,757Operating income


174,294



25,462



199,756Net interest expense


(77,248
)


(5,173
)


(82,421
)Income tax expense


(16,882
)


(5,452
)


(22,334
)Total assets


1,983,676



284,487



2,268,163Capital expenditures


16,246



16,883



33,129   United


UnitedSuccessor

States


Kingdom


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

$
318,060


$
84,373


$
402,433Other revenues


50,055







50,055Total revenues

$
368,115


$
84,373


$
452,488Depreciation and amortization

$
21,591


$
5,097


$
26,688Operating income


120,821



14,925



135,746Net interest expense


(60,182
)


(4,472
)


(64,654
)Income tax expense


(11,210
)


(3,401
)


(14,611
)Total assets


1,906,471



370,922



2,277,393Capital expenditures


13,663



5,339



19,002   F-36




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  United


UnitedPredecessor

States


Kingdom


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

$
136,865


$
33,733


$
170,598Other revenues


20,757







20,757Total revenues

$
157,622


$
33,733


$
191,355Depreciation and amortization

$
9,486


$
2,939


$
12,425Operating income


20,929



5,409



26,338Net interest expense


(7,150
)


(1,438
)


(8,588
)Income tax expense


(2,795
)


(1,350
)


(4,145
)Total assets


1,114,429



209,279



1,323,708Capital expenditures


5,224



2,625



7,849   United


UnitedPredecessor

States


Kingdom


TotalYear Ended December 31, 2006Net patient service revenues

$
411,347


$
95,994


$
507,341Other revenues


60,033







60,033Total revenues

$
471,380


$
95,994


$
567,374Depreciation and amortization

$
26,353


$
8,163


$
34,516Operating income


145,375



13,584



158,959Net interest expense


(25,180
)


(3,357
)


(28,537
)Income tax expense


(21,037
)


(1,675
)


(22,712
)Total assets


1,027,243



204,613



1,231,856Capital expenditures


22,383



11,116



33,499   (14)
    Commitments
    and Contingencies  (a)
    Financial
    Guarantees    Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others
 F-37




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    (b)
    Litigation    (c)
    Self
    Insurance and Professional Liability Claims    (d)
    Employee
    Benefit Plans       F-38




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  (e)
    Employment
    Agreements        (15)
    Subsequent
    Events      (16)
    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)
    December 31, 2008 and 2007
    Condensed
    Consolidating Balance Sheets:
  Non-Participating


Consolidation


ConsolidatedAs of December 31, 2008

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
42,025


$
7,410


$



$
49,435Accounts receivable, net






57,172



41



57,213Other receivables


43,033



39,454



(65,417
)


17,070Inventories of supplies


109



8,970







9,079Prepaids and other current assets


9,625



2,110







11,735Total current assets


94,792



115,116



(65,376
)


144,532Property and equipment, net


16,036



184,959



829



201,824Investments in affiliates


1,022,144



63



(714,436
)


307,771Goodwill and intangible assets, net


790,491



322,866



475,782



1,589,139Other assets


97,400



152



(72,655
)


24,897Total assets

$
2,020,863


$
623,156


$
(375,856
)

$
2,268,163Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
910


$
21,284


$



$
22,194Accrued expenses and other


153,249



46,371



(62,932
)


136,688Current portion of long-term debt


5,556



20,368



(1,436
)


24,488Total current liabilities


159,715



88,023



(64,368
)


183,370Long-term debt, less current portion


954,968



139,445



(20,954
)


1,073,459Other long-term liabilities


142,043



12,169



(1,056
)


153,156Minority interests






12,184



81,857



94,041Stockholders equity


764,137



371,335



(371,335
)


764,137Total liabilities and stockholders equity

$
2,020,863


$
623,156


$
(375,856
)

$
2,268,163   F-40




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Non-Participating


Consolidation


ConsolidatedAs of December 31, 2007

Guarantors


Investees


Adjustments


TotalAssetsCurrent assets:Cash and cash equivalents

$
66,665


$
10,093


$



$
76,758Accounts receivable, net






59,796



(239
)


59,557Other receivables


26,616



43,019



(60,661
)


8,974Inventories of supplies






9,597



(102
)


9,495Prepaids and other current assets


17,696



2,473



(113
)


20,056Total current assets


110,977



124,978



(61,115
)


174,840Property and equipment, net


15,452



212,149



1,438



229,039Investments in affiliates


951,129



1,565



(685,337
)


267,357Goodwill and intangible assets, net


834,711



378,619



377,490



1,590,820Other assets


93,703



1,102



(79,468
)


15,337Total assets

$
2,005,972


$
718,413


$
(446,992
)

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

$
1,607


$
21,535


$
(160
)

$
22,982Accrued expenses and other


152,649



46,282



(59,815
)


139,116Current portion of long-term debt


3,787



22,831



(1,307
)


25,311Total current liabilities


158,043



90,648



(61,282
)


187,409Long-term debt, less current portion


926,519



156,725



(10,493
)


1,072,751Other long-term liabilities


114,604



14,054



(1,294
)


127,364Minority interests






14,061



69,002



83,063Stockholders equity


806,806



442,925



(442,925
)


806,806Total liabilities and stockholders equity

$
2,005,972


$
718,413


$
(446,992
)

$
2,277,393  F-41




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Condensed
    Consolidating Statements of Operations:
  Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2008  Successor

Guarantors


Investees


Adjustments


TotalRevenues

$
94,119


$
572,029


$
(23,925
)

$
642,223Equity in earnings of unconsolidated affiliates


113,516



2,465



(68,939
)


47,042Operating expenses, excluding depreciation and amortization


76,204



400,474



(23,926
)


452,752Depreciation and amortization


6,993



29,224



540



36,757Operating income


124,438



144,796



(69,478
)


199,756Interest expense, net


(70,024
)


(12,493
)


96



(82,421
)Other income (expense), net


(1,383
)


(97
)


(310
)


(1,790
)Income before minority interests


53,031



132,206



(69,692
)


115,545Minority interests in income of consolidated subsidiaries






(6,956
)


(48,178
)


(55,134
)Income from continuing operations before income taxes


53,031



125,250



(117,870
)


60,411Income tax expense


(14,954
)


(7,384
)


4



(22,334
)Income from continuing operations


38,077



117,866



(117,866
)


38,077Loss from discontinued operations, net of tax


(563
)










(563
)Net income

$
37,514


$
117,866


$
(117,866
)

$
37,514   Period from April 19 through




Non-Participating


Consolidation


ConsolidatedDecember 31, 2007  Successor

Guarantors


Investees


Adjustments


TotalRevenues

$
63,009


$
410,684


$
(21,205
)

$
452,488Equity in earnings of unconsolidated affiliates


71,090



833



(48,056
)


23,867Operating expenses, excluding depreciation and amortization


52,233



282,881



(21,193
)


313,921Depreciation and amortization


5,287



20,778



623



26,688Operating income


76,579



107,858



(48,691
)


135,746Interest expense, net


(55,180
)


(9,474
)






(64,654
)Other income (expense), net


(574
)


177



(45
)


(442
)Income before minority interests


20,825



98,561



(48,736
)


70,650Minority interests in income of consolidated subsidiaries






(7,618
)


(37,502
)


(45,120
)Income from continuing operations before income taxes


20,825



90,943



(86,238
)


25,530Income tax expense


(9,906
)


(4,881
)


176



(14,611
)Income from continuing operations


10,919



86,062



(86,062
)


10,919Loss from discontinued operations, net of tax


(2,190
)










