##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the Fiscal Year Ended December 31, 2004


Commission file No. 000-32837


UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


(Exact name of Registrant as specified in its charter)


|                                                                                            |  |                                         
|------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                    |  | 75-2749762                              
|(State of Incorporation)                                                                    |  | (I.R.S. Employer
    Identification No.)
|                                                                                           
|15305 Dallas Parkway, Suite 1600
    Addison, Texas(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:


|                                                                                                                                          |  |                                                    
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------
|                                                                                                                                          |  | Name of Each Exchange                              
|Title of Each Class                                                                                                                       |  | on Which Registered                                
|                                                                                                                                          |  |                                                    
|Common Stock, par value $.01 per share
    Rights to Purchase Series A Junior Participating Preferred
    Stock, par value $.01 per share |  | The Nasdaq Stock Market
    The Nasdaq Stock Market

þ o


o


þ o


|                                                                                                                     |  |   |               | 
|-------------------------------------------------------------------------------------------------------------------- |  | - | ------------- | 
|Aggregate market value of outstanding Common Stock held by
    non-affiliates of the Registrant, as of June 30, 2004 |  | $ | 1,097,916,482 | 
|                                                                                                                     |  |   |              
|Number of shares of Common Stock outstanding as of
    March 9, 2005                                                 |  |   | 28,803,610    | 
|                                                                                                                     |  |   |              

DOCUMENTS INCORPORATED BY REFERENCE












---










UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


2004 ANNUAL REPORT ON FORM 10-K


TABLE OF CONTENTS


|                                             |  |                                                                                                    |  |  |    | 
|-------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  |  | -- | 
|PART I                                      
|Item 1.                                      |  | Business                                                                                           |  |  | 3  | 
|Item 2.                                      |  | Properties                                                                                         |  |  | 35 | 
|Item 3.                                      |  | Legal Proceedings                                                                                  |  |  | 35 | 
|Item 4.                                      |  | Submission of Matters to a Vote of Security
    Holders                                            |  |  | 35 | 
|PART II                                     
|Item 5.                                      |  | Market for Registrants Common Equity
    and Related Stockholder Matters                          |  |  | 35 | 
|Item 6.                                      |  | Selected Consolidated Financial Data                                                               |  |  | 36 | 
|Item 7.                                      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations          |  |  | 38 | 
|Item 7A.                                     |  | Quantitative and Qualitative Disclosures
    about Market Risk                                     |  |  | 53 | 
|Item 8.                                      |  | Financial Statements and Supplementary
    Data                                                    |  |  | 54 | 
|Item 9.                                      |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure           |  |  | 54 | 
|Item 9A.                                     |  | Controls and Procedures                                                                            |  |  | 54 | 
|PART III                                    
|Item 10.                                     |  | Directors and Executive Officers of the
    Registrant                                             |  |  | 55 | 
|Item 11.                                     |  | Executive Compensation                                                                             |  |  | 56 | 
|Item 12.                                     |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters |  |  | 56 | 
|Item 13.                                     |  | Certain Relationships and Related
    Transactions                                                 |  |  | 56 | 
|Item 14.                                     |  | Principal Accountant Fees and Services                                                             |  |  | 56 | 
|PART IV                                     
|Item 15                                      |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                |  |  | 56 | 
|Subsidiaries                                
|Consent of KPMG LLP                         
|Power of Attorney - Donald E. Steen         
|Power of Attorney - Joel T. Allison         
|Power of Attorney - James C. Crews          
|Power of Attorney - John C. Garrett, M.D.   
|Power of Attorney - Thomas L. Mills         
|Power of Attorney - Boone Powell, Jr.       
|Power of Attorney - Paul B. Queally         
|Power of Attorney - Jerry P. Widman         
|Power of Attorney - David P. Zarin, M.D.    
|Certification of CEO Pursuant to Section 302
|Certification of CFO Pursuant to Section 302
|Certification of CEO Pursuant to Section 906
|Certification of CFO Pursuant to Section 906





|      |                                                                                                                                                                                                                                                                                                                                                   
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: | The responses to Items 10 through 14 will be included in
    the Companys definitive proxy statement to be filed
    pursuant to Regulation 14A for the Annual Meeting of
    Stockholders to be held May 3, 2005. The required
    information is incorporated into this Form 10-K by
    reference to that document and is not repeated herein.

FORWARD LOOKING STATEMENTS




1



---



##### Table of Contents





2



---



##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

General








Available Information


http://www.sec.gov. http://www.unitedsurgical.com


Industry Background




3



---



##### Table of Contents







| |              
| | -------------
| | United States









| |               
| | --------------
| | United Kingdom



4



---



##### Table of Contents





Our Business Strategy






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



| |                                                                 
| | ----------------------------------------------------------------
| | Attract and retain top quality surgeons and other
    physicians





| |                                                                          
| | -------------------------------------------------------------------------
| | Pursue strategic relationships with not-for-profit
    healthcare systems





| |                                        
| | ---------------------------------------
| | Expand our presence in existing markets



5



---



##### Table of Contents





| |                                  
| | ---------------------------------
| | Expand selectively in new markets







| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | the potential to achieve strong increases in revenues and cash
    flows;                                
|
| |  | whether the physicians, healthcare systems and payors in the
    market are receptive to surgery centers;
|
| |  | the size 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;                                                           
|
| |  | whether the facility is well-positioned to negotiate agreements
    with insurers and other payors; and  
|
| |  | licensing and other regulatory considerations.                                                           





| |                               
| | ------------------------------
| | Enhance operating efficiencies



Operations




| |                                
| | -------------------------------
| | Operations in the United States



6



---



##### Table of Contents















| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | make illegal the referral of Medicare and other patients to our
    surgery centers by physicians affiliated with us;                                                  
|
| |  | create the substantial likelihood that cash distributions from
    the partnership or limited liability company to the physician
    owners thereof will be illegal; or
|
| |  | cause physician ownership interests in the partnerships or
    limited liability companies to be illegal.                                                              

7



---



##### Table of Contents









| |                        
| | -----------------------
| | Strategic Relationships









| |                                 
| | --------------------------------
| | Operations in the United Kingdom



8



---



##### Table of Contents













| |         
| | --------
| | Case Mix



|                     |       |      |    |     |      |  |    |     |  
|-------------------- | ----- | ---- | -- | --- | ---- |  | -- | --- | -
|Specialty            |       | U.S. |    |     | U.K. | 
|                     |       |      |    |     |      | 
|Orthopedic           |       |      | 23 | %   |      |  | 27 | %  
|Pain management      |       |      | 20 |     |      |  | 1  |    
|Gynecology           |       |      | 3  |     |      |  | 12 | (1)
|General surgery      |       |      | 5  |     |      |  | 13 |    
|Ear, nose and throat |       |      | 6  |     |      |  | 3  |    
|Gastrointestinal     |       |      | 15 |     |      |  | 3  |    
|Plastic surgery      |       |      | 5  |     |      |  | 22 |    
|Ophthalmology        |       |      | 10 |     |      |  | 3  |    
|Other                |       |      | 13 |     |      |  | 16 |    
|                     |       |      |    |     |      | 
|                     | Total |      |    | 100 | %    |  |    | 100 | %
|                     |       |      |    |     |      | 






|    |                                      
|--- | -------------------------------------
|(1) | Also includes in vitro fertilization.

9



---



##### Table of Contents





| |          
| | ---------
| | Payor Mix



|                  |       |      |    |     |      |  |    |     |  
|----------------- | ----- | ---- | -- | --- | ---- |  | -- | --- | -
|Payor             |       | U.S. |    |     | U.K. | 
|                  |       |      |    |     |      | 
|Private insurance |       |      | 68 | %   |      |  | 50 | %  
|Self-pay          |       |      | 3  |     |      |  | 43 |    
|Government        |       |      | 27 | (1) |      |  | 7  |    
|Other             |       |      | 2  |     |      |  |   |    
|                  |       |      |    |     |      | 
|                  | Total |      |    | 100 | %    |  |    | 100 | %
|                  |       |      |    |     |      | 






|    |                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based solely on case volume. Because government payors typically
    pay less than private insurance, the percentage of our
    U.S. revenue attributable to government payors is
    approximately 10% for Medicare and 1% for Medicaid.



|                                        |                                      |                            |                         |               |    |   | 
|--------------------------------------- | ------------------------------------ | -------------------------- | ----------------------- | ------------- | -- | - | 
|                                        |                                      |                            |                         | Number of     |   
|                                        |                                      |                            |                         | Facilities    |   
|                                        |                                      |                            |                         | Operated with |   
|Healthcare System                       |                                      | Geographical Focus         |                         | USPI          |   
|                                        |                                      |                            |                         |               |   
|Single Market Systems:                  |                                      |                            |                         |               |    |  
|Baylor Health Care System               |                                      | Dallas/Fort Worth, Texas   |                         |               | 20 |  
|Memorial Hermann Healthcare System      |                                      | Houston, Texas             |                         |               | 5  |  
|INTEGRIS Health                         |                                      | Oklahoma                   |                         |               | 2  |  
|Meridian Health System                  |                                      | New Jersey                 |                         |               | 2  |  
|Covenant Health:                        |                                      | Eastern Tennessee          |                         |               | 1  |  
|                                        | Fort Sanders Parkwest Medical Center |                            | Knoxville, Tennessee    |               |    |   | 
|Decatur General Hospital                |                                      | Decatur, Alabama           |                         |               | 1  |  
|Mountain States Health Alliance:        |                                      | Northeast Tennessee        |                         |               | 1  |  
|                                        | Johnson City Medical Center          |                            | Johnson City, Tennessee |               |    |   | 
|Northside Cherokee Hospital             |                                      | Atlanta, Georgia           |                         |               | 1  |  
|Robert Wood Johnson University Hospital |                                      | East Brunswick, New Jersey |                         |               | 1  |  
|Sarasota Memorial Hospital              |                                      | Florida                    |                         |               | 1  |  
|McLaren Health Care Corporation         |                                      | Michigan                   |                         |               | (a | )

10



---



##### Table of Contents



|                           |                                                         |                             |                           |               |    |   | 
|-------------------------- | ------------------------------------------------------- | --------------------------- | ------------------------- | ------------- | -- | - | 
|                           |                                                         |                             |                           | Number of     |   
|                           |                                                         |                             |                           | Facilities    |   
|                           |                                                         |                             |                           | Operated with |   
|Healthcare System          |                                                         | Geographical Focus          |                           | USPI          |   
|                           |                                                         |                             |                           |               |   
|Multi-Market Systems:      |                                                         |                             |                           |               |    |  
|Ascension Health:          |                                                         | 19 states and D.C. (b)      |                           |               | 6  |  
|                           | St. Thomas Health Services System (5 facilities)        |                             | Middle Tennessee          |               |    |   | 
|                           | St. Agnes HealthCare (1 facility)                       |                             | Baltimore, Maryland       |               |    |   | 
|Catholic Healthcare West:  |                                                         | California, Arizona, Nevada |                           |               | 4  |  
|                           | St. Josephs Hospital and Medical Center (3 facilities) |                             | Phoenix, Arizona          |               |    |   | 
|                           | St. Rose Dominican Hospital (1 facility)                |                             | Henderson, Nevada         |               |    |   | 
|                           | Glendale Memorial Hospital and Health Center(a)         |                             | Glendale, California      |               |    |   | 
|                           | St. Johns Regional Medical Center(a)                   |                             | Oxnard, California        |               |    |   | 
|                           | San Gabriel Valley Medical Center(a)                    |                             | San Gabriel, California   |               |    |   | 
|Bon Secours Health System: |                                                         | Nine eastern states (c)     |                           |               |    |  
|                           | Mary Immaculate Hospital                                |                             | Newport News, Virginia    |               |    | 1 | 
|                           | Memorial Regional Medical Center(a)                     |                             | Richmond, Virginia        |               |    |   | 
|CHRISTUS Health:           |                                                         | Six states (d)              |                           |               | 1  |  
|                           | Christus Santa Rosa Health Corporation                  |                             | San Antonio, Texas        |               |    |   | 
|Providence Health System:  |                                                         | Four western states (e)     |                           |               | 1  |  
|                           | Providence Holy Cross Medical Center                    |                             | Mission Hills, California |               |    |   | 
|Adventist Health System:   |                                                         | Eleven states (f)           |                           |               | (a | )
|                           | Huguley Memorial Medical Center                         |                             | Fort Worth, Texas         |               |    |   | 
|Totals                     |                                                         |                             |                           |               | 48 |  






|    |  |                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | A joint venture agreement has been signed and projects have been
    initiated, but no facilities in this joint venture are yet
    operational.                                                                                    
|(b) |  | Alabama, Arkansas, Arizona, Connecticut, District of Columbia,
    Florida, Georgia, Idaho, Illinois, Indiana, Louisiana, Maryland,
    Michigan, Missouri, New York, Pennsylvania, Tennessee, Texas,
    Washington, and Wisconsin.
|(c) |  | Florida, Kentucky, Maryland, Michigan, New Jersey, New York,
    Pennsylvania, South Carolina, and Virginia.                                                                                                                        
|(d) |  | Arkansas, Louisiana, Missouri, Oklahoma, Texas, and Utah.                                                                                                                                                                           
|(e) |  | Alaska, California, Oregon, and Washington.                                                                                                                                                                                         
|(f) |  | Colorado, Florida, Georgia, Illinois, Kansas, Kentucky,
    Michigan, North Carolina, Tennessee, Texas and Wisconsin.                                                                                                               

11



---



##### Table of Contents





| |           
| | ----------
| | Facilities



| |   |          |  |                    |                                                                 |  |           |          |     |            |  |   |  |  |  |    | 
| | - | -------- |  | ------------------ | --------------------------------------------------------------- |  | --------- | -------- | --- | ---------- |  | - |  |  |  | -- | 
| |   |          |  | Date of            |                                                                 |  | Number    |          |     |           
| |   |          |  | Acquisition        |                                                                 |  | of        |          |     | Percentage | 
| |   |          |  | or                 |                                                                 |  | Operating |          |     | Owned by   | 
| |   | Facility |  | Affiliation        |                                                                 |  | Rooms     |          |     | USPI       | 
| |   |          |  |                    |                                                                 |  |           |          |     |            | 
| |   |          |  | United States      |                                                                 |  |           |          |     |            |  |   |  |  |  |   
| |   |          |  | Atlanta            |                                                                 |  |           |          |     |            |  |   |  |  |  |   
| | * |          |  |                    | Advanced Surgery Center of Georgia, Canton, Georgia(1)          |  |           | 3/27/02  |     |            |  | 3 |  |  |  | 28 | 
| |   |          |  |                    | East West Surgery Center, Austell, Georgia                      |  |           | 9/1/00   | (4) |            |  | 3 |  |  |  | 51 | 
| |   |          |  |                    | Lawrenceville Surgery Center, Lawrenceville, Georgia            |  |           | 8/1/01   |     |            |  | 2 |  |  |  | 15 | 
| |   |          |  |                    | Northwest Georgia Surgery Center, Marietta, Georgia             |  |           | 11/1/00  | (4) |            |  | 2 |  |  |  | 15 | 
| |   |          |  |                    | Orthopaedic South Surgical Center, Morrow, Georgia              |  |           | 11/28/03 |     |            |  | 2 |  |  |  | 15 | 
| |   |          |  |                    | Resurgens Surgical Center, Atlanta, Georgia                     |  |           | 10/1/98  | (4) |            |  | 4 |  |  |  | 40 | 
| |   |          |  |                    | Roswell Surgery Center, Roswell, Georgia                        |  |           | 10/1/00  | (4) |            |  | 2 |  |  |  | 15 | 
| |   |          |  | Chicago            |                                                                 |  |           |          |     |            |  |   |  |  |  |   
| |   |          |  |                    | Same Day Surgery 25 East, Chicago, Illinois                     |  |           | 10/15/04 |     |            |  | 4 |  |  |  | 93 | 
| |   |          |  |                    | Same Day Surgery Elmwood Park, Elmwood Park, Illinois           |  |           | 10/15/04 |     |            |  | 3 |  |  |  | 75 | 
| |   |          |  |                    | Same Day Surgery North Shore, Evanston, Illinois                |  |           | 10/15/04 |     |            |  | 2 |  |  |  | 92 | 
| |   |          |  |                    | Same Day Surgery River North, Chicago, Illinois                 |  |           | 10/15/04 |     |            |  | 4 |  |  |  | 72 | 
| |   |          |  |                    | Same Day Surgery Six Corners, Chicago, Illinois                 |  |           | 10/15/04 |     |            |  | 4 |  |  |  | 50 | 
| |   |          |  | Dallas/ Fort Worth |                                                                 |  |           |          |     |            |  |   |  |  |  |   
| | * |          |  |                    | Surgery Center of Arlington, Arlington, Texas(1)                |  |           | 2/1/99   |     |            |  | 6 |  |  |  | 43 | 
| | * |          |  |                    | Baylor Surgicare, Garland, Texas(1)                             |  |           | 6/1/99   |     |            |  | 6 |  |  |  | 20 | 
| | * |          |  |                    | Bellaire Surgery Center, Fort Worth, Texas                      |  |           | 10/15/02 |     |            |  | 4 |  |  |  | 20 | 
| | * |          |  |                    | Denton Surgicare, Denton, Texas(1)                              |  |           | 2/1/99   |     |            |  | 4 |  |  |  | 21 | 
| | * |          |  |                    | Frisco Medical Center, Frisco, Texas(5)                         |  |           | 9/30/02  |     |            |  | 6 |  |  |  | 20 | 
| | * |          |  |                    | Grapevine Surgicare, Grapevine, Texas                           |  |           | 2/16/02  |     |            |  | 4 |  |  |  | 11 | 
| | * |          |  |                    | Irving-Coppell Surgical Hospital, Irving,Texas(5)               |  |           | 10/20/03 |     |            |  | 5 |  |  |  | 10 | 
| | * |          |  |                    | Surgery Center of Lewisville, Lewisville, Texas(1),(3)          |  |           | 9/16/02  |     |            |  | 6 |  |  |  | 0  | 
| | * |          |  |                    | Mary Shiels Hospital(5)                                         |  |           | 4/1/03   |     |            |  | 5 |  |  |  | 20 | 
| | * |          |  |                    | Medical Centre Surgicare, Fort Worth, Texas(1),(5)              |  |           | 12/18/98 |     |            |  | 8 |  |  |  | 44 | 
| | * |          |  |                    | Metroplex Surgicare, Bedford, Texas(1)                          |  |           | 12/18/98 |     |            |  | 5 |  |  |  | 44 | 
| | * |          |  |                    | North Texas Surgery Center, Dallas, Texas(1)                    |  |           | 12/18/98 |     |            |  | 4 |  |  |  | 45 | 
| | * |          |  |                    | Park Cities Surgery Center, Dallas, Texas                       |  |           | 6/9/03   |     |            |  | 4 |  |  |  | 41 | 
| | * |          |  |                    | Physicians Day Surgery Center, Dallas, Texas                    |  |           | 10/12/00 |     |            |  | 4 |  |  |  | 20 | 
| | * |          |  |                    | Physicians Surgical Center of Fort Worth, Fort Worth,
    Texas |  |           | 7/13/04  |     |            |  | 4 |  |  |  | 8  | 
| | * |          |  |                    | Premier Ambulatory Surgery Center of Garland, Garland, Texas    |  |           | 2/1/99   |     |            |  | 2 |  |  |  | 45 | 
| | * |          |  |                    | Heath Surgicare, Rockwall, Texas                                |  |           | 11/1/04  |     |            |  | 3 |  |  |  | 28 | 
| | * |          |  |                    | Texas Surgery Center, Dallas, Texas(1)                          |  |           | 6/1/99   |     |            |  | 4 |  |  |  | 20 | 
| | * |          |  |                    | Trophy Club Medical Center, Trophy Club, Texas(5)               |  |           | 5/3/04   |     |            |  | 6 |  |  |  | 23 | 
| | * |          |  |                    | Valley View Surgery Center, Dallas, Texas                       |  |           | 12/18/98 |     |            |  | 4 |  |  |  | 58 | 
| |   |          |  | Houston            |                                                                 |  |           |          |     |            |  |   |  |  |  |   
| | * |          |  |                    | Doctors Outpatient Surgicenter, Pasadena, Texas                 |  |           | 9/1/99   |     |            |  | 5 |  |  |  | 68 | 
| | * |          |  |                    | Memorial Hermann Surgery Center Northwest, Houston, Texas       |  |           | 9/1/04   |     |            |  | 5 |  |  |  | 13 | 

12



---



##### Table of Contents



| |   |          |  |                    |                                                                           |  |           |          |     |            |  |   |  |  |  |    | 
| | - | -------- |  | ------------------ | ------------------------------------------------------------------------- |  | --------- | -------- | --- | ---------- |  | - |  |  |  | -- | 
| |   |          |  | Date of            |                                                                           |  | Number    |          |     |           
| |   |          |  | Acquisition        |                                                                           |  | of        |          |     | Percentage | 
| |   |          |  | or                 |                                                                           |  | Operating |          |     | Owned by   | 
| |   | Facility |  | Affiliation        |                                                                           |  | Rooms     |          |     | USPI       | 
| |   |          |  |                    |                                                                           |  |           |          |     |            | 
| | * |          |  |                    | Sugar Land Surgical Hospital, Sugar Land, Texas(5)                        |  |           | 12/28/02 |     |            |  | 4 |  |  |  | 13 | 
| | * |          |  |                    | TOPS Surgical Specialty Hospital, Houston, Texas(5)                       |  |           | 7/1/99   |     |            |  | 7 |  |  |  | 47 | 
| | * |          |  |                    | United Surgery Center  Southeast, Houston, Texas(1)                      |  |           | 9/1/99   |     |            |  | 3 |  |  |  | 83 | 
| |   |          |  | Los Angeles        |                                                                           |  |           |          |     |            |  |   |  |  |  |   
| |   |          |  |                    | Coast Surgery Center of South Bay, Torrance, California(1)                |  |           | 12/18/01 |     |            |  | 3 |  |  |  | 63 | 
| |   |          |  |                    | Pacific Endo-Surgical Center, Torrance, California                        |  |           | 8/1/03   |     |            |  | 1 |  |  |  | 63 | 
| | * |          |  |                    | San Fernando Valley Surgery Center, Mission Hills,
    California         |  |           | 11/1/04  |     |            |  | 3 |  |  |  | 42 | 
| |   |          |  |                    | San Gabriel Valley Surgical Center, West Covina, California               |  |           | 11/16/01 |     |            |  | 4 |  |  |  | 59 | 
| |   |          |  |                    | The Center for Ambulatory Surgical Treatment, Los Angeles,
    California |  |           | 11/14/02 |     |            |  | 4 |  |  |  | 25 | 
| |   |          |  | Nashville          |                                                                           |  |           |          |     |            |  |   |  |  |  |   
| | * |          |  |                    | Baptist Ambulatory Surgery Center, Nashville, Tennessee                   |  |           | 3/1/98   | (4) |            |  | 6 |  |  |  | 22 | 
| | * |          |  |                    | Baptist Plaza Surgicare, Nashville, Tennessee                             |  |           | 12/3/03  |     |            |  | 7 |  |  |  | 24 | 
| | * |          |  |                    | Middle Tennessee Ambulatory Surgery Center, Murfreesboro,
    Tennessee   |  |           | 7/29/98  |     |            |  | 4 |  |  |  | 35 | 
| | * |          |  |                    | Physicians Pavilion Surgery Center, Smyrna, Tennessee                     |  |           | 7/29/98  |     |            |  | 4 |  |  |  | 95 | 
| | * |          |  |                    | Saint Thomas SurgiCare, Nashville, Tennessee                              |  |           | 7/15/02  |     |            |  | 5 |  |  |  | 22 | 
| |   |          |  | New Jersey         |                                                                           |  |           |          |     |            |  |   |  |  |  |   
| |   |          |  |                    | Central Jersey Surgery Center, Eatontown, New Jersey                      |  |           | 11/1/04  |     |            |  | 3 |  |  |  | 25 | 
| | * |          |  |                    | Robert Wood Johnson Surgery Center, East Brunswick, New Jersey            |  |           | 6/26/02  |     |            |  | 5 |  |  |  | 44 | 
| |   |          |  |                    | Shore Outpatient Surgicenter, Lakewood, New Jersey                        |  |           | 11/1/04  |     |            |  | 3 |  |  |  | 63 | 
| | * |          |  |                    | Shrewsbury Surgery Center, Shrewsbury, New Jersey                         |  |           | 4/1/99   |     |            |  | 4 |  |  |  | 28 | 
| | * |          |  |                    | Toms River Surgery Center, Toms River, New Jersey                         |  |           | 3/15/02  |     |            |  | 4 |  |  |  | 28 | 
| |   |          |  | Phoenix            |                                                                           |  |           |          |     |            |  |   |  |  |  |   
| | * |          |  |                    | Arizona Orthopedic Surgical Hospital, Phoenix, Arizona(5)                 |  |           | 5/19/04  |     |            |  | 6 |  |  |  | 38 | 
| | * |          |  |                    | St. Josephs Outpatient Surgery Center, Phoenix, Arizona                  |  |           | 9/2/03   |     |            |  | 9 |  |  |  | 49 | 
| | * |          |  |                    | Warner Outpatient Surgery Center, Phoenix, Arizona                        |  |           | 7/1/99   |     |            |  | 4 |  |  |  | 38 | 
| |   |          |  | Additional Markets |                                                                           |  |           |          |     |            |  |   |  |  |  |   
| |   |          |  |                    | Alamo Heights Surgery Center, San Antonio, Texas                          |  |           | 12/1/04  |     |            |  | 3 |  |  |  | 66 | 
| |   |          |  |                    | Austintown Ambulatory Surgery Center, Austintown, Ohio(1)                 |  |           | 4/12/02  |     |            |  | 5 |  |  |  | 63 | 
| | * |          |  |                    | Cape Surgery Center, Sarasota, Florida                                    |  |           | 10/18/04 |     |            |  | 6 |  |  |  | 48 | 
| | * |          |  |                    | Christus Santa Rosa Surgery Center, San Antonio, Texas                    |  |           | 5/3/04   |     |            |  | 5 |  |  |  | 21 | 
| |   |          |  |                    | Corpus Christi Outpatient Surgery Center, Corpus Christi,
    Texas(1)    |  |           | 5/1/02   |     |            |  | 5 |  |  |  | 69 | 
| |   |          |  |                    | Creekwood Surgery Center, Kansas City, Missouri(1)                        |  |           | 7/29/98  |     |            |  | 4 |  |  |  | 64 | 
| |   |          |  |                    | Day-Op Center of Long Island, Mineola, New York(2)                        |  |           | 12/4/98  |     |            |  | 4 |  |  |  | 0  | 
| | * |          |  |                    | Decatur Ambulatory Surgery Center, Decatur, Alabama(1)                    |  |           | 7/29/98  |     |            |  | 2 |  |  |  | 61 | 
| |   |          |  |                    | Destin Surgery Center, Destin, Florida                                    |  |           | 9/25/02  |     |            |  | 2 |  |  |  | 30 | 
| |   |          |  |                    | Las Cruces Surgical Center, Las Cruces, New Mexico(1)                     |  |           | 2/1/01   |     |            |  | 3 |  |  |  | 50 | 
| | * |          |  |                    | Mary Immaculate Ambulatory Surgical Center, Newport News,
    Virginia    |  |           | 7/19/04  |     |            |  | 4 |  |  |  | 25 | 
| | * |          |  |                    | Mountain Empire Surgery Center, Johnson City, Tennessee                   |  |           | 2/20/00  | (4) |            |  | 4 |  |  |  | 20 | 
| |   |          |  |                    | New Mexico Orthopaedic Surgery Center, Albuquerque, New Mexico            |  |           | 2/29/00  | (4) |            |  | 4 |  |  |  | 51 | 

