Exhibit 10.7
                               THIRD AMENDMENT TO
                                CREDIT AGREEMENT

         THIS  THIRD  AMENDMENT  TO  CREDIT  AGREEMENT  is made and  dated as of
December 14, 1999 (the "Third  Amendment")  among SIERRA HEALTH  SERVICES,  INC.
(the "Company"),  the Banks party to the Credit Agreement referred to below, and
BANK OF AMERICA,  N.A., a national banking association,  as Administrative Agent
(the "Agent"),  and amends that certain Credit Agreement dated as of October 30,
1998, as amended by that certain First  Amendment  dated as of November 23, 1998
and that certain Second  Amendment to Credit  Agreement  dated as of January 15,
1999 (as further amended or modified from time to time, the "Credit Agreement").

                                                     RECITALS

         WHEREAS,  the  Company has  requested  the Agent and the Banks to amend
certain  provisions  of the  Credit  Agreement,  and the Agent and the Banks are
willing to do so, on the terms and conditions specified herein;

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:

     1.  Terms.  All terms used  herein  shall have the same  meanings as in the
Credit Agreement unless otherwise defined herein.

         2.       Amendment.  The Credit Agreement is hereby amended as follows:
                  ---------

                  2.1      Amendments to Section 1.01.
                           --------------------------

                  (a) The  definition  of the term  "Applicable  Commitment  Fee
Rate" in Section 1.01 of the Credit  Agreement  is hereby  amended by adding the
following clause to the end of the first sentence  following the chart set forth
therein:  ", and from  December 10, 1999 through the delivery of the  Compliance
Certificate  for the fiscal  quarter  ending  September 30, 2000, the Applicable
Commitment Fee Rate shall be Level 6."

                  (b) The definition of the term "Applicable  Margin" in Section
1.01 of the Credit Agreement is hereby amended by adding the following clause to
the end of the first sentence following the chart set forth therein: ", and from
December  10, 1999 until the  delivery  of the  Compliance  Certificate  for the
fiscal quarter ending  September 30, 2000, the Applicable  Margin shall be Level
6."

                  (c) The  definition  of the term "Sierra  Adjusted  EBITDA" in
Section 1.01 of the Credit  Agreement is hereby  amended and restated to read in
its entirety as follows:

                                                         1


<PAGE>



                           "Sierra Adjusted  EBITDA" means, for any period,  the
                  net income of the  Company and its  consolidated  Subsidiaries
                  (other than,  for the fiscal  quarters  ending on December 31,
                  1998,  March 31, 1999,  June 30, 1999 and  September 30, 1999,
                  HMO  Texas  and  PMAT)  plus,   to  the  extent   deducted  in
                  determining net income,  total book taxes,  Interest  Expense,
                  depreciation  and  amortization  expenses  and  solely for the
                  final  fiscal  quarter  of 1998  and the  first  three  fiscal
                  quarters of 1999, the Specified  Charges set forth on Schedule
                  1.01 and, in addition to the foregoing, all of the charges set
                  forth in clauses (ii), (iii) and (iv) of the definition of the
                  term  "Specified  Charges",  minus any non-cash  extraordinary
                  gains.  Sierra  Adjusted  EBITDA shall be calculated as of the
                  last day of the most  recently  ended  fiscal  quarter  of the
                  Company  for  the  period  of  four  consecutive  full  fiscal
                  quarters  then  ended  (the  "Measurement  Period"),  and such
                  calculation   shall  include,   on  a  pro  forma  basis,  the
                  Consolidated   Adjusted  EBITDA  of  any  Person  (other  than
                  Kaiser-Texas)   acquired  by  the   Company   pursuant  to  an
                  Acquisition   during  the  Measurement   Period,  as  if  such
                  Acquisition  had occurred on the first day of the  Measurement
                  Period.

                  (d) The definition of the term "Specified  Charges" in Section
1.01 of the Credit  Agreement is hereby  amended and restated in its entirety to
read as follows:

                           "Specified Charges" means (i) those charges set forth
                  in Schedule 1.01 hereof,  (ii) up to  $13,200,000  of one-time
                  charges  prior to taxes  incurred  by the Company in the first
                  fiscal  quarter of 1999,  (iii) up to  $47,000,000 of one-time
                  charges (after adjustment for $2,000,000 of gains on a sale of
                  pharmacy assets) incurred by the Company in the fourth quarter
                  of 1999 ; provided,  however that not more than $21,000,000 of
                  such  charges  shall be  attributable  to  premium  deficiency
                  reserves  for Kaiser  Texas and such  charges for Kaiser Texas
                  shall be applied only to the operations of Kaiser Texas in the
                  year 2000 and to corporate-  related support services provided
                  by the Company for Kaiser Texas in the year 2000; and provided
                  further that not more than  $10,000,000  of such charges shall
                  be  used  to  strengthen  CII's  reserves,   and  (iv)  up  to
                  $8,000,000  of charges  incurred by the Company in  connection
                  with a bid for the TRICARE  Region 6 MCS  contract  during the
                  period from March 1, 2000  through  June 30,  2001;  provided,
                  however,  that not more than  $500,000 of such  charges may be
                  incurred  during the period from March 1, 2000  through  March
                  31, 2000 and that not more than $2,500,000 of such charges may
                  be incurred during any fiscal quarter thereafter.

     2.2 Amendment to Section 7.02. Subsection (b) of Section 7.02 of the Credit
Agreement is hereby amended by adding the following immediately prior to the end
thereof:

                  "plus,  for each  reporting  period ending in the year 2000, a
                  certificate from a Responsible Officer of the Company, showing
                  the  application  of any  charges  taken  by the  Company  for
                  premium  deficiency  reserves  for Kaiser  Texas  during  such
                  period;"

                                                         2


<PAGE>



                  2.3 Amendment to Section 8.01.  Subsection (h) of Section 8.01
of the Credit Agreement is hereby amended by deleting the figure  "$100,000,000"
and replacing it with the figure "$50,000,000".

     2.4 Amendment to Section 8.08. Subsection (e) of Section 8.08 of the Credit
Agreement is hereby amended and restated to read in its entirety as follows:

     "(e) Guarantees by the Company of (i) leases by its  Subsidiaries of office
and medical space and (ii) the  obligations  of Health Plan of Nevada,  Inc. and
Sierra Health and Life Insurance  Company,  Inc. under their insurance  policies
issued to clients of J&H Marsh & McLennan, Inc.; and"

                  2.5  Amendments  to Section  8.10.  Clauses  (ii) and (iii) of
Section 8.10 of the Credit  Agreement are hereby amended and restated to read in
their entirety as follows:

                           (ii) in the case of purchases or  redemptions  of the
                  Convertible  Debt only,  such  purchases  or  redemptions  are
                  funded  by CII from  internally  generated  funds and not from
                  funds advanced by the Company or any Subsidiary of the Company
                  and  the  aggregate  amount  expended  by  CII  in  connection
                  therewith does not exceed  $10,000,000  during the period from
                  December  10,  1999  through   December  31,  2000,  it  being
                  understood  that no other  Restricted  Payments  shall be made
                  from December 10, 1999 through December 31, 2000;

                           (iii)  commencing  January 1, 2001,  if the Company's
                  Leverage Ratio as of December 31, 2000 or as of the end of any
                  fiscal  quarter  thereafter  shall be less  than 2.75 to 1.00,
                  after giving effect to such Restricted Payment,  the aggregate
                  amount of all such Restricted Payments made in any fiscal year
                  does not exceed  $15,000,000,  it being  understood that until
                  the Company's  Leverage Ratio shall be less than 2.75 to 1.00,
                  except for the purchases or redemptions permitted under clause
                  (ii) above, no Restricted Payments shall be made; and

                           (iv) after giving effect to such Restricted  Payment,
                  the  aggregate  amount of all  Restricted  Payments  after the
                  Closing Date does not exceed $50,000,000;

                  2.6      Amendment to Section 8.14.
                           -------------------------

     (a)  Subsection (a) of  Section  8.14 of the  Credit  Agreement  is hereby
amended and restated to read in its entirety as follows:

                           (a)  permit  its  Leverage  Ratio  at the  end of any
                  fiscal  quarter  set forth below to exceed the ratio set forth
                  below opposite such date:

                                                         3


<PAGE>


<TABLE>

<CAPTION>

                          For the Quarter Ended: Ratio

<S>                                 <C> <C>                            <C>     <C>
                           December 31, 1998                           3.75 to 1.00
                           March 31, 1999                              3.50 to 1.00
                           June 30, 1999                               3.25 to 1.00
                           December 31, 1999                           3.25 to 1.00
                           March 31, 2000                              3.25 to 1.00
                           June 30, 2000                               3.00 to 1.00
                           September 30, 2000                          3.00 to 1.00
                           December 31, 2000                           2.75 to 1.00
                           Thereafter                                  2.50 to 1.00
</TABLE>

     (b)  Subsection  (c) of  Section  8.14 of the  Credit  Agreement  is hereby
amended and restated to read in its entirety as follows:

                           (c) permit its Fixed  Charges  Coverage  Ratio at the
                  end of any fiscal  quarter set forth below to be less than the
                  ratio set forth below opposite such date:

<TABLE>

<CAPTION>

                           For the Quarter Ended:                       Ratio

<S>                                 <C> <C>                            <C>     <C>
                           December 31, 1998                           1.50 to 1.00
                           March 31, 1999                              1.50 to 1.00
                           June 30, 1999                               1.50 to 1.00
                           December 31, 1999                           1.50 to 1.00
                           March 31, 2000                              1.75 to 1.00
                           June 30, 2000                               2.00 to 1.00
                           September 30, 2000                          2.00 to 1.00
                           December 31, 2000                           2.00 to 1.00
                           March 31, 2001                              2.25 to 1.00
                           June 30, 2001                               2.50 to 1.00
                           September 30, 2001                          2.75 to 1.00
                           December 31, 2001                           2.75 to 1.00
                           Thereafter                                  3.00 to 1.00
</TABLE>

     3.  Representations and Warranties.  The Company represents and warrants to
the Agent and the Banks that,  on and as of the date  hereof,  and after  giving
effect to this Third Amendment:

                  3.1 Authorization.  The execution, delivery and performance by
the Company of this Third  Amendment  has been duly  authorized by all necessary
corporate action,  and this Third Amendment has been duly executed and delivered
by the Company.

     3.2 Binding Obligation.  This Third Amendment  constitutes the legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms,  except as  enforceability  may be limited by applicable  bankruptcy,
insolvency, or similar laws



                                                         4


<PAGE>



     affecting the  enforcement of creditors'  rights  generally or by equitable
principles relating to enforceability.

                  3.3 No Legal Obstacle to Amendment.  The  execution,  delivery
and performance of this Third Amendment will not (a) contravene the Organization
Documents  of the  Company;  (b)  constitute  a  breach  or  default  under  any
contractual  restriction  or  violate  or  contravene  any  law or  governmental
regulation  or court decree or order  binding on or affecting  the Company which
individually or in the aggregate does or could  reasonably be expected to have a
Material Adverse Effect; or (c) result in, or require the creation or imposition
of, any Lien on any of the Company's properties. No approval or authorization of
any  governmental  authority  is required to permit the  execution,  delivery or
performance  by the  Company  of  this  Third  Amendment,  or  the  transactions
contemplated hereby.

                  3.4  Incorporation  of Certain  Representations.  After giving
effect to the terms of this Third Amendment,  the representations and warranties
of the  Company  set forth in Article VI of the  Credit  Agreement  are true and
correct in all respects on and as of the date hereof as though made on and as of
the date hereof,  except to the extent such representations  relate solely to an
earlier specified date.

     3.5 Default.  No Default or Event of Default under the Credit Agreement has
occurred and is continuing.

     4.  Conditions,  Effectiveness.  The  effectiveness of this Third Amendment
shall be subject to the  compliance  by the Company with its  agreements  herein
contained,  and to the delivery of the  following to Agent in form and substance
satisfactory to Agent on or before December 20, 1999:

     4.1 Execution of Third Amendment.  The Company,  the Agent and the Majority
Banks shall have signed a copy hereof and the same shall have been  delivered to
the Agent.

     4.2  Pledge   Agreement   Affirmations.   The  Agent  shall  have  received
affirmation  letters in respect of the Pledge  Agreement,  substantially  in the
form of Exhibit A, from each Pledgor Subsidiary.

                  4.3  Amendment  Fees.  Payment to the Agent,  for the pro rata
benefit of each Bank  approving  this Third  Amendment  on or before  5:00 p.m.,
Pacific  time,  on December 20, 1999,  of an amendment fee in an amount equal to
 .325% of the  aggregate  amount of the  Commitments  held by the Banks that have
executed and  delivered  this Third  Amendment by such time;  and payment of all
other fees and  expenses of the Agent in  connection  with this Third  Amendment
(including,  without  limitation,  the fees and  expenses  of the counsel to the
Agent).

     4.4 Other Evidence.  Such other evidence with respect to the Company or any
other person as the Agent or any Bank may  reasonably  request to establish  the
consummation of



                                                         5


<PAGE>



the  transactions  contemplated  hereby,  the taking of all corporate  action in
connection with this Third Amendment and the Credit Agreement and the compliance
with the conditions set forth herein.

Upon satisfaction of the foregoing  conditions,  the effectiveness of this Third
Amendment shall be retroactive to September 30, 1999.