(2,190
)Net income

$
8,729


$
86,062


$
(86,062
)

$
8,729   F-42




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Period from January 1 through




Non-Participating


Consolidation


ConsolidatedApril 18, 2007  Predecessor

Guarantors


Investees


Adjustments


TotalRevenues

$
26,714


$
173,575


$
(8,934
)

$
191,355Equity in earnings of unconsolidated affiliates


28,137



158



(18,389
)


9,906Operating expenses, excluding depreciation and amortization


51,244



120,371



(9,118
)


162,497Depreciation and amortization


2,219



9,408



799



12,426Operating income


1,388



43,954



(19,004
)


26,338Interest expense, net


(4,996
)


(3,592
)






(8,588
)Loss on early retirement of debt


(2,435
)










(2,435
)Other income (expense), net


917



(718
)


599



798Income (loss) before minority interests


(5,126
)


39,644



(18,405
)


16,113Minority interests in income of consolidated subsidiaries






(4,855
)


(14,011
)


(18,866
)Income (loss) from continuing operations before income taxes


(5,126
)


34,789



(32,416
)


(2,753
)Income tax (expense) benefit


(1,772
)


(2,375
)


2



(4,145
)Income (loss) from continuing operations


(6,898
)


32,414



(32,414
)


(6,898
)Loss from discontinued operations, net of tax


(251
)










(251
)Net income (loss)

$
(7,149
)

$
32,414


$
(32,414
)

$
(7,149
)   Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2006  Predecessor

Guarantors


Investees


Adjustments


TotalRevenues

$
84,921


$
508,982


$
(26,529
)

$
567,374Equity in earnings of unconsolidated affiliates


93,460



2,209



(64,101
)


31,568Operating expenses, excluding depreciation and amortization


80,279



352,072



(26,884
)


405,467Depreciation and amortization


8,310



26,178



28



34,516Operating income


89,792



132,941



(63,774
)


158,959Interest expense, net


(17,217
)


(11,320
)






(28,537
)Other income (expense), net


(13,017
)


225



(315
)


(13,107
)Income before minority interests


59,558



121,846



(64,089
)


117,315Minority interests in income of consolidated subsidiaries






(15,353
)


(39,279
)


(54,632
)Income from continuing operations before income taxes


59,558



106,493



(103,368
)


62,683Income tax expense


(19,587
)


(3,201
)


76



(22,712
)Income from continuing operations


39,971



103,292



(103,292
)


39,971Loss from discontinued operations, net of tax


(5,725
)










(5,725
)Net income

$
34,246


$
103,292


$
(103,292
)

$
34,246  F-43




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Condensed
    Consolidating Statements of Comprehensive Income
    (Loss):
  Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2008  Successor

Guarantor


Investees


Adjustments


TotalNet income (loss)

$
37,514


$
117,866


$
(117,866
)

$
37,514Other 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
)Other comprehensive income (loss)


(82,523
)


(73,752
)


73,752



(82,523
)Comprehensive income (loss)

$
(45,009
)

$
44,114


$
(44,114
)

$
(45,009
)   Period from April 19 through




Non-Participating


Consolidation


ConsolidatedDecember 31, 2007  Successor

Guarantors


Investees


Adjustments


TotalNet income (loss)

$
8,729


$
86,062


$
(86,062
)

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


(1,646
)


(1,646
)


1,646



(1,646
)Pension adjustments, net of tax


161



161



(161
)


161Other comprehensive income (loss)


(1,485
)


(1,485
)


1,485



(1,485
)Comprehensive income (loss)

$
7,244


$
84,577


$
(84,577
)

$
7,244   Period from January 1 through




Non-Participating


Consolidation


ConsolidatedApril 18, 2007  Predecessor

Guarantors


Investees


Adjustments


TotalNet income (loss)

$
(7,149
)

$
32,414


$
(32,414
)

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


2,169



2,169



(2,169
)


2,169Comprehensive income (loss)

$
(4,980
)

$
34,583


$
(34,583
)

$
(4,980
)  F-44




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Condensed
    Consolidating Statements of Stockholders Equity:
  Non-Participating


Consolidation


ConsolidatedGuarantors


Investees


Adjustments


TotalPredecessorBalance, December 31, 2006

$
599,274


$
268,367


$
(268,367
)

$
599,274Net income (loss)


(7,149
)


32,414



(32,414
)


(7,149
)Equity-based compensation expense


17,100











17,100Acquisitions and contributions






36,126



(36,126
)


Disposals and deconsolidations






(3,628
)


3,628



Distributions






(55,096
)


55,096



Foreign currency translation and other


2,169



2,169



(2,169
)


2,169Stock issuances and related tax benefit


19,841











19,841Balance, April 18, 2007

$
631,235


$
280,352


$
(280,352
)

$
631,235   Non-Participating


Consolidation


ConsolidatedGuarantors


Investees


Adjustments


TotalSuccessorBalance, April 19, 2007

$



$



$



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


783,994



448,081



(448,081
)


783,994Net income


8,729



86,062



(86,062
)


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


2,091











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


13,477











13,477Acquisitions and contributions






9,974



(9,974
)


Disposals and deconsolidations






(8,192
)


8,192



Distributions






(91,515
)


91,515



Foreign currency translation and other


(1,485
)


(1,485
)


1,485



(1,485
)Balance, December 31, 2007


806,806



442,925



(442,925
)


806,806Net income


37,514



117,866



(117,866
)


37,514Contribution related to equity award grants by USPI Group
    Holdings, Inc.


2,340



513



(513
)


2,340Acquisitions and contributions






12,918



(12,918
)


Disposals and deconsolidations






(15,675
)


15,675



Distributions






(113,463
)


113,463



Foreign currency translation and other


(82,523
)


(73,749
)


73,749



(82,523
)Balance, December 31, 2008

$
764,137


$
371,335


$
(371,335
)

$
764,137  F-45




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Condensed
    Consolidating Statements of Cash Flows:
  Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2008  Successor

Guarantor


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
37,514


$
117,866


$
(117,866
)

$
37,514Loss on discontinued operations


563











563Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


12,306



35,812



5,015



53,133Net cash provided by (used in) operating activities


50,383



153,678



(112,851
)


91,210Cash flows from investing activities:Purchases of property and equipment, net


(4,189
)


(26,974
)






(31,163
)Purchases of new businesses and equity interests, net


(90,622
)


(107
)






(90,729
)Other items, net


(5,202
)


(3,084
)


2,411



(5,875
)Net cash used in investing activities


(100,013
)


(30,165
)


2,411



(127,767
)Cash flows from financing activities:Long-term borrowings, net


28,700



(13,455
)


1,527



16,772Net equity contributions from USPI Group Holdings, Inc.


40











40Other items, net


(3,799
)


(112,692
)


108,913



(7,578
)Net cash provided by (used in) financing activities


24,941



(126,147
)


110,440



9,234Net cash provided by discontinued operations


49











49Effect 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-46




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Period from April 19 through




Non-Participating


Consolidation


ConsolidatedDecember 31, 2007  Successor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
8,729


$
86,062


$
(86,062
)

$
8,729Loss from discontinued operations


2,190











2,190Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


24,226



34,739



(2,526
)


56,439Net cash provided by (used in) operating activities


35,145



120,801



(88,588
)


67,358Cash flows from investing activities:Purchases of property and equipment, net


(3,733
)


(7,990
)






(11,723
)Purchases and sales of new businesses and equity interests, net


(73,049
)










(73,049
)Other items, net


18,968



12,104



(20,244
)


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


(57,814
)


4,114



(20,244
)


(73,944
)Cash flows from financing activities:Long-term borrowings, net


703,031



(20,104
)


2,265



685,192Net equity contributions from USPI Group Holdings, Inc.