13



---



##### Table of Contents



| |   |          |  |                |                                                                                       |  |           |          |     |            |  |   |  |  |  |     | 
| | - | -------- |  | -------------- | ------------------------------------------------------------------------------------- |  | --------- | -------- | --- | ---------- |  | - |  |  |  | --- | 
| |   |          |  | Date of        |                                                                                       |  | Number    |          |     |           
| |   |          |  | Acquisition    |                                                                                       |  | of        |          |     | Percentage | 
| |   |          |  | or             |                                                                                       |  | Operating |          |     | Owned by   | 
| |   | Facility |  | Affiliation    |                                                                                       |  | Rooms     |          |     | USPI       | 
| |   |          |  |                |                                                                                       |  |           |          |     |            | 
| | * |          |  |                | Oklahoma Center for Orthopedic MultiSpecialty Surgery, Oklahoma
    City, Oklahoma(5) |  |           | 8/2/04   |     |            |  | 4 |  |  |  | 25  | 
| |   |          |  |                | Specialists Surgery Center, Oklahoma City, Oklahoma(1)                                |  |           | 3/27/02  |     |            |  | 4 |  |  |  | 51  | 
| | * |          |  |                | Parkway Surgery Center, Henderson, Nevada                                             |  |           | 8/3/98   |     |            |  | 5 |  |  |  | 45  | 
| | * |          |  |                | Parkwest Surgery Center, Knoxville, Tennessee                                         |  |           | 7/26/01  |     |            |  | 5 |  |  |  | 22  | 
| |   |          |  |                | Reading Surgery Center, Spring Township, Pennsylvania                                 |  |           | 7/1/04   |     |            |  | 3 |  |  |  | 65  | 
| | * |          |  |                | Saint Agnes Surgery Center, Ellicott City, Maryland                                   |  |           | 10/01/04 |     |            |  | 4 |  |  |  | 75  | 
| | * |          |  |                | Southwest Orthopaedic Ambulatory Surgery Center, Oklahoma City,
    Oklahoma          |  |           | 8/2/04   |     |            |  | 2 |  |  |  | 25  | 
| |   |          |  |                | The Surgery Center, Middleburg Heights, Ohio(1)                                       |  |           | 6/19/02  |     |            |  | 7 |  |  |  | 64  | 
| |   |          |  |                | Surgi-Center of Central Virginia, Fredericksburg, Virginia                            |  |           | 11/29/01 |     |            |  | 4 |  |  |  | 78  | 
| |   |          |  |                | Surgery Center of Fort Lauderdale, Fort Lauderdale,
    Florida                       |  |           | 11/1/04  |     |            |  | 4 |  |  |  | 61  | 
| |   |          |  |                | Teton Outpatient Services, Jackson, Wyoming                                           |  |           | 8/1/98   | (4) |            |  | 2 |  |  |  | 52  | 
| |   |          |  |                | Texan Surgery Center, Austin, Texas                                                   |  |           | 6/1/03   |     |            |  | 3 |  |  |  | 65  | 
| |   |          |  |                | Tulsa Outpatient Surgery Center, Tulsa, Oklahoma                                      |  |           | 11/1/04  |     |            |  | 4 |  |  |  | 30  | 
| |   |          |  |                | United Surgery Center, Cottonwood, Arizona(6)                                         |  |           | 7/14/03  |     |            |  | 2 |  |  |  | 25  | 
| |   |          |  |                | University Surgical Center, Winter Park, Florida                                      |  |           | 10/15/98 |     |            |  | 3 |  |  |  | 40  | 
| |   |          |  |                | Zeeba Surgery Center, Lyndhurst, Ohio(1)                                              |  |           | 10/11/02 |     |            |  | 5 |  |  |  | 58  | 
| |   |          |  | United Kingdom |                                                                                       |  |           |          |     |            |  |   |  |  |  |    
| |   |          |  |                | Parkside Hospital, Wimbledon                                                          |  |           | 4/6/00   |     |            |  | 4 |  |  |  | 100 | 
| |   |          |  |                | Holly House Hospital, Essex                                                           |  |           | 4/6/00   |     |            |  | 3 |  |  |  | 100 | 
| |   |          |  |                | Highgate Private Clinic, Highgate                                                     |  |           | 4/29/03  |     |            |  | 3 |  |  |  | 100 | 






| |   |                                                               
| | - | --------------------------------------------------------------
| | * | Facilities jointly owned with not-for-profit hospital systems.



|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(1) | Certain of our surgery centers are licensed and equipped to
    accommodate 23-hour stays.                   
|   
|(2) | Operated through a consulting and administrative agreement.                                                  
|   
|(3) | Management agreement only.                                                                                   
|   
|(4) | Indicates date of acquisition by OrthoLink Physician
    Corporation. We acquired OrthoLink in February 2001.
|   
|(5) | Surgical hospitals, all of which are licensed and equipped for
    overnight stays.                          
|   
|(6) | During January 2005 we sold our ownership in this facility and
    exited the management contract.           











14



---



##### Table of Contents





Development




|                        |  |          |          |  |      |          |                   |      |           |           |            |  |  |  |                 | 
|----------------------- |  | -------- | -------- |  | ---- | -------- | ----------------- | ---- | --------- | --------- | ---------- |  |  |  | --------------- | 
|                        |  |          |          |  |      | Expected |                   |      | Number of |          
|                        |  | Hospital |          |  |      |          | Opening           |      |           | Operating |           
|Facility Location       |  | Partner  |          |  | Type |          |                   | Date |           |           | Rooms/Beds | 
|                        |  |          |          |  |      |          |                   |      |           |           |            | 
|Garland, Texas          |  |          | Baylor   |  |      |          | Surgery Center    |      |           |           | 2Q05       |  |  |  | 5 ORs          | 
|Dallas, Texas           |  |          | Baylor   |  |      |          | Surgery Center    |      |           |           | 3Q05       |  |  |  | 5 ORs          | 
|Oxnard, California      |  |          | CHW      |  |      |          | Surgery Center    |      |           |           | 1Q05       |  |  |  | 4 ORs          | 
|San Gabriel, California |  |          | CHW      |  |      |          | Surgery Center    |      |           |           | 1Q05       |  |  |  | 3 ORs          | 
|Manalapan, New Jersey   |  |          | Meridian |  |      |          | Surgery Center    |      |           |           | 3Q05       |  |  |  | 4 ORs          | 
|Baton Rouge, Louisiana  |  |          | None     |  |      |          | Surgical Hospital |      |           |           | 3Q05       |  |  |  | 4 ORs, 11 beds | 



Marketing




Competition








15



---



##### Table of Contents







Employees




Professional and General Liability Insurance




Government Regulation




| |              
| | -------------
| | United States





16



---



##### Table of Contents









| |                                              
| | ---------------------------------------------
| | Licensure and certificate-of-need regulations











17



---



##### Table of Contents







| |                                                           
| | ----------------------------------------------------------
| | Medicare and Medicaid Participation in Surgery
    Centers













| |                          
| | -------------------------
| | Federal Anti-Kickback Law



18



---



##### Table of Contents







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













| |                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) all of the investors must either be physicians who are
    in a position to refer patients directly to the center and
    perform procedures on the referred patients, group practices
    composed exclusively of those physicians, or investors who are
    not employed by the entity or by any of its investors, are not
    in a position

19



---



##### Table of Contents



| |                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | to provide items or services to the entity or any of its
    investors, and are not in a position to make or influence
    referrals directly or indirectly to the entity or any of its
    investors;                                                                                                                                             
|
| | (2) at least one-third of each physician investors
    medical practice income from all sources for the previous fiscal
    year or twelve-month period must be derived from performing
    outpatient procedures that require a surgery center or private
    specialty hospital setting in accordance with Medicare
    reimbursement rules; and
|
| | (3) at least one third of the Medicare-eligible outpatient
    surgery procedures performed by each physician investor for the
    previous fiscal year or previous twelve-month period must be
    performed at the surgery center in which the investment is made.                                                                               













| |                                    
| | -----------------------------------
| | Federal Physician Self-Referral Law



20



---



##### Table of Contents













| |                                
| | -------------------------------
| | False and Other Improper Claims



21



---



##### Table of Contents











| |                                                         
| | --------------------------------------------------------
| | State Anti-Kickback and Physician Self-Referral
    Laws







| |                                                  
| | -------------------------------------------------
| | Health Information Security and Privacy Practices



22



---



##### Table of Contents







| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | electronic transactions and code sets;                                        
|
| |  | unique identifiers for providers, employers, health plans and
    individuals;
|
| |  | security and electronic signatures;                                           
|
| |  | privacy; and                                                                  
|
| |  | enforcement.                                                                  









European Union




23



---



##### Table of Contents











| |               
| | --------------
| | United Kingdom



Risk Factors


An investment in United Surgical Partners International, Inc.
involves certain risks. You should carefully read the risks and
uncertainties described below and the other information included
or incorporated by reference in this report.




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



24



---



##### Table of Contents





| |                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to acquire and develop additional surgery
    centers or private surgical hospitals on favorable terms, we may
    be unable to execute our acquisition and development strategy,
    which could limit our future growth.





| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we incur material liabilities as a result of acquiring
    companies or surgical facilities, our operating results could be
    adversely affected.





| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | If we are unable to manage growth, we may be unable to
    achieve our growth strategy.





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on our relationships with not-for-profit
    healthcare systems and their ability to assist in negotiating
    managed care contracts on behalf of the surgical facilities that
    we jointly own with healthcare systems. If we are not able to
    maintain our strategic alliances with these not-for-profit
    healthcare systems, or enter into new alliances, we may be
    unable to implement our business strategies successfully.



25



---



##### Table of Contents







| |                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we and our not-for-profit healthcare system partners
    are unable to successfully negotiate contracts and maintain
    satisfactory relationships with managed care organizations or
    other third party payors, our revenues may decrease.







| |                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on our relationships with the physicians who use
    our facilities. Our ability to provide medical services at our
    facilities would be impaired and our revenues reduced if we are
    not able to maintain these relationships.





| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | Our United Kingdom operations are subject to unique risks,
    any of which, if they actually occur, could adversely affect our
    results.





| |   |                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------
| |  | competition with government sponsored healthcare systems;                                                                          
|
| |  | unforeseen changes in foreign regulatory requirements or
    domestic regulatory requirements affecting our foreign
    operations;

26



---



##### Table of Contents





| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | identifying, attracting, retaining and working successfully with
    qualified local management;                                                                                                                        
|
| |  | fluctuations in exchange rates;                                                                                                                                                                                         
|
| |  | 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 significant indebtedness could limit our
    flexibility.







| |   |                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we must dedicate a substantial portion of our cash flows from
    operations to the payment of principal and interest on our
    indebtedness, reducing the funds available for our operations;                        
|
| |  | a portion of our borrowings are at variable rates of interest,
    making us vulnerable to increases in interest rates;                                                                                                
|
| |  | we may be more highly leveraged than some of our competitors,
    which could place us at a competitive disadvantage;                                                                                                  
|
| |  | our degree of leverage may make us more vulnerable to a downturn
    in our business or the economy generally; and                                                                                                     
|
| |  | the terms of our existing credit arrangements contain numerous
    financial and other restrictive covenants, including
    restrictions on paying dividends, incurring additional
    indebtedness and selling assets.



| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | Our revenues may be reduced by changes in payment methods
    or rates under the Medicare or Medicaid programs.



27



---



##### Table of Contents





| |                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Efforts to regulate the construction, acquisition or
    expansion of healthcare facilities could prevent us from
    acquiring additional surgery centers or private surgical
    hospitals, renovating our existing facilities or expanding the
    breadth of services we offer.





| |                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | New federal and state legislative and regulatory
    initiatives relating to patient privacy and electronic data
    security could require us to expend substantial sums acquiring
    and implementing new information and transaction systems, which
    could negatively impact our financial results.











28



---



##### Table of Contents







| |                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to comply with applicable laws and regulations,
    we could suffer penalties or be required to make significant
    changes to our operations.





| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | physician ownership of our domestic facilities;                                           
|
| |  | the adequacy of medical care, equipment, personnel, operating
    policies and procedures;
|
| |  | building codes;                                                                           
|
| |  | licensure, certification and accreditation;                                               
|
| |  | billing for services;                                                                     
|
| |  | maintenance and protection of records; and                                                
|
| |  | environmental protection.                                                                 







| |                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If a federal or state agency asserts a different position
    or enacts new laws or regulations regarding illegal remuneration
    under the Medicare or Medicaid programs, we may be subject to
    civil and criminal penalties, experience a significant reduction
    in our revenues or be excluded from participation in the
    Medicare and Medicaid programs.



29



---



##### 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.





30



---



##### Table of Contents









| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Companies within the healthcare industry continue to be
    the subject of federal and state investigations, which increases
    the risk that we may become subject to investigations in the
    future.





| |   |                                                   
| | - | --------------------------------------------------
| |  | cost reporting and billing practices;             
|
| |  | quality of care;                                  
|
| |  | financial reporting;                              
|
| |  | financial relationships with referral sources; and
|
| |  | medical necessity of services provided.           





| |                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If laws governing the corporate practice of medicine
    change, we may be required to restructure some of our domestic
    relationships which may result in significant costs to us and
    divert other resources.



31



---



##### Table of Contents







| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | If domestic regulations change, we may be obligated to
    purchase some or all of the ownership interests of the
    physicians affiliated with us.





| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | make illegal the referral of Medicare or other patients to our
    surgical facilities by physicians affiliated with us;                                                                                                                 
|
| |  | create the substantial likelihood that cash distributions from
    the limited partnerships or limited liability companies through
    which we operate our surgical facilities to physicians
    affiliated with us would be illegal; or
|
| |  | make illegal the ownership by the physicians affiliated with us
    of interests in the partnerships or limited liability companies
    through which we own and operate our surgical facilities.                                        





| |                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The recently adopted Medicare Prescription Drug,
    Improvement, and Modernization Act of 2003 could restrict our
    ability to operate our facilities licensed as hospitals and
    could adversely impact our reimbursement revenues.



32



---



##### 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.



33



---



##### Table of Contents







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





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



34



---



##### Table of Contents







| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Provisions of our charter documents, Delaware law and our
    stockholder rights plan could discourage a takeover you may
    consider favorable or the removal of our current
    management.





| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | authorize the issuance of blank check preferred
    stock;                                                                                                                         
|
| |  | provide for a classified board of directors with staggered,
    three-year terms;                                                                                                    
|
| |  | prohibit cumulative voting in the election of directors;                                                                                                                             
|
| |  | prohibit our stockholders from acting by written consent without
    the approval of our board of directors;                                                                         
|
| |  | limit the persons who may call special meetings of
    stockholders; and                                                                                                             
|
| |  | establish advance notice requirements for nominations for
    election to the board of directors or for proposing matters to
    be approved by stockholders at stockholder meetings.










|        |           
|------- | ----------
|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 and Related
    Stockholder Matters

Market for Common Stock.


35



---



##### Table of Contents





|                              |                |      |   |       |     |  |   |       | 
|----------------------------- | -------------- | ---- | - | ----- | --- |  | - | ----- | 
|                              |                | High |   |       | Low | 
|                              |                |      |   |       |     | 
|Year Ended December 31, 2003: |                |      |   |       |     |  |   |      
|                              | First Quarter  |      | $ | 20.21 |     |  | $ | 14.29 | 
|                              | Second Quarter |      |   | 24.62 |     |  |   | 16.70 | 
|                              | Third Quarter  |      |   | 29.35 |     |  |   | 22.37 | 
|                              | Fourth Quarter |      |   | 34.50 |     |  |   | 27.33 | 
|Year Ended December 31, 2004: |                |      |   |       |     |  |   |      
|                              | First Quarter  |      | $ | 39.87 |     |  | $ | 32.01 | 
|                              | Second Quarter |      |   | 41.15 |     |  |   | 33.41 | 
|                              | Third Quarter  |      |   | 40.00 |     |  |   | 32.57 | 
|                              | Fourth Quarter |      |   | 42.78 |     |  |   | 31.63 | 





| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | any applicable contractual restrictions limiting our ability to
    pay dividends;
|
| |  | our earnings;                                                                     
|
| |  | our financial condition;                                                          
|
| |  | our ability to fund our capital requirements; and                                 
|
| |  | other factors our board deems relevant.                                           



Recent Sales of Unregistered Securities.







|        |                                     
|------- | ------------------------------------
|Item 6. | Selected Consolidated Financial Data





36



---



##### Table of Contents



|                                                                 |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |          |         |   |   |         |         |       |  
|---------------------------------------------------------------- | -------------------------------- | ------------------------ | -------- | ------- | ---- | - | -------- | ------- | ---- | - | -------- | ------- | ---- | ---- | -------- | ------- | - | - | ------- | ------- | ----- | -
|                                                                 |                                  | Years Ended December 31, |         
|                                                                 |                                  |                          |         
|                                                                 |                                  | 2004                     |          |         | 2003 |   |          | 2002    |      |   | 2001     |         |      | 2000 |         
|                                                                 |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |         
|                                                                 |                                  | (In thousands)           |         
|Consolidated Statement of Operations Data:                       |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |          |         |   |   |         |        
|Total revenues                                                   |                                  | $                        | 389,530  |         |      | $ | 310,564  |         |      | $ | 243,814  |         |      | $    | 167,043  |         |   | $ | 78,894  |        
|Equity in earnings of unconsolidated affiliates                  |                                  |                          | 18,626   |         |      |   | 15,074   |         |      |   | 9,454    |         |      |      | 5,879    |         |   |   | 844     |        
|Operating expenses excluding depreciation and amortization       |                                  |                          | (273,614 | )       |      |   | (216,213 | )       |      |   | (170,193 | )       |      |      | (123,030 | )       |   |   | (64,732 | )      
|Depreciation and amortization                                    |                                  |                          | (27,209  | )       |      |   | (22,700  | )       |      |   | (19,123  | )       |      |      | (18,042  | )       |   |   | (7,774  | )      
|                                                                 |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |         
|Operating income                                                 |                                  |                          | 107,333  |         |      |   | 86,725   |         |      |   | 63,952   |         |      |      | 31,851   |         |   |   | 7,232   |        
|Other income (expense):                                          |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |          |         |   |   |         |        
|                                                                 | Interest income                  |                          |          | 1,591   |      |   |          | 1,015   |      |   |          | 774     |      |      |          | 758     |   |   |         | 397     |      
|                                                                 | Interest expense                 |                          |          | (26,720 | )    |   |          | (24,863 | )    |   |          | (23,307 | )    |      |          | (14,834 | ) |   |         | (10,614 | )    
|                                                                 | Loss on early retirement of debt |                          |          | (1,635  | )    |   |          |        |      |   |          |        |      |      |          | (5,166  | ) |   |         |        |      
|                                                                 | Other                            |                          |          | 247     |      |   |          | 733     |      |   |          | (11     | )    |      |          | 133     |   |   |         | (282    | )    
|                                                                 |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |         
|Income (loss) before minority interests                          |                                  |                          | 80,816   |         |      |   | 63,610   |         |      |   | 41,408   |         |      |      | 12,742   |         |   |   | (3,267  | )      
|Minority interests in income of consolidated subsidiaries        |                                  |                          | (30,441  | )       |      |   | (23,959  | )       |      |   | (14,809  | )       |      |      | (7,339   | )       |   |   | (2,656  | )      
|Income tax (expense) benefit                                     |                                  |                          | (17,867  | )       |      |   | (14,934  | )       |      |   | (9,923   | )       |      |      | 1,446    |         |   |   | 320     |        
|                                                                 |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |         
|Income (loss) from continuing operations                         |                                  |                          | 32,508   |         |      |   | 24,717   |         |      |   | 16,676   |         |      |      | 6,850    |         |   |   | (5,603  | )      
|Earnings (loss) from discontinued operations, net of tax         |                                  |                          | 53,667   |         |      |   | 5,159    |         |      |   | 2,924    |         |      |      | (4,100   | )       |   |   | (2,561  | )      
|                                                                 |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |         
|Net income (loss)                                                |                                  | $                        | 86,175   |         |      | $ | 29,876   |         |      | $ | 19,600   |         |      | $    | 2,750    |         |   | $ | (8,163  | )      
|                                                                 |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |         
|Net income (loss) attributable to common stockholders(a)         |                                  | $                        | 86,175   |         |      | $ | 29,876   |         |      | $ | 19,600   |         |      | $    | 66       |         |   | $ | (14,134 | )      
|Share Data:                                                      |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |          |         |   |   |         |        
|Net income (loss) per share attributable to common stockholders: |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |          |         |   |   |         |        
|Basic:                                                           |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |          |         |   |   |         |        
|                                                                 | Continuing operations            |                          | $        | 1.16    |      |   | $        | 0.91    |      |   | $        | 0.67    |      |      | $        | 0.22    |   |   | $       | (1.47   | )    
|                                                                 | Discontinued operations          |                          |          | 1.92    |      |   |          | 0.19    |      |   |          | 0.12    |      |      |          | (0.22   | ) |   |         | (0.33   | )    
|                                                                 |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |         
|                                                                 |                                  | Total                    |          | $       | 3.08 |   |          | $       | 1.10 |   |          | $       | 0.79 |      |          | $       |  |   |         | $       | (1.80 | )
|Diluted:                                                         |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |          |         |   |   |         |        
|                                                                 | Continuing operations            |                          | $        | 1.11    |      |   | $        | 0.88    |      |   | $        | 0.64    |      |      | $        | 0.21    |   |   | $       | (1.47   | )    
|                                                                 | Discontinued operations          |                          |          | 1.83    |      |   |          | 0.18    |      |   |          | 0.11    |      |      |          | (0.21   | ) |   |         | (0.33   | )    
|                                                                 |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |         
|                                                                 |                                  | Total                    |          | $       | 2.94 |   |          | $       | 1.06 |   |          | $       | 0.75 |      |          | $       |  |   |         | $       | (1.80 | )
|Weighted average number of common shares Basic shares            |                                  |                          | 27,942   |         |      |   | 27,133   |         |      |   | 24,925   |         |      |      | 18,380   |         |   |   | 7,850   |        
|                                                                 | Diluted shares                   |                          |          | 29,298  |      |   |          | 28,244  |      |   |          | 26,056  |      |      |          | 19,291  |   |   |         | 7,850   |      
|Other Data:                                                      |                                  |                          |          |         |      |   |          |         |      |   |          |         |      |      |          |         |   |   |         |        
|Number of facilities operated as of the end of period(b)         |                                  |                          | 87       |         |      |   | 65       |         |      |   | 56       |         |      |      | 41       |         |   |   | 25      |        
|Cash flows from operating activities                             |                                  | $                        | 91,540   |         |      | $ | 74,375   |         |      | $ | 49,869   |         |      | $    | 36,700   |         |   | $ | 8,639   |        

37



---



##### Table of Contents



|                                 |  |                        |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         |  
|-------------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | -
|                                 |  | As of December 31,     |        
|                                 |  |                        |        
|                                 |  | 2004                   |         |  | 2003 |   |         | 2002 |  |   | 2001    |  |  | 2000 |        
|                                 |  |                        |         |  |      |   |         |      |  |   |         |  |  |      |        
|                                 |  | (Dollars in thousands) |        
|Consolidated Balance Sheet Data: |  |                        |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         |  
|Working capital                  |  | $                      | 87,178  |  |      | $ | 29,957  |      |  | $ | 51,412  |  |  | $    | 40,285  |  |  | $ | (58,213 | )
|Cash and cash equivalents        |  |                        | 93,467  |  |      |   | 28,519  |      |  |   | 47,571  |  |  |      | 33,881  |  |  |   | 3,451   |  
|Total assets                     |  |                        | 922,304 |  |      |   | 870,509 |      |  |   | 728,758 |  |  |      | 556,857 |  |  |   | 330,396 |  
|Total debt                       |  |                        | 288,485 |  |      |   | 304,744 |      |  |   | 276,703 |  |  |      | 238,681 |  |  |   | 187,767 |  
|Redeemable preferred stock       |  |                        |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   | 32,819  |  
|Total stockholders equity       |  |                        | 474,609 |  |      |   | 390,655 |      |  |   | 322,261 |  |  |      | 226,527 |  |  |   | 48,797  |  






|    |                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes preferred stock dividends of $2,684 and $5,971 for the
    years ended December 31, 2001 and 2000, respectively. No
    preferred stock dividends were declared in 2004, 2003, or 2002.
    No common stock dividends were declared or paid in any period.



|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|(b) |  | Does not include Spanish facilities. Not derived from audited
    financial statements.






