##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to  .
 COMMISSION FILE NUMBER: 333-117362
 IASIS HEALTHCARE LLC
  DELAWARE
    
    20-1150104(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)DOVER CENTRE 
117 SEABOARD LANE, BUILDING EFRANKLIN, TENNESSEE
    
    37067(Address of principal executive offices)
    
    (Zip Code)
 (615) 844-2747
 Not Applicable
 þ o
 YES
o NO o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer  þ
    
    Smaller reporting company o
 YES o NO þ




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets (Unaudited)  June 30, 2010 and September 30, 2009
    
    
    1Condensed Consolidated Statements of Operations (Unaudited)  Quarters and Nine Months
Ended June 30, 2010 and 2009
    
    
    2Condensed Consolidated Statements of Cash Flows (Unaudited)  Nine Months Ended June 30,
2010 and 2009
    
    
    3Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 4. Controls and Procedures
    
    
    41PART II. OTHER INFORMATION
    
    
    42Item 6. Exhibits
    
    
    42Exhibit 31.1Exhibit 31.2
   i




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##### Table of Contents



PART I.
 FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In Thousands)
 June 30,
    
    
    September 30,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    130,160
    
    
    $
    206,528Accounts receivable, less allowance for doubtful accounts of
$120,280 and $126,132 at June 30, 2010 and September 30, 2009,
respectively
    
    
    221,327
    
    
    
    230,198Inventories
    
    
    53,476
    
    
    
    50,492Deferred income taxes
    
    
    11,130
    
    
    
    39,038Prepaid expenses and other current assets
    
    
    121,379
    
    
    
    49,453Total current assets
    
    
    537,472
    
    
    
    575,709Property and equipment, net
    
    
    980,797
    
    
    
    997,353Goodwill
    
    
    717,920
    
    
    
    717,920Other intangible assets, net
    
    
    27,750
    
    
    
    30,000Other assets, net
    
    
    35,522
    
    
    
    36,222Total assets
    
    $
    2,299,461
    
    
    $
    2,357,204LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    71,821
    
    
    $
    68,552Salaries and benefits payable
    
    
    45,369
    
    
    
    42,548Accrued interest payable
    
    
    2,128
    
    
    
    12,511Medical claims payable
    
    
    110,556
    
    
    
    113,519Other accrued expenses and other current liabilities
    
    
    85,389
    
    
    
    65,701Current portion of long-term debt and capital lease obligations
    
    
    6,705
    
    
    
    8,366Total current liabilities
    
    
    321,968
    
    
    
    311,197Long-term debt and capital lease obligations
    
    
    1,046,480
    
    
    
    1,051,471Deferred income taxes
    
    
    103,352
    
    
    
    106,425Other long-term liabilities
    
    
    56,212
    
    
    
    54,222Non-controlling interests with redemption rights
    
    
    72,527
    
    
    
    72,527Equity:Members equity
    
    
    688,576
    
    
    
    750,932Non-controlling interests
    
    
    10,346
    
    
    
    10,430Total equity
    
    
    698,922
    
    
    
    761,362Total liabilities and equity
    
    $
    2,299,461
    
    
    $
    2,357,204
   1




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In Thousands)
 Quarter Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net revenue:Acute care revenue
    
    $
    438,211
    
    
    $
    417,880
    
    
    $
    1,300,445
    
    
    $
    1,237,506Premium revenue
    
    
    199,777
    
    
    
    183,738
    
    
    
    591,022
    
    
    
    504,410Total net revenue
    
    
    637,988
    
    
    
    601,618
    
    
    
    1,891,467
    
    
    
    1,741,916Costs and expenses:Salaries and benefits (includes
stock compensation of $118, $141,
$2,367 and $420, respectively)
    
    
    170,035
    
    
    
    164,879
    
    
    
    514,688
    
    
    
    495,387Supplies
    
    
    66,333
    
    
    
    63,950
    
    
    
    200,167
    
    
    
    187,529Medical claims
    
    
    172,031
    
    
    
    158,919
    
    
    
    510,692
    
    
    
    422,519Other operating expenses
    
    
    93,579
    
    
    
    79,708
    
    
    
    266,854
    
    
    
    237,011Provision for bad debts
    
    
    49,416
    
    
    
    45,594
    
    
    
    142,901
    
    
    
    137,892Rentals and leases
    
    
    10,067
    
    
    
    10,008
    
    
    
    30,487
    
    
    
    29,221Interest expense, net
    
    
    16,711
    
    
    
    16,334
    
    
    
    50,065
    
    
    
    51,129Depreciation and amortization
    
    
    24,007
    
    
    
    24,217
    
    
    
    71,909
    
    
    
    73,509Management fees
    
    
    1,250
    
    
    
    1,250
    
    
    
    3,750
    
    
    
    3,750Hurricane-related property damage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    938Total costs and expenses
    
    
    603,429
    
    
    
    564,859
    
    
    
    1,791,513
    
    
    
    1,638,885Earnings from continuing operations
before gain (loss) on disposal of
assets and income taxes
    
    
    34,559
    
    
    
    36,759
    
    
    
    99,954
    
    
    
    103,031Gain (loss) on disposal of assets, net
    
    
    (149
    )
    
    
    184
    
    
    
    (206
    )
    
    
    1,497Earnings from continuing operations
before income taxes
    
    
    34,410
    
    
    
    36,943
    
    
    
    99,748
    
    
    
    104,528Income tax expense
    
    
    12,683
    
    
    
    13,715
    
    
    
    36,544
    
    
    
    38,975Net earnings from continuing operations
    
    
    21,727
    
    
    
    23,228
    
    
    
    63,204
    
    
    
    65,553Earnings (loss) from discontinued
operations, net of income taxes
    
    
    (384
    )
    
    
    167
    
    
    
    (363
    )
    