779,279











779,279Payments to repurchase common stock


(1,430,879
)










(1,430,879
)Other items, net


(43,308
)


(97,389
)


106,567



(34,130
)Net cash provided by (used in) financing activities


8,123



(117,493
)


108,832



(538
)Net cash provided by discontinued operations


755











755Effect of exchange rate changes on cash






(70
)






(70
)Net increase (decrease) in cash


(13,791
)


7,352







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


80,456



2,741







83,197Cash at the end of the period

$
66,665


$
10,093


$



$
76,758   F-47




---



##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Period from January 1 through




Non-Participating


Consolidation


ConsolidatedApril 18, 2007  Predecessor

Guarantors


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
(7,149
)

$
32,414


$
(32,414
)

$
(7,149
)Loss from discontinued operations


251











251Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


35,733



21,989



(21,725
)


35,997Net cash provided by (used in) operating activities


28,835



54,403



(54,139
)


29,099Cash flows from investing activities:Purchases of property and equipment, net


(576
)


(5,596
)






(6,172
)Purchases and sales of new businesses and equity interests, net


(10,789
)










(10,789
)Other items, net


(4,490
)


(8,411
)


4,373



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


(15,855
)


(14,007
)


4,373



(25,489
)Cash flows from financing activities:Long-term borrowings, net


(511
)


9,688



4,083



13,260Proceeds from issuance of common stock


6,135











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


22,306



45



(8,456
)


13,895Other items, net


15,821



(55,081
)


54,139



14,879Net cash provided by (used in) financing activities


43,751



(45,348
)


49,766



48,169Net cash used in discontinued operations


(209
)










(209
)Effect of exchange rate changes on cash






(113
)






(113
)Net increase (decrease) in cash


56,522



(5,065
)






51,457Cash at the beginning of the period


23,934



7,806







31,740Cash at the end of the period

$
80,456


$
2,741


$



$
83,197   F-48




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  Non-Participating


Consolidation


ConsolidatedYear Ended December 31, 2006  Predecessor

Guarantor


Investees


Adjustments


TotalCash flows from operating activities:Net income (loss)

$
34,246


$
103,292


$
(103,292
)

$
34,246Loss from discontinued operations


5,725











5,725Changes in operating and intercompany assets and liabilities and
    noncash items included in net income (loss)


41,468



40,208



(20,172
)


61,504Net cash provided by (used in) operating activities


81,439



143,500



(123,464
)


101,475Cash flows from investing activities:Purchases of property and equipment, net


(3,838
)


(24,384
)






(28,222
)Purchases of new businesses and equity interests, net


(261,734
)


9,228







(252,506
)Other items, net


2,798



6,592



(7,559
)


1,831Net cash used in investing activities


(262,774
)


(8,564
)


(7,559
)


(278,897
)Cash flows from financing activities:Long-term borrowings, net


38,925



(10,060
)


857



29,722Proceeds from issuance of common stock


7,684











7,684Other items, net


37,364



(124,779
)


130,166



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


83,973



(134,839
)


131,023



80,157Net cash used in discontinued operations


(1,328
)










(1,328
)Effect of exchange rate changes on cash






(107
)






(107
)Net increase (decrease) in cash


(98,690
)


(10
)






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


122,624



7,816







130,440Cash at the end of the period

$
23,934


$
7,806


$



$
31,740   (17)
    New
    Accounting Pronouncements  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
 F-49




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
    Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133
  No. 142-3, Determination of the Useful Life of Intangible Assets FSP 142-3 Goodwill and Other Intangible
    Assets FSP 142-3 Business Combinations FSP 142-3 FSP 142-3
  No. 08-6, Equity Method Investment Accounting Considerations (EITF 08-6). EITF 08-6 EITF 08-6 EITF 08-6
  Employers Disclosures about Postretirement Benefit Plan
    Assets Employers
    Disclosures about Pensions and Other Postretirement Benefits,
 F-50




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##### Table of Contents



UNITED
    SURGICAL PARTNERS INTERNATIONAL, INC.
    AND SUBSIDIARIES
    Notes to Consolidated Financial
    Statements  (Continued)
    December 31, 2008 and 2007
  (18)
    Selected
    Quarterly Financial Data (Unaudited)  Successor



Predecessor



Successor2007 QuartersApril 1



April 192008 Quarters






through



throughFirst


Second


Third


Fourth



First


April 18



June 30


Third


FourthNet revenues

$
165,400


$
162,902


$
153,663


$
160,258



$
159,951


$
31,404



$
131,145


$
154,670


$
166,673Income (loss) from continuing operations


7,660



7,419



7,447



15,551




8,867



(15,765
)



4,343



(53
)


6,629     Financial Statement Schedule
  Form 10-K:
   F-51




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##### Table of Contents



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


Additions Charged to:








Balance atBeginning of


Costs and


Other





Other


End ofPeriod


Expenses


Accounts


Deductions(2)


Items(3)


Period(In thousands)Year ended December 31, 2006(1)

$
6,656



10,100







(8,530
)


1,729


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


9,955



3,324







(2,269
)


383



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


11,393



7,769







(7,946
)


1,505



12,721Year ended December 31, 2008(1)


12,721



7,568







(9,063
)


318



11,544   Valuation
    allowance for deferred tax assets
  Balance at


Additions Charged to:








Balance atBeginning of


Costs and


Other





Other


End ofPeriod


Expenses


Accounts(4)


Deductions(2)


Items(3)


PeriodYear ended December 31, 2006

$



$



$



$



$
2,460


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


2,460



1,323















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


3,783



5,121



28,918











37,822Year ended December 31, 2008


37,822



1,332



(596
)










38,558     (1)
    
    Includes amounts related to companies disposed of in 2006
    through 2008.(2)
    
    Accounts written off.(3)
    
    Primarily beginning balances for purchased businesses and
    entities that were deconsolidated.(4)
    
    Recorded to goodwill   S-1




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES Consolidated
    Financial Statements
    Years Ended June 30, 2008 and 2007
    (With Independent Auditors Report
    Thereon)
  1




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##### Table of Contents



REPORT OF
    ERNST & YOUNG LLP, INDEPENDENT AUDITORS             
 2




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIESConsolidated Balance Sheets
    June 30, 2008 and 2007
  2008


2007(In thousands, except per share amounts)ASSETSCURRENT ASSETS:Cash

$
3,527


$
6,285Patient receivables, net of allowance for doubtful accounts of
    $10,448,000 and $6,384,000 at June 30, 2008 and 2007,
    respectively


45,417



29,293Due from affiliate (note 9)


30,676



35,606Inventories of supplies


7,337



5,376Current portion of notes receivable (note 6)






389Prepaid and other current assets


1,728



1,204Total current assets


88,685



78,153PROPERTY AND EQUIPMENT, net (note 2)


148,411



135,571OTHER LONG-TERM ASSETS:Investments in unconsolidated affiliates (note 4)


1,618



1,316Goodwill and intangible assets, net (notes 4 and 5)


131,319



93,516Notes receivable, net of current portion (note 6)






949Other


652



1,164Total assets

$
370,685


$
310,669LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable

$
18,013



13,595Accrued expenses and other


13,687



9,737Due to affiliates (notes 6 and 9)