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operation



Overview










38



---



##### Table of Contents





Critical Accounting Policies and Estimates






| |              
| | -------------
| | Consolidation







39



---



##### Table of Contents





| |                                            
| | -------------------------------------------
| | 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 and
    determinable; and
|
| |  | Collectibility is reasonably assured.                             









40



---



##### Table of Contents





| |             
| | ------------
| | Income Taxes





| |                  
| | -----------------
| | Intangible Assets

Accounting for Goodwill and Other Intangible Assets


Discontinued Operations




Acquisitions, Equity Investments and Development Projects














41



---



##### Table of Contents





























42



---



##### Table of Contents



Sources of Revenue






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | net patient service revenue for the facilities that we
    consolidate for financial reporting purposes, which are
    typically those in which we have ownership interests of greater
    than 50% or otherwise maintain effective control;                                                                                                                                                                                                                                                                                                                      
|
| |  | management and administrative services revenue, consisting of
    the fees that we earn from managing the facilities that we do
    not consolidate for financial reporting purposes and the fees we
    earn from providing certain consulting and administrative
    services to physicians. 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, |    
|                                               |  |              |    
|                                               |  | 2004         |     |   | 2003 |  |     | 2002 | 
|                                               |  |              |     |   |      |  |     |      | 
|Net patient service revenue                    |  |              | 90  | % |      |  | 88  | %    |  |  | 87  | %
|Management and administrative services revenue |  |              | 10  |   |      |  | 12  |      |  |  | 13  |  
|                                               |  |              |     |   |      |  |     |      | 
|Total revenue                                  |  |              | 100 | % |      |  | 100 | %    |  |  | 100 | %





|                                                                              |                                                      |                          |        |        |      |   |        |        |  |   |        |        | 
|----------------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------ | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                              |                                                      | Years Ended December 31, |       
|                                                                              |                                                      |                          |       
|                                                                              |                                                      | 2004                     |        |        | 2003 |   |        | 2002   | 
|                                                                              |                                                      |                          |        |        |      |   |        |        | 
|Management of surgical facilities                                             |                                                      | $                        | 18,115 |        |      | $ | 15,169 |        |  | $ | 9,556  |       
|Consulting and other services provided to physicians and related
    entities |                                                      |                          | 19,527 |        |      |   | 21,036 |        |  |   | 21,682 |       
|                                                                              |                                                      |                          |        |        |      |   |        |        | 
|                                                                              | Total management and administrative service revenues |                          | $      | 37,642 |      |   | $      | 36,205 |  |   | $      | 31,238 | 



|               |       |                          |    |     |      |  |    |      |   |  |    |     |  
|-------------- | ----- | ------------------------ | -- | --- | ---- |  | -- | ---- | - |  | -- | --- | -
|               |       | Years Ended December 31, |   
|               |       |                          |   
|               |       | 2004                     |    |     | 2003 |  |    | 2002 |  
|               |       |                          |    |     |      |  |    |      |  
|United States  |       |                          | 78 | %   |      |  | 80 | %    |   |  | 81 | %  
|United Kingdom |       |                          | 22 |     |      |  | 20 |      |   |  | 19 |    
|               |       |                          |    |     |      |  |    |      |  
|               | Total |                          |    | 100 | %    |  |    | 100  | % |  |    | 100 | %



43



---



##### Table of Contents



Equity in Earnings of Unconsolidated Affiliates




|                                                                                            |  |                          |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                            |  | Years Ended December 31, |        
|                                                                                            |  |                          |        
|                                                                                            |  | 2004                     |         |   | 2003 |   |         | 2002 | 
|                                                                                            |  |                          |         |   |      |   |         |      | 
|Total revenues                                                                              |  | $                        | 339,109 |   |      | $ | 240,848 |      |  | $ | 141,166 |  
|Depreciation and amortization                                                               |  |                          | 15,480  |   |      |   | 11,538  |      |  |   | 7,189   |  
|Operating income                                                                            |  |                          | 103,679 |   |      |   | 76,252  |      |  |   | 41,913  |  
|Interest expense, net                                                                       |  |                          | 9,297   |   |      |   | 7,246   |      |  |   | 4,077   |  
|Net income                                                                                  |  |                          | 93,598  |   |      |   | 67,914  |      |  |   | 37,279  |  
|Long-term debt                                                                              |  |                          | 100,443 |   |      |   | 77,899  |      |  |   | 66,596  |  
|USPIs equity in earnings of unconsolidated affiliates                                      |  |                          | 18,626  |   |      |   | 15,074  |      |  |   | 9,454   |  
|USPIs implied weighted average ownership percentage based
    on affiliates net income(1) |  |                          | 19.9    | % |      |   | 22.2    | %    |  |   | 25.4    | %
|USPIs implied weighted average ownership percentage based
    on affiliates debt(2)       |  |                          | 24.0    | % |      |   | 23.9    | %    |  |   | 25.6    | %
|Unconsolidated facilities operated at period end                                            |  |                          | 44      |   |      |   | 33      |      |  |   | 26      |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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
    percentage is lower during the twelve months ended
    December 31, 2004 than in year-ended 2003 and 2002,
    primarily as a result of losses incurred at facilities recently
    opened or under development.
|   
|(2) | Our weighted average percentage ownership in our unconsolidated
    affiliates is calculated as the total debt of each
    unconsolidated affiliate, multiplied by the percentage ownership
    USPI held in the affiliate as of the end of each respective
    period, divided by the total debt of all of the unconsolidated
    affiliates as of the end of each respective period.                                                                                          

Results of Operations




|                                                            |  |                          |       |   |      |  |       |      |  |  |       |  
|----------------------------------------------------------- |  | ------------------------ | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                            |  | Years Ended December 31, |      
|                                                            |  |                          |      
|                                                            |  | 2004                     |       |   | 2003 |  |       | 2002 | 
|                                                            |  |                          |       |   |      |  |       |      | 
|Total revenues                                              |  |                          | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | %
|Equity in earnings of unconsolidated affiliates             |  |                          | 4.8   |   |      |  | 4.9   |      |  |  | 3.9   |  
|Operating expenses, excluding depreciation and amortization |  |                          | (70.2 | ) |      |  | (69.6 | )    |  |  | (69.8 | )
|Depreciation and amortization                               |  |                          | (7.0  | ) |      |  | (7.4  | )    |  |  | (7.9  | )
|                                                            |  |                          |       |   |      |  |       |      | 
|Operating income                                            |  |                          | 27.6  |   |      |  | 27.9  |      |  |  | 26.2  |  
|Minority interests in income of consolidated entities       |  |                          | (7.8  | ) |      |  | (7.7  | )    |  |  | (6.1  | )
|Interest and other expense, net                             |  |                          | (6.9  | ) |      |  | (7.5  | )    |  |  | (9.2  | )
|                                                            |  |                          |       |   |      |  |       |      | 
|Income from continuing operations before income taxes       |  |                          | 12.9  |   |      |  | 12.7  |      |  |  | 10.9  |  
|Income tax expense                                          |  |                          | (4.6  | ) |      |  | (4.8  | )    |  |  | (4.1  | )
|                                                            |  |                          |       |   |      |  |       |      | 
|Income from continuing operations                           |  |                          | 8.3   |   |      |  | 7.9   |      |  |  | 6.8   |  
|Earnings from discontinued operations                       |  |                          | 13.8  |   |      |  | 1.7   |      |  |  | 1.2   |  
|                                                            |  |                          |       |   |      |  |       |      | 
|Net income                                                  |  |                          | 22.1  |   |      |  | 9.6   |      |  |  | 8.0   |  
|                                                            |  |                          |       |   |      |  |       |      | 

44



---



##### Table of Contents



Executive Summary








Revenues






|                           |                                              |                          |  |    |         |   |  |         |    |   |  |    |    |  
|-------------------------- | -------------------------------------------- | ------------------------ |  | -- | ------- | - |  | ------- | -- | - |  | -- | -- | -
|                           |                                              | Years Ended December 31, | 
|                           |                                              |                          | 
|                           |                                              | 2004(1)                  |  |    | 2003(1) |   |  | 2002(1) |   
|                           |                                              |                          |  |    |         |   |  |         |   
|United States facilities:  |                                              |                          |  |    |         |   |  |         |    |   |  |   
|                           | Net revenue                                  |                          |  | 17 | %       |   |  | 19      | %  |   |  | 22 | % 
|                           |                                              | Surgical cases           |  |    | 7       | % |  |         | 9  | % |  |    | 17 | %
|                           |                                              | Net revenue per case(2)  |  |    | 9       | % |  |         | 10 | % |  |    | 5  | %
|United Kingdom facilities: |                                              |                          |  |    |         |   |  |         |    |   |  |   
|                           | Net revenue using actual exchange rates      |                          |  | 32 | %       |   |  | 19      | %  |   |  | 22 | % 
|                           | Net revenue using constant exchange rates(3) |                          |  | 18 | %       |   |  | 9       | %  |   |  | 17 | % 

45



---



##### Table of Contents








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Growth in same store facilities, compared to the prior year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(2) | Our overall domestic same store growth in net revenue per case
    was favorably impacted by the growth at our eight same store
    surgical hospitals, which on average perform more complex cases
    than ambulatory surgery centers. For the year ended 2004, the
    net revenue per case of our same store ambulatory surgery
    centers (excluding surgical hospitals) increased 3% compared to
    the corresponding prior year period. This rate of growth was
    slower than in prior years largely as a result of the workers
    compensation reimbursement changes and lapse of the managed care
    contract described above.
|   
|(3) | Measures current year using prior year exchange rates. We have
    experienced strong year over year growth at the Highgate
    facility since acquiring it during the second quarter of 2003 as
    well as steady increases in the revenues of the oncology center
    on the campus of our Parkside facility, which became operational
    during the third quarter of 2003.                                                                                                                                                                                                                                                              

Joint Ventures with Not-for-Profit Hospitals




|                             |                               |                                        |    |    |      |  |    |      |    |  |    |    |  | 
|---------------------------- | ----------------------------- | -------------------------------------- | -- | -- | ---- |  | -- | ---- | -- |  | -- | -- |  | 
|                             |                               | 2004                                   |    |    | 2003 |  |    | 2002 |   
|                             |                               |                                        |    |    |      |  |    |      |   
|United States facilities(1): |                               |                                        |    |    |      |  |    |      |    |  |    |   
|                             | With a hospital partner       |                                        |    | 48 |      |  |    | 35   |    |  |    | 26 | 
|                             | Without a hospital partner    |                                        |    | 36 |      |  |    | 27   |    |  |    | 28 | 
|                             |                               |                                        |    |    |      |  |    |      |   
|Total U.S. facilities        |                               |                                        | 84 |    |      |  | 62 |      |    |  | 54 |   
|United Kingdom facilities    |                               |                                        | 3  |    |      |  | 3  |      |    |  | 2  |   
|Spain facilities             |                               |                                        |   |    |      |  | 9  |      |    |  | 8  |   
|                             |                               |                                        |    |    |      |  |    |      |   
|Total facilities operated    |                               |                                        | 87 |    |      |  | 74 |      |    |  | 64 |   
|                             |                               |                                        |    |    |      |  |    |      |   
|Change from prior year-end:  |                               |                                        |    |    |      |  |    |      |    |  |    |   
|                             | De novo (newly constructed)   |                                        |    | 9  |      |  |    | 4    |    |  |    |    | 
|                             | Acquisition                   |                                        |    | 13 |      |  |    | 6    |    |  |    |    | 
|                             | Sale of Spanish operations(2) |                                        |    | (9 | )    |  |    |     |    |  |    |    | 
|                             |                               |                                        |    |    |      |  |    |      |   
|                             |                               | Total increase in number of facilities |    |    | 13   |  |    |      | 10 |  |    |    |  | 
|                             |                               |                                        |    |    |      |  |    |      |   






|    |                                                                                 
|--- | --------------------------------------------------------------------------------
|(1) | At December 31, 2004, physicians own a portion of all of
    these facilities.  
|   
|(2) | We sold all nine of our Spanish facilities during the third
    quarter of 2004.

Facility Operating Margins




46



---



##### Table of Contents





|                             |                            |                         |     |      |      |  |     |      |     |  |     |     |    
|---------------------------- | -------------------------- | ----------------------- | --- | ---- | ---- |  | --- | ---- | --- |  | --- | --- | ---
|                             |                            | Year Ended December 31, |    
|                             |                            |                         |    
|                             |                            | 2004                    |     |      | 2003 |  |     | 2002 |    
|                             |                            |                         |     |      |      |  |     |      |    
|United States facilities:    |                            |                         |     |      |      |  |     |      |     |  |     |    
|                             | With a hospital partner    |                         |     | 250  | bps  |  |     | 420  | bps |  |     | 440 | bps
|                             | Without a hospital partner |                         |     | 30   |      |  |     | 170  |     |  |     | 190 |    
|Total U.S. facilities        |                            |                         | 230 |      |      |  | 310 |      |     |  | 340 |    
|United Kingdom facilities(2) |                            |                         | (10 | )bps |      |  | 260 | bps  |     |  | 60  | 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 Western Europe because we have a variety
    of ownership levels in the facilities we operate, and facilities
    open for less than a year are excluded from same store
    calculations.
|   
|(2) | The greatest increases in revenues during 2004 were achieved at
    locations that earn lower margins than the average for our U.K.
    facilities. The margins of the Highgate facility, which we
    acquired during the second quarter of 2003, and of the Parkside
    oncology center we opened during the third quarter of 2003
    increased in 2004 compared to 2003, but they remain lower than
    the margins of our other two U.K. facilities.                    

Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003








47



---



##### Table of Contents



















Year Ended December 31, 2003 Compared to Year Ended
December 31, 2002








48



---



##### Table of Contents













,






Liquidity and Capital Resources








49



---



##### Table of Contents







| |   |                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $36.2 million paid to acquire Same Day Surgery, L.L.C.,
    which owns five surgical centers in Chicago, Illinois and to
    concurrently acquire a portion of the minority ownership
    interests in four of these facilities,
|
| |  | $33.0 million paid to acquire Specialty Surgicenters, Inc.,
    which operates four surgical centers, and to acquire a portion
    of the minority ownership interests in two of these facilities,                              
|
| |  | $16.6 million paid to acquire a controlling interest in a
    surgery center in San Antonio, Texas,                                                                                                                             
|
| |  | $14.6 million paid to acquire a controlling interest in a
    surgery center in Reading, Pennsylvania,                                                                                                                          
|
| |  | $13.3 million to acquire a noncontrolling interest in a
    surgical hospital and surgery center in Oklahoma City, Oklahoma,                                                                                                    
|
| |  | $6.4 million paid to acquire a controlling interest in a
    surgery center in Austintown, Ohio, in which we had previously
    owned a noncontrolling interest,                                                                
|
| |  | $4.0 million to acquire additional ownership in a surgery
    center in Los Angeles, California,                                                                                                                                
|
| |  | $3.2 million paid to acquire a controlling interest in a
    surgery center in Dallas, Texas, in which we had previously
    owned a noncontrolling interest, and                                                               
|
| |  | $3.8 million of other transactions.                                                                                                                                                                                             







50



---



##### Table of Contents









|       |  |                  |         |  
|------ |  | ---------------- | ------- | -
|Period |  | Redemption Price |        
|       |  |                  |        
|2006   |  |                  | 105.000 | %
|2007   |  |                  | 103.333 | %
|2008   |  |                  | 101.667 | %
|2009   |  |                  | 100.000 | %
|2010   |  |                  | 100.000 | %





|                                                         |                                      |                        |         |         |        |   |        |               |        |   |               |        |  |         |        |        |  |   |         |         | 
|-------------------------------------------------------- | ------------------------------------ | ---------------------- | ------- | ------- | ------ | - | ------ | ------------- | ------ | - | ------------- | ------ |  | ------- | ------ | ------ |  | - | ------- | ------- | 
|                                                         |                                      | Payments Due by Period |        
|                                                         |                                      |                        |        
|                                                         |                                      |                        |         | Within  |        |   |        |               | Beyond |  
|Contractual Cash Obligations                             |                                      | Total                  |         |         | 1 Year |   |        | Years 2 and 3 |        |   | Years 4 and 5 |        |  | 5 Years |       
|                                                         |                                      |                        |         |         |        |   |        |               |        |   |               |        |  |         |       
|                                                         |                                      | (In Thousands)         |        
|Long term debt obligations (principal plus interest)(1): |                                      |                        |         |         |        |   |        |               |        |   |               |        |  |         |        |        |  |   |         |        
|                                                         | Senior Subordinated Notes            |                        | $       | 255,000 |        |   | $      | 15,000        |        |   | $             | 30,000 |  |         | $      | 30,000 |  |   | $       | 180,000 | 
|                                                         | U.K. credit facility                 |                        |         | 82,026  |        |   |        | 9,339         |        |   |               | 21,824 |  |         |        | 24,796 |  |   |         | 26,067  | 
|                                                         | Other debt at operating subsidiaries |                        |         | 25,357  |        |   |        | 4,610         |        |   |               | 10,476 |  |         |        | 7,037  |  |   |         | 3,234   | 
|Capitalized lease obligations                            |                                      |                        | 112,482 |         |        |   | 11,128 |               |        |   | 14,883        |        |  |         | 11,350 |        |  |   | 75,121  |        
|Operating lease obligations                              |                                      |                        | 60,364  |         |        |   | 9,563  |               |        |   | 17,293        |        |  |         | 13,871 |        |  |   | 19,637  |        
|                                                         |                                      |                        |         |         |        |   |        |               |        |   |               |        |  |         |       
|Total contractual cash obligations                       |                                      | $                      | 535,229 |         |        | $ | 49,640 |               |        | $ | 94,476        |        |  | $       | 87,054 |        |  | $ | 304,059 |        
|                                                         |                                      |                        |         |         |        |   |        |               |        |   |               |        |  |         |       






|    |                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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,
    2004 rates applicable to each debt instrument.

51



---



##### Table of Contents












52



---



##### Table of Contents





New Accounting Pronouncements


Share-Based Payment, Accounting for Stock
Issued to Employees









|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about Market
    Risk







53



---



##### Table of Contents



 









|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures




Managements Report on Internal Control Over Financial
Reporting








| |   |                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 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.                                                                                                                                    

54



---



##### Table of Contents



Internal Control  Integrated
Framework.




| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | SSI Holdings, Inc.                                                                     
|
| |  | USP Baltimore, Inc.                                                                    
|
| |  | USP Chicago, Inc.                                                                      
|
| |  | USP Houston, Inc. (Investment in Memorial Hermann/ USP Surgery
    Centers III, L.L.P.)
|
| |  | USP Mission Hills, Inc.                                                                
|
| |  | USP Newport News, Inc.                                                                 
|
| |  | USP Oklahoma, Inc. (Investment in Southwest Ambulatory Surgery
    Center, L.L.C.)     
|
| |  | USP Reading, Inc.                                                                      
|
| |  | USP San Antonio, Inc.                                                                  
|
| |  | USP Sarasota, Inc.                                                                     





Limitations on the Effectiveness of Controls







PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



55



---



##### Table of Contents








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








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








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services






PART IV







|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and Reports on
    Form 8-K

(a) 1. Financial Statements




|                                                                                                             |  |  |     | 
|------------------------------------------------------------------------------------------------------------ |  |  | --- | 
|Reports of Independent Registered Public
    Accounting Firm                                                 |  |  | F-1 | 
|Consolidated Balance Sheets as of
    December 31, 2004 and 2003                                             |  |  | F-4 | 
|Consolidated Statements of Income for the
    years ended December 31, 2004, 2003 and 2002                   |  |  | F-5 | 
|Consolidated Statements of Comprehensive
    Income for the years ended December 31, 2004, 2003 and
    2002 |  |  | F-6 | 
|Consolidated Statements of
    Stockholders Equity for the years ended December 31,
    2004, 2003 and 2002 |  |  | F-7 | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2004, 2003 and 2002               |  |  | F-8 | 
|Notes to Consolidated Financial
    Statements                                                               |  |  | F-9 | 