    
    (333
    )Net earnings
    
    
    21,343
    
    
    
    23,395
    
    
    
    62,841
    
    
    
    65,220Net earnings attributable to
non-controlling interests
    
    
    (2,002
    )
    
    
    (2,666
    )
    
    
    (6,063
    )
    
    
    (7,240
    )Net earnings attributable to IASIS
Healthcare LLC
    
    $
    19,341
    
    
    $
    20,729
    
    
    $
    56,778
    
    
    $
    57,980
   2




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In Thousands)
 Nine Months EndedJune 30,2010
    
    
    2009Cash flows from operating activitiesNet earnings
    
    $
    62,841
    
    
    $
    65,220Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization
    
    
    71,909
    
    
    
    73,509Amortization of loan costs
    
    
    2,356
    
    
    
    2,257Stock compensation costs
    
    
    2,367
    
    
    
    420Deferred income taxes
    
    
    23,839
    
    
    
    11,792Income tax benefit from stock compensation
    
    
    (1,770
    )
    
    
    Income tax benefit from parent company interest
    
    
    4,989
    
    
    
    Loss (gain) on disposal of assets, net
    
    
    206
    
    
    
    (1,497
    )Loss from discontinued operations
    
    
    363
    
    
    
    333Hurricane-related property damage
    
    
    
    
    
    
    938Changes in operating assets and liabilities, net of the effect of acquisitions and
dispositions:Accounts receivable, net
    
    
    9,154
    
    
    
    (18,854
    )Inventories, prepaid expenses and other current assets
    
    
    (74,909
    )
    
    
    (2,491
    )Accounts payable, other accrued expenses and other accrued liabilities
    
    
    13,137
    
    
    
    39,231Net cash provided by operating activities  continuing operations
    
    
    114,482
    
    
    
    170,858Net cash provided by (used in) operating activities  discontinued operations
    
    
    (567
    )
    
    
    1,548Net cash provided by operating activities
    
    
    113,915
    
    
    
    172,406Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    (53,465
    )
    
    
    (66,608
    )Cash paid for acquisition, net
    
    
    
    
    
    
    (1,521
    )Proceeds from sale of assets
    
    
    50
    
    
    
    5,240Change in other assets, net
    
    
    1,856
    
    
    
    1,832Net cash used in investing activities  continuing operations
    
    
    (51,559
    )
    
    
    (61,057
    )Net cash provided by investing activities  discontinued operations
    
    
    
    
    
    
    10Net cash used in investing activities
    
    
    (51,559
    )
    
    
    (61,047
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (6,772
    )
    
    
    (53,672
    )Distribution to parent company in connection with the repurchase of equity, net
    
    
    (124,962
    )
    
    
    Distributions to non-controlling interests
    
    
    (6,921
    )
    
    
    (4,721
    )Costs paid
for the repurchase of partnership interests, net
    
    
    (69
    )
    
    
    (1,379
    )Net cash used in financing activities
    
    
    (138,724
    )
    
    
    (59,772
    )Change in cash and cash equivalents
    
    
    (76,368
    )
    
    
    51,587Cash and cash equivalents at beginning of period
    
    
    206,528
    
    
    
    80,738Cash and cash equivalents at end of period
    
    $
    130,160
    
    
    $
    132,325Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    58,145
    
    
    $
    60,519Cash paid for income taxes, net
    
    $
    7,513
    
    
    $
    3,834
   3




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1. ORGANIZATION AND BASIS OF PRESENTATION
   
    
    Salt Lake City, Utah;
    
    Phoenix, Arizona;
    
    Tampa-St. Petersburg, Florida;
    
    three cities in Texas, including San Antonio;
    
    Las Vegas, Nevada; and
    
    West Monroe, Louisiana.
    Principles of Consolidation
   4




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Use of Estimates
  Reclassifications
  General and Administrative
  Adoption of New Accounting Standards
    5




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Non-controllingInterests with
    
    
    
    
    
    
    Non-Redemption
    
    
    Members
    
    
    controllingRights
    
    
    Equity
    
    
    Interests
    
    
    Total EquityBalance at September 30, 2009 (as previously
reported)
    
    $
    
    
    
    $
    780,847
    
    
    $
    
    
    
    $
    780,847Adjustment to non-controlling interests
from adoption of FASB authoritative
guidance
    
    
    72,527
    
    
    
    (29,915
    )
    
    
    10,430
    
    
    
    (19,485
    )Balance at September 30, 2009 (as adjusted)
    
    
    72,527
    
    
    
    750,932
    
    
    
    10,430
    
    
    
    761,362Net earnings
    
    
    5,968
    
    
    
    56,778
    
    
    
    95
    
    
    
    56,873Distributions to, and repurchases of,
non-controlling interests
    
    
    (6,811
    )
    
    
    
    
    
    
    (179
    )
    
    
    (179
    )Stock compensation
    
    
    
    
    
    
    2,367
    
    
    
    
    
    
    
    2,367Other comprehensive loss
    
    
    
    
    
    
    (685
    )
    
    
    
    
    
    
    (685
    )Distribution to parent company in
connection with the repurchase of equity,
net
    
    
    
    
    
    
    (124,962
    )
    
    
    
    
    
    
    (124,962
    )Contribution from parent related to tax
benefit from Holdings Senior PIK Loans
interest
    
    
    
    
    
    
    4,989
    
    
    
    
    
    
    
    4,989Adjustment to redemption value of
non-controlling interests with redemption
rights
    
    
    843
    
    
    
    (843
    )
    
    
    
    
    
    
    (843
    )Balance at June 30, 2010
    
    $
    72,527
    
    
    $
    688,576
    
    
    $
    10,346
    
    
    $
    698,922
   Subsequent Events Consideration
   6




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 2. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
  June 30,
    