3,216



2,199Current portion of long-term obligations (note 7)


12,057



7,767Total current liabilities


46,973



33,298LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION (note 7)


123,646



109,908OTHER LIABILITIES


10,238



7,326Total liabilities


180,857



150,532MINORITY INTERESTS (note 4)


29,910



25,702COMMINTMENTS AND CONTINGENCIES(Notes 3, 7, 8 and 10)MEMBERS EQUITY (note 3)


159,918



134,435Total liabilities and members equity

$
370,685


$
310,669  3




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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, 2008 AND 2007
  2008


2007(In thousands)REVENUES:Net patient service revenue

$
348,203


$
259,716Management and royalty fee income (note 9)


600



600Other income


469



120Total revenues


349,272



260,436EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES


1,059



686OPERATING EXPENSES:Salaries, benefits, and other employee costs


82,316



57,051Medical services and supplies


78,203



58,972Management and royalty fees (note 9)


14,546



11,657Professional fees


5,714



1,314Other operating expenses


52,434



38,918Provision for doubtful accounts


13,646



8,197Depreciation and amortization


17,706



13,418Total operating expenses


264,565



189,527Operating income


85,766



71,595NONOPERATING EXPENSES:Interest expense


(13,570
)


(7,585
)Interest income (note 9)


1,445



2,199Other expense, net


(61
)


(85
)Income before minority interests and income tax


73,580



66,124MINORITY INTERESTS IN INCOME OF CONSOLIDATED SUBSIDIARIES


(34,341
)


(31,711
)Income before income taxes


39,239



34,413INCOME TAX


(3,673
)


(903
)Net income

$
35,566


$
33,510    4




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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, 2008 AND 2007
  Contributed Capital


Retained EarningsUSP


BHS


BUMC


USP


BHS


BUMC


Total(In thousands)Balance at July 1, 2007

$
35,889


$
36,033


$



$
18,160


$
18,233


$



$
108,315Net income














16,721



16,789







33,510Contribution of capital


11,168



8,590



















19,758Distributions of earnings














(13,546
)


(13,602
)






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


(1,309
)


1,309



















Balance at June 30, 2007


45,748



45,932







21,335



21,420


$




134,435Net income














17,747



17,819







35,566Contributions of capital


14,381



7,457



4,092















25,930Distributions of earnings














(17,971
)


(18,042
)






(36,013
)Assign BUMC 49% of BHS 50.1% interest in THVG, effective
    6/29/08






(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


$
159,918    5




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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, 2008 AND 2007
  2008


2007CASH FLOWS FROM OPERATING ACTIVITIES:Net income

$
35,566


$
33,510Adjustments to reconcile net income to net cash provided by
    operating activities:Provision for doubtful accounts


13,646



8,197Depreciation and amortization


17,706



13,418Amortization of debt issue costs


3



71Equity in earnings of unconsolidated affiliates, net of
    distributions received


(230
)


201Minority interests in income of consolidated subsidiaries, net
    of distributions paid


2,280



2,199Changes in operating assets and liabilities, net of acquisitionsPatient receivables


(26,173
)


(13,008
)Due from (to) affiliates, net


743



(229
)Inventories of supplies, prepaids, and other assets


(1,704
)


(1,249
)Accounts payable and accrued expenses


4,295



6,111Net cash provided by operating activities


46,132



49,221CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of equity interests, net of cash received of 291,000
    and 11,000 for 2008 and 2007, respectively


(9,476
)


(4,427
)Sale of equity interests


952



1,417Purchases of property and equipment


(18,301
)


(18,010
)Sales of property and equipment


26



27Cash collections on notes receivable from affiliates


1,338



361Change in cash management balances with affiliate


7,692



(7,890
)Net cash used in investing activities


(17,769
)


(28,522
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from long-term debt

$
19,798


$
11,215Payments on long-term obligations


(14,089
)


(6,417
)Returns of capital to minority interest holders


(817
)


(502
)Distributions to Company members


(36,013
)


(27,148
)Net cash used in financing activities


(31,121
)


(22,852
)DECREASE IN CASH


(2,758
)


(2,153
)CASH, beginning of period


6,285



8,438CASH, end of period

$
3,527


$
6,285SUPPLEMENTAL INFORMATION:Cash paid for interest

$
12,814


$
7,463Cash paid for taxes


2,375



Noncash transactions:Noncash settlement of note receivable (note 4)






4,135Noncash assets contributed by Members (note 3)


25,930



19,758Asset acquired under capital leases


1,840



49,817  6




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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, 2008 AND 2007
  1.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Description
    of Business
          Basis
    of Accounting
    Principles
    of Consolidation
   7




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
  Use of
    Estimates
    New
    Accounting Pronouncements
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements, an amendment of ARB No. 51
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial Liabilities
    Including an Amendment of FASB Statement No. 115
  Cash
    Equivalents
   8




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
  Inventories
    of Supplies
    Property
    and Equipment
    Investments
    in Unconsolidated Affiliates
    Intangible
    Assets and Goodwill
    Impairment
    of Long-Lived Assets and Long-Lived Assets to Be Disposed
    Of
    Fair
    Value of Financial Instruments
   9




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
  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.
 10




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
  Commitments
    and Contingencies
    2.
    PROPERTY
    AND EQUIPMENT    EstimatedUseful Lives


2008


2007Buildings and leasehold improvements


5-25 years


$
110,629


$
96,034Equipment


3-15 years



68,405



56,563Furniture and fixtures


5-15 years



8,880



3,859Construction in progress






124



3,251188,038



159,707Less accumulated depreciation and amortization






(39,627
)


(24,136
)Net property and equipment





$
148,411


$
135,571     2008


2007Buildings

$
81,112


$
82,434Equipment and furniture


16,163



13,00197,275



95,435Less accumulated amortization


(15,823
)


(8,483
)Net property and equipment under capital leases

$
81,452


$
86,952   3.
    CAPITAL
    CONTRIBUTIONS BY MEMBERS      Ownership


Net AssetsInvestee

Percentage


Contributed


Effective DateFort Worth Surgicare Partners, Ltd. (Fort Worth)


50.1
%

$
19,670


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


2.0
%


88


July 1, 2006Arlington 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
%


9,481


June 30, 2008  11




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
      Fort Worthand MCSH


Arlington


Rockwall


MetroplexCurrent assets

$
7,015


$
2,955


$
1,250


$
2,302Investments in unconsolidated affiliates


88











Property and equipment


12,642



4,196



805



1,436Goodwill


18,320



11,912



8,254



8,317Other noncurrent assets


212



164



20



25Total assets acquired


38,277



19,227



10,329



12,080Current liabilities


5,293



2,360



905



1,172Long-term debt


11,838



3,412



5,606



267Other noncurrent liabilities


42







8



Total liabilities assumed


17,173



5,772



6,519



1,439Minority interests payable


1,346



772



44



1,160Net assets acquired

$
19,758


$
12,683


$
3,766


$
9,481  12




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
  4.
    INVESTMENTS
    IN SUBSIDIARIES AND UNCONSOLIDATED AFFILIATES    Percentage OwnedJune 30,


June 30,Legal Name

Facility

City

2008


2007Consolidated 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


56.9



50.1Dallas Surgical Partners, L.L.P.

Texas Surgery Center

Dallas


56.9



50.1Dallas Surgical Partners, L.L.P.

Physicians Day Surgery Center

Dallas


56.9



50.1Denton Surgicare Partners, Ltd.