56



---



##### Table of Contents






Report of Independent Registered Public Accounting
Firm












Internal Control  Integrated Framework






F-1



---



##### Table of Contents



Report of Independent Registered Public Accounting
Firm






Internal Control  Integrated Framework








Internal
Control  Integrated Framework Internal Control  Integrated Framework




F-2



---



##### Table of Contents







| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | SSI Holdings, Inc.                                                                     
|
| |  | USP Baltimore, Inc.                                                                    
|
| |  | USP Chicago, Inc.                                                                      
|
| |  | USP Houston, Inc. (Investment in Memorial Hermann/ USP Surgery
    Centers III, L.L.P.)
|
| |  | USP Mission Hills, Inc.                                                                
|
| |  | USP Newport News, Inc.                                                                 
|
| |  | USP Oklahoma, Inc. (Investment in Southwest Ambulatory Surgery
    Center, L.L.C.)     
|
| |  | USP Reading, Inc.                                                                      
|
| |  | USP San Antonio, Inc.                                                                  
|
| |  | USP Sarasota, Inc.                                                                     





| |         
| | --------
| | KPMG LLP





F-3



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES





Consolidated Balance Sheets


December 31, 2004 and 2003


|                                                                                                                                       |                           |                       |         |         |      |   |         |         | 
|-------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | --------------------- | ------- | ------- | ---- | - | ------- | ------- | 
|                                                                                                                                       |                           | 2004                  |         |         | 2003 |  
|                                                                                                                                       |                           |                       |         |         |      |  
|                                                                                                                                       |                           | (In thousands, except |        
|                                                                                                                                       |                           | per share amounts)    |        
|ASSETS                                                                                                                                
|Cash and cash equivalents                                                                                                              |                           | $                     | 93,467  |         |      | $ | 28,519  |        
|Patient receivables, net of allowance for doubtful accounts of
    $7,277 and $8,838, respectively                                     |                           |                       | 43,591  |         |      |   | 56,591  |        
|Other receivables (note 4)                                                                                                             |                           |                       | 20,293  |         |      |   | 20,168  |        
|Inventories of supplies                                                                                                                |                           |                       | 7,188   |         |      |   | 9,024   |        
|Deferred tax asset, net                                                                                                                |                           |                       | 7,393   |         |      |   | 6,747   |        
|Prepaids and other current assets                                                                                                      |                           |                       | 7,035   |         |      |   | 12,548  |        
|                                                                                                                                       |                           |                       |         |         |      |  
|                                                                                                                                       | Total current assets      |                       |         | 178,967 |      |   |         | 133,597 | 
|Property and equipment, net (note 5)                                                                                                   |                           |                       | 265,889 |         |      |   | 348,063 |        
|Investments in affiliates (note 3)                                                                                                     |                           |                       | 43,402  |         |      |   | 32,104  |        
|Intangible assets, net (note 6)                                                                                                        |                           |                       | 402,355 |         |      |   | 326,645 |        
|Other assets                                                                                                                           |                           |                       | 31,691  |         |      |   | 30,100  |        
|                                                                                                                                       |                           |                       |         |         |      |  
|                                                                                                                                       | Total assets              |                       | $       | 922,304 |      |   | $       | 870,509 | 
|                                                                                                                                       |                           |                       |         |         |      |  
|                                                                                                                                      
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                  
|Accounts payable                                                                                                                       |                           | $                     | 18,048  |         |      | $ | 36,453  |        
|Accrued salaries and benefits                                                                                                          |                           |                       | 20,582  |         |      |   | 19,609  |        
|Due to affiliates                                                                                                                      |                           |                       | 12,805  |         |      |   | 5,490   |        
|Accrued interest                                                                                                                       |                           |                       | 1,856   |         |      |   | 1,739   |        
|Current portion of long-term debt (note 8)                                                                                             |                           |                       | 15,316  |         |      |   | 16,794  |        
|Other accrued expenses                                                                                                                 |                           |                       | 23,182  |         |      |   | 23,555  |        
|                                                                                                                                       |                           |                       |         |         |      |  
|                                                                                                                                       | Total current liabilities |                       |         | 91,789  |      |   |         | 103,640 | 
|                                                                                                                                       |                           |                       |         |         |      |  
|Long-term debt, less current portion (note 8)                                                                                          |                           |                       | 273,169 |         |      |   | 287,950 |        
|Other long-term liabilities                                                                                                            |                           |                       | 2,624   |         |      |   | 8,327   |        
|Deferred tax liability, net                                                                                                            |                           |                       | 31,846  |         |      |   | 33,979  |        
|                                                                                                                                       |                           |                       |         |         |      |  
|                                                                                                                                       | Total liabilities         |                       |         | 399,428 |      |   |         | 433,896 | 
|Minority interests (note 3)                                                                                                            |                           |                       | 48,267  |         |      |   | 45,958  |        
|Commitments and contingencies (notes 9 and 16)                                                                                         |                           |                       |         |         |      |   |         |        
|Stockholders equity (note 10):                                                                                                        |                           |                       |         |         |      |   |         |        
|Common stock                                                                                                                           |                           |                       |         |         |      |   |         |        
|Other, $0.01 par value; 200,000 shares authorized;
    28,660 and 27,705 shares issued at December 31, 2004
    and 2003, respectively |                           |                       | 287     |         |      |   | 277     |        
|Additional paid-in capital                                                                                                             |                           |                       | 349,191 |         |      |   | 330,519 |        
|Treasury stock, at cost, 14 and 52 shares at
    December 31, 2004 and 2003, respectively                                              |                           |                       | (320    | )       |      |   | (986    | )      
|Deferred compensation                                                                                                                  |                           |                       | (7,689  | )       |      |   | (4,548  | )      
|Receivables from sales of common stock                                                                                                 |                           |                       |        |         |      |   | (1      | )      
|Accumulated other comprehensive income, net of tax                                                                                     |                           |                       | 14,420  |         |      |   | 32,852  |        
|Retained earnings                                                                                                                      |                           |                       | 118,720 |         |      |   | 32,542  |        
|                                                                                                                                       |                           |                       |         |         |      |  
|Total stockholders equity                                                                                                             |                           |                       | 474,609 |         |      |   | 390,655 |        
|                                                                                                                                       |                           |                       |         |         |      |  
|Total liabilities and stockholders equity                                                                                             |                           | $                     | 922,304 |         |      | $ | 870,509 |        
|                                                                                                                                       |                           |                       |         |         |      |  



F-4



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES





Consolidated Statements of Income


|                                                         |                                                           |                                             |         |         |         |      |        |         |         |      |        |         |         |      | 
|-------------------------------------------------------- | --------------------------------------------------------- | ------------------------------------------- | ------- | ------- | ------- | ---- | ------ | ------- | ------- | ---- | ------ | ------- | ------- | ---- | 
|                                                         |                                                           | Years Ended December 31,                    |        
|                                                         |                                                           |                                             |        
|                                                         |                                                           | 2004                                        |         |         | 2003    |      |        | 2002    |        
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|                                                         |                                                           | (In thousands, except                       |        
|                                                         |                                                           | per share amounts)                          |        
|Revenues:                                                |                                                           |                                             |         |         |         |      |        |         |         |      |        |        
|                                                         | Net patient service revenue                               |                                             | $       | 351,071 |         |      | $      | 272,952 |         |      | $      | 212,203 |        
|                                                         | Management and administrative services revenue            |                                             |         | 37,642  |         |      |        | 36,205  |         |      |        | 31,238  |        
|                                                         | Other income                                              |                                             |         | 817     |         |      |        | 1,407   |         |      |        | 373     |        
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|                                                         |                                                           | Total revenue                               |         |         | 389,530 |      |        |         | 310,564 |      |        |         | 243,814 |     
|Equity in earnings of unconsolidated affiliates          |                                                           |                                             | 18,626  |         |         |      | 15,074 |         |         |      | 9,454  |        
|Operating expenses:                                      |                                                           |                                             |         |         |         |      |        |         |         |      |        |        
|                                                         | Salaries, benefits, and other employee costs              |                                             |         | 100,333 |         |      |        | 75,051  |         |      |        | 58,903  |        
|                                                         | Medical services and supplies                             |                                             |         | 64,671  |         |      |        | 49,055  |         |      |        | 38,646  |        
|                                                         | Other operating expenses                                  |                                             |         | 72,958  |         |      |        | 59,429  |         |      |        | 47,145  |        
|                                                         | General and administrative expenses                       |                                             |         | 27,493  |         |      |        | 25,819  |         |      |        | 20,196  |        
|                                                         | Provision for doubtful accounts                           |                                             |         | 8,159   |         |      |        | 6,859   |         |      |        | 5,303   |        
|                                                         | Depreciation and amortization                             |                                             |         | 27,209  |         |      |        | 22,700  |         |      |        | 19,123  |        
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|                                                         |                                                           | Total operating expenses                    |         |         | 300,823 |      |        |         | 238,913 |      |        |         | 189,316 |     
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|Operating income                                         |                                                           |                                             | 107,333 |         |         |      | 86,725 |         |         |      | 63,952 |        
|                                                         | Interest income                                           |                                             |         | 1,591   |         |      |        | 1,015   |         |      |        | 774     |        
|                                                         | Interest expense                                          |                                             |         | (26,720 | )       |      |        | (24,863 | )       |      |        | (23,307 | )      
|                                                         | Loss on early termination of credit facility (Note 5)     |                                             |         | (1,635  | )       |      |        |        |         |      |        |        |        
|                                                         | Other                                                     |                                             |         | 247     |         |      |        | 733     |         |      |        | (11     | )      
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|                                                         |                                                           | Total other expense, net                    |         |         | (26,517 | )    |        |         | (23,115 | )    |        |         | (22,544 | )   
|Income before minority interests                         |                                                           |                                             | 80,816  |         |         |      | 63,610 |         |         |      | 41,408 |        
|                                                         | Minority interests in income of consolidated subsidiaries |                                             |         | (30,441 | )       |      |        | (23,959 | )       |      |        | (14,809 | )      
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|Income from continuing operations before income taxes    |                                                           |                                             | 50,375  |         |         |      | 39,651 |         |         |      | 26,599 |        
|                                                         | Income tax expense                                        |                                             |         | (17,867 | )       |      |        | (14,934 | )       |      |        | (9,923  | )      
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|Income from continuing operations                        |                                                           |                                             | 32,508  |         |         |      | 24,717 |         |         |      | 16,676 |        
|Discontinued operations, net of tax (Note 2):            |                                                           |                                             |         |         |         |      |        |         |         |      |        |        
|                                                         | Income from discontinued operations                       |                                             |         | 3,329   |         |      |        | 5,159   |         |      |        | 2,924   |        
|                                                         | Net gain on disposal of Spanish operations                |                                             |         | 50,338  |         |      |        |        |         |      |        |        |        
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|                                                         |                                                           | Total earnings from discontinued operations |         |         | 53,667  |      |        |         | 5,159   |      |        |         | 2,924   |     
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|Net income                                               |                                                           | $                                           | 86,175  |         |         | $    | 29,876 |         |         | $    | 19,600 |        
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|Net income per share attributable to common stockholders |                                                           |                                             |         |         |         |      |        |         |         |      |        |        
|                                                         | Basic:                                                    |                                             |         |         |         |      |        |         |         |      |        |         |        
|                                                         |                                                           | Continuing operations                       |         | $       | 1.16    |      |        | $       | 0.91    |      |        | $       | 0.67    |     
|                                                         |                                                           | Discontinued operations                     |         |         | 1.92    |      |        |         | 0.19    |      |        |         | 0.12    |     
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|                                                         |                                                           |                                             | Total   |         | $       | 3.08 |        |         | $       | 1.10 |        |         | $       | 0.79 | 
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|                                                         | Diluted:                                                  |                                             |         |         |         |      |        |         |         |      |        |         |        
|                                                         |                                                           | Continuing operations                       |         | $       | 1.11    |      |        | $       | 0.88    |      |        | $       | 0.64    |     
|                                                         |                                                           | Discontinued operations                     |         |         | 1.83    |      |        |         | 0.18    |      |        |         | 0.11    |     
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|                                                         |                                                           |                                             | Total   |         | $       | 2.94 |        |         | $       | 1.06 |        |         | $       | 0.75 | 
|                                                         |                                                           |                                             |         |         |         |      |        |         |        
|Weighted average number of common shares                 |                                                           |                                             |         |         |         |      |        |         |         |      |        |        
|                                                         | Basic                                                     |                                             |         | 27,942  |         |      |        | 27,133  |         |      |        | 24,925  |        
|                                                         | Diluted                                                   |                                             |         | 29,298  |         |      |        | 28,244  |         |      |        | 26,056  |        

F-5



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES





Consolidated Statements of Comprehensive Income


|                                                     |                                          |                          |        |         |      |   |        |        |  |   |        |        |  
|---------------------------------------------------- | ---------------------------------------- | ------------------------ | ------ | ------- | ---- | - | ------ | ------ |  | - | ------ | ------ | -
|                                                     |                                          | Years Ended December 31, |       
|                                                     |                                          |                          |       
|                                                     |                                          | 2004                     |        |         | 2003 |   |        | 2002   | 
|                                                     |                                          |                          |        |         |      |   |        |        | 
|                                                     |                                          | (In thousands)           |       
|Net income                                           |                                          | $                        | 86,175 |         |      | $ | 29,876 |        |  | $ | 19,600 |       
|Other comprehensive income (loss), net of taxes:     |                                          |                          |        |         |      |   |        |        |  |   |        |       
|                                                     | Foreign currency translation adjustments |                          |        | 2,515   |      |   |        | 28,964 |  |   |        | 20,364 |  
|                                                     | Minimum pension liability adjustment     |                          |        | (235    | )    |   |        | 496    |  |   |        | (1,529 | )
|                                                     | Net unrealized gains on securities       |                          |        | 70      |      |   |        | 102    |  |   |        | 47     |  
|Reclassifications due to sale of Spanish operations: |                                          |                          |        |         |      |   |        |        |  |   |        |       
|                                                     | Foreign currency translation adjustments |                          |        | (20,563 | )    |   |        |       |  |   |        |       |  
|                                                     | Net unrealized gains on securities       |                          |        | (219    | )    |   |        |       |  |   |        |       |  
|                                                     |                                          |                          |        |         |      |   |        |        | 
|                                                     | Other comprehensive income (loss)        |                          |        | (18,432 | )    |   |        | 29,562 |  |   |        | 18,882 |  
|                                                     |                                          |                          |        |         |      |   |        |        | 
|Comprehensive income                                 |                                          | $                        | 67,743 |         |      | $ | 59,438 |        |  | $ | 38,482 |       
|                                                     |                                          |                          |        |         |      |   |        |        | 



F-6



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES





Consolidated Statements of Stockholders Equity


For the years ended December 31, 2004, 2003 and 2002


|                                                       |            |                |        |   |            |   |         |         |  |             |            |    |             |              |               |        |          |          |        |        |  |              |          |   |  |       |         |   |  |   |         |        |  |   |         |        | 
|------------------------------------------------------ | ---------- | -------------- | ------ | - | ---------- | - | ------- | ------- |  | ----------- | ---------- | -- | ----------- | ------------ | ------------- | ------ | -------- | -------- | ------ | ------ |  | ------------ | -------- | - |  | ----- | ------- | - |  | - | ------- | ------ |  | - | ------- | ------ | 
|                                                       |            |                |        |   |            |   |         |         |  | Receivables |            |    | Accumulated |              |               |        |          |         
|                                                       |            | Common Stock   |        |   |            |   |         |         |  |             | from Sales |    |             | Other        |               |        | Retained |          |        |       
|                                                       |            |                |        |   | Additional |   |         |         |  |             |            | of |             |              | Comprehensive |        |          | Earnings |        |        | 
|                                                       |            | Outstanding    |        |   |            |   | Paid-in |         |  | Treasury    |            |    | Deferred    |              |               | Common |          |          | Income |        |  | (Accumulated |          |   | 
|                                                       |            | Shares         |        |   | Par Value  |   |         | Capital |  |             | Stock      |    |             | Compensation |               |        | Stock    |          |        | (Loss) |  |              | Deficit) |   |  | Total |        
|                                                       |            |                |        |   |            |   |         |         |  |             |            |    |             |              |               |        |          |          |        |        |  |              |          |   |  |       |        
|                                                       |            | (In thousands) |       
|Balance, December 31, 2001                             |            |                | 24,102 |   |            | $ | 244     |         |  | $           | 265,809    |    |             | $            | (5,909        | )      |          | $        | (369   | )      |  | $            | (1,174   | ) |  | $     | (15,592 | ) |  | $ | (16,482 | )      |  | $ | 226,527 |       
|Issuance of common stock and exercise of stock options |            |                | 3,034  |   |            |   | 29      |         |  |             | 54,667     |    |             |              | 3,035         |        |          |          | (1,230 | )      |  |              | 983      |   |  |       |        |   |  |   | (20     | )      |  |   | 57,464  |       
|Repurchases of common stock                            |            |                | (32    | ) |            |   |        |         |  |             | 274        |    |             |              | (859          | )      |          |          |       |        |  |              |         |   |  |       |        |   |  |   |        |        |  |   | (585    | )     
|Amortization of deferred compensation                  |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          | 373    |        |  |              |         |   |  |       |        |   |  |   |        |        |  |   | 373     |       
|                                                       | Net income |                |        |  |            |   |         |        |  |             |            |   |             |              |               |       |          |          |        |       |  |              |          |  |  |       |         |  |  |   |         | 19,600 |  |   |         | 19,600 | 
|Foreign currency translation adjustments               |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | 20,364  |   |  |   |        |        |  |   | 20,364  |       
|Unrealized gains on securities                         |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | 47      |   |  |   |        |        |  |   | 47      |       
|Minimum pension liability adjustment, net of tax       |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | (1,529  | ) |  |   |        |        |  |   | (1,529  | )     
|                                                       |            |                |        |   |            |   |         |         |  |             |            |    |             |              |               |        |          |          |        |        |  |              |          |   |  |       |        
|Balance, December 31, 2002                             |            |                | 27,104 |   |            | $ | 273     |         |  |             | 320,750    |    |             |              | (3,733        | )      |          |          | (1,226 | )      |  |              | (191     | ) |  |       | 3,290   |   |  |   | 3,098   |        |  |   | 322,261 |       
|Issuance of common stock and exercise of stock options |            |                | 552    |   |            |   | 4       |         |  |             | 9,656      |    |             |              | 2,864         |        |          |          | (4,137 | )      |  |              | 190      |   |  |       |        |   |  |   | (432    | )      |  |   | 8,145   |       
|Repurchases of common stock                            |            |                | (3     | ) |            |   |        |         |  |             | 113        |    |             |              | (117          | )      |          |          |       |        |  |              |         |   |  |       |        |   |  |   |        |        |  |   | (4      | )     
|Amortization of deferred compensation                  |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          | 815    |        |  |              |         |   |  |       |        |   |  |   |        |        |  |   | 815     |       
|Net income                                             |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       |        |   |  |   | 29,876  |        |  |   | 29,876  |       
|Foreign currency translation adjustments               |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | 28,964  |   |  |   |        |        |  |   | 28,964  |       
|Unrealized gains on securities                         |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | 102     |   |  |   |        |        |  |   | 102     |       
|Minimum pension liability adjustment, net of tax       |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | 496     |   |  |   |        |        |  |   | 496     |       
|                                                       |            |                |        |   |            |   |         |         |  |             |            |    |             |              |               |        |          |          |        |        |  |              |          |   |  |       |        
|Balance, December 31, 2003                             |            |                | 27,653 |   |            |   | 277     |         |  |             | 330,519    |    |             |              | (986          | )      |          |          | (4,548 | )      |  |              | (1       | ) |  |       | 32,852  |   |  |   | 32,542  |        |  |   | 390,655 |       
|Issuance of common stock and exercise of stock options |            |                | 1,005  |   |            |   | 10      |         |  |             | 18,679     |    |             |              | 1,077         |        |          |          | (5,113 | )      |  |              | 1        |   |  |       |        |   |  |   | 3       |        |  |   | 14,657  |       
|Repurchases of common stock                            |            |                | (12    | ) |            |   |        |         |  |             | (7         | )  |             |              | (411          | )      |          |          |       |        |  |              |         |   |  |       |        |   |  |   |        |        |  |   | (418    | )     
|Amortization of deferred compensation                  |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          | 1,972  |        |  |              |         |   |  |       |        |   |  |   |        |        |  |   | 1,972   |       
|Net income                                             |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       |        |   |  |   | 86,175  |        |  |   | 86,175  |       
|Foreign currency translation adjustments               |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | 2,515   |   |  |   |        |        |  |   | 2,515   |       
|Unrealized gains on securities                         |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | 70      |   |  |   |        |        |  |   | 70      |       
|Minimum pension liability adjustment, net of tax       |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | (235    | ) |  |   |        |        |  |   | (235    | )     
|Reclassifications due to sale of Spanish operations    |            |                |       |   |            |   |        |         |  |             |           |    |             |              |              |        |          |          |       |        |  |              |         |   |  |       | (20,782 | ) |  |   |        |        |  |   | (20,782 | )     
|                                                       |            |                |        |   |            |   |         |         |  |             |            |    |             |              |               |        |          |          |        |        |  |              |          |   |  |       |        
|Balance, December 31, 2004                             |            |                | 28,646 |   |            | $ | 287     |         |  | $           | 349,191    |    |             | $            | (320          | )      |          | $        | (7,689 | )      |  | $            |         |   |  | $     | 14,420  |   |  | $ | 118,720 |        |  | $ | 474,609 |       
|                                                       |            |                |        |   |            |   |         |         |  |             |            |    |             |              |               |        |          |          |        |        |  |              |          |   |  |       |        

F-7



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES





Consolidated Statements of Cash Flows


|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |   |   |        |         |   |  | 
|------------------------------------------------------ | ------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | -------- | ---- | - | ------- | ------- | - | - | ------ | ------- | - |  | 
|                                                       |                                                                                | Years Ended December 31,                                                              |                                                                                                                                         
|                                                       |                                                                                |                                                                                       |                                                                                                                                         
|                                                       |                                                                                | 2004                                                                                  |                                                                                                                                          |          | 2003 |   |         | 2002    |  
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|                                                       |                                                                                | (In thousands)                                                                        |                                                                                                                                         
|Cash flows from operating activities:                  |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |   |   |        |        
|                                                       | Income from continuing operations                                              |                                                                                       | $                                                                                                                                        | 32,508   |      |   | $       | 24,717  |   |   | $      | 16,676  |  
|                                                       |                                                                                | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                                                                                          |          |      |   |         |         |   |   |        |         |   | 
|                                                       | Provision for doubtful accounts                                                |                                                                                       |                                                                                                                                          | 8,159    |      |   |         | 6,859   |   |   |        | 5,303   |  
|                                                       | Depreciation and amortization                                                  |                                                                                       |                                                                                                                                          | 27,209   |      |   |         | 22,700  |   |   |        | 19,123  |  
|                                                       | Amortization of debt issue costs and discount                                  |                                                                                       |                                                                                                                                          | 1,771    |      |   |         | 1,814   |   |   |        | 1,374   |  
|                                                       | Deferred income taxes                                                          |                                                                                       |                                                                                                                                          | 4,619    |      |   |         | 9,290   |   |   |        | 7,148   |  
|                                                       | Loss on early termination of credit agreement                                  |                                                                                       |                                                                                                                                          | 1,635    |      |   |         |        |   |   |        |        |  
|                                                       | Equity in earnings of unconsolidated affiliates                                |                                                                                       |                                                                                                                                          | (18,626  | )    |   |         | (15,074 | ) |   |        | (9,454  | )
|                                                       | Minority interests in income of consolidated subsidiaries                      |                                                                                       |                                                                                                                                          | 30,441   |      |   |         | 23,959  |   |   |        | 14,809  |  
|                                                       | Equity-based compensation                                                      |                                                                                       |                                                                                                                                          | 3,299    |      |   |         | 2,970   |   |   |        | 373     |  
|                                                       |                                                                                |                                                                                       | Increases (decreases) in cash from changes in operating
    assets and liabilities, net of effects from purchases of new
    businesses: |          |      |   |         |         |   |   |        |         |   |  | 
|                                                       | Patient receivables                                                            |                                                                                       |                                                                                                                                          | (13,729  | )    |   |         | (13,891 | ) |   |        | (7,197  | )
|                                                       | Other receivables                                                              |                                                                                       |                                                                                                                                          | (518     | )    |   |         | 15,380  |   |   |        | (1,757  | )
|                                                       | Inventories of supplies, prepaids and other current assets                     |                                                                                       |                                                                                                                                          | (2,342   | )    |   |         | (379    | ) |   |        | (2,573  | )
|                                                       | Accounts payable and other current liabilities                                 |                                                                                       |                                                                                                                                          | 14,908   |      |   |         | (3,883  | ) |   |        | 6,308   |  
|                                                       | Other long-term liabilities                                                    |                                                                                       |                                                                                                                                          | 2,206    |      |   |         | (87     | ) |   |        | (264    | )
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|                                                       | Net cash provided by operating activities                                      |                                                                                       |                                                                                                                                          | 91,540   |      |   |         | 74,375  |   |   |        | 49,869  |  
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|Cash flows from investing activities:                  |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |   |   |        |        
|                                                       | Purchases of new businesses and equity interests, net of cash
    received     |                                                                                       |                                                                                                                                          | (131,123 | )    |   |         | (43,939 | ) |   |        | (54,809 | )
|                                                       | Proceeds from sale of Spanish operations                                       |                                                                                       |                                                                                                                                          | 141,132  |      |   |         |        |   |   |        |        |  
|                                                       | Purchases of property and equipment                                            |                                                                                       |                                                                                                                                          | (23,869  | )    |   |         | (22,274 | ) |   |        | (23,393 | )
|                                                       | Increase in deposits and notes receivable                                      |                                                                                       |                                                                                                                                          | (5,517   | )    |   |         | (13,937 | ) |   |        | (500    | )
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|                                                       | Net cash used in investing activities                                          |                                                                                       |                                                                                                                                          | (19,377  | )    |   |         | (80,150 | ) |   |        | (78,702 | )
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|Cash flows from financing activities:                  |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |   |   |        |        
|                                                       | Proceeds from long-term debt                                                   |                                                                                       |                                                                                                                                          | 18,341   |      |   |         | 40,309  |   |   |        | 59,446  |  
|                                                       | Payments on long-term debt                                                     |                                                                                       |                                                                                                                                          | (26,368  | )    |   |         | (42,721 | ) |   |        | (62,991 | )
|                                                       | Proceeds from issuance of common stock                                         |                                                                                       |                                                                                                                                          | 9,598    |      |   |         | 4,311   |   |   |        | 53,665  |  
|                                                       | Payments to repurchase common stock                                            |                                                                                       |                                                                                                                                          |         |      |   |         | (4      | ) |   |        |        |  
|                                                       | Distributions on investments in affiliates                                     |                                                                                       |                                                                                                                                          | (10,316  | )    |   |         | (7,570  | ) |   |        | (3,309  | )
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|Net cash provided by (used in) financing activities    |                                                                                |                                                                                       | (8,745                                                                                                                                   | )        |      |   | (5,675  | )       |   |   | 46,811 |        
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|Net cash provided by (used in) discontinued operations |                                                                                |                                                                                       | 1,272                                                                                                                                    |          |      |   | (7,373  | )       |   |   | (4,029 | )      
|Effect of exchange rate changes on cash                |                                                                                |                                                                                       | 258                                                                                                                                      |          |      |   | (229    | )       |   |   | (259   | )      
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|Net increase (decrease) in cash and cash equivalents   |                                                                                |                                                                                       | 64,948                                                                                                                                   |          |      |   | (19,052 | )       |   |   | 13,690 |        
|Cash and cash equivalents at beginning of year         |                                                                                |                                                                                       | 28,519                                                                                                                                   |          |      |   | 47,571  |         |   |   | 33,881 |        
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|Cash and cash equivalents at end of year               |                                                                                | $                                                                                     | 93,467                                                                                                                                   |          |      | $ | 28,519  |         |   | $ | 47,571 |        
|                                                       |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |  
|Supplemental information:                              |                                                                                |                                                                                       |                                                                                                                                          |          |      |   |         |         |   |   |        |        
|                                                       | Interest paid, net of amounts capitalized                                      |                                                                                       | $                                                                                                                                        | 25,050   |      |   | $       | 23,249  |   |   | $      | 21,925  |  
|                                                       | Income taxes paid                                                              |                                                                                       |                                                                                                                                          | 30,927   |      |   |         | 5,889   |   |   |        | 3,090   |  
|                                                       |                                                                                | Non-cash transactions:                                                                |                                                                                                                                          |          |      |   |         |         |   |   |        |         |   | 
|                                                       | Issuance of common stock for service contracts                                 |                                                                                       | $                                                                                                                                        |         |      |   | $       | 254     |   |   | $      | 1,002   |  
|                                                       | Issuance of common stock to employees                                          |                                                                                       |                                                                                                                                          | 5,250    |      |   |         | 6,291   |   |   |        |        |  
|                                                       | Sale of noncontrolling interests for notes receivable                          |                                                                                       |                                                                                                                                          |         |      |   |         | 2,492   |   |   |        |        |  
|                                                       | Common stock, options, and warrants issued for purchases of new
    businesses |                                                                                       |                                                                                                                                          |         |      |   |         |        |   |   |        | 1,186   |  
|                                                       | Assets acquired under capital lease obligations                                |                                                                                       |                                                                                                                                          | 27,691   |      |   |         | 586     |   |   |        | 1,600   |  
|                                                       | Note receivable for remaining proceeds of sale of Spanish
    operations       |                                                                                       |                                                                                                                                          | 18,035   |      |   |         |        |   |   |        |        |  