    
    September 30,2010
    
    
    2009Senior secured credit facilities
    
    $
    571,733
    
    
    $
    576,150Senior subordinated notes
    
    
    475,000
    
    
    
    475,000Capital leases and other obligations
    
    
    6,452
    
    
    
    8,6871,053,185
    
    
    
    1,059,837Less current maturities
    
    
    6,705
    
    
    
    8,366$
    1,046,480
    
    
    $
    1,051,471
 Senior Secured Credit Facilities
       7




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 8 3 / 4 % Senior Subordinated Notes
 3 4 3 4 3 4 3 4 3 4 3 4
 Holdings Senior Paid-in-Kind Loans
  3. INTEREST RATE SWAPS
  Total NotionalDate Range
    
    Amounts(in thousands)Expiring on February 28, 2011
    
    $
    225,000Expiring on February 29, 2012
    
    $
    200,000
    8




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   4. COMPREHENSIVE INCOME
  Quarter Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net earnings
    
    $
    21,343
    
    
    $
    23,395
    
    
    $
    62,841
    
    
    $
    65,220Change in fair value of interest rate swaps
    
    
    56
    
    
    
    2,852
    
    
    
    (1,092
    )
    
    
    (2,217
    )Change in
income tax expense (benefit)
    
    
    (21
    )
    
    
    (1,068
    )
    
    
    407
    
    
    
    829Comprehensive income
    
    $
    21,378
    
    
    $
    25,179
    
    
    $
    62,156
    
    
    $
    63,832
  June 30,
    
    
    September 30,2010
    
    
    2009Fair value of interest rate swaps
    
    $
    (5,753
    )
    
    $
    (4,660
    )Income tax benefit
    
    
    2,142
    
    
    
    1,734Accumulated other comprehensive loss
    
    $
    (3,611
    )
    
    $
    (2,926
    )
 5. DISTRIBUTION TO PARENT
   9




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 6. COMMITMENTS AND CONTINGENCIES
 Net Revenue
  Professional, General and Workers Compensation Liability Risks
   Health Choice
    10




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Acquisitions
  Other
 qui tam qui tam qui tam qui tam
  11




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 7. SEGMENT AND GEOGRAPHIC INFORMATION
  For the Quarter Ended June 30, 2010Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    438,211
    
    
    $
    
    
    
    $
    
    
    
    $
    438,211Premium revenue
    
    
    
    
    
    
    199,777
    
    
    
    
    
    
    
    199,777Revenue between segments
    
    
    2,319
    
    
    
    
    
    
    
    (2,319
    )
    
    
    Net revenue
    
    
    440,530
    
    
    
    199,777
    
    
    
    (2,319
    )
    
    
    637,988Salaries and benefits (excludes
stock compensation)
    
    
    165,051
    
    
    
    4,866
    
    
    
    
    
    
    
    169,917Supplies
    
    
    66,293
    
    
    
    40
    
    
    
    
    
    
    
    66,333Medical claims
    
    
    
    
    
    
    174,350
    
    
    
    (2,319
    )
    
    
    172,031Other operating expenses
    
    
    87,451
    
    
    
    6,128
    
    
    
    
    
    
    
    93,579Provision for bad debts
    
    
    49,416
    
    
    
    
    
    
    
    
    
    
    
    49,416Rentals and leases
    
    
    9,650
    
    
    
    417
    
    
    
    
    
    
    
    10,067Adjusted EBITDA(1)
    
    
    62,669
    
    
    
    13,976
    
    
    
    
    
    
    
    76,645Interest expense, net
    
    
    16,711
    
    
    
    
    
    
    
    
    
    
    
    16,711Depreciation and amortization
    
    
    23,115
    
    
    
    892
    
    
    
    
    
    
    
    24,007Stock compensation
    
    
    118
    
    
    
    
    
    
    
    
    
    
    
    118Management fees
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Earnings from continuing
operations before loss on
disposal of assets and income
taxes
    
    
    21,475
    
    
    
    13,084
    
    
    
    
    
    
    
    34,559Loss on disposal of assets, net
    
    
    (149
    )
    
    
    
    
    
    
    
    
    
    
    (149
    )Earnings from continuing
operations before income
taxes
    
    $
    21,326
    
    
    $
    13,084
    
    
    $
    
    
    
    $
    34,410
 For the Quarter Ended June 30, 2009Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    417,880
    
    
    $
    
    
    
    $
    
    
    
    $
    417,880Premium revenue
    
    
    
    
    
    
    183,738
    
    
    
    
    
    
    
    183,738Revenue between segments
    
    
    2,542
    
    
    
    
    
    
    
    (2,542
    )
    
    
    Net revenue
    
    
    420,422
    
    
    
    183,738
    
    
    
    (2,542
    )
    
    
    601,618Salaries and benefits (excludes
stock compensation)
    
    
    159,838
    
    
    
    4,900
    
    
    
    
    
    
    
    164,738Supplies
    
    
    63,905
    
    
    
    45
    
    
    
    
    
    
    
    63,950Medical claims
    
    
    
    
    
    
    161,461
    
    
    
    (2,542
    )
    
    
    158,919Other operating expenses
    
    
    75,876
    
    
    
    3,832
    
    
    
    
    
    
    
    79,708Provision for bad debts
    
    
    45,594
    
    
    
    
    
    
    
    
    
    
    
    45,594Rentals and leases
    
    
    9,635
    
    
    
    373
    
    
    
    
    
    
    
    10,008Adjusted EBITDA(1)
    
    
    65,574
    
    
    
    13,127
    
    
    
    
    
    
    
    78,701Interest expense, net
    
    
    16,334
    
    
    
    
    
    
    
    
    
    
    
    16,334Depreciation and amortization
    
    
    23,320
    
    
    
    897
    
    
    
    
    
    
    
    24,217Stock compensation
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    141Management fees
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Earnings from continuing
operations before gain on
disposal of assets and income
taxes
    