Baylor Surgicare at Denton

Denton


50.1



50.1Frisco Medical Center, L.L.P.

Baylor Medical Center at Frisco

Frisco


50.1



50.1Garland Surgicare Partners, Ltd.

Baylor Surgicare at Garland

Garland


50.1



50.1Grapevine Surgicare Partners, Ltd.

Baylor Surgicare at Grapevine

Grapevine


50.1



50.1Lewisville Surgicare Partners, Ltd.

Baylor Surgicare at Lewisville

Lewisville


52.8



51.1MSH Partners, L.P.

Mary Shiels Hospital

Dallas


56.9



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

North Central Surgery Center

Dallas


28.9



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

North Garland Surgery Center

Garland


52.4



51.1Rockwall/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


50.5



50.1Valley View Surgicare Partners, Ltd.

Baylor Surgicare at Valley View

Dallas


50.1



50.1Fort Worth Surgicare Partners, Ltd.

Baylor Surgical Hospital of Fort Worth

Fort Worth


50.1



50.1Arlington Surgicare Partners, Ltd.

Surgery Center of Arlington

Arlington


50.1



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

Rockwall Surgery Center

Rockwall


50.1



Baylor Surgicare at Plano, L.L.C.

Baylor Surgicare at Plano

Plano


50.1



Metroplex Surgicare Partners, Ltd.

Metroplex Surgicare

Bedford


50.1



Arlington Orthopedic and Spine Hospitals, LLC

Arlington Hospital

Arlington


50.1



Unconsolidated affiliates:Denton Surgicare Real Estate, Ltd.

(2)

n/a


49.0
%


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

Irving-Coppell Surgical Hospital

Irving


18.4



17.8MCSH 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.     13




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
    
    Net payments made for the year ended June 30, 2008 for the
    purchase of noncontrolling interests in University Surgical
    Partners of Dallas, L. L. P. (USPD) totaling $3,774,215.
    Payments made of $1,538,222 and proceeds received of $952,201
    for the year ended June 30, 2008, and payments made of
    $845,150 and proceeds received of $1,417,136 for the year ended
    June 30, 2007, related to other transactions, primarily
    purchases and sales of individual partnership units with
    physicians who invest in the facilities.      BaylorSurgicare atPlano, L.L.CCurrent assets

$
372Property and equipment


923Goodwill


4,299Total assets acquired


5,594Current liabilities


857Long-term debt


461Total liabilities assumed


1,318Minority interests payable


112Net assets acquired


4,164     5.
    GOODWILL
    AND INTANGIBLE ASSETS    2008


2007Goodwill

$
130,137


$
92,332Other intangible assets


1,182



1,184Total

$
131,319


$
93,516  14




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
    Balance, June 30, 2006

$
69,803Additions:Contribution of Fort Worth and MCSH


18,320Trophy Club purchase price finalization


4,160Other


49Balance, June 30, 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 noncontrolling interests in USPD


3,360Other


1,663Balance, June 30, 2008

$
130,137       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   June 30, 2007Gross Carrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Debt issue costs

$
79


$
(45
)

$
34Indefinite useful lives:Management contracts


1,150







1,150Total intangible assets

$
1,229


$
(45
)

$
1,184  15




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
    6.
    NOTES RECEIVABLE    7.
    LONG TERM
    OBLIGATIONS    2008


2007Capital lease obligations (note 8)

$
92,044


$
90,669Notes payable to financial institutions


43,659



27,006Total long-term obligations


135,703



117,675Less current portion


(12,057
)


(7,767
)Long-term obligations, less current portion

$
123,646


$
109,908     2009

$
12,0572010


11,1532011


10,0642012


8,6792013


4,808Thereafter


88,942Total long-term obligations

$
135,703       8.
    LEASES   16




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
    Capital


OperatingLeases


LeasesYear ending June 30:2009

$
12,784


$
9,9592010


12,253



8,3692011


11,820



8,0882012


11,555



8,0562013


11,573



7,573Thereafter


163,545



75,559Total minimum lease payments

$
223,530


$
117,604Amount representing interest


(131,486
)Present value of minimum lease payments

$
92,044     9.
    RELATED-PARTY
    TRANSACTIONS         17




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
  10.
    COMMITMENTS
    AND CONTINGENCIES  Financial
    Guarantees
    Litigation
    and Professional Liability Claims
    11.
    SUBSEQUENT
    EVENTS   18




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##### Table of Contents



TEXAS
    HEALTH VENTURE GROUP, L.L.C.
    AND SUBSIDIARIES
   Year Ended June 30, 2007 and Six Months Ended
    June 30, 2006
 (With Independent Auditors Report Thereon)
  19




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##### Table of Contents



Report of
    Ernst & Young LLP, Independent Auditors               20




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##### Table of Contents



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


2006ASSETSCurrent assets:Cash

$
6,285,079


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


29,292,533



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


35,605,498



25,310,228Inventories of supplies


5,376,034



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


388,928



360,910Prepaid and other current assets


1,204,112



889,039Total current assets


78,152,184



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


135,570,797



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


1,316,339



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


93,515,925



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


949,396



5,460,871Other


1,164,304



1,574,384Total assets

$
310,668,945


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

$
13,595,214


$
6,546,656Accrued expenses and other


9,736,364



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


2,199,392



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


7,767,096



5,268,557Total current liabilities


33,298,066



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


109,908,324



45,928,764Other liabilities


7,325,833



6,554,719Total liabilities


150,532,223



76,301,184Minority interests (note 4)


25,701,959



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


134,434,763



108,314,548Total liabilities and members equity

$
310,668,945


$
206,827,574    21




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##### Table of Contents



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


Six MonthsJune 30,


Ended June 30,2007


2006Revenues:Net patient service revenue

$
259,716,347


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


600,000



300,000Other income


119,451



43,432Total revenues


260,435,798



97,397,634Equity in earnings of unconsolidated affiliates


686,372



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


57,051,254



21,389,146Medical services and supplies


58,972,428



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


11,656,497



4,252,477Professional fees


1,314,082



267,903Other operating expenses


38,917,762



16,677,859Provision for doubtful accounts


8,197,418



2,189,256Depreciation and amortization


13,417,811



4,764,091Total operating expenses


189,527,252



69,438,132Operating income


71,594,918



28,462,808Interest expense


(7,584,751
)


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


2,199,426



839,081Other expense, net


(85,283
)


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


66,124,310



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


(31,711,272
)


(12,609,642
)Income before income taxes


34,413,038



13,937,622Income tax


(903,342
)


Net income

$
33,509,696


$
13,937,622    22




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Consolidated Statements of Members Equity
    Year Ended June 30, 2007 and Six Months Ended June 30,
    2006
  Contributed Capital


Retained EarningsUSP


Baylor


USP


Baylor


TotalBalance, January 1, 2006

$
35,888,661


$
36,032,503


$
19,150,489


$
19,227,244


$
110,298,897Net income










6,954,873



6,982,749



13,937,622Distributions of earnings










(7,945,064
)


(7,976,907
)


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


35,888,661



36,032,503



18,160,298



18,233,086



108,314,548Net income










16,721,338



16,788,358



33,509,696Contributions of capital


11,168,863



8,590,086











19,758,949Distributions of earnings










(13,547,066
)


(13,601,364
)


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


(1,309,177
)