F-8



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES





Notes to Consolidated Financial Statements


December 31, 2004 and 2003




|    |                                                         
|--- | --------------------------------------------------------
|(1) | Summary of Significant Accounting Policies and Practices



|    |                        
|--- | -----------------------
|(a) | Description of Business













|    |                                  
|--- | ---------------------------------
|(b) | Translation of Foreign Currencies





|    |                            
|--- | ---------------------------
|(c) | Principles of Consolidation





|    |                 
|--- | ----------------
|(d) | Use of Estimates



F-9



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|    |                  
|--- | -----------------
|(e) | Reclassifications





|    |                                 
|--- | --------------------------------
|(f) | Cash Equivalents and Investments











|    |                        
|--- | -----------------------
|(g) | Inventories of Supplies





|    |                       
|--- | ----------------------
|(h) | Property and Equipment





|    |                  
|--- | -----------------
|(i) | Intangible Assets

Accounting for Goodwill and Other Intangible Assets


F-10



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|    |                                
|--- | -------------------------------
|(j) | Impairment of Long-lived Assets





|    |                                    
|--- | -----------------------------------
|(k) | Fair Value of Financial Instruments





|    |                    
|--- | -------------------
|(l) | Revenue Recognition





|    |                                                
|--- | -----------------------------------------------
|(m) | Equity in Earnings of Unconsolidated Affiliates





|    |             
|--- | ------------
|(n) | Income Taxes



F-11



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|    |                          
|--- | -------------------------
|(o) | Equity-Based Compensation



Accounting for Stock Issued to Employees, Accounting for Stock-Based
Compensation, Accounting for Stock-Based Compensation 
Transition and Disclosure,


|                           |                                                                                                                                 |                          |   |        |      |  |   |        |   |  |   |        |  
|-------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                           |                                                                                                                                 | Years Ended December 31, |  
|                           |                                                                                                                                 |                          |  
|                           |                                                                                                                                 | 2004                     |   |        | 2003 |  |   | 2002   |  
|                           |                                                                                                                                 |                          |   |        |      |  |   |        |  
|Net income:                |                                                                                                                                 |                          |   |        |      |  |   |        |   |  |   |       
|                           | As reported                                                                                                                     |                          | $ | 86,175 |      |  | $ | 29,876 |   |  | $ | 19,600 |  
|                           | Add: Total stock-based employee compensation expense included in
    reported net income, net of taxes                          |                          |   | 2,145  |      |  |   | 1,930  |   |  |   | 534    |  
|                           | Less: Total stock-based employee compensation expense determined
    under fair value based method for all awards, net of taxes |                          |   | (6,072 | )    |  |   | (6,030 | ) |  |   | (3,947 | )
|                           |                                                                                                                                 |                          |   |        |      |  |   |        |  
|                           | Pro forma                                                                                                                       |                          | $ | 82,248 |      |  | $ | 25,776 |   |  | $ | 16,187 |  
|                           |                                                                                                                                 |                          |   |        |      |  |   |        |  
|Basic earnings per share   |                                                                                                                                 |                          |   |        |      |  |   |        |   |  |   |       
|                           | As reported                                                                                                                     |                          | $ | 3.08   |      |  | $ | 1.10   |   |  | $ | 0.79   |  
|                           | Pro forma                                                                                                                       |                          |   | 2.94   |      |  |   | 0.95   |   |  |   | 0.65   |  
|Diluted earnings per share |                                                                                                                                 |                          |   |        |      |  |   |        |   |  |   |       
|                           | As reported                                                                                                                     |                          | $ | 2.94   |      |  | $ | 1.06   |   |  | $ | 0.75   |  
|                           | Pro forma                                                                                                                       |                          |   | 2.81   |      |  |   | 0.91   |   |  |   | 0.62   |  





F-12



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




Accounting for Equity
Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling Goods or Services.




|    |                              
|--- | -----------------------------
|(p) | Commitments and Contingencies





|    |                        
|--- | -----------------------
|(2) | Discontinued Operations

Accounting for the Impairment or Disposal of Long-Lived
Assets









F-13



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)







|                                                            |                                                         |                         |        |         |      |   |         |        |      |   |        |       |      | 
|----------------------------------------------------------- | ------------------------------------------------------- | ----------------------- | ------ | ------- | ---- | - | ------- | ------ | ---- | - | ------ | ----- | ---- | 
|                                                            |                                                         | Year Ended December 31, |       
|                                                            |                                                         |                         |       
|                                                            |                                                         | 2004                    |        |         | 2003 |   |         | 2002   |     
|                                                            |                                                         |                         |        |         |      |   |         |        |     
|Revenues(1)                                                 |                                                         | $                       | 99,078 |         |      | $ | 120,632 |        |      | $ | 89,117 |      
|                                                            | Income from discontinued operations before income taxes |                         | $      | 6,015   |      |   | $       | 6,752  |      |   | $      | 3,447 |     
|                                                            | Income tax expense                                      |                         |        | (2,686  | )    |   |         | (1,593 | )    |   |        | (523  | )   
|                                                            |                                                         |                         |        |         |      |   |         |        |     
|                                                            | Income from discontinued operations(1)                  |                         | $      | 3,329   |      |   | $       | 5,159  |      |   | $      | 2,924 |     
|                                                            |                                                         |                         |        |         |      |   |         |        |     
|Gain on sale of discontinued operations before income taxes |                                                         | $                       | 72,486 |         |      | $ |        |        |      | $ |       |      
|                                                            | Income tax expense                                      |                         |        | (22,148 | )    |   |         |       |      |   |        |      |     
|                                                            |                                                         |                         |        |         |      |   |         |        |     
|                                                            | Net gain on sale of discontinued operations             |                         | $      | 50,338  |      |   | $       |       |      |   | $      |      |     
|                                                            |                                                         |                         |        |         |      |   |         |        |     
|Earnings per diluted share:                                 |                                                         |                         |        |         |      |   |         |        |      |   |        |      
|                                                            | Income from discontinued operations                     |                         | $      | 0.11    |      |   | $       | 0.18   |      |   | $      | 0.11  |     
|                                                            | Gain on sale of discontinued operations                 |                         |        | 1.72    |      |   |         |       |      |   |        |      |     
|                                                            |                                                         |                         |        |         |      |   |         |        |     
|                                                            |                                                         | Total                   |        | $       | 1.83 |   |         | $      | 0.18 |   |        | $     | 0.11 | 
|                                                            |                                                         |                         |        |         |      |   |         |        |     






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 2004 amounts primarily relate to the period prior to
    September 9, 2004, the effective date of the sale of the
    Spanish operations. Expenses of approximately $0.7 million
    were incurred after the effective date related to winding down
    the Spanish operations, primarily consisting of establishing a
    valuation allowance against foreign tax credits whose benefit is
    considered unlikely to be realized.



|    |                                    
|--- | -----------------------------------
|(3) | Acquisitions and Equity Investments









F-14



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)














|                                                      |  |                          |         |  |      |   |         | 
|----------------------------------------------------- |  | ------------------------ | ------- |  | ---- | - | ------- | 
|                                                      |  | Years Ended December 31, |        
|                                                      |  | (Unaudited)              |        
|                                                      |  |                          |        
|                                                      |  | 2004                     |         |  | 2003 |  
|                                                      |  |                          |         |  |      |  
|Net revenues                                          |  | $                        | 434,791 |  |      | $ | 375,772 | 
|Income from continuing operations                     |  |                          | 40,325  |  |      |   | 35,776  | 
|Diluted earnings per share from continuing operations |  | $                        | 1.38    |  |      | $ | 1.27    | 





F-15



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                               |                        |      |    |         |      |  |    |         |  |  |    |         | 
|---------------------------------------------- | ---------------------- | ---- | -- | ------- | ---- |  | -- | ------- |  |  | -- | ------- | 
|                                               |                        | 2004 |    |         | 2003 |  |    | 2002    | 
|                                               |                        |      |    |         |      |  |    |         | 
|Unconsolidated facilities operated at year-end |                        |      | 44 |         |      |  | 33 |         |  |  | 26 |        
|Income statement information:                  |                        |      |    |         |      |  |    |         |  |  |    |        
|                                               | Revenues               |      | $  | 339,109 |      |  | $  | 240,848 |  |  | $  | 141,166 | 
|                                               | Operating income       |      |    | 103,679 |      |  |    | 76,252  |  |  |    | 41,913  | 
|                                               | Net income             |      |    | 93,598  |      |  |    | 67,914  |  |  |    | 37,279  | 
|Balance sheet information:                     |                        |      |    |         |      |  |    |         |  |  |    |        
|                                               | Current assets         |      | $  | 96,006  |      |  | $  | 69,659  |  |  | $  | 39,125  | 
|                                               | Noncurrent assets      |      |    | 163,410 |      |  |    | 132,380 |  |  |    | 91,528  | 
|                                               | Current liabilities    |      |    | 51,027  |      |  |    | 38,234  |  |  |    | 22,974  | 
|                                               | Noncurrent liabilities |      |    | 96,415  |      |  |    | 73,414  |  |  |    | 59,301  | 



|    |                  
|--- | -----------------
|(4) | Other Receivables





|    |                       
|--- | ----------------------
|(5) | Property and Equipment



|                                     |                            |              |            |  |      |   |          |         |  |   |          |         | 
|------------------------------------ | -------------------------- | ------------ | ---------- |  | ---- | - | -------- | ------- |  | - | -------- | ------- | 
|                                     |                            | Estimated    |            |  |      |   |         
|                                     |                            | Useful Lives |            |  | 2004 |   |          | 2003    | 
|                                     |                            |              |            |  |      |   |          |         | 
|Land and land improvements           |                            |              |           |  |      | $ | 21,973   |         |  | $ | 38,817   |        
|Buildings and leasehold improvements |                            |              | 7-50 years |  |      |   | 202,668  |         |  |   | 246,335  |        
|Equipment                            |                            |              | 3-12 years |  |      |   | 149,174  |         |  |   | 208,443  |        
|Furniture and fixtures               |                            |              | 4-20 years |  |      |   | 8,625    |         |  |   | 17,912   |        
|Construction in progress             |                            |              |            |  |      |   | 1,307    |         |  |   | 13,689   |        
|                                     |                            |              |            |  |      |   |          |         | 
|                                     |                            |              |            |  |      |   | 383,747  |         |  |   | 525,196  |        
|Less accumulated depreciation        |                            |              |            |  |      |   | (117,858 | )       |  |   | (177,133 | )      
|                                     |                            |              |            |  |      |   |          |         | 
|                                     | Net property and equipment |              |            |  |      |   | $        | 265,889 |  |   | $        | 348,063 | 
|                                     |                            |              |            |  |      |   |          |         | 



F-16



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                              |                                                 |      |         |        |      |   |         |        | 
|----------------------------- | ----------------------------------------------- | ---- | ------- | ------ | ---- | - | ------- | ------ | 
|                              |                                                 | 2004 |         |        | 2003 |  
|                              |                                                 |      |         |        |      |  
|Land and buildings            |                                                 | $    | 48,199  |        |      | $ | 67,310  |       
|Equipment and furniture       |                                                 |      | 29,701  |        |      |   | 37,378  |       
|                              |                                                 |      |         |        |      |  
|                              |                                                 |      | 77,900  |        |      |   | 104,688 |       
|Less accumulated amortization |                                                 |      | (24,196 | )      |      |   | (32,906 | )     
|                              |                                                 |      |         |        |      |  
|                              | Net property and equipment under capital leases |      | $       | 53,704 |      |   | $       | 71,782 | 
|                              |                                                 |      |         |        |      |  



|    |                               
|--- | ------------------------------
|(6) | Goodwill and Intangible Assets

Accounting for Goodwill and Other Intangible
Assets






|                        |       |              |         |         |      |   |         |         | 
|----------------------- | ----- | ------------ | ------- | ------- | ---- | - | ------- | ------- | 
|                        |       | December 31, |        
|                        |       |              |        
|                        |       | 2004         |         |         | 2003 |  
|                        |       |              |         |         |      |  
|Goodwill                |       | $            | 319,355 |         |      | $ | 255,987 |        
|Other intangible assets |       |              | 83,000  |         |      |   | 70,658  |        
|                        |       |              |         |         |      |  
|                        | Total |              | $       | 402,355 |      |   | $       | 326,645 | 
|                        |       |              |         |         |      |  



|                             |  |      |         |        |         |   |        |       |  |   |         |   |  |   |         |  
|---------------------------- |  | ---- | ------- | ------ | ------- | - | ------ | ----- |  | - | ------- | - |  | - | ------- | -
|                             |  |      |         | United |         |   |        |       | 
|                             |  | U.S. |         |        | Kingdom |   |        | Spain |  |   | Total   |  
|                             |  |      |         |        |         |   |        |       |  |   |         |  
|Balance at December 31, 2002 |  | $    | 152,935 |        |         | $ | 20,265 |       |  | $ | 42,298  |   |  | $ | 215,498 |  
|Additions                    |  |      | 26,664  |        |         |   | 2,718  |       |  |   | 71      |   |  |   | 29,453  |  
|Other                        |  |      |        |        |         |   | 2,492  |       |  |   | 8,544   |   |  |   | 11,036  |  
|                             |  |      |         |        |         |   |        |       |  |   |         |  
|Balance at December 31, 2003 |  |      | 179,599 |        |         |   | 25,475 |       |  |   | 50,913  |   |  |   | 255,987 |  
|                             |  |      |         |        |         |   |        |       |  |   |         |  
|Additions                    |  |      | 116,688 |        |         |   | 57     |       |  |   |        |   |  |   | 116,745 |  
|Disposals                    |  |      | (2,398  | )      |         |   |       |       |  |   | (50,913 | ) |  |   | (53,311 | )
|Other                        |  |      | (1,948  | )      |         |   | 1,882  |       |  |   |        |   |  |   | (66     | )
|                             |  |      |         |        |         |   |        |       |  |   |         |  
|Balance at December 31, 2004 |  | $    | 291,941 |        |         | $ | 27,414 |       |  | $ |        |   |  | $ | 319,355 |  
|                             |  |      |         |        |         |   |        |       |  |   |         |  

F-17



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)








|                        |                         |                   |        |        |              |   |        |         |   |   |        |        | 
|----------------------- | ----------------------- | ----------------- | ------ | ------ | ------------ | - | ------ | ------- | - | - | ------ | ------ | 
|                        |                         | December 31, 2004 |       
|                        |                         |                   |       
|                        |                         | Gross             |        |        |             
|                        |                         | Carrying          |        |        | Accumulated  |   |        |        
|                        |                         | Amount            |        |        | Amortization |   |        | Total   |  
|                        |                         |                   |        |        |              |   |        |         |  
|Definite Useful Lives   |                         |                   |        |        |              |   |        |         |   |   |        |       
|Management Contracts    |                         | $                 | 25,506 |        |              | $ | (9,168 | )       |   | $ | 16,338 |       
|Other                   |                         |                   | 7,892  |        |              |   | (1,942 | )       |   |   | 5,950  |       
|                        |                         |                   |        |        |              |   |        |         |  
|                        | Total                   |                   | $      | 33,398 |              |   | $      | (11,110 | ) |   |        | 22,288 | 
|                        |                         |                   |        |        |              |   |        |         |  
|Indefinite Useful Lives |                         |                   |        |        |              |   |        |         |   |   |        |       
|Management Contracts    |                         |                   |        |        |              |   |        |         |   |   | 59,908 |       
|Other                   |                         |                   |        |        |              |   |        |         |   |   | 804    |       
|                        |                         |                   |        |        |              |   |        |         |  
|                        | Total                   |                   |        |        |              |   |        |         |   |   |        | 60,712 | 
|                        |                         |                   |        |        |              |   |        |         |  
|                        | Total intangible assets |                   |        |        |              |   |        |         |   |   | $      | 83,000 | 
|                        |                         |                   |        |        |              |   |        |         |  

F-18



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                        |                         |                   |        |        |              |   |        |         |   |   |        |        | 
|----------------------- | ----------------------- | ----------------- | ------ | ------ | ------------ | - | ------ | ------- | - | - | ------ | ------ | 
|                        |                         | December 31, 2003 |       
|                        |                         |                   |       
|                        |                         | Gross             |        |        |             
|                        |                         | Carrying          |        |        | Accumulated  |   |        |        
|                        |                         | Amount            |        |        | Amortization |   |        | Total   |  
|                        |                         |                   |        |        |              |   |        |         |  
|Definite Useful Lives   |                         |                   |        |        |              |   |        |         |   |   |        |       
|Management Contracts    |                         | $                 | 27,391 |        |              | $ | (8,828 | )       |   | $ | 18,563 |       
|Other                   |                         |                   | 13,839 |        |              |   | (4,609 | )       |   |   | 9,230  |       
|                        |                         |                   |        |        |              |   |        |         |  
|                        | Total                   |                   | $      | 41,230 |              |   | $      | (13,437 | ) |   |        | 27,793 | 
|                        |                         |                   |        |        |              |   |        |         |  
|Indefinite Useful Lives |                         |                   |        |        |              |   |        |         |   |   |        |       
|Management Contracts    |                         |                   |        |        |              |   |        |         |   |   | 42,245 |       
|Other                   |                         |                   |        |        |              |   |        |         |   |   | 620    |       
|                        |                         |                   |        |        |              |   |        |         |  
|                        | Total                   |                   |        |        |              |   |        |         |   |   |        | 42,865 | 
|                        |                         |                   |        |        |              |   |        |         |  
|                        | Total intangible assets |                   |        |        |              |   |        |         |   |   | $      | 70,658 | 
|                        |                         |                   |        |        |              |   |        |         |  





|     |  |   |       | 
|---- |  | - | ----- | 
|2005 |  | $ | 2,102 | 
|2006 |  |   | 2,098 | 
|2007 |  |   | 1,926 | 
|2008 |  |   | 1,926 | 
|2009 |  |   | 1,925 | 
|     |  |   |      
|     |  | $ | 9,977 | 
|     |  |   |      



|    |                      
|--- | ---------------------
|(7) | Long-Term Investments



Accounting for Certain
Investments in Debt and Equity Securities


F-19



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |               
|--- | --------------
|(8) | Long-term Debt



|                                        |                                      |      |         |         |      |   |         |         | 
|--------------------------------------- | ------------------------------------ | ---- | ------- | ------- | ---- | - | ------- | ------- | 
|                                        |                                      | 2004 |         |         | 2003 |  
|                                        |                                      |      |         |         |      |  
|Senior credit agreements                |                                      | $    | 65,918  |         |      | $ | 63,876  |        
|Senior subordinated notes               |                                      |      | 149,077 |         |      |   | 148,989 |        
|Notes payable to financial institutions |                                      |      | 20,698  |         |      |   | 26,505  |        
|Capital lease obligations               |                                      |      | 52,792  |         |      |   | 65,374  |        
|                                        |                                      |      |         |         |      |  
|                                        | Total long-term debt                 |      |         | 288,485 |      |   |         | 304,744 | 
|Less current portion                    |                                      |      | (15,316 | )       |      |   | (16,794 | )      
|                                        |                                      |      |         |         |      |  
|                                        | Long-term debt, less current portion |      | $       | 273,169 |      |   | $       | 287,950 | 
|                                        |                                      |      |         |         |      |  



|    |                
|--- | ---------------
|(a) | Lines of Credit









|    |                  
|--- | -----------------
|(b) | Subordinated Debt



F-20



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|       |  |                  |          | 
|------ |  | ---------------- | -------- | 
|Period |  | Redemption Price |         
|       |  |                  |         
|2006   |  |                  | 105.000% | 
|2007   |  |                  | 103.333% | 
|2008   |  |                  | 101.667% | 
|2009   |  |                  | 100.000% | 
|2010   |  |                  | 100.000% | 







|    |                     
|--- | --------------------
|(c) | Other Long-term Debt









|    |       
|--- | ------
|(9) | Leases



F-21



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                             |                                         |         |         |         |           |   |        |        | 
|---------------------------- | --------------------------------------- | ------- | ------- | ------- | --------- | - | ------ | ------ | 
|                             |                                         | Capital |         |         | Operating |  
|                             |                                         | Leases  |         |         | Leases    |  
|                             |                                         |         |         |         |           |  
|Year ending December 31,     |                                         |         |         |         |           |   |        |       
|2005                         |                                         | $       | 11,128  |         |           | $ | 9,563  |       
|2006                         |                                         |         | 7,987   |         |           |   | 8,954  |       
|2007                         |                                         |         | 6,897   |         |           |   | 8,339  |       
|2008                         |                                         |         | 6,111   |         |           |   | 7,607  |       
|2009                         |                                         |         | 5,239   |         |           |   | 6,264  |       
|Thereafter                   |                                         |         | 75,120  |         |           |   | 19,637 |       
|                             |                                         |         |         |         |           |  
|                             | Total minimum lease payments            |         |         | 112,482 |           |   | $      | 60,364 | 
|                             |                                         |         |         |         |           |  
|Amount representing interest |                                         |         | (59,690 | )       |           |   |        |       
|                             |                                         |         |         |         |           |  
|                             | Present value of minimum lease payments |         | $       | 52,792  |           |   |        |        | 
|                             |                                         |         |         |         |           |  





|     |                
|---- | ---------------
|(10) | Preferred Stock



|                                                                     |                                            |  |           |            | 
|-------------------------------------------------------------------- | ------------------------------------------ |  | --------- | ---------- | 
|Series A Redeemable Preferred Stock, $0.01 par value                 |                                            |  | 31,200    |           
|Series B Convertible Redeemable Preferred Stock,
    $0.01 par value |                                            |  | 2,716     |           
|Series C Convertible Preferred Stock, $0.01 par value                |                                            |  | 20,000    |           
|Series D Redeemable Preferred Stock, $0.01 par value                 |                                            |  | 40,000    |           
|Series A Junior Participating Preferred Stock,
    $0.01 par value   |                                            |  | 500,000   |           
|Not designated                                                       |                                            |  | 9,460,000 |           
|                                                                     |                                            |  |          
|                                                                     | Total authorized shares of Preferred Stock |  |           | 10,053,916 | 
|                                                                     |                                            |  |          