    
    24,529
    
    
    
    12,230
    
    
    
    
    
    
    
    36,759Gain on disposal of assets, net
    
    
    184
    
    
    
    
    
    
    
    
    
    
    
    184Earnings from continuing
operations before income
taxes
    
    $
    24,713
    
    
    $
    12,230
    
    
    $
    
    
    
    $
    36,943
  12




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 For the Nine Months Ended June 30, 2010Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    1,300,445
    
    
    $
    
    
    
    $
    
    
    
    $
    1,300,445Premium revenue
    
    
    
    
    
    
    591,022
    
    
    
    
    
    
    
    591,022Revenue between segments
    
    
    8,331
    
    
    
    
    
    
    
    (8,331
    )
    
    
    Net revenue
    
    
    1,308,776
    
    
    
    591,022
    
    
    
    (8,331
    )
    
    
    1,891,467Salaries and benefits (excludes
stock compensation)
    
    
    497,916
    
    
    
    14,405
    
    
    
    
    
    
    
    512,321Supplies
    
    
    200,030
    
    
    
    137
    
    
    
    
    
    
    
    200,167Medical claims
    
    
    
    
    
    
    519,023
    
    
    
    (8,331
    )
    
    
    510,692Other operating expenses
    
    
    248,380
    
    
    
    18,474
    
    
    
    
    
    
    
    266,854Provision for bad debts
    
    
    142,901
    
    
    
    
    
    
    
    
    
    
    
    142,901Rentals and leases
    
    
    29,334
    
    
    
    1,153
    
    
    
    
    
    
    
    30,487Adjusted EBITDA(1)
    
    
    190,215
    
    
    
    37,830
    
    
    
    
    
    
    
    228,045Interest expense, net
    
    
    50,065
    
    
    
    
    
    
    
    
    
    
    
    50,065Depreciation and amortization
    
    
    69,240
    
    
    
    2,669
    
    
    
    
    
    
    
    71,909Stock compensation
    
    
    2,367
    
    
    
    
    
    
    
    
    
    
    
    2,367Management fees
    
    
    3,750
    
    
    
    
    
    
    
    
    
    
    
    3,750Earnings from continuing
operations before loss on
disposal of assets and income
taxes
    
    
    64,793
    
    
    
    35,161
    
    
    
    
    
    
    
    99,954Loss on disposal of assets, net
    
    
    (206
    )
    
    
    
    
    
    
    
    
    
    
    (206
    )Earnings from continuing
operations before income
taxes
    
    $
    64,587
    
    
    $
    35,161
    
    
    $
    
    
    
    $
    99,748Segment assets
    
    $
    2,006,311
    
    
    $
    293,150
    
    
    
    
    
    
    $
    2,299,461Capital expenditures
    
    $
    53,288
    
    
    $
    177
    
    
    
    
    
    
    $
    53,465Goodwill
    
    $
    712,163
    
    
    $
    5,757
    
    
    
    
    
    
    $
    717,920
 For the Nine Months Ended June 30, 2009Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    1,237,506
    
    
    $
    
    
    
    $
    
    
    
    $
    1,237,506Premium revenue
    
    
    
    
    
    
    504,410
    
    
    
    
    
    
    
    504,410Revenue between segments
    
    
    6,551
    
    
    
    
    
    
    
    (6,551
    )
    
    
    Net revenue
    
    
    1,244,057
    
    
    
    504,410
    
    
    
    (6,551
    )
    
    
    1,741,916Salaries and benefits (excludes
stock compensation)
    
    
    480,214
    
    
    
    14,753
    
    
    
    
    
    
    
    494,967Supplies
    
    
    187,316
    
    
    
    213
    
    
    
    
    
    
    
    187,529Medical claims
    
    
    
    
    
    
    429,070
    
    
    
    (6,551
    )
    
    
    422,519Other operating expenses
    
    
    220,272
    
    
    
    16,739
    
    
    
    
    
    
    
    237,011Provision for bad debts
    
    
    137,892
    
    
    
    
    
    
    
    
    
    
    
    137,892Rentals and leases
    
    
    28,038
    
    
    
    1,183
    
    
    
    
    
    
    
    29,221Hurricane-related property damage
    
    
    938
    
    
    
    
    
    
    
    
    
    
    
    938Adjusted EBITDA(1)
    
    
    189,387
    
    
    
    42,452
    
    
    
    
    
    
    
    231,839Interest expense, net
    
    
    51,129
    
    
    
    
    
    
    
    
    
    
    
    51,129Depreciation and amortization
    
    
    70,860
    
    
    
    2,649
    
    
    
    
    
    
    
    73,509Stock compensation
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    420Management fees
    
    
    3,750
    
    
    
    
    
    
    
    
    
    
    
    3,750Earnings from continuing
operations before gain on
disposal of assets and income
taxes
    
    
    63,228
    
    
    
    39,803
    
    
    
    
    
    
    
    103,031Gain on disposal of assets, net
    
    
    1,497
    
    
    
    
    
    
    
    
    
    
    
    1,497Earnings from continuing
operations before income
taxes
    
    $
    64,725
    
    
    $
    39,803
    
    
    $
    
    
    
    $
    104,528Segment assets
    
    $
    2,141,103
    
    
    $
    225,832
    
    
    
    
    
    
    $
    2,366,935Capital expenditures
    
    $
    65,810
    
    
    $
    798
    
    
    
    
    
    
    $
    66,608Goodwill
    
    $
    776,341
    
    
    $
    5,757
    
    
    
    
    
    
    $
    782,098
  13




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (1)
    