1,309,177











Balance, June 30, 2007

$
45,748,347


$
45,931,766


$
21,334,570


$
21,420,080


$
134,434,763    23




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##### Table of Contents



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


Six MonthsJune 30,


Ended June 30,2007


2006Cash flows from operating activities:Net income

$
33,509,696


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


8,197,418



2,189,256Depreciation and amortization


13,417,811



4,764,091Amortization of debt issue costs


71,625



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


201,221



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


2,199,302



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


(13,008,376
)


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


(229,022
)


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


(1,249,313
)


(218,771
)Accounts payable and accrued expenses


6,111,500



(690,911
)Net cash provided by operating activities


49,221,862



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


(4,427,615
)


(345,943
)Sales of equity interests


1,417,136



3,098,980Purchases of property and equipment


(18,009,917
)


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


27,347



37,748Cash collections on notes receivable from affiliates


360,910



170,584Change in cash management balances with affiliate


(7,889,964
)


(940,793
)Net cash used in investing activities


(28,522,103
)


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


11,215,318



406,620Payments on long-term obligations


(6,416,985
)


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


(502,142
)


Distributions to Company members


(27,148,430
)


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


(22,852,239
)


(17,804,776
)Decrease in cash


(2,152,480
)


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


8,437,559



11,220,390Cash, end of period

$
6,285,079


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

$
7,463,407


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


4,135,215



Noncash assets contributed by Members (note 3)


19,758,949



Asset acquired under capital leases


49,816,688



655,822    24




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial Statements
 June 30, 2007 and 2006
  (1)
    Summary
    of Significant Accounting Policies  (a)
    Description
    of Business          (b)
    Basis
    of Accounting    (c)
    Principles
    of Consolidation   25




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 June 30, 2007 and 2006
  (d)
    Use of
    Estimates    (e)
    New
    Accounting Pronouncement      (f)
    Cash
    Equivalents    (g)
    Inventories
    of Supplies    (h)
    Property
    and Equipment   26




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 June 30, 2007 and 2006
    (i)
    Investments
    in Unconsolidated Affiliates    (j)
    Intangible
    Assets and Goodwill    (k)
    Impairment
    of Long-Lived Assets and Long-Lived Assets to Be Disposed
    Of    (l)
    Fair
    Value of Financial Instruments    (m)
    Revenue
    Recognition     27




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 June 30, 2007 and 2006
  (n)
    Equity
    in Earnings of Unconsolidated Affiliates    (o)
    Income
    Taxes      (p)
    Commitments
    and Contingencies    (q)
    Factors
    Affecting Comparability    (2)
    Property
    and Equipment    EstimatedUseful Lives


2007


2006Buildings and leasehold improvements


5-25 years


$
96,034,308


$
38,494,705Equipment


3-15 years



56,563,126



36,465,447Furniture and fixtures


5-15 years



3,858,383



3,489,732Construction in progress






3,250,788



1,059,267159,706,605



79,509,151Less accumulated depreciation and amortization






(24,135,808
)


(11,581,706
)Net property and equipment





$
135,570,797


$
67,927,445  28




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 June 30, 2007 and 2006
    2007


2006Buildings

$
82,434,546


$
24,636,190Equipment and furniture


13,001,066



9,823,50895,435,612



34,459,698Less accumulated amortization


(8,483,264
)


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

$
86,952,348


$
30,821,423   (3)  Capital
    Contributions by Members
    Ownership


Net AssetsInvestee

Percentage


Contributed


Effective DateFort Worth Surgicare Partners, Ltd. (Fort Worth)


50.1
%

$
19,670,959



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


2.0
%


87,990



July 1, 2006      29




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 June 30, 2007 and 2006
    THVG FortWorth, L.P.Current assets

$
7,014,902Property and equipment


12,642,825Investments in unconsolidated affiliates


87,990Goodwill


18,319,919Other noncurrent assets


211,920Total assets acquired


38,277,556Current liabilities


5,292,979Long-term debt


11,837,885Other noncurrent liabilities


42,096Total liabilities assumed


17,172,960Minority interests payable


1,345,647Net assets acquired

$
19,758,949   (4)  Investments
    in Subsidiaries and Unconsolidated Affiliates
    Percentage OwnedJune 30,


June 30,Legal Name

Facility

City

2007


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

Bellaire Surgery Center

Fort Worth


50.1
%


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

Baylor Surgicare

Dallas


50.1



50.1Dallas Surgical Partners, L.L.P.

Texas Surgery Center

Dallas


50.1



50.1Dallas Surgical Partners, L.L.P.

Physicians Day Surgery Center

Dallas


50.1



50.1Denton Surgicare Partners, Ltd.

Baylor Surgicare at Denton

Denton


50.1



50.1Frisco Medical Center, L.L.P.

Baylor Medical Center at Frisco

Frisco


50.1



50.1Garland Surgicare Partners, Ltd.

Baylor Surgicare at Garland

Garland


50.1



50.1Grapevine Surgicare Partners, Ltd.

Baylor Surgicare at Grapevine

Grapevine


50.1



50.1Lewisville Surgicare Partners, Ltd.

Baylor Surgicare at Lewisville

Lewisville


51.1



50.1MSH Partners, L.P.

Mary Shiels Hospital

Dallas


50.1



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

North Central Surgery Center

Dallas


25.5



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

North Garland Surgery Center

Garland


51.1



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

Baylor Surgicare at Heath

Heath


50.1



59.5Trophy Club Medical Center, L.P.

Trophy Club Medical Center

Fort Worth


50.1



50.1Valley View Surgicare Partners, Ltd.

Baylor Surgicare at Valley View

Dallas


50.1



50.1Fort Worth Surgicare Partners, Ltd.

Baylor Surgical Hospital of Fort Worth

Fort Worth


50.1



Unconsolidated affiliates:Denton Surgicare Real Estate, Ltd.

n/a

n/a


49.0
%


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

Irving-Coppell Surgical Hospital

Irving


17.8



18.6MCSH Real Estate Investors, Ltd.

n/a

n/a


2.0



     (1)
    
    List includes holding companies, which are wholly owned by the
    Company and hold the Companys investments in the
    Facilities. 30




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##### Table of Contents



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


2006Goodwill

$
92,331,722


$
69,803,284Other intangible assets


1,184,203



1,255,828Total

$
93,515,925


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

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


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


4,159,180Other


49,339Balance, June 30, 2007

$
92,331,722    31




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 June 30, 2007 and 2006
    June 30, 2007Gross Carrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Debt issue costs

$
79,061


$
(44,858
)

$
34,203Indefinite useful lives:Management contracts










1,150,000Total intangible assets









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


AccumulatedAmount


Amortization


TotalDefinite useful lives:Debt issue costs

$
185,602


$
(79,774
)

$
105,828Indefinite useful lives:Management contracts










1,150,000Total intangible assets









$
1,255,828     (6)
    Notes
    Receivable     32




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 June 30, 2007 and 2006
  (7)
    Long Term
    Obligations    2007


2006Capital lease obligations (note 8)

$
90,668,885


$
38,050,108Notes payable to financial institutions


27,006,535



13,147,213Total long-term obligations


117,675,420



51,197,321Less current portion


(7,767,096
)


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

$
109,908,324


$
45,928,764     2008

$
7,767,0962009


8,525,7642010


6,231,5142011


5,169,5472012


4,235,513Thereafter


85,745,986Total long-term obligations

$
117,675,420       (8)
    Leases   33




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 June 30, 2007 and 2006
    Capital