F-22



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|     |                           
|---- | --------------------------
|(11) | Related Party Transactions





|     |             
|---- | ------------
|(12) | Income Taxes



|         |  |      |        |  |      |   |        |      |  |   |        | 
|-------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|         |  | 2004 |        |  | 2003 |   |        | 2002 | 
|         |  |      |        |  |      |   |        |      | 
|Domestic |  | $    | 40,426 |  |      | $ | 32,180 |      |  | $ | 20,422 | 
|Foreign  |  |      | 9,949  |  |      |   | 7,471  |      |  |   | 6,177  | 
|         |  |      |        |  |      |   |        |      | 
|         |  | $    | 50,375 |  |      | $ | 39,651 |      |  | $ | 26,599 | 
|         |  |      |        |  |      |   |        |      | 



|                              |                        |         |   |        |          |  |   |       |   |  |   |        | 
|----------------------------- | ---------------------- | ------- | - | ------ | -------- |  | - | ----- | - |  | - | ------ | 
|                              |                        | Current |   |        | Deferred |  |   | Total |  
|                              |                        |         |   |        |          |  |   |       |  
|Year ended December 31, 2004: |                        |         |   |        |          |  |   |       |   |  |   |       
|                              | U.S. federal           |         | $ | 8,686  |          |  | $ | 4,638 |   |  | $ | 13,324 | 
|                              | State and local        |         |   | 1,517  |          |  |   | 791   |   |  |   | 2,308  | 
|                              | Foreign                |         |   | 3,045  |          |  |   | (810  | ) |  |   | 2,235  | 
|                              |                        |         |   |        |          |  |   |       |  
|                              | Net income tax expense |         | $ | 13,248 |          |  | $ | 4,619 |   |  | $ | 17,867 | 
|                              |                        |         |   |        |          |  |   |       |  

|                              |                        |         |   |       |          |  |   |       |   |  |   |        | 
|----------------------------- | ---------------------- | ------- | - | ----- | -------- |  | - | ----- | - |  | - | ------ | 
|                              |                        | Current |   |       | Deferred |  |   | Total |  
|                              |                        |         |   |       |          |  |   |       |  
|Year ended December 31, 2003: |                        |         |   |       |          |  |   |       |   |  |   |       
|                              | U.S. federal           |         | $ | 1,919 |          |  | $ | 9,196 |   |  | $ | 11,115 | 
|                              | State and local        |         |   | 1,300 |          |  |   | 729   |   |  |   | 2,029  | 
|                              | Foreign                |         |   | 2,425 |          |  |   | (635  | ) |  |   | 1,790  | 
|                              |                        |         |   |       |          |  |   |       |  
|                              | Net income tax expense |         | $ | 5,644 |          |  | $ | 9,290 |   |  | $ | 14,934 | 
|                              |                        |         |   |       |          |  |   |       |  

|                              |                        |         |   |       |          |  |   |       |   |  |   |       | 
|----------------------------- | ---------------------- | ------- | - | ----- | -------- |  | - | ----- | - |  | - | ----- | 
|                              |                        | Current |   |       | Deferred |  |   | Total |  
|                              |                        |         |   |       |          |  |   |       |  
|Year ended December 31, 2002: |                        |         |   |       |          |  |   |       |   |  |   |      
|                              | U.S. federal           |         | $ |      |          |  | $ | 7,103 |   |  | $ | 7,103 | 
|                              | State and local        |         |   | 809   |          |  |   | 460   |   |  |   | 1,269 | 
|                              | Foreign                |         |   | 1,966 |          |  |   | (415  | ) |  |   | 1,551 | 
|                              |                        |         |   |       |          |  |   |       |  
|                              | Net income tax expense |         | $ | 2,775 |          |  | $ | 7,148 |   |  | $ | 9,923 | 
|                              |                        |         |   |       |          |  |   |       |  

F-23



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                     |                                                                                  |                          |        |        |      |   |        |        |   |   |       |       |  
|---------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------ | ------ | ------ | ---- | - | ------ | ------ | - | - | ----- | ----- | -
|                                                     |                                                                                  | Years Ended December 31, |       
|                                                     |                                                                                  |                          |       
|                                                     |                                                                                  | 2004                     |        |        | 2003 |   |        | 2002   |  
|                                                     |                                                                                  |                          |        |        |      |   |        |        |  
|Computed expected tax expense                      |                                                                                  | $                        | 17,631 |        |      | $ | 13,884 |        |   | $ | 9,309 |      
|Increase (reduction) in income taxes resulting from: |                                                                                  |                          |        |        |      |   |        |        |   |   |       |      
|                                                     | Differences between U.S. financial reporting and foreign
    statutory reporting |                          |        | (631   | )    |   |        | (369   | ) |   |       | (264  | )
|                                                     | State tax expense                                                                |                          |        | 1,582  |      |   |        | 1,614  |   |   |       | 998   |  
|                                                     | Removal of foreign tax rate differential                                         |                          |        | (612   | )    |   |        | (481   | ) |   |       | (389  | )
|                                                     | Intangible assets                                                                |                          |        | 22     |      |   |        | 165    |   |   |       | 296   |  
|                                                     | Other                                                                            |                          |        | (125   | )    |   |        | 121    |   |   |       | (27   | )
|                                                     |                                                                                  |                          |        |        |      |   |        |        |  
|                                                     | Total                                                                            |                          | $      | 17,867 |      |   | $      | 14,934 |   |   | $     | 9,923 |  
|                                                     |                                                                                  |                          |        |        |      |   |        |        |  



|                          |                                            |              |   |        |      |  |        |        | 
|------------------------- | ------------------------------------------ | ------------ | - | ------ | ---- |  | ------ | ------ | 
|                          |                                            | December 31, |  
|                          |                                            |              |  
|                          |                                            | 2004         |   |        | 2003 | 
|                          |                                            |              |   |        |      | 
|Deferred tax assets:      |                                            |              |   |        |      |  |        |       
|                          | Net operating loss carryforwards           |              | $ | 2,495  |      |  | $      | 10,271 | 
|                          | Accrued expenses                           |              |   | 6,631  |      |  |        | 3,289  | 
|                          | Bad debts                                  |              |   | 762    |      |  |        | 2,745  | 
|                          | Basis difference of property and equipment |              |   |       |      |  |        | 1,250  | 
|                          | Tax credits                                |              |   |       |      |  |        | 764    | 
|                          | Capitalized costs and other                |              |   | 450    |      |  |        | 1,610  | 
|                          |                                            |              |   |        |      | 
|                          | Total deferred tax assets                  |              |   | 10,338 |      |  |        | 19,929 | 
|Less valuation allowance  |                                            |              |  |        |      |  | (4,948 | )     
|                          |                                            |              |   |        |      | 
|                          | Net deferred tax assets                    |              | $ | 10,338 |      |  | $      | 14,981 | 
|                          |                                            |              |   |        |      | 
|Deferred tax liabilities: |                                            |              |   |        |      |  |        |       
|                          | Basis difference of acquisitions           |              | $ | 23,814 |      |  | $      | 32,158 | 
|                          | Accelerated depreciation                   |              |   | 9,860  |      |  |        | 9,443  | 
|                          | Capitalized interest and other             |              |   | 1,117  |      |  |        | 612    | 
|                          | Prepaid expenses                           |              |   |       |      |  |        |       | 
|                          |                                            |              |   |        |      | 
|                          | Total deferred tax liabilities             |              | $ | 34,791 |      |  | $      | 42,213 | 
|                          |                                            |              |   |        |      | 



F-24



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|     |                          
|---- | -------------------------
|(13) | Equity-Based Compensation







F-25



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                               |  |              |      |   |      |  |      |      |  |  |      |  
|------------------------------ |  | ------------ | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                               |  | Years Ended  |     
|                               |  | December 31, |     
|                               |  |              |     
|                               |  | 2004         |      |   | 2003 |  |      | 2002 | 
|                               |  |              |      |   |      |  |      |      | 
|Expected life in years         |  |              | 3.0  |   |      |  | 3.0  |      |  |  | 5.0  |  
|Weighted average interest rate |  |              | 2.7  | % |      |  | 2.8  | %    |  |  | 4.0  | %
|Dividend yield                 |  |              | 0.0  | % |      |  | 0.0  | %    |  |  | 0.0  | %
|Volatility                     |  |              | 40.0 | % |      |  | 40.0 | %    |  |  | 40.0 | %



|                                        |           |           |           |          |          |   |       |       | 
|--------------------------------------- | --------- | --------- | --------- | -------- | -------- | - | ----- | ----- | 
|                                        |           |           |           | Weighted |         
|                                        |           |           |           | Average  |         
|                                        |           | Number of |           |          | Exercise |  
|                                        |           | Shares    |           |          | Price    |  
|                                        |           |           |           |          |          |  
|Balance at December 31, 2001            |           |           | 2,858,964 |          |          | $ | 13.62 |      
|                                        | Granted   |           |           | 888,233  |          |   |       | 24.84 | 
|                                        | Exercised |           |           | (372,121 | )        |   |       | 7.13  | 
|                                        | Forfeited |           |           | (131,486 | )        |   |       | 18.34 | 
|                                        | Expired   |           |           |         |          |   |       |      | 
|                                        |           |           |           |          |          |  
|Balance at December 31, 2002            |           |           | 3,243,590 |          |          | $ | 17.24 |      
|                                        |           |           |           |          |          |  
|                                        | Granted   |           |           | 389,000  |          |   |       | 19.72 | 
|                                        | Exercised |           |           | (215,657 | )        |   |       | 14.31 | 
|                                        | Forfeited |           |           | (99,247  | )        |   |       | 21.52 | 
|                                        | Expired   |           |           |         |          |   |       |      | 
|                                        |           |           |           |          |          |  
|Balance at December 31, 2003            |           |           | 3,317,686 |          |          | $ | 17.60 |      
|                                        |           |           |           |          |          |  
|                                        | Granted   |           |           | 119,500  |          |   |       | 37.20 | 
|                                        | Exercised |           |           | (541,843 | )        |   |       | 14.91 | 
|                                        | Forfeited |           |           | (118,039 | )        |   |       | 21.40 | 
|                                        | Expired   |           |           |         |          |   |       |      | 
|                                        |           |           |           |          |          |  
|Balance at December 31, 2004            |           |           | 2,777,304 |          |          | $ | 18.81 |      
|                                        |           |           |           |          |          |  
|Shares exercisable at December 31, 2002 |           |           | 1,199,493 |          |          | $ | 12.36 |      
|Shares exercisable at December 31, 2003 |           |           | 1,618,877 |          |          | $ | 14.64 |      
|Shares exercisable at December 31, 2004 |           |           | 1,772,633 |          |          | $ | 16.34 |      

F-26



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                         |  |             |           |          |          |          |         |              |  |  |      | 
|------------------------ |  | ----------- | --------- | -------- | -------- | -------- | ------- | ------------ |  |  | ---- | 
|                         |  |             |           |          |          | Weighted |        
|                         |  |             |           | Weighted |          |          | Average |             
|                         |  | Stock       |           |          | Average  |          |         | Remaining    | 
|                         |  | Options     |           |          | Exercise |          |         | Contractual  | 
|Range of Exercise Prices |  | Outstanding |           |          | Price    |          |         | Life (Years) | 
|                         |  |             |           |          |          |          |         |              | 
|$ 2.55-$13.50            |  |             | 927,698   |          |          | $        | 11.27   |              |  |  | 4.84 | 
|$14.00-$20.76            |  |             | 945,256   |          |          |          | 18.33   |              |  |  | 5.61 | 
|$21.00-$38.58            |  |             | 904,350   |          |          |          | 27.06   |              |  |  | 6.48 | 
|                         |  |             |           |          |          |          |         |              | 
|                         |  |             | 2,777,304 |          |          | $        | 18.81   |              |  |  | 5.64 | 
|                         |  |             |           |          |          |          |         |              | 



|                         |  |             |           |  |                  |   |       | 
|------------------------ |  | ----------- | --------- |  | ---------------- | - | ----- | 
|                         |  | Stock       |           |  |                 
|                         |  | Options     |           |  | Weighted Average |  
|Range of Exercise Prices |  | Exercisable |           |  | Exercise Price   |  
|                         |  |             |           |  |                  |  
|$ 2.55-$13.50            |  |             | 887,294   |  |                  | $ | 11.17 | 
|$14.00-$20.76            |  |             | 522,979   |  |                  |   | 18.63 | 
|$21.00-$38.58            |  |             | 362,360   |  |                  |   | 25.70 | 
|                         |  |             |           |  |                  |  
|                         |  |             | 1,772,633 |  |                  | $ | 16.34 | 
|                         |  |             |           |  |                  |  

Employee Stock Purchase Plan






|     |                   
|---- | ------------------
|(14) | Earnings Per Share



F-27



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                |                               |                          |        |        |        |  |        |        |        |  |        |        |        | 
|----------------------------------------------- | ----------------------------- | ------------------------ | ------ | ------ | ------ |  | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                                                |                               | Years Ended December 31, |       
|                                                |                               |                          |       
|                                                |                               | 2004                     |        |        | 2003   |  |        | 2002   |       
|                                                |                               |                          |        |        |        |  |        |        |       
|Net income attributable to common shareholders: |                               |                          |        |        |        |  |        |        |        |  |        |       
|                                                | Continuing operations         |                          | $      | 32,508 |        |  | $      | 24,717 |        |  | $      | 16,676 |       
|                                                | Discontinued operations       |                          |        | 53,667 |        |  |        | 5,159  |        |  |        | 2,924  |       
|                                                |                               |                          |        |        |        |  |        |        |       
|                                                |                               | Total                    |        | $      | 86,175 |  |        | $      | 29,876 |  |        | $      | 19,600 | 
|                                                |                               |                          |        |        |        |  |        |        |       
|Weighted average common shares outstanding      |                               |                          | 27,942 |        |        |  | 27,133 |        |        |  | 24,925 |       
|Effect of dilutive securities:                  |                               |                          |        |        |        |  |        |        |        |  |        |       
|                                                | Stock options                 |                          |        | 1,232  |        |  |        | 803    |        |  |        | 841    |       
|                                                | Warrants and restricted stock |                          |        | 124    |        |  |        | 308    |        |  |        | 290    |       
|                                                |                               |                          |        |        |        |  |        |        |       
|Shares used for diluted earnings per share      |                               |                          | 29,298 |        |        |  | 28,244 |        |        |  | 26,056 |       
|                                                |                               |                          |        |        |        |  |        |        |       
|Basic earnings per share:                       |                               |                          |        |        |        |  |        |        |        |  |        |       
|                                                | Continuing operations         |                          | $      | 1.16   |        |  | $      | 0.91   |        |  | $      | 0.67   |       
|                                                | Discontinued operations       |                          |        | 1.92   |        |  |        | 0.19   |        |  |        | 0.12   |       
|                                                |                               |                          |        |        |        |  |        |        |       
|                                                |                               | Total                    |        | $      | 3.08   |  |        | $      | 1.10   |  |        | $      | 0.79   | 
|                                                |                               |                          |        |        |        |  |        |        |       
|Diluted earnings per share:                     |                               |                          |        |        |        |  |        |        |        |  |        |       
|                                                | Continuing operations         |                          | $      | 1.11   |        |  | $      | 0.88   |        |  | $      | 0.64   |       
|                                                | Discontinued operations       |                          |        | 1.83   |        |  |        | 0.18   |        |  |        | 0.11   |       
|                                                |                               |                          |        |        |        |  |        |        |       
|                                                |                               | Total                    |        | $      | 2.94   |  |        | $      | 1.06   |  |        | $      | 0.75   | 
|                                                |                               |                          |        |        |        |  |        |        |       



|     |                    
|---- | -------------------
|(15) | Segment Disclosures

Disclosures About Segments of an Enterprise and Related
Information,


F-28



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                              |                |      |         |         |         |   |         |        |  |   |         |         | 
|----------------------------- | -------------- | ---- | ------- | ------- | ------- | - | ------- | ------ |  | - | ------- | ------- | 
|                              |                |      |         | United  |         |   |        
|2004 (In thousands)           |                | U.S. |         |         | Kingdom |   |         | Total  | 
|                              |                |      |         |         |         |   |         |        | 
|Net patient service revenue   |                | $    | 266,617 |         |         | $ | 84,454  |        |  | $ | 351,071 |        
|Other revenue                 |                |      | 38,459  |         |         |   |        |        |  |   | 38,459  |        
|                              |                |      |         |         |         |   |         |        | 
|                              | Total revenues |      | $       | 305,076 |         |   | $       | 84,454 |  |   | $       | 389,530 | 
|                              |                |      |         |         |         |   |         |        | 
|Depreciation and amortization |                | $    | 20,373  |         |         | $ | 6,836   |        |  | $ | 27,209  |        
|Operating income              |                |      | 92,818  |         |         |   | 14,515  |        |  |   | 107,333 |        
|Net interest expense          |                |      | (21,267 | )       |         |   | (3,862  | )      |  |   | (25,129 | )      
|Income tax expense            |                |      | (15,632 | )       |         |   | (2,235  | )      |  |   | (17,867 | )      
|Total assets                  |                |      | 721,830 |         |         |   | 200,474 |        |  |   | 922,304 |        
|Capital expenditures          |                |      | 40,978  |         |         |   | 10,582  |        |  |   | 51,560  |        

|                              |                |      |         |         |         |   |         |        |  |   |         |         | 
|----------------------------- | -------------- | ---- | ------- | ------- | ------- | - | ------- | ------ |  | - | ------- | ------- | 
|                              |                |      |         | United  |         |   |        
|2003 (In thousands)           |                | U.S. |         |         | Kingdom |   |         | Total  | 
|                              |                |      |         |         |         |   |         |        | 
|Net patient service revenue   |                | $    | 212,176 |         |         | $ | 60,776  |        |  | $ | 272,952 |        
|Other revenue                 |                |      | 37,612  |         |         |   |        |        |  |   | 37,612  |        
|                              |                |      |         |         |         |   |         |        | 
|                              | Total revenues |      | $       | 249,788 |         |   | $       | 60,776 |  |   | $       | 310,564 | 
|                              |                |      |         |         |         |   |         |        | 
|Depreciation and amortization |                | $    | 17,697  |         |         | $ | 5,003   |        |  | $ | 22,700  |        
|Operating income              |                |      | 76,786  |         |         |   | 9,939   |        |  |   | 86,725  |        
|Net interest expense          |                |      | (20,883 | )       |         |   | (2,965  | )      |  |   | (23,848 | )      
|Income tax expense            |                |      | (13,143 | )       |         |   | (1,791  | )      |  |   | (14,934 | )      
|Total assets                  |                |      | 468,326 |         |         |   | 163,265 |        |  |   | 631,591 |        
|Capital expenditures          |                |      | 11,226  |         |         |   | 11,634  |        |  |   | 22,860  |        

|                              |                |      |         |         |         |   |         |        |  |   |         |         | 
|----------------------------- | -------------- | ---- | ------- | ------- | ------- | - | ------- | ------ |  | - | ------- | ------- | 
|                              |                |      |         | United  |         |   |        
|2002 (In thousands)           |                | U.S. |         |         | Kingdom |   |         | Total  | 
|                              |                |      |         |         |         |   |         |        | 
|Net patient service revenue   |                | $    | 164,769 |         |         | $ | 47,434  |        |  | $ | 212,203 |        
|Other revenue                 |                |      | 31,611  |         |         |   |        |        |  |   | 31,611  |        
|                              |                |      |         |         |         |   |         |        | 
|                              | Total revenues |      | $       | 196,380 |         |   | $       | 47,434 |  |   | $       | 243,814 | 
|                              |                |      |         |         |         |   |         |        | 
|Depreciation and amortization |                | $    | 15,427  |         |         | $ | 3,696   |        |  | $ | 19,123  |        
|Operating income              |                |      | 55,222  |         |         |   | 8,730   |        |  |   | 63,952  |        
|Net interest expense          |                |      | (20,061 | )       |         |   | (2,472  | )      |  |   | (22,533 | )      
|Income tax expense            |                |      | (8,560  | )       |         |   | (1,363  | )      |  |   | (9,923  | )      
|Total assets                  |                |      | 438,824 |         |         |   | 121,330 |        |  |   | 560,154 |        
|Capital expenditures          |                |      | 11,663  |         |         |   | 13,330  |        |  |   | 24,993  |        

F-29



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|     |                              
|---- | -----------------------------
|(16) | Commitments and Contingencies



|    |                     
|--- | --------------------
|(a) | Financial Guarantees

Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others,




|    |                                             
|--- | --------------------------------------------
|(b) | Litigation and Professional Liability Claims





|    |               
|--- | --------------
|(c) | Self Insurance





|    |                       
|--- | ----------------------
|(d) | Employee Benefit Plans





F-30



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|    |                      
|--- | ---------------------
|(e) | Employment Agreements









|    |                            
|--- | ---------------------------
|(f) | Spanish Tax Indemnification

 Accounting for Contingencies 




|     |                  
|---- | -----------------
|(17) | Subsequent Events



F-31



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|     |                                             
|---- | --------------------------------------------
|(18) | Condensed Consolidating Financial Statements





F-32



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Condensed Consolidating Balance Sheets:


|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |          |   |   |         |         | 
|------------------------------------ | ------------------------------------------ | ---------- | ------- | ----------------- | --------- | - | ------------- | ----------- |  | ------------ | -------- | -------- | - | - | ------- | ------- | 
|                                     |                                            |            |         | Non-Participating |           |   | Consolidation |             |  | Consolidated |         
|As of December 31, 2004              |                                            | Guarantors |         |                   | Investees |   |               | Adjustments |  |              | Total    |         
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|ASSETS:                             
|Current assets:                      |                                            |            |         |                   |           |   |               |             |  |              |          |          |   |   |         |        
|Cash and cash equivalents            |                                            | $          | 83,905  |                   |           | $ | 9,562         |             |  | $            |         |          |   | $ | 93,467  |        
|Patient receivables, net             |                                            |            | 186     |                   |           |   | 43,405        |             |  |              |         |          |   |   | 43,591  |        
|Other receivables                    |                                            |            | 5,549   |                   |           |   | 22,028        |             |  |              | (7,284   | )        |   |   | 20,293  |        
|Inventories                          |                                            |            | 206     |                   |           |   | 6,982         |             |  |              |         |          |   |   | 7,188   |        
|Other                                |                                            |            | 12,620  |                   |           |   | 1,808         |             |  |              |         |          |   |   | 14,428  |        
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                     | Total current assets                       |            |         | 102,466           |           |   |               | 83,785      |  |              |          | (7,284   | ) |   |         | 178,967 | 
|Property and equipment, net          |                                            |            | 30,104  |                   |           |   | 235,785       |             |  |              |         |          |   |   | 265,889 |        
|Investments in affiliates            |                                            |            | 107,570 |                   |           |   | 608           |             |  |              | (64,776  | )        |   |   | 43,402  |        
|Intangible assets, net               |                                            |            | 304,764 |                   |           |   | 112,500       |             |  |              | (14,909  | )        |   |   | 402,355 |        
|Other                                |                                            |            | 96,321  |                   |           |   | 25,192        |             |  |              | (89,822  | )        |   |   | 31,691  |        
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                     | Total assets                               |            | $       | 641,225           |           |   | $             | 457,870     |  |              | $        | (176,791 | ) |   | $       | 922,304 | 
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                            |            |         |                   |           |   |               |             |  |              |          |          |   |   |         |        
|Accounts payable                     |                                            | $          | 1,741   |                   |           | $ | 16,307        |             |  | $            |         |          |   | $ | 18,048  |        
|Accrued expenses                     |                                            |            | 89,148  |                   |           |   | 35,076        |             |  |              | (65,799  | )        |   |   | 58,425  |        
|Current portion of long-term debt    |                                            |            | 1,302   |                   |           |   | 15,409        |             |  |              | (1,395   | )        |   |   | 15,316  |        
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                     | Total current liabilities                  |            |         | 92,191            |           |   |               | 66,792      |  |              |          | (67,194  | ) |   |         | 91,789  | 
|Long-term debt                       |                                            |            | 153,675 |                   |           |   | 145,264       |             |  |              | (25,770  | )        |   |   | 273,169 |        
|Other liabilities                    |                                            |            | 25,081  |                   |           |   | 9,389         |             |  |              |         |          |   |   | 34,470  |        
|Minority interests                   |                                            |            |        |                   |           |   | 11,444        |             |  |              | 36,823   |          |   |   | 48,267  |        
|Stockholders equity                 |                                            |            | 370,278 |                   |           |   | 224,981       |             |  |              | (120,650 | )        |   |   | 474,609 |        
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                     | Total liabilities and stockholders equity |            | $       | 641,225           |           |   | $             | 457,870     |  |              | $        | (176,791 | ) |   | $       | 922,304 | 
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         