    Adjusted EBITDA represents earnings from continuing operations before interest expense,
income tax expense, depreciation and amortization, stock compensation, gain (loss) on disposal
of assets and management fees. Management fees represent monitoring and advisory fees paid to
TPG, the Companys majority financial sponsor, and certain other members of IASIS Investment
LLC, majority shareholder of IAS. Management routinely calculates and communicates adjusted
EBITDA and believes that it is useful to investors because it is commonly used as an
analytical indicator within the healthcare industry to evaluate hospital performance, allocate
resources and measure leverage capacity and debt service ability. In addition, the Company
uses adjusted EBITDA as a measure of performance for its business segments and for incentive
compensation purposes. Adjusted EBITDA should not be considered as a measure of financial
performance under GAAP, and the items excluded from adjusted EBITDA are significant components
in understanding and assessing financial performance. Adjusted EBITDA should not be considered
in isolation or as an alternative to net earnings, cash flows generated by operating,
investing, or financing activities or other financial statement data presented in the
condensed consolidated financial statements as an indicator of financial performance or
liquidity. Adjusted EBITDA, as presented, differs from what is defined under the Companys
senior secured credit facilities and may not be comparable to similarly titled measures of
other companies. 9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
 3 4
   14




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    129,963
    
    
    $
    197
    
    
    $
    
    
    
    $
    130,160Accounts receivable, net
    
    
    
    
    
    
    89,781
    
    
    
    131,546
    
    
    
    
    
    
    
    221,327Inventories
    
    
    
    
    
    
    23,351
    
    
    
    30,125
    
    
    
    
    
    
    
    53,476Deferred income taxes
    
    
    11,130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,130Prepaid expenses and other
current assets
    
    
    
    
    
    
    18,374
    
    
    
    103,005
    
    
    
    
    
    
    
    121,379Total current assets
    
    
    11,130
    
    
    
    261,469
    
    
    
    264,873
    
    
    
    
    
    
    
    537,472Property and equipment, net
    
    
    
    
    
    
    349,340
    
    
    
    631,457
    
    
    
    
    
    
    
    980,797Intercompany
    
    
    
    
    
    
    (214,143
    )
    
    
    214,143
    
    
    
    
    
    
    
    Net investment in and advances
to subsidiaries
    
    
    1,799,503
    
    
    
    
    
    
    
    
    
    
    
    (1,799,503
    )
    
    
    Goodwill
    
    
    17,331
    
    
    
    67,445
    
    
    
    633,144
    
    
    
    
    
    
    
    717,920Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    27,750
    
    
    
    
    
    
    
    27,750Other assets, net
    
    
    12,825
    
    
    
    18,224
    
    
    
    4,473
    
    
    
    
    
    
    
    35,522Total assets
    
    $
    1,840,789
    
    
    $
    482,335
    
    
    $
    1,775,840
    
    
    $
    (1,799,503
    )
    
    $
    2,299,461Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    32,769
    
    
    $
    39,052
    
    
    $
    
    
    
    $
    71,821Salaries and benefits payable
    
    
    
    
    
    
    23,278
    
    
    
    22,091
    
    
    
    
    
    
    
    45,369Accrued interest payable
    
    
    2,128
    
    
    
    (3,223
    )
    
    
    3,223
    
    
    
    
    
    
    
    2,128Medical claims payable
    
    
    
    
    
    
    
    
    
    
    110,556
    
    
    
    
    
    
    
    110,556Other accrued expenses and
other current liabilities
    
    
    
    
    
    
    34,457
    
    
    
    50,932
    
    
    
    
    
    
    
    85,389Current portion of long-term
debt and capital lease
obligations
    
    
    5,890
    
    
    
    815
    
    
    
    20,274
    
    
    
    (20,274
    )
    
    
    6,705Total current liabilities
    
    
    8,018
    
    
    
    88,096
    
    
    
    246,128
    
    
    
    (20,274
    )
    
    
    321,968Long-term debt and capital
lease obligations
    
    
    1,040,843
    
    
    
    5,637
    
    
    
    552,400
    
    
    
    (552,400
    )
    
    
    1,046,480Deferred income taxes
    
    
    103,352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103,352Other long-term liabilities
    
    
    
    
    
    
    55,575
    
    
    
    637
    
    
    
    
    
    
    
    56,212Total liabilities
    
    
    1,152,213
    
    
    
    149,308
    
    
    
    799,165
    
    
    
    (572,674
    )
    
    
    1,528,012Non-controlling interests with
redemption rights
    
    
    
    
    
    
    72,527
    
    
    
    
    
    
    
    
    
    
    
    72,527Equity:Members equity
    
    
    688,576
    
    
    
    250,154
    
    
    
    976,675
    
    
    
    (1,226,829
    )
    
    
    688,576Non-controlling interests
    
    
    
    
    
    
    10,346
    
    
    
    
    
    
    
    
    
    
    
    10,346Total equity
    
    
    688,576
    
    
    
    260,500
    
    
    
    976,675
    
    
    
    (1,226,829
    )
    
    
    698,922Total liabilities and equity
    
    $
    1,840,789
    
    
    $
    482,335
    
    
    $
    1,775,840
    
    
    $
    (1,799,503
    )
    
    $
    2,299,461
  15




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    206,331
    
    
    $
    197
    
    
    $
    
    
    
    $
    206,528Accounts receivable, net
    
    
    
    
    
    
    90,883
    
    
    
    139,315
    
    
    
    
    
    
    
    230,198Inventories
    
    
    
    
    
    
    22,405
    
    
    
    28,087
    
    
    
    
    
    
    
    50,492Deferred income taxes
    
    
    39,038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,038Prepaid expenses and other
current assets
    
    
    
    
    
    
    15,521
    
    
    
    33,932
    
    
    
    
    
    
    
    49,453Total current assets
    
    
    39,038
    
    
    
    335,140
    
    
    
    201,531
    
    
    
    
    
    
    
    575,709Property and equipment, net
    
    
    
    
    
    
    347,657
    
    
    