OperatingLeases


LeasesYear ending June 30:2008

$
11,166,782


$
8,162,3652009


11,431,169



8,195,6892010


11,053,539



7,060,7422011


10,939,133



6,961,4282012


11,253,326



6,976,941Thereafter


180,850,433



77,253,862Total minimum lease payments

$
236,694,382


$
114,611,027Amount representing interest


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

$
90,668,885     (9)
    Related-Party
    Transactions         34




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
 June 30, 2007 and 2006
  (10)
    Commitments
    and Contingencies  (a)
    Financial
    Guarantees    (b)
    North
    Central Facility Expansion    (c)
    Litigation
    and Professional Liability Claims    (11)
    Subsequent
    Events       35




---



##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C
    AND SUBSIDIARIES Consolidated
    Financial Statements
    (Unaudited)
    December 31, 2005 and 2004
  36




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Consolidated Balance Sheets
    December 31, 2005 and 2004  2005


2004(Unaudited)


(Unaudited)ASSETSCurrent assets:Cash

$
11,220,390



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


21,422,273



107,591Due from affiliates (note 9)


24,369,435



12,504,707Inventories of supplies


3,929,899



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


347,667



220,000Other


721,911



7,401Total current assets


62,011,575



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


66,887,648



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


1,137,728



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


67,472,871



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


5,484,370



3,324,032Other


1,579,901



5,000Total assets

$
204,574,093



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

$
7,696,820



151,495Accrued expenses and other


6,331,597



64,991Due to affiliates


1,877,705



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


4,823,547



118,753Total current liabilities


20,729,669



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


47,653,957



896,247Other liabilities


6,100,186



Total liabilities


74,483,812



3,343,983Minority interests (note 4)


19,791,384



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


110,298,897



31,166,698Total liabilities and members equity

$
204,574,093



34,915,376    37




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Consolidated Statements of Income
    Years ended December 31, 2005 and 2004  2005


2004(Unaudited)


(Unaudited)Revenues:Net patient service revenue

$
157,714,790



200,187Management and royalty fee income


610,400



4,533,515Other income


85,457



Total revenues


158,410,647



4,733,702Equity in earnings of unconsolidated affiliates


310,780



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


34,979,213



253,733Medical services and supplies


29,417,676



37,317Management and royalty fees


6,608,049



4,545,165Professional fees


1,234,060



316,716Other operating expenses


24,666,955



475,168Provision for doubtful accounts


3,718,343



6,006Depreciation and amortization


7,215,344



19,125Total operating expenses


107,839,640



5,653,230Operating income:


50,881,787



13,887,376Interest expense


(5,147,836
)


(19,340
)Interest income (note 9)


1,149,601



514,731Other income


1,249



Income before minority interests


46,884,801



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


(22,703,422
)


237,954Income before state franchise taxes


24,181,379



14,620,721State franchise tax expense


(154,598
)


(29,873
)Net income

$
24,026,781



14,590,848    38




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Consolidated Statements of Members Equity
    Years ended December 31, 2005 and 2004  Contributed Capital


Retained EarningsUSP


Baylor


USP


Baylor


Total(Unaudited)Balance, December 31, 2003

$
3,006,361



3,006,361



7,531,564



7,531,564



21,075,850Net income










7,295,424



7,295,424



14,590,848Distributions of earnings










(2,250,000
)


(2,250,000
)


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


3,006,361



3,006,361



12,576,988



12,576,988



31,166,698Net income










11,989,364



12,037,417



24,026,781Transfer of membership interests


(6,013
)


6,013



(25,154
)


25,154



Contributions of capital


35,419,158



30,489,284











65,908,442Distributions of earnings










(5,390,709
)


(5,412,315
)


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


(2,530,845
)


2,530,845











Balance, December 31, 2005

$
35,888,661



36,032,503



19,150,489



19,227,244



110,298,897    39




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Consolidated Statements of Cash Flows
    Years ended December 31, 2005 and 2004  2005


2004(Unaudited)


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

$
24,026,781



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


3,718,343



6,006Depreciation and amortization


7,215,344



19,125Amortization of debt issue costs


12,140



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


3,096,250



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


5,887,220



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


(7,275,705
)


(113,597
)Due from affiliates, net


649,427



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


(192,217
)


(47,629
)Accounts payable and accrued expenses


5,737,163



187,486Net cash provided by operating activities


42,874,746



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


(19,535,329
)


(941,235
)Sales of equity interests


3,097,520



247,000Purchases of property and equipment


(9,728,631
)


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


110,442



886,424Returns of capital from unconsolidated affiliates


120,978



Change in cash invested with affiliate


(15,026,497
)


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


(40,961,517
)


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


2,246,831



1,015,000Payments on long-term debt


(5,973,205
)


Capital contributions by Company members


23,821,902



Distributions to Company members


(10,803,024
)


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


9,292,504



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


11,205,733



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


14,657



1,501,564Cash, end of year

$
11,220,390



14,657Supplemental information:Cash paid for interest

$
5,182,372



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


42,086,540



Equity investment contribution due to an affiliate






2,012,500    40




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##### Table of Contents



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

December 31, 2005 and 2004 (1)
    Summary
    of Significant Accounting Policies  (a)
    Description
    of Business            (b)
    Basis
    of Accounting    (c)
    Principles
    of Consolidation   41




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
  (d)
    Use of
    Estimates    (e)
    Revisions
    to Cash Flow Statement        Year Ended December 31, 2004Net Cash Provided by (Used in)Operating


Investing


FinancingActivities


Activities


ActivitiesPreviously reported

$
(776,427
)


(9,380,813
)


8,670,333Distributions received from equity method investees


12,155,333







(12,155,333
)As revised

$
11,378,906



(9,380,813
)


(3,485,000
)   (f)
    Cash
    Equivalents    (g)
    Inventories
    of Supplies    (h)
    Property
    and Equipment   42




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
    (i)
    Investments
    in Unconsolidated Affiliates    (j)
    Intangible
    Assets    (k)
    Impairment
    of Long-Lived Assets and Long-Lived Assets to Be Disposed
    Of    (l)
    Revenue
    Recognition     43




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
    (m)
    Income
    Taxes    (n)
    Commitments
    and Contingencies    (2)
    Property
    and Equipment    EstimatedUseful Lives


2005


2004Buildings and leasehold improvements


5-25 years


$
35,971,823



90,779Equipment


3-15 years



35,218,904



1,948,995Furniture and fixtures


5-15 years



2,929,154



59,85674,119,881



2,099,630Less accumulated depreciation






(7,232,233
)


(19,125
)Net property and equipment





$
66,887,648



2,080,505     2005


2004Buildings

$
24,633,431



Equipment and furniture


9,267,182



33,900,613



Less accumulated depreciation


(2,080,018
)


Net property and equipment under capital leases

$
31,820,595



  44




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
  (3)
    Capital
    Contributions by Members    Ownership


Net assetsInvestee

Percentage


Contributed


Effective DateLewisville Surgicare Partners, Ltd. (Lewisville)


50.1
%

$
28,557,006



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


50.1
%


4,767,170



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


50.1
%


4,600,883



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


50.1
%


4,161,481



January 1, 2005     per-unit
 45




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
  (4)
    Investments
    in Subsidiaries and Unconsolidated Affiliates    Percentage Owned by THVGas of December 31Legal Name

Facility

City

2005


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

Bellaire Surgery Center

Fort Worth


50.1
%


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

Baylor Surgicare

Dallas


50.1



40.4Dallas Surgical Partners, L.L.P.

Texas Surgery Center

Dallas


50.1



40.4Dallas Surgical Partners, L.L.P.