F-33



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |          |   |   |         |         | 
|------------------------------------ | ------------------------------------------ | ---------- | ------- | ----------------- | --------- | - | ------------- | ----------- |  | ------------ | -------- | -------- | - | - | ------- | ------- | 
|                                     |                                            |            |         | Non-Participating |           |   | Consolidation |             |  | Consolidated |         
|As of December 31, 2003              |                                            | Guarantors |         |                   | Investees |   |               | Adjustments |  |              | Total    |         
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|ASSETS:                             
|Current assets:                      |                                            |            |         |                   |           |   |               |             |  |              |          |          |   |   |         |        
|Cash and cash equivalents            |                                            | $          | 15,147  |                   |           | $ | 13,372        |             |  | $            |         |          |   | $ | 28,519  |        
|Patient receivables, net             |                                            |            | 127     |                   |           |   | 56,464        |             |  |              |         |          |   |   | 56,591  |        
|Other receivables                    |                                            |            | 37,980  |                   |           |   | 21,183        |             |  |              | (38,995  | )        |   |   | 20,168  |        
|Inventories                          |                                            |            | 279     |                   |           |   | 8,745         |             |  |              |         |          |   |   | 9,024   |        
|Other                                |                                            |            | 11,781  |                   |           |   | 7,514         |             |  |              |         |          |   |   | 19,295  |        
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                     | Total current assets                       |            |         | 65,314            |           |   |               | 107,278     |  |              |          | (38,995  | ) |   |         | 133,597 | 
|Property and equipment, net          |                                            |            | 36,044  |                   |           |   | 312,587       |             |  |              | (568     | )        |   |   | 348,063 |        
|Investments in affiliates            |                                            |            | 175,504 |                   |           |   | 14,344        |             |  |              | (157,744 | )        |   |   | 32,104  |        
|Intangible assets, net               |                                            |            | 184,314 |                   |           |   | 158,378       |             |  |              | (16,047  | )        |   |   | 326,645 |        
|Other                                |                                            |            | 120,142 |                   |           |   | 11,521        |             |  |              | (101,563 | )        |   |   | 30,100  |        
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                     | Total assets                               |            | $       | 581,318           |           |   | $             | 604,108     |  |              | $        | (314,917 | ) |   | $       | 870,509 | 
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY
|Current liabilities:                 |                                            |            |         |                   |           |   |               |             |  |              |          |          |   |   |         |        
|Accounts payable                     |                                            | $          | 1,396   |                   |           | $ | 35,994        |             |  | $            | (937     | )        |   | $ | 36,453  |        
|Accrued expenses                     |                                            |            | 27,138  |                   |           |   | 24,500        |             |  |              | (1,245   | )        |   |   | 50,393  |        
|Current portion of long-term debt    |                                            |            | 1,763   |                   |           |   | 16,146        |             |  |              | (1,115   | )        |   |   | 16,794  |        
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                     | Total current liabilities                  |            |         | 30,297            |           |   |               | 76,640      |  |              |          | (3,297   | ) |   |         | 103,640 | 
|Long-term debt                       |                                            |            | 156,963 |                   |           |   | 264,020       |             |  |              | (133,033 | )        |   |   | 287,950 |        
|Other liabilities                    |                                            |            | 18,998  |                   |           |   | 23,308        |             |  |              |         |          |   |   | 42,306  |        
|Minority interests                   |                                            |            |        |                   |           |   | 11,403        |             |  |              | 34,555   |          |   |   | 45,958  |        
|Stockholders equity                 |                                            |            | 375,060 |                   |           |   | 228,737       |             |  |              | (213,142 | )        |   |   | 390,655 |        
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         
|                                     | Total liabilities and stockholders equity |            | $       | 581,318           |           |   | $             | 604,108     |  |              | $        | (314,917 | ) |   | $       | 870,509 | 
|                                     |                                            |            |         |                   |           |   |               |             |  |              |          |         

F-34



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Condensed Consolidating Statements of Income:


|                                                             |  |            |         |                   |           |   |               |             |  |              |         |   |  |   |         |  
|------------------------------------------------------------ |  | ---------- | ------- | ----------------- | --------- | - | ------------- | ----------- |  | ------------ | ------- | - |  | - | ------- | -
|                                                             |  |            |         | Non-Participating |           |   | Consolidation |             |  | Consolidated |        
|Year Ended December 31, 2004                                 |  | Guarantors |         |                   | Investees |   |               | Adjustments |  |              | Total   |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Revenues                                                     |  | $          | 73,101  |                   |           | $ | 336,243       |             |  | $            | (19,814 | ) |  | $ | 389,530 |  
|Equity in earnings of unconsolidated affiliates              |  |            | 18,626  |                   |           |   |              |             |  |              |        |   |  |   | 18,626  |  
|Operating expenses, excluding depreciation and amortization  |  |            | 57,755  |                   |           |   | 236,046       |             |  |              | (20,187 | ) |  |   | 273,614 |  
|Depreciation and amortization                                |  |            | 10,459  |                   |           |   | 16,750        |             |  |              |        |   |  |   | 27,209  |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Operating income                                             |  |            | 23,513  |                   |           |   | 83,447        |             |  |              | 373     |   |  |   | 107,333 |  
|Interest expense, net                                        |  |            | (14,843 | )                 |           |   | (10,286       | )           |  |              |        |   |  |   | (25,129 | )
|Other expense                                                |  |            | (767    | )                 |           |   | (311          | )           |  |              | (310    | ) |  |   | (1,388  | )
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Income before minority interests                             |  |            | 7,903   |                   |           |   | 72,850        |             |  |              | 63      |   |  |   | 80,816  |  
|Minority interests in income of consolidated subsidiaries    |  |            |        |                   |           |   | (12,805       | )           |  |              | (17,636 | ) |  |   | (30,441 | )
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Income (loss) from continuing operations before income taxes |  |            | 7,903   |                   |           |   | 60,045        |             |  |              | (17,573 | ) |  |   | 50,375  |  
|Income tax expense                                           |  |            | (15,636 | )                 |           |   | (2,231        | )           |  |              |        |   |  |   | (17,867 | )
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Income (loss) from continuing operations                     |  |            | (7,733  | )                 |           |   | 57,814        |             |  |              | (17,573 | ) |  |   | 32,508  |  
|Earnings from discontinued operations, net of tax            |  |            | 2,145   |                   |           |   | 51,522        |             |  |              |        |   |  |   | 53,667  |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Net income (loss)                                            |  | $          | (5,588  | )                 |           | $ | 109,336       |             |  | $            | (17,573 | ) |  | $ | 86,175  |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  

F-35



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                                             |  |            |         |                   |           |   |               |             |  |              |         |   |  |   |         |  
|------------------------------------------------------------ |  | ---------- | ------- | ----------------- | --------- | - | ------------- | ----------- |  | ------------ | ------- | - |  | - | ------- | -
|                                                             |  |            |         | Non-Participating |           |   | Consolidation |             |  | Consolidated |        
|Year Ended December 31, 2003                                 |  | Guarantors |         |                   | Investees |   |               | Adjustments |  |              | Total   |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Revenues                                                     |  | $          | 69,078  |                   |           | $ | 256,996       |             |  | $            | (15,510 | ) |  | $ | 310,564 |  
|Equity in earnings of unconsolidated affiliates              |  |            | 15,074  |                   |           |   |              |             |  |              |        |   |  |   | 15,074  |  
|Operating expenses, excluding depreciation and amortization  |  |            | 54,107  |                   |           |   | 177,925       |             |  |              | (15,819 | ) |  |   | 216,213 |  
|Depreciation and amortization                                |  |            | 10,369  |                   |           |   | 12,355        |             |  |              | (24     | ) |  |   | 22,700  |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Operating income                                             |  |            | 19,676  |                   |           |   | 66,716        |             |  |              | 333     |   |  |   | 86,725  |  
|Interest expense, net                                        |  |            | (16,285 | )                 |           |   | (7,563        | )           |  |              |        |   |  |   | (23,848 | )
|Other income (expense)                                       |  |            | 316     |                   |           |   | 726           |             |  |              | (309    | ) |  |   | 733     |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Income before minority interests                             |  |            | 3,707   |                   |           |   | 59,879        |             |  |              | 24      |   |  |   | 63,610  |  
|Minority interests in income of consolidated subsidiaries    |  |            |        |                   |           |   | (10,600       | )           |  |              | (13,359 | ) |  |   | (23,959 | )
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Income (loss) from continuing operations before income taxes |  |            | 3,707   |                   |           |   | 49,279        |             |  |              | (13,335 | ) |  |   | 39,651  |  
|Income tax expense                                           |  |            | (12,834 | )                 |           |   | (2,100        | )           |  |              |        |   |  |   | (14,934 | )
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Income (loss) from continuing operations                     |  |            | (9,127  | )                 |           |   | 47,179        |             |  |              | (13,335 | ) |  |   | 24,717  |  
|Earnings (loss) from discontinued operations, net of tax     |  |            | 2,983   |                   |           |   | 2,189         |             |  |              | (13     | ) |  |   | 5,159   |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Net income (loss)                                            |  | $          | (6,144  | )                 |           | $ | 49,368        |             |  | $            | (13,348 | ) |  | $ | 29,876  |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  

|                                                             |  |            |         |                   |           |   |               |             |  |              |         |   |  |   |         |  
|------------------------------------------------------------ |  | ---------- | ------- | ----------------- | --------- | - | ------------- | ----------- |  | ------------ | ------- | - |  | - | ------- | -
|                                                             |  |            |         | Non-Participating |           |   | Consolidation |             |  | Consolidated |        
|Year Ended December 31, 2002                                 |  | Guarantors |         |                   | Investees |   |               | Adjustments |  |              | Total   |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Revenues                                                     |  | $          | 60,478  |                   |           | $ | 194,440       |             |  | $            | (11,104 | ) |  | $ | 243,814 |  
|Equity in earnings of unconsolidated affiliates              |  |            | 9,454   |                   |           |   |              |             |  |              |        |   |  |   | 9,454   |  
|Operating expenses, excluding depreciation and amortization  |  |            | 45,352  |                   |           |   | 136,213       |             |  |              | (11,372 | ) |  |   | 170,193 |  
|Depreciation and amortization                                |  |            | 9,726   |                   |           |   | 9,421         |             |  |              | (24     | ) |  |   | 19,123  |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Operating income                                             |  |            | 14,854  |                   |           |   | 48,806        |             |  |              | 292     |   |  |   | 63,952  |  
|Interest expense, net                                        |  |            | (16,041 | )                 |           |   | (6,492        | )           |  |              |        |   |  |   | (22,533 | )
|Other income (expense)                                       |  |            | 292     |                   |           |   | (11           | )           |  |              | (292    | ) |  |   | (11     | )
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Income (loss) before minority interests                      |  |            | (895    | )                 |           |   | 42,303        |             |  |              |        |   |  |   | 41,408  |  
|Minority interests in income of consolidated subsidiaries    |  |            |        |                   |           |   | (7,111        | )           |  |              | (7,698  | ) |  |   | (14,809 | )
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Income (loss) from continuing operations before income taxes |  |            | (895    | )                 |           |   | 35,192        |             |  |              | (7,698  | ) |  |   | 26,599  |  
|Income tax expense                                           |  |            | (8,040  | )                 |           |   | (1,883        | )           |  |              |        |   |  |   | (9,923  | )
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Income (loss) from continuing operations                     |  |            | (8,935  | )                 |           |   | 33,309        |             |  |              | (7,698  | ) |  |   | 16,676  |  
|Earnings from discontinued operations, net of tax            |  |            | 2,601   |                   |           |   | 323           |             |  |              |        |   |  |   | 2,924   |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  
|Net income (loss)                                            |  | $          | (6,334  | )                 |           | $ | 33,632        |             |  | $            | (7,698  | ) |  | $ | 19,600  |  
|                                                             |  |            |         |                   |           |   |               |             |  |              |         |  

F-36



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Condensed Consolidating Statements of Cash Flows:


|                                                                                                        |                                                     |            |          |                   |           |   |               |             |   |              |         |         |   |   |          |         |  
|------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ---------- | -------- | ----------------- | --------- | - | ------------- | ----------- | - | ------------ | ------- | ------- | - | - | -------- | ------- | -
|                                                                                                        |                                                     |            |          | Non-Participating |           |   | Consolidation |             |   | Consolidated |        
|Year Ended December 31, 2004                                                                            |                                                     | Guarantors |          |                   | Investees |   |               | Adjustments |   |              | Total   |        
|                                                                                                        |                                                     |            |          |                   |           |   |               |             |   |              |         |        
|Cash flows from operating activities:                                                                   |                                                     |            |          |                   |           |   |               |             |   |              |         |         |   |   |          |        
|Income (loss) from continuing operations                                                                |                                                     | $          | (7,733   | )                 |           | $ | 57,814        |             |   | $            | (17,573 | )       |   | $ | 32,508   |        
|Changes in operating and intercompany assets and liabilities and
    noncash items included in net loss |                                                     |            | 221,018  |                   |           |   | (84,036       | )           |   |              | (77,950 | )       |   |   | 59,032   |        
|                                                                                                        |                                                     |            |          |                   |           |   |               |             |   |              |         |        
|Net cash provided by (used in) operating activities                                                     |                                                     |            | 213,285  |                   |           |   | (26,222       | )           |   |              | (95,523 | )       |   |   | 91,540   |        
|Cash flows from investing activities:                                                                   |                                                     |            |          |                   |           |   |               |             |   |              |         |         |   |   |          |        
|Purchases of property and equipment, net                                                                |                                                     |            | (6,922   | )                 |           |   | (16,947       | )           |   |              |        |         |   |   | (23,869  | )      
|Purchases of new businesses, net                                                                        |                                                     |            | (131,092 | )                 |           |   | (31           | )           |   |              |        |         |   |   | (131,123 | )      
|Proceeds from sale of Spanish operations                                                                |                                                     |            |         |                   |           |   | 207,203       |             |   |              | (66,071 | )       |   |   | 141,132  |        
|Other items                                                                                             |                                                     |            | (4,126   | )                 |           |   | (1,391        | )           |   |              |        |         |   |   | (5,517   | )      
|                                                                                                        |                                                     |            |          |                   |           |   |               |             |   |              |         |        
|                                                                                                        | Net cash provided by (used in) investing activities |            |          | (142,140          | )         |   |               | 188,834     |   |              |         | (66,071 | ) |   |          | (19,377 | )
|Cash flows from financing activities:                                                                   |                                                     |            |          |                   |           |   |               |             |   |              |         |         |   |   |          |        
|Long-term borrowings, net                                                                               |                                                     |            | (2,508   | )                 |           |   | (5,519        | )           |   |              |        |         |   |   | (8,027   | )      
|Proceeds from issuance of common stock                                                                  |                                                     |            | 9,598    |                   |           |   |              |             |   |              |        |         |   |   | 9,598    |        
|Other items                                                                                             |                                                     |            | (10,315  | )                 |           |   | (161,595      | )           |   |              | 161,594 |         |   |   | (10,316  | )      
|                                                                                                        |                                                     |            |          |                   |           |   |               |             |   |              |         |        
|                                                                                                        | Net cash provided by (used in) financing activities |            |          | (3,225            | )         |   |               | (167,114    | ) |              |         | 161,594 |   |   |          | (8,745  | )
|Net cash provided by discontinued operations                                                            |                                                     |            |         |                   |           |   | 1,272         |             |   |              |        |         |   |   | 1,272    |        
|Effect of exchange rate changes on cash                                                                 |                                                     |            |         |                   |           |   | 258           |             |   |              |        |         |   |   | 258      |        
|Net increase (decrease) in cash                                                                         |                                                     |            | 67,920   |                   |           |   | (2,972        | )           |   |              |        |         |   |   | 64,948   |        
|Cash at the beginning of the year                                                                       |                                                     |            | 15,147   |                   |           |   | 13,372        |             |   |              |        |         |   |   | 28,519   |        
|                                                                                                        |                                                     |            |          |                   |           |   |               |             |   |              |         |        
|Cash at the end of the year                                                                             |                                                     | $          | 83,067   |                   |           | $ | 10,400        |             |   | $            |        |         |   | $ | 93,467   |        
|                                                                                                        |                                                     |            |          |                   |           |   |               |             |   |              |         |        

F-37



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |         |   |   |         |         |  
|------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ---------- | ------- | ----------------- | --------- | - | ------------- | ----------- | - | ------------ | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                        |                                                     |            |         | Non-Participating |           |   | Consolidation |             |   | Consolidated |        
|Year Ended December 31, 2003                                                                            |                                                     | Guarantors |         |                   | Investees |   |               | Adjustments |   |              | Total   |        
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |        
|Cash flows from operating activities:                                                                   |                                                     |            |         |                   |           |   |               |             |   |              |         |         |   |   |         |        
|Income (loss) from continuing operations                                                                |                                                     | $          | (9,127  | )                 |           | $ | 47,192        |             |   | $            | (13,348 | )       |   | $ | 24,717  |        
|Changes in operating and intercompany assets and liabilities and
    noncash items included in net loss |                                                     |            | 53,716  |                   |           |   | (40,051       | )           |   |              | 35,993  |         |   |   | 49,658  |        
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |        
|Net cash provided by operating activities                                                               |                                                     |            | 44,589  |                   |           |   | 7,141         |             |   |              | 22,645  |         |   |   | 74,375  |        
|Cash flows from investing activities:                                                                   |                                                     |            |         |                   |           |   |               |             |   |              |         |         |   |   |         |        
|Purchases of property and equipment, net                                                                |                                                     |            | (4,586  | )                 |           |   | (17,688       | )           |   |              |        |         |   |   | (22,274 | )      
|Purchases of new businesses                                                                             |                                                     |            | (30,038 | )                 |           |   | (13,901       | )           |   |              |        |         |   |   | (43,939 | )      
|Other items                                                                                             |                                                     |            | (13,937 | )                 |           |   |              |             |   |              |        |         |   |   | (13,937 | )      
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |        
|                                                                                                        | Net cash used in investing activities               |            |         | (48,561           | )         |   |               | (31,589     | ) |              |         |        |   |   |         | (80,150 | )
|Cash flows from financing activities:                                                                   |                                                     |            |         |                   |           |   |               |             |   |              |         |         |   |   |         |        
|Long-term borrowings, net                                                                               |                                                     |            | (2,330  | )                 |           |   | 22,563        |             |   |              | (22,645 | )       |   |   | (2,412  | )      
|Proceeds from issuance of common stock                                                                  |                                                     |            | 4,307   |                   |           |   |              |             |   |              |        |         |   |   | 4,307   |        
|Other items                                                                                             |                                                     |            | (7,570  | )                 |           |   |              |             |   |              |        |         |   |   | (7,570  | )      
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |        
|                                                                                                        | Net cash provided by (used in) financing activities |            |         | (5,593            | )         |   |               | 22,563      |   |              |         | (22,645 | ) |   |         | (5,675  | )
|                                                                                                        | Net cash used in discontinued operations            |            |         |                  |           |   |               | (7,373      | ) |              |         |        |   |   |         | (7,373  | )
|Effect of exchange rate changes on cash                                                                 |                                                     |            |        |                   |           |   | (229          | )           |   |              |        |         |   |   | (229    | )      
|Net decrease in cash                                                                                    |                                                     |            | (9,565  | )                 |           |   | (9,487        | )           |   |              |        |         |   |   | (19,052 | )      
|Cash at the beginning of the year                                                                       |                                                     |            | 24,712  |                   |           |   | 22,859        |             |   |              |        |         |   |   | 47,571  |        
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |        
|Cash at the end of the year                                                                             |                                                     | $          | 15,147  |                   |           | $ | 13,372        |             |   | $            |        |         |   | $ | 28,519  |        
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |        

F-38



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |          |   |   |         |         |  
|------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ---------- | ------- | ----------------- | --------- | - | ------------- | ----------- | - | ------------ | ------- | -------- | - | - | ------- | ------- | -
|                                                                                                        |                                                     |            |         | Non-Participating |           |   | Consolidation |             |   | Consolidated |        
|Year Ended December 31, 2002                                                                            |                                                     | Guarantors |         |                   | Investees |   |               | Adjustments |   |              | Total   |         
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |         
|Cash flows from operating activities:                                                                   |                                                     |            |         |                   |           |   |               |             |   |              |         |          |   |   |         |        
|Income (loss) from continuing operations                                                                |                                                     | $          | (8,935  | )                 |           | $ | 33,310        |             |   | $            | (7,699  | )        |   | $ | 16,676  |        
|Changes in operating and intercompany assets and liabilities and
    noncash items included in net loss |                                                     |            | 25,980  |                   |           |   | (105,854      | )           |   |              | 113,067 |          |   |   | 33,193  |        
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |         
|Net cash provided by (used in) operating activities                                                     |                                                     |            | 17,045  |                   |           |   | (72,544       | )           |   |              | 105,368 |          |   |   | 49,869  |        
|Cash flows from investing activities:                                                                   |                                                     |            |         |                   |           |   |               |             |   |              |         |          |   |   |         |        
|Purchases of property and equipment, net                                                                |                                                     |            | (4,661  | )                 |           |   | (18,732       | )           |   |              |        |          |   |   | (23,393 | )      
|Purchases of new businesses                                                                             |                                                     |            | (54,809 | )                 |           |   |              |             |   |              |        |          |   |   | (54,809 | )      
|Other items                                                                                             |                                                     |            | (517    | )                 |           |   | 17            |             |   |              |        |          |   |   | (500    | )      
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |         
|                                                                                                        | Net cash used in investing activities               |            |         | (59,987           | )         |   |               | (18,715     | ) |              |         |         |   |   |         | (78,702 | )
|Cash flows from financing activities:                                                                   |                                                     |            |         |                   |           |   |               |             |   |              |         |          |   |   |         |        
|Long-term borrowings, net                                                                               |                                                     |            | (3,097  | )                 |           |   | (448          | )           |   |              |        |          |   |   | (3,545  | )      
|Proceeds from issuance of common stock                                                                  |                                                     |            | 53,665  |                   |           |   | 32,716        |             |   |              | (32,716 | )        |   |   | 53,665  |        
|Other items                                                                                             |                                                     |            | (3,309  | )                 |           |   | 72,110        |             |   |              | (72,110 | )        |   |   | (3,309  | )      
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |         
|                                                                                                        | Net cash provided by (used in) financing activities |            |         | 47,259            |           |   |               | 104,378     |   |              |         | (104,826 | ) |   |         | 46,811  |  
|Net cash used in discontinued operations                                                                |                                                     |            |        |                   |           |   | (4,029        | )           |   |              |        |          |   |   | (4,029  | )      
|Effect of exchange rate changes on cash                                                                 |                                                     |            |        |                   |           |   | 283           |             |   |              | (542    | )        |   |   | (259    | )      
|Net increase in cash                                                                                    |                                                     |            | 4,317   |                   |           |   | 9,373         |             |   |              |        |          |   |   | 13,690  |        
|Cash at the beginning of the year                                                                       |                                                     |            | 20,396  |                   |           |   | 13,485        |             |   |              |        |          |   |   | 33,881  |        
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |         
|Cash at the end of the year                                                                             |                                                     | $          | 24,713  |                   |           | $ | 22,858        |             |   | $            |        |          |   | $ | 47,571  |        
|                                                                                                        |                                                     |            |         |                   |           |   |               |             |   |              |         |         



|     |                              
|---- | -----------------------------
|(19) | New Accounting Pronouncements

Share-Based Payment, Accounting for Stock
Issued to Employees




F-39



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|     |                                              
|---- | ---------------------------------------------
|(20) | Selected Quarterly Financial Data (Unaudited)

|                                                      |  |                                          |        |  |                                          |   |        |       |  |   |        |  |  |       |        |  |        |   |        |       |  |   |        |  |  |   |        |  |  |   |         | 
|----------------------------------------------------- |  | ---------------------------------------- | ------ |  | ---------------------------------------- | - | ------ | ----- |  | - | ------ |  |  | ----- | ------ |  | ------ | - | ------ | ----- |  | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|                                                      |  | 2003 Quarters                            |        |  | 2004 Quarters                            |  
|                                                      |  |                                          |        |  |                                          |  
|                                                      |  | First                                    |        |  | Second                                   |   |        | Third |  |   | Fourth |  |  | First |        |  | Second |   |        | Third |  |   | Fourth | 
|                                                      |  |                                          |        |  |                                          |   |        |       |  |   |        |  |  |       |        |  |        |   |        |       |  |   |        | 
|                                                      |  | (In thousands, except per share amounts) |        |  | (In thousands, except per share amounts) |  
|Net revenues                                          |  | $                                        | 71,201 |  |                                          | $ | 77,195 |       |  | $ | 77,445 |  |  | $     | 84,723 |  |        | $ | 90,372 |       |  | $ | 93,966 |  |  | $ | 96,557 |  |  | $ | 108,635 | 
|Income from continuing operations                     |  |                                          | 5,545  |  |                                          |   | 6,525  |       |  |   | 6,361  |  |  |       | 6,286  |  |        |   | 7,848  |       |  |   | 8,574  |  |  |   | 6,735  |  |  |   | 9,351   | 
|Basic earnings per share from continuing operations   |  | $                                        | 0.21   |  |                                          | $ | 0.24   |       |  | $ | 0.23   |  |  | $     | 0.23   |  |        | $ | 0.28   |       |  | $ | 0.31   |  |  | $ | 0.24   |  |  | $ | 0.33    | 
|Diluted earnings per share from continuing operations |  | $                                        | 0.20   |  |                                          | $ | 0.23   |       |  | $ | 0.22   |  |  | $     | 0.22   |  |        | $ | 0.27   |       |  | $ | 0.29   |  |  | $ | 0.23   |  |  | $ | 0.32    | 



F-40



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|    |                              
|--- | -----------------------------
|(2) | Financial Statement Schedules



S-1



---



##### Table of Contents



UNITED SURGICAL PARTNERS INTERNATIONAL, INC.


AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


|                                                |  |  |     | 
|----------------------------------------------- |  |  | --- | 
|Schedule II  Valuation and Qualifying Accounts |  |  | S-1 | 

SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS


FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004


Allowance for Doubtful Accounts


|        |  |                |       |                       |           |   |       |                |  |  |               |  |  |                |        |   |               |   |        |   |  |   |       | 
|------- |  | -------------- | ----- | --------------------- | --------- | - | ----- | -------------- |  |  | ------------- |  |  | -------------- | ------ | - | ------------- | - | ------ | - |  | - | ----- | 
|        |  |                |       | Additions Charged to: |           |   |       |                |  |  |              
|        |  | Balance at     |       |                       |           |   |       |                |  |  |               | 
|        |  | Beginning of   |       |                       | Costs and |   |       |                |  |  |               |  |  | Balance at     |       
|        |  | Period         |       |                       | Expenses  |   |       | Other Accounts |  |  | Deductions(2) |  |  | Other Items(3) |        |   | End of Period |  
|        |  |                |       |                       |           |   |       |                |  |  |               |  |  |                |        |   |               |  
|        |  | (In thousands) |      
|2002(1) |  | $              | 4,726 |                       |           | $ | 6,330 |                |  |  |              |  |  | $              | (7,404 | ) |               | $ | 3,502  |   |  | $ | 7,154 | 
|2003(1) |  |                | 7,154 |                       |           |   | 7,772 |                |  |  |              |  |  |                | (7,222 | ) |               |   | 1,134  |   |  |   | 8,838 | 
|2004    |  |                | 8,838 | (1)                   |           |   | 8,159 |                |  |  |              |  |  |                | (7,592 | ) |               |   | (2,128 | ) |  |   | 7,277 | 






|    |                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes Spanish operations, which the Company disposed of
    during 2004.                                                                                               
|   
|(2) | Accounts written off.                                                                                                                                                     
|   
|(3) | Primarily beginning balances for purchased businesses. For 2004,
    these amounts are offset by $3.8 million of deductions due
    to the sale of the Spanish operations.



S-2



---



##### Table of Contents





|    |          
|--- | ---------
|(3) | Exhibits:

|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 2  | .1#         |  | Agreement and Plan of Merger, dated as of December 6, 2000,
    among the Company, OPC Acquisition Corporation and OrthoLink
    Physicians Corporation (previously filed as Exhibit 2.1 to
    the Companys Registration Statement on Form S-1
    (No. 333-55442) and incorporated herein by reference)                                                                                                             
|       
|        | 2  | .2#         |  | Agreement for the Sale and Purchase of Shares and Loan Notes in
    Aspen Healthcare Holdings Limited, dated April  6,
    2000, between Electra Private Equity Partners 1995 and others
    and Global Healthcare Partners Limited (previously filed as
    Exhibit 2.2 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1 (No. 333-55442) and
    incorporated herein by reference)          
|       
|        | 2  | .3#         |  | Agreement and Plan of Reorganization, dated as of March 26,
    2002, by and among the Company, USP Acquisition Corporation,
    Surgicoe Corporation and each of the shareholders of Surgicoe
    named in the agreement (previously filed as Exhibit 2.1 to
    the Companys Current Report on Form 8-K filed with
    the Commission on April 16, 2002 and incorporated herein by
    reference)                   
|       
|        | 2  | .4#         |  | Sale and Purchase Agreement, dated July 29, 2004, between
    USPE Holdings Limited, United Surgical Partners International,
    Inc., Jenebe International S.a.r.l., Delphirica Investments
    S.a.r.l., Alosem Sociedad Civil, Tesalia Sociedad Civil and
    Capital Stock S.C.R., S.A. (previously filed as
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K and incorporated herein by reference)
|       
|        | 3  | .1#         |  | Second Amended and Restated Certificate of Incorporation
    (previously filed as Exhibit 3.1 to Amendment No. 4 to
    the Companys Registration Statement on Form S-1 (No.
    333-55442) and incorporated herein by reference)                                                                                                                                                                                     
|       
|        | 3  | .2#         |  | Amended and Restated Bylaws (previously filed as
    Exhibit 3.2 to the Companys Registration Statement on
    Form S-3 (No. 333-99309) and incorporated herein by
    reference)                                                                                                                                                                                                                                     
|        | 4  | .1#         |  | Form of Common Stock Certificate (previously filed as
    Exhibit 4.1 to Amendment No. 4 to the Companys
    Registration Statement on Form S-1 (No. 333-55442) and
    incorporated herein by reference)                                                                                                                                                                                                             
|       
|        | 4  | .2#         |  | Indenture, dated as of December 19, 2001, among United
    Surgical Partners Holdings, Inc., the guarantor parties thereto
    and U.S. Trust Company of Texas, N.A. (previously filed as
    Exhibit 4.2 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2001 and
    incorporated herein by reference)                                                                               
|       
|        | 4  | .3#         |  | Global Security, dated as of December 19, 2001, governing
    United Surgical Partners Holdings, Inc.s outstanding
    10% Senior Subordinated Notes due 2011 (previously filed as
    Exhibit 4.3 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2001 and
    incorporated herein by reference)                                                                                     
|       
|        | 4  | .4#         |  | Rights Agreement between the Company and First Union National
    Bank as Rights Agent dated June 13, 2001 (previously filed
    as Exhibit 4.1 to the Companys Form 8-A filed
    with the Commission on June 13, 2001 and incorporated
    herein by reference)                                                                                                                                                     
|       
|        | 10 | .1#         |  | Credit Agreement, dated April 6, 2000, by and among Global
    Healthcare Partners Limited and the Governor and Company of the
    Bank of Scotland (previously filed as Exhibit 10.3 to the
    Companys Registration Statement on Form S-1
    (No. 333-55442) and incorporated herein by reference)                                                                                                                
|       
|        | 10 | .2#         |  | Contribution and Purchase Agreement, dated as of May 11,
    1999, by and among USP North Texas, Inc., Baylor Health
    Services, Texas Health Ventures Group LLC and THVG/ Health First
    L.L.C. (previously filed as Exhibit 10.11 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1 (No. 333-55442) and incorporated herein by
    reference)                                       
|       
|        | 10 | .3#         |  | Common Stock Purchase Warrant, dated June 1, 1999
    (previously filed as Exhibit 10.15 to the Companys
    Registration Statement on Form S-1 (No. 333-55442) and
    incorporated herein by reference)                                                                                                                                                                                                             

II-1



---



##### Table of Contents



|        |    |       |             |                                                                                                                                                                                                                                                                     
|------- | -- | ----- | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |       |            
|Number  |    |       | Description
|        |    |       |            
|       
|        | 10 | .4#   |             | Stock Purchase Warrant, dated March 27, 2000 (previously
    filed as Exhibit 10.16 to the Companys Registration
    Statement on Form S-1 (No. 333-55442) and incorporated
    herein by reference)                                                               
|       
|        | 10 | .5#   |             | Employment Agreement, dated as of November 15, 2002, by and
    between the Company and Donald E. Steen                                                                                                                                                             
|       
|        | 10 | .5.1# |             | Amendment of Employment Agreement, dated as of February 18,
    2004                                                                                                                                                                                                
|       
|        | 10 | .6#   |             | Employment Agreement, dated as of November 15, 2002, by and
    between the Company and William H. Wilcox                                                                                                                                                           
|       
|        | 10 | .7#   |             | Stock Option and Restricted Stock Purchase Plan (previously
    filed as Exhibit 10.19 to the Companys Registration
    Statement on Form S-1 (No. 333-55442) and incorporated
    herein by reference)                                                            
|       
|        | 10 | .8#   |             | 2001 Equity-Based Compensation Plan (previously filed as
    Exhibit 10.20 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1 (No. 333-55442) and
    incorporated herein by reference)                                                     
|       
|        | 10 | .9#   |             | Employee Stock Purchase Plan (previously filed as
    Exhibit 10.21 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1 (No. 333-55442) and
    incorporated herein by reference)                                                            
|       
|        | 10 | .10#  |             | Deferred Compensation Plan, effective as of January 1, 2005
    (previously filed as Exhibit 99.1 to the Companys
    Current Report on Form 8-K dated January 6, 2005 and
    incorporated herein by reference)                                                   
|       
|        | 10 | .11#  |             | Supplemental Retirement Plan, effective as of February 12,
    2002 (previously filed as Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the
    quarterly period ended June 30, 2002 and incorporated
    herein by reference)                 
|       
|        | 10 | .12#  |             | Form of Indemnification Agreement between the Company and its
    directors and officers (previously filed as Exhibit 10.22
    to Amendment No. 1 to the Companys Registration
    Statement on Form S-1 (No. 333-55442) and incorporated
    herein by reference)
|       
|        | 10 | .13#  |             | Employment Agreement, dated as of August 1, 2003, by and
    between the Company and Jonathan R. Bond                                                                                                                                                               
|       
|        | 10 | .14#  |             | Employment Agreement, dated as of August 1, 2003, by and
    between the Company and Brett P. Brodnax                                                                                                                                                               
|       
|        | 10 | .15#  |             | Employment Agreement, dated as of August 1, 2003, by and
    between the Company and Mark C. Garvin                                                                                                                                                                 
|       
|        | 10 | .16#  |             | Employment Agreement, dated as of August 1, 2003, by and
    between the Company and Mark A. Kopser                                                                                                                                                                 
|       
|        | 21 | .1*   |             | List of the Companys subsidiaries.                                                                                                                                                                                                                                 
|       
|        | 23 | .1*   |             | Consent of KPMG LLP                                                                                                                                                                                                                                                 
|       
|        | 24 | .1*   |             | Power of Attorney  Donald E. Steen                                                                                                                                                                                                                                 
|       
|        | 24 | .2*   |             | Power of Attorney  Joel T. Allison                                                                                                                                                                                                                                 
|       
|        | 24 | .3*   |             | Power of Attorney  James C. Crews                                                                                                                                                                                                                                  
|       
|        | 24 | .4*   |             | Power of Attorney  John C. Garrett, M.D.                                                                                                                                                                                                                           
|       
|        | 24 | .5*   |             | Power of Attorney  Thomas L. Mills                                                                                                                                                                                                                                 
|       
|        | 24 | .6*   |             | Power of Attorney  Boone Powell, Jr.                                                                                                                                                                                                                               
|       
|        | 24 | .7*   |             | Power of Attorney  Paul B. Queally                                                                                                                                                                                                                                 
|       
|        | 24 | .8*   |             | Power of Attorney  Jerry P. Widman                                                                                                                                                                                                                                 

II-2



---



##### Table of Contents



|        |    |     |             |                                                                                                       
|------- | -- | --- | ----------- | ------------------------------------------------------------------------------------------------------
|Exhibit |    |     |            
|Number  |    |     | Description
|        |    |     |            
|       
|        | 24 | .9* |             | Power of Attorney  David P. Zarin, M.D.                                                              
|       
|       
|        | 31 | .1* |             | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002
|       
|        | 31 | .2* |             | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002
|       
|        | 32 | .1* |             | Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002
|       
|        | 32 | .2* |             | Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002






|  |                  
|- | -----------------
|* | Filed herewith.  
| 
|# | Previously filed.

(b) Reports on Form 8-K








II-3



---



##### Table of Contents






SIGNATURES






| |                                                 
| | ------------------------------------------------
| | United Surgical Partners
    International, Inc.



| |     |                      
| | --- | ---------------------
| | By: | /s/ William H. Wilcox

| |                                       
| | --------------------------------------
| |                                       
| | William H. Wilcox                     
| | President, Chief Executive Officer and
| | Director                              





|                                           |  |                                                                                                        |  |                |  | 
|------------------------------------------ |  | ------------------------------------------------------------------------------------------------------ |  | -------------- |  | 
|Signature                                  |  | Title                                                                                                  |  | Date          
|                                           |  |                                                                                                        |  |               
|                                          
|*Donald
    E. Steen                       |  | Chairman of the Board                                                                                  |  | March 10, 2005
|                                          
|/s/ William H. WilcoxWilliam
    H. Wilcox |  | President, Chief Executive Officer and Director (Principal
    Executive Officer)                      |  | March 10, 2005
|                                          
|/s/ Mark A. KopserMark
    A. Kopser       |  | Senior Vice President and Chief Financial Officer (Principal
    Financial Officer)                    |  | March 10, 2005
|                                          
|/s/ John J. WellikJohn
    J. Wellik       |  | Senior Vice President, Accounting and Administration, and
    Secretary (Principal Accounting Officer) |  | March 10, 2005
|                                          
|*Joel
    T. Allison                       |  | Director                                                                                               |  | March 10, 2005
|                                          
|*James
    C. Crews                        |  | Director                                                                                               |  | March 10, 2005
|                                          
|*John
    C. Garrett, M.D.                 |  | Director                                                                                               |  | March 10, 2005
|                                          
|*Thomas
    L. Mills                       |  | Director                                                                                               |  | March 10, 2005
|                                          
|*Boone
    Powell, Jr.                     |  | Director                                                                                               |  | March 10, 2005
|                                          
|*Paul
    B. Queally                       |  | Director                                                                                               |  | March 10, 2005

II-4



---



##### Table of Contents



|                          |  |          |  |                |  | 
|------------------------- |  | -------- |  | -------------- |  | 
|Signature                 |  | Title    |  | Date          
|                          |  |          |  |               
|                         
|*Jerry
    P. Widman      |  | Director |  | March 10, 2005
|                         
|*David
    P. Zarin, M.D. |  | Director |  | March 10, 2005





| |     |                   
| | --- | ------------------
| | By: | /s/ John J. Wellik

| |                 
| | ----------------
| |                 
| | John J. Wellik  
| | Attorney-in-fact



II-5



---



##### Table of Contents






INDEX TO EXHIBITS


|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 2  | .1#         |  | Agreement and Plan of Merger, dated as of December 6, 2000,
    among the Company, OPC Acquisition Corporation and OrthoLink
    Physicians Corporation (previously filed as Exhibit 2.1 to
    the Companys Registration Statement on Form S-1 (No.
    333-55442) and incorporated herein by reference)                                                                                                             
|       
|        | 2  | .2#         |  | Agreement for the Sale and Purchase of Shares and Loan Notes in
    Aspen Healthcare Holdings Limited, dated April 6, 2000,
    between Electra Private Equity Partners 1995 and others and
    Global Healthcare Partners Limited (previously filed as
    Exhibit 2.2 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1 (No. 333-55442) and
    incorporated herein by reference)           
|       
|        | 2  | .3#         |  | Agreement and Plan of Reorganization, dated as of March 26,
    2002, by and among the Company, USP Acquisition Corporation,
    Surgicoe Corporation and each of the shareholders of Surgicoe
    named in the agreement (previously filed as Exhibit 2.1 to
    the Companys Current Report on Form 8-K filed with the
    Commission on April 16, 2002 and incorporated herein by
    reference)                   
|       
|        | 2  | .4#         |  | Sale and Purchase Agreement, dated July 29, 2004, between
    USPE Holdings Limited, United Surgical Partners International,
    Inc., Jenebe International S.a.r.l., Delphirica Investments
    S.a.r.l., Alosem Sociedad Civil, Tesalia Sociedad Civil and
    Capital Stock S.C.R., S.A. (previously filed as
    Exhibit 10.1 to the Companys Current Report on Form
    8-K and incorporated herein by reference)
|       
|        | 3  | .1#         |  | Second Amended and Restated Certificate of Incorporation
    (previously filed as Exhibit 3.1 to Amendment No. 4 to
    the Companys Registration Statement on Form S-1 (No.
    333-55442) and incorporated herein by reference)                                                                                                                                                                                     
|       
|        | 3  | .2#         |  | Amended and Restated Bylaws (previously filed as
    Exhibit 3.2 to the Companys Registration Statement on
    Form S-3 (No. 333-99309) and incorporated herein by
    reference)                                                                                                                                                                                                                                     
|       
|        | 4  | .1#         |  | Form of Common Stock Certificate (previously filed as
    Exhibit 4.1 to Amendment No. 4 to the Companys
    Registration Statement on Form S-1 (No. 333-55442) and
    incorporated herein by reference)                                                                                                                                                                                                             
|       
|        | 4  | .2#         |  | Indenture, dated as of December 19, 2001, among United
    Surgical Partners Holdings, Inc., the guarantor parties thereto
    and U.S. Trust Company of Texas, N.A. (previously filed as
    Exhibit 4.2 to the Companys Annual Report on Form
    10-K for the year ended December 31, 2001 and incorporated
    herein by reference)                                                                               
|       
|        | 4  | .3#         |  | Global Security, dated as of December 19, 2001, governing
    United Surgical Partners Holdings, Inc.s outstanding
    10% Senior Subordinated Notes due 2011 (previously filed as
    Exhibit 4.3 to the Companys Annual Report on Form
    10-K for the year ended December 31, 2001 and incorporated
    herein by reference)                                                                                     
|       
|        | 4  | .4#         |  | Rights Agreement between the Company and First Union National
    Bank as Rights Agent dated June 13, 2001 (previously filed
    as Exhibit 4.1 to the Companys Form 8-A filed with
    the Commission on June 13, 2001 and incorporated herein by
    reference)                                                                                                                                                     
|       
|        | 10 | .1#         |  | Credit Agreement, dated April 6, 2000, by and among Global
    Healthcare Partners Limited and the Governor and Company of the
    Bank of Scotland (previously filed as Exhibit 10.3 to the
    Companys Registration Statement on Form S-1 (No.
    333-55442) and incorporated herein by reference)                                                                                                                
|       
|        | 10 | .2#         |  | Contribution and Purchase Agreement, dated as of May 11,
    1999, by and among USP North Texas, Inc., Baylor Health
    Services, Texas Health Ventures Group LLC and THVG/Health First
    L.L.C. (previously filed as Exhibit 10.11 to Amendment
    No. 2 to the Companys Registration Statement on
    Form S-1 (No. 333-55442) and incorporated herein by
    reference)                                        
|       
|        | 10 | .3#         |  | Common Stock Purchase Warrant, dated June 1, 1999
    (previously filed as Exhibit 10.15 to the Companys
    Registration Statement on Form S-1 (No. 333- 55442) and
    incorporated herein by reference)                                                                                                                                                                                                            
|       
|        | 10 | .4#         |  | Stock Purchase Warrant, dated March 27, 2000 (previously
    filed as Exhibit 10.16 to the Companys Registration
    Statement on Form S-1 (No. 333-55442) and incorporated
    herein by reference)                                                                                                                                                                                                                  
|       
|        | 10 | .5#         |  | Employment Agreement, dated as of November 15, 2002, by and
    between the Company and Donald E. Steen                                                                                                                                                                                                                                                                                                                
|        | 10 | .5.1#       |  | Amendment of Employment Agreement, dated as of February 18,
    2004                                                                                                                                                                                                                                                                                                                                                   

II-6



---



##### Table of Contents



|        |    |      |             |                                                                                                                                                                                                                                                                     
|------- | -- | ---- | ----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |      |            
|Number  |    |      | Description
|        |    |      |            
|       
|        | 10 | .6#  |             | Employment Agreement, dated as of November 15, 2002, by and
    between the Company and William H. Wilcox                                                                                                                                                           
|       
|        | 10 | .7#  |             | Stock Option and Restricted Stock Purchase Plan (previously
    filed as Exhibit 10.19 to the Companys Registration
    Statement on Form S-1 (No. 333-55442) and incorporated
    herein by reference)                                                            
|       
|        | 10 | .8#  |             | 2001 Equity-Based Compensation Plan (previously filed as
    Exhibit 10.20 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1 (No. 333-55442) and
    incorporated herein by reference)                                                     
|       
|        | 10 | .9#  |             | Employee Stock Purchase Plan (previously filed as
    Exhibit 10.21 to Amendment No. 1 to the Companys
    Registration Statement on Form S-1 (No. 333-55442) and
    incorporated herein by reference)                                                            
|       
|        | 10 | .10# |             | Deferred Compensation Plan, effective as of January 1, 2005
    (previously filed as Exhibit 99.1 to the Companys
    Current Report on Form 8-K dated January 6, 2005 and
    incorporated herein by reference)                                                   
|       
|        | 10 | .11# |             | Supplemental Retirement Plan, effective as of February 12,
    2002 (previously filed as Exhibit 10.1 to the
    Companys Quarterly Report on Form 10-Q for the quarterly
    period ended June 30, 2002 and incorporated herein by
    reference)                 
|       
|        | 10 | .12# |             | Form of Indemnification Agreement between the Company and its
    directors and officers (previously filed as Exhibit 10.22
    to Amendment No. 1 to the Companys Registration
    Statement on Form S-1 (No. 333-55442) and incorporated
    herein by reference)
|       
|        | 10 | .13# |             | Employment Agreement, dated as of August 1, 2003, by and
    between the Company and Jonathan R. Bond                                                                                                                                                               
|       
|        | 10 | .14# |             | Employment Agreement, dated as of August 1, 2003, by and
    between the Company and Brett P. Brodnax                                                                                                                                                               
|       
|        | 10 | .15# |             | Employment Agreement, dated as of August 1, 2003, by and
    between the Company and Mark C. Garvin                                                                                                                                                                 
|       
|        | 10 | .16# |             | Employment Agreement, dated as of August 1, 2003, by and
    between the Company and Mark A. Kopser                                                                                                                                                                 
|       
|        | 21 | .1*  |             | List of the Companys subsidiaries.                                                                                                                                                                                                                                 
|       
|        | 23 | .1*  |             | Consent of KPMG LLP                                                                                                                                                                                                                                                 
|       
|        | 24 | .1*  |             | Power of Attorney  Donald E. Steen                                                                                                                                                                                                                                 
|       
|        | 24 | .2*  |             | Power of Attorney  Joel T. Allison                                                                                                                                                                                                                                 
|       
|        | 24 | .3*  |             | Power of Attorney  James C. Crews                                                                                                                                                                                                                                  
|       
|        | 24 | .4*  |             | Power of Attorney  John C. Garrett, M.D.                                                                                                                                                                                                                           
|       
|        | 24 | .5*  |             | Power of Attorney  Thomas L. Mills                                                                                                                                                                                                                                 
|       
|        | 24 | .6*  |             | Power of Attorney  Boone Powell, Jr.                                                                                                                                                                                                                               
|       
|        | 24 | .7*  |             | Power of Attorney  Paul B. Queally                                                                                                                                                                                                                                 
|       
|        | 24 | .8*  |             | Power of Attorney  Jerry P. Widman                                                                                                                                                                                                                                 
|       
|        | 24 | .9*  |             | Power of Attorney  David P. Zarin, M.D.                                                                                                                                                                                                                            
|       
|        | 31 | .1*  |             | Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                              
|       
|        | 31 | .2*  |             | Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                              
|       
|        | 32 | .1*  |             | Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                              
|       
|        | 32 | .2*  |             | Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                              






|  |                  
|- | -----------------
|* | Filed herewith.  
| 
|# | Previously filed.

II-7