    649,696
    
    
    
    
    
    
    
    997,353Intercompany
    
    
    
    
    
    
    (243,956
    )
    
    
    243,956
    
    
    
    
    
    
    
    Net investment in and advances
to subsidiaries
    
    
    1,851,008
    
    
    
    
    
    
    
    
    
    
    
    (1,851,008
    )
    
    
    Goodwill
    
    
    17,331
    
    
    
    67,445
    
    
    
    633,144
    
    
    
    
    
    
    
    717,920Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    
    
    
    
    30,000Other assets, net
    
    
    15,182
    
    
    
    16,780
    
    
    
    4,260
    
    
    
    
    
    
    
    36,222Total assets
    
    $
    1,922,559
    
    
    $
    523,066
    
    
    $
    1,762,587
    
    
    $
    (1,851,008
    )
    
    $
    2,357,204Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    25,269
    
    
    $
    43,283
    
    
    $
    
    
    
    $
    68,552Salaries and benefits payable
    
    
    
    
    
    
    25,008
    
    
    
    17,540
    
    
    
    
    
    
    
    42,548Accrued interest payable
    
    
    12,511
    
    
    
    (3,239
    )
    
    
    3,239
    
    
    
    
    
    
    
    12,511Medical claims payable
    
    
    
    
    
    
    
    
    
    
    113,519
    
    
    
    
    
    
    
    113,519Other accrued expenses and
other current liabilities
    
    
    
    
    
    
    39,559
    
    
    
    26,142
    
    
    
    
    
    
    
    65,701Current portion of long-term
debt and capital lease
obligations
    
    
    7,431
    
    
    
    935
    
    
    
    20,614
    
    
    
    (20,614
    )
    
    
    8,366Total current liabilities
    
    
    19,942
    
    
    
    87,532
    
    
    
    224,337
    
    
    
    (20,614
    )
    
    
    311,197Long-term debt and capital
lease obligations
    
    
    1,045,260
    
    
    
    6,211
    
    
    
    566,980
    
    
    
    (566,980
    )
    
    
    1,051,471Deferred income taxes
    
    
    106,425
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,425Other long-term liabilities
    
    
    
    
    
    
    53,577
    
    
    
    645
    
    
    
    
    
    
    
    54,222Total liabilities
    
    
    1,171,627
    
    
    
    147,320
    
    
    
    791,962
    
    
    
    (587,594
    )
    
    
    1,523,315Non-controlling interests with
redemption rights
    
    
    
    
    
    
    72,527
    
    
    
    
    
    
    
    
    
    
    
    72,527Equity:Members equity
    
    
    750,932
    
    
    
    292,789
    
    
    
    970,625
    
    
    
    (1,263,414
    )
    
    
    750,932Non-controlling interests
    
    
    
    
    
    
    10,430
    
    
    
    
    
    
    
    
    
    
    
    10,430Total equity
    
    
    750,932
    
    
    
    303,219
    
    
    
    970,625
    
    
    
    (1,263,414
    )
    
    
    761,362Total liabilities and equity
    
    $
    1,922,559
    
    
    $
    523,066
    
    
    $
    1,762,587
    
    
    $
    (1,851,008
    )
    
    $
    2,357,204
  16




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenueAcute care revenue
    
    $
    
    
    
    $
    170,905
    
    
    $
    269,625
    
    
    $
    (2,319
    )
    
    $
    438,211Premium revenue
    
    
    
    
    
    
    
    
    
    
    199,777
    
    
    
    
    
    
    
    199,777Total net revenue
    
    
    
    
    
    
    170,905
    
    
    
    469,402
    
    
    
    (2,319
    )
    
    
    637,988Costs and expensesSalaries and benefits
    
    
    
    
    
    
    86,937
    
    
    
    83,098
    
    
    
    
    
    
    
    170,035Supplies
    
    
    
    
    
    
    27,907
    
    
    
    38,426
    
    
    
    
    
    
    
    66,333Medical claims
    
    
    
    
    
    
    
    
    
    
    174,350
    
    
    
    (2,319
    )
    
    
    172,031Other operating expenses
    
    
    
    
    
    
    29,185
    
    
    
    64,394
    
    
    
    
    
    
    
    93,579Provision for bad debts
    
    
    
    
    
    
    21,589
    
    
    
    27,827
    
    
    
    
    
    
    
    49,416Rentals and leases
    
    
    
    
    
    
    4,268
    
    
    
    5,799
    
    
    
    
    
    
    
    10,067Interest expense, net
    
    
    16,711
    
    
    
    
    
    
    
    10,507
    
    
    
    (10,507
    )
    
    
    16,711Depreciation and amortization
    
    
    
    
    
    
    10,271
    
    
    
    13,736
    
    
    
    
    
    
    
    24,007Management fees
    
    
    1,250
    
    
    
    (5,759
    )
    
    
    5,759
    
    
    
    
    
    
    
    1,250Equity in earnings of affiliates
    
    
    (39,249
    )
    
    
    
    
    
    
    
    
    
    
    39,249
    
    
    
    Total costs and expenses
    
    
    (21,288
    )
    
    
    174,398
    
    
    
    423,896
    
    
    
    26,423
    
    
    
    603,429Earnings (loss) from continuing
operations before loss on disposal
of assets and income taxes
    
    
    21,288
    
    
    
    (3,493
    )
    
    
    45,506
    
    
    
    (28,742
    )
    
    
    34,559Loss on disposal of assets,
net
    
    
    
    
    
    
    (31
    )
    
    
    (118
    )
    
    
    
    
    
    
    (149
    )Earnings (loss) from continuing
operations before income taxes
    
    
    21,288
    
    
    
    (3,524
    )
    
    
    45,388
    
    
    
    (28,742
    )
    
    
    34,410Income tax expense
    
    
    12,683
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,683Net earnings (loss) from
continuing operations
    