Physicians Day Surgery Center

Dallas


50.1



40.4Denton Surgicare Partners, Ltd.

Baylor Surgicare at Denton

Denton


50.1



42.7Frisco Medical Center, L.L.P.

Baylor Medical Center at Frisco

Frisco


50.1



40.0Garland Surgicare Partners, Ltd.

Premier Ambulatory Surgery Center of Garland

Garland


50.1



Grapevine Surgicare Partners, Ltd.

Baylor Surgicare at Grapevine

Grapevine


50.1



21.2Lewisville Surgicare Partners, Ltd.

Baylor Surgicare at Lewisville

Lewisville


50.1



MSH Partners, L.P.

Mary Shiels Hospital

Dallas


50.1



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

North Central Surgery Center

Dallas


51.4



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

North Garland Surgery Center

Garland


50.1



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

Heath Surgicare

Heath


59.5



55.5Trophy Club Medical Center, L.P.

Trophy Club Medical Center

Fort Worth


50.1



Valley View Surgicare Partners, Ltd.

Valley View Surgery Center

Dallas


50.1



Unconsolidated affiliates:Denton Surgicare Real Estate, Ltd.

n/a

n/a


49.0
%


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

Irving-Coppell Surgical Hospital

Irving


14.5



19.0     (1)
    
    List excludes holding companies, which are wholly owned by the
    Company and hold the Companys investments in the
    facilities. 46




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
     Purchase




Ownership PercentageInvestee

Price


Effective Date

Before


Acquired


AfterFrisco Medical Center, L.L.P.

$
8,800,736


January 1, 2005


40.0
%


10.1
%


50.1
%Grapevine Surgicare Partners, Ltd.


7,199,011


January 1, 2005


21.2



28.9



50.1University Surgical Partners, L.L.P.


6,092,110


January 1, 2005


40.4



9.7



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


931,882


January 1, 2005


40.7



9.4



50.1Denton Surgicare Partners, Ltd.


798,163


January 1, 2005


42.7



7.4



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


429,660


June 1, 2005


25.0



25.1



50.1Acquired cash


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

$
19,299,703     Grapevine


UniversityFrisco Medical


Surgicare


SurgicalCenter, L.L.P.


Partners, Ltd.


Partners, L.L.P.Current assets

$
9,231,896



1,484,263



6,644,549Property and equipment


22,482,946



6,341,540



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


(3,015,111
)


(129,072
)


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


(1,252,316
)






(91,455
)Goodwill


8,117,475



6,909,782



7,094,253Other noncurrent assets


1,223,491



15,999



37,641Total assets acquired


36,788,381



14,622,512



17,405,309Current liabilities


6,129,145



1,127,795



3,421,544Long-term debt


18,174,891



5,879,075



3,379,391Other noncurrent liabilities










Total liabilities assumed


24,304,036



7,006,870



6,800,935Minority interests payable


3,683,609



416,631



4,512,264Net assets acquired

$
8,800,736



7,199,011



6,092,110     (1)
    
    The Company previously held an equity method investment in this
    entity.(2)
    
    The Companys note receivable from this entity eliminates
    in consolidation as a result of the Company acquiring a
    controlling interest in this entity.   47




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
      
    Net proceeds of $2,720,647 from sales of noncontrolling
    interests in North Central Surgical Center, L.L.P. The North
    Central facility opened in December 2005.
    Net proceeds of $141,247 related to other transactions,
    primarily purchases and sales individual partnership units with
    physicians who invest in the facilities.  (5)
    Goodwill
    and Intangible Assets    December 312005


2004Goodwill

$
66,206,975



2,142,200Other intangible assets


1,265,896



1,150,000Total

$
67,472,871



3,292,200     Balance, December 31, 2004

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


40,274,826Buyups (note 4)


23,734,016Other


55,933Balance, December 31, 2005

$
66,206,975    48




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
    December 31, 2005GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Other

$
185,602



(69,706
)


115,896Indefinite useful lives:Management contracts










1,150,000Total intangible assets









$
1,265,896   December 31, 2004GrossCarrying


AccumulatedAmount


Amortization


TotalDefinite useful lives:Other

$








Indefinite useful lives:Management contracts










1,150,000Total intangible assets









$
1,150,000       (6)
    Notes
    Receivable     49




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
  (7)
    Long-Term
    Debt    2005


2004Capital lease obligations

$
38,661,268



Notes payable to financial institutions


13,816,236



1,015,000Total long-term debt


52,477,504



1,015,000Less current portion


(4,823,547
)


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

$
47,653,957



896,247         (8)
    Leases      Capital


OperatingLeases


LeasesYear ending December 31:2006

$
6,490,243



6,171,6832007


6,395,936



6,032,3152008


6,399,958



5,642,2502009


6,425,802



4,644,8482010


5,187,572



3,854,531Thereafter


49,774,407



56,721,807Total minimum lease payments


80,673,918


$
83,067,434Amount representing interest


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

$
38,661,268    50




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
  (9)
    Related-Party
    Transactions          (10)
    Commitments
    and Contingencies  (a)
    Financial
    Guarantees   51




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##### Table of Contents



TEXAS
    HEALTH VENTURES GROUP, L.L.C.
    AND SUBSIDIARIES
    Notes to Consolidated Financial Statements 
    (Unaudited)  (Continued)
 December 31, 2005 and 2004
  (b)
    Litigation
    and Professional Liability Claims   52




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##### Table of Contents



Exhibits:
  ExhibitNumber

Description2
.1

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

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

Amended and Restated Certificate of Incorporation (previously
    filed as 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 (previously filed as an exhibit to the Companys
    Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)10
.2

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

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

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

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

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

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

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

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

First Amendment to the USPI Group Holdings, Inc. 2007 Equity
    Incentive Plan.(2)(3)10
.11

Amended and Restated Deferred Compensation Plan.(2)(3) IV-1




---



##### Table of Contents



ExhibitNumber

Description10
.12

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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




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##### Table of Contents



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

Title

Date*Donald
    E. Steen

Chairman of the Board

February 25, 2009/s/  William
    H. WilcoxWilliam
    H. Wilcox

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

February 25, 2009/s/  Mark
    A. KopserMark
    A. Kopser

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

February 25, 2009/s/  John
    J. WellikJohn
    J. Wellik

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

February 25, 2009*Joel
    T. Allison

Director

February 25, 2009*Michael
    E. Donovan

Director

February 25, 2009*John
    C. Garrett, M.D.

Director

February 25, 2009*D.
    Scott Mackesy

Director

February 25, 2009*James
    Ken Newman

Director

February 25, 2009*Boone
    Powell, Jr.

Director

February 25, 2009 IV-3




---



##### Table of Contents



Signature

Title

Date*Paul
    B. Queally

Director

February 25, 2009*Raymond
    A. Ranelli

Director

February 25, 2009     *
    
    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 From
    8-K filed
    with the Commission on January 31, 2006 and incorporated
    herein by reference).(1)2
.2

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

Amended and Restated Certificate of Incorporation (previously
    filed as 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 (previously filed as an exhibit to the Companys
    Registration Statement on
    Form S-4
    (No. 333-144337)
    and incorporated herein by reference).(1)10
.2

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

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

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

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

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

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

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

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

First Amendment to the USPI Group Holdings, Inc. 2007 Equity
    Incentive Plan.(2)(3) IV-5




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##### Table of Contents



ExhibitNumber

Description10
.11

Amended and Restated Deferred Compensation Plan.(2)(3)10
.12

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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