         5.       Miscellaneous.
                  -------------

                  5.1  Effectiveness  of the  Credit  Agreement  and the  Notes.
Except as hereby  expressly  amended,  the Credit  Agreement and the Notes shall
each remain in full force and effect,  and are hereby  ratified and confirmed in
all respects on and as of the date hereof.

                  5.2 Waivers.  This Third  Amendment  is limited  solely to the
matters  expressly  set forth  herein and is  specific in time and in intent and
does not constitute, nor should it be construed as, a waiver or amendment of any
other term or condition, right, power or privilege under the Credit Agreement or
under any  agreement,  contract,  indenture,  document or  instrument  mentioned
therein;  nor does it preclude or prejudice any rights of the Agent or the Banks
thereunder, or any exercise thereof or the exercise of any other right, power or
privilege,  nor shall it require the  Majority  Banks to agree to an  amendment,
waiver or consent for a similar  transaction or on a future occasion,  nor shall
any future waiver of any right, power, privilege or default hereunder,  or under
any  agreement,  contract,  indenture,  document or instrument  mentioned in the
Credit Agreement,  constitute a waiver of any other right,  power,  privilege or
default of the same or of any other term or provision.

                  5.3 Counterparts.  This Third Amendment may be executed in any
number of  counterparts,  and all of such  counterparts  taken together shall be
deemed to constitute one and the same instrument.

     5.4 Governing Law. This Third  Amendment shall be governed by and construed
in accordance with the laws of the State of California.



                                                         6


<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be duly executed and delivered as of the date first written above.

                                      SIERRA HEALTH SERVICES, INC.


                                      By:
                                      Name:
                                      Title:


                                      BANK OF AMERICA, N.A., as Administrative
                                      Agent

                                      By:
                                      Name:
                                      Title:


                                      BANK OF AMERICA, N.A., as a Bank


                                      By:
                                      Name:
                                      Title:


                                      FIRST UNION NATIONAL BANK, as a Bank


                                      By:
                                      Name:
                                      Title:


                                      CREDIT LYONNAIS NEW YORK BRANCH, as
                                      a Bank

                                      By:
                                      Name:
                                      Title:




                                                         7


<PAGE>



                                      BANK ONE, NA, as a Bank


                                      By:
                                      Name:
                                      Title:


                                      WELLS FARGO BANK, N.A., as a Bank


                                      By:
                                      Name:
                                      Title:


                                      UNION BANK OF CALIFORNIA, N.A., as a Bank


                                      By:
                                      Name:
                                      Title:


                                      DEUTSCHE BANK AG, NEW YORK AND/OR
                                      CAYMAN ISLANDS BRANCHES, as a Bank


                                      By:
                                      Name:
                                      Title:


                                      By:
                                      Name:
                                      Title:







<PAGE>



                                                        EXHIBIT A to
                                                        Third Amendment
                                                        to Credit Agreement

                                   December 14, 1999




Sierra Health Services, Inc.
Sierra Medical Management, Inc.
Prime Holdings, Inc.
c/o Sierra Health Services, Inc.
2724 North Tenaya Way
Las Vegas, Nevada 89128

         Re:      Sierra Health Services, Inc.

Gentlemen:

         Please refer to (1) the Credit Agreement, dated as of October 30, 1998,
as amended by that  certain  First  Amendment  dated as of November 23, 1998 and
that  certain  Second  Amendment  dated as of  January  15,  1999  (the  "Credit
Agreement"),  by and among Sierra Health  Services,  Inc., as the Borrower,  the
commercial lending institutions party thereto (collectively,  the "Lenders") and
Bank of America,  N.A., as agent (herein, in such capacity,  called the "Agent")
and (2) the Pledge Agreements dated October 30, 1998 from each of the addressees
in favor of the Lenders and the Agent (the "Pledge Agreements").  Pursuant to an
amendment  dated of even  date  herewith,  a copy of which is  attached  hereto,
certain terms of the Credit  Agreement were amended.  We hereby request that you
(i) acknowledge and reaffirm all of your obligations and undertakings under your
Pledge  Agreement and (ii)  acknowledge and agree that your Pledge  Agreement is
and shall remain in full force and effect in accordance with the terms thereof.

         Please indicate your agreement to the foregoing by signing in the space
provided below, and returning the executed copy to the undersigned.

                                         BANK OF AMERICA, N.A., as Agent


                                         By:______________________________
                                         Title:






<PAGE>



Acknowledged and Agreed to
as of the date hereof

SIERRA HEALTH SERVICES, INC.
SIERRA MEDICAL MANAGEMENT, INC.


By:____________________________
   Its:___________________________


PRIME HOLDINGS, INC.


By:____________________________
   Its:___________________________






<PAGE>