    
    8,605
    
    
    
    (3,524
    )
    
    
    45,388
    
    
    
    (28,742
    )
    
    
    21,727Earnings (loss) from discontinued
operations, net of income taxes
    
    
    229
    
    
    
    (608
    )
    
    
    (5
    )
    
    
    
    
    
    
    (384
    )Net earnings (loss)
    
    
    8,834
    
    
    
    (4,132
    )
    
    
    45,383
    
    
    
    (28,742
    )
    
    
    21,343Net earnings attributable to
non-controlling interests
    
    
    
    
    
    
    (2,002
    )
    
    
    
    
    
    
    
    
    
    
    (2,002
    )Net earnings (loss) attributable
to IASIS Healthcare LLC
    
    $
    8,834
    
    
    $
    (6,134
    )
    
    $
    45,383
    
    
    $
    (28,742
    )
    
    $
    19,341
  17




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenueAcute care revenue
    
    $
    
    
    
    $
    162,850
    
    
    $
    257,572
    
    
    $
    (2,542
    )
    
    $
    417,880Premium revenue
    
    
    
    
    
    
    
    
    
    
    183,738
    
    
    
    
    
    
    
    183,738Total net revenue
    
    
    
    
    
    
    162,850
    
    
    
    441,310
    
    
    
    (2,542
    )
    
    
    601,618Costs and expensesSalaries and benefits
    
    
    
    
    
    
    81,176
    
    
    
    83,703
    
    
    
    
    
    
    
    164,879Supplies
    
    
    
    
    
    
    26,629
    
    
    
    37,321
    
    
    
    
    
    
    
    63,950Medical claims
    
    
    
    
    
    
    
    
    
    
    161,461
    
    
    
    (2,542
    )
    
    
    158,919Other operating expenses
    
    
    
    
    
    
    31,174
    
    
    
    48,534
    
    
    
    
    
    
    
    79,708Provision for bad debts
    
    
    
    
    
    
    22,557
    
    
    
    23,037
    
    
    
    
    
    
    
    45,594Rentals and leases
    
    
    
    
    
    
    3,925
    
    
    
    6,083
    
    
    
    
    
    
    
    10,008Interest expense, net
    
    
    16,334
    
    
    
    
    
    
    
    9,464
    
    
    
    (9,464
    )
    
    
    16,334Depreciation and amortization
    
    
    
    
    
    
    10,064
    
    
    
    14,153
    
    
    
    
    
    
    
    24,217Management fees
    
    
    1,250
    
    
    
    (5,531
    )
    
    
    5,531
    
    
    
    
    
    
    
    1,250Equity in earnings of affiliates
    
    
    (41,599
    )
    
    
    
    
    
    
    
    
    
    
    41,599
    
    
    
    Total costs and expenses
    
    
    (24,015
    )
    
    
    169,994
    
    
    
    389,287
    
    
    
    29,593
    
    
    
    564,859Earnings (loss) from continuing
operations before gain (loss) on
disposal of assets and income
taxes
    
    
    24,015
    
    
    
    (7,144
    )
    
    
    52,023
    
    
    
    (32,135
    )
    
    
    36,759Gain (loss) on disposal of assets,
net
    
    
    
    
    
    
    187
    
    
    
    (3
    )
    
    
    
    
    
    
    184Earnings (loss) from continuing
operations before income taxes
    
    
    24,015
    
    
    
    (6,957
    )
    
    
    52,020
    
    
    
    (32,135
    )
    
    
    36,943Income tax expense
    
    
    12,650
    
    
    
    
    
    
    
    1,065
    
    
    
    
    
    
    
    13,715Net earnings (loss) from
continuing operations
    
    
    11,365
    
    
    
    (6,957
    )
    
    
    50,955
    
    
    
    (32,135
    )
    
    
    23,228Earnings (loss) from discontinued
operations, net of income taxes
    
    
    (100
    )
    
    
    253
    
    
    
    14
    
    
    
    
    
    
    
    167Net earnings (loss)
    
    
    11,265
    
    
    
    (6,704
    )
    
    
    50,969
    
    
    
    (32,135
    )
    
    
    23,395Net earnings attributable
to non-controlling interests
    
    
    
    
    
    
    (2,666
    )
    
    
    
    
    
    
    
    
    
    
    (2,666
    )Net earnings (loss) attributable
to IASIS Healthcare LLC
    
    $
    11,265
    
    
    $
    (9,370
    )
    
    $
    50,969
    
    
    $
    (32,135
    )
    
    $
    20,729
  18




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenueAcute care revenue
    
    $
    
    
    
    $
    517,001
    
    
    $
    791,775
    
    
    $
    (8,331
    )
    
    $
    1,300,445Premium revenue
    
    
    
    
    
    
    
    
    
    
    591,022
    
    
    
    
    
    
    
    591,022Total net revenue
    
    
    
    
    
    
    517,001
    
    
    
    1,382,797
    
    
    
    (8,331
    )
    
    
    1,891,467Costs and expensesSalaries and benefits
    
    
    
    
    
    
    261,713
    
    
    
    252,975
    
    
    
    
    
    
    
    514,688Supplies
    
    
    
    
    
    
    84,049
    
    
    
    116,118
    
    
    
    
    
    
    
    200,167Medical claims
    
    
    
    
    
    
    
    
    
    
    519,023
    
    
    
    (8,331
    )
    
    
    510,692Other operating
expenses
    
    
    
    
    
    
    86,414
    
    
    
    180,440
    
    
    
    
    
    
    
    266,854Provision for bad debts
    
    
    
    
    
    
    65,352
    
    
    
    77,549
    
    
    
    
    
    
    
    142,901Rentals and leases
    
    
    
    
    
    
    12,750
    
    
    
    17,737
    
    
    
    
    
    
    
    30,487Interest expense, net
    
    
    50,065
    
    
    
    
    
    
    
    30,886
    
    
    
    (30,886
    )
    
    
    50,065Depreciation and
amortization
    
    
    
    
    
    
    30,129
    
    
    
    41,780
    
    
    
    
    
    
    
    71,909Management fees
    
    
    3,750
    
    
    
    (17,075
    )
    
    
    17,075
    
    
    
    
    
    
    
    3,750Equity in earnings of
affiliates
    
    
    (116,035
    )
    
    
    
    
    
    
    
    
    
    
    116,035
    
    
    
    Total costs and
expenses
    
    
    (62,220
    )
    
    
    523,332
    
    
    
    1,253,583
    
    
    
    76,818
    
    
    
    1,791,513Earnings (loss) from
continuing operations
before gain (loss) on
disposal of assets and
income taxes
    
    
    62,220
    
    
    
    (6,331
    )
    
    
    129,214
    
    
    
    (85,149
    )
    
    
    99,954Gain (loss) on disposal
of assets, net
    
    
    
    
    
    
    28
    
    
    
    (234
    )
    
    
    
    
    
    
    (206
    )Earnings (loss) from
continuing operations
before income taxes
    
    
    62,220
    
    
    
    (6,303
    )
    
    
    128,980
    
    
    
    (85,149
    )
    
    
    99,748Income tax expense
    
    
    36,544
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,544Net earnings (loss) from
continuing operations
    
    
    25,676
    
    
    
    (6,303
    )
    
    
    128,980
    
    
    
    (85,149
    )
    
    
    63,204Earnings (loss) from
discontinued operations,
net of income taxes
    
    
    216
    
    
    
    (571
    )
    
    
    (8
    )
    
    
    
    
    
    
    (363
    )Net earnings (loss)
    
    
    25,892
    
    
    
    (6,874
    )
    
    
    128,972
    
    
    
    (85,149
    )
    
    
    62,841Net earnings attributable
to non-controlling
interests
    
    
    
    
    
    
    (6,063
    )
    
    
    
    
    
    
    
    
    
    
    (6,063
    )Net earnings (loss)
attributable to IASIS
Healthcare LLC
    
    $
    25,892
    
    
    $
    (12,937
    )
    
    $
    128,972
    
    
    $
    (85,149
    )
    
    $
    56,778
  19




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenueAcute care revenue
    
    $
    
    
    
    $
    488,285
    
    
    $
    755,772
    
    
    $
    (6,551
    )
    
    $
    1,237,506Premium revenue
    
    
    
    
    
    
    
    
    
    
    504,410
    
    
    
    
    
    
    
    504,410Total net revenue
    
    
    
    
    
    
    488,285
    
    
    
    1,260,182
    
    
    
    (6,551
    )
    
    
    1,741,916Costs and expensesSalaries and benefits
    
    
    
    
    
    
    246,364
    
    
    
    249,023
    
    
    
    
    
    
    
    495,387Supplies
    
    
    
    
    
    
    78,200
    
    
    
    109,329
    
    
    
    
    
    
    
    187,529Medical claims
    
    
    
    
    
    
    
    
    
    
    429,070
    
    
    
    (6,551
    )
    
    
    422,519Other operating
expenses
    
    
    
    
    
    
    86,769
    
    
    
    150,242
    
    
    
    
    
    
    
    237,011Provision for bad debts
    
    
    
    
    
    
    68,297
    
    
    
    69,595
    
    
    
    
    
    
    
    137,892Rentals and leases
    
    
    
    
    
    
    11,942
    
    
    
    17,279
    
    
    
    
    
    
    
    29,221Interest expense, net
    
    
    51,129
    
    
    
    
    
    
    
    33,237
    
    
    
    (33,237
    )
    
    
    51,129Depreciation and
amortization
    
    
    
    
    
    
    31,827
    
    
    
    41,682
    
    
    
    
    
    
    
    73,509Management fees
    
    
    3,750
    
    
    
    (16,267
    )
    
    
    16,267
    
    
    
    
    
    
    
    3,750Hurricane-related
property damage
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    
    
    
    
    938Equity in earnings of
affiliates
    
    
    (117,334
    )
    
    
    
    
    
    
    
    
    
    
    117,334
    
    
    
    Total costs and
expenses
    
    
    (62,455
    )
    
    
    507,132
    
    
    
    1,116,662
    
    
    
    77,546
    
    
    
    1,638,885Earnings (loss) from
continuing operations
before gain on disposal
of assets and income
taxes
    
    
    62,455
    
    
    
    (18,847
    )
    
    
    143,520
    
    
    
    (84,097
    )
    
    
    103,031Gain on disposal of
assets, net
    
    
    
    
    
    
    1,479
    
    
    
    18
    
    
    
    
    
    
    
    1,497Earnings (loss) from
continuing operations
before income taxes
    
    
    62,455
    
    
    
    (17,368
    )
    
    
    143,538
    
    
    
    (84,097
    )
    
    
    104,528Income tax expense
    
    
    37,910
    
    
    
    
    
    
    
    1,065
    
    
    
    
    
    
    
    38,975Net earnings (loss) from
continuing operations
    
    
    24,545
    
    
    
    (17,368
    )
    
    
    142,473
    
    
    
    (84,097
    )
    
    
    65,553Earnings (loss) from
discontinued operations,
net of income taxes
    
    
    198
    
    
    
    (561
    )
    
    
    30
    
    
    
    
    
    
    
    (333
    )Net earnings (loss)
    
    
    24,743
    
    
    
    (17,929
    )
    
    
    142,503
    
    
    
    (84,097
    )
    
    
    65,220Net earnings attributable
to non-controlling
interests
    
    
    
    
    
    
    (7,240
    )
    
    
    
    
    
    
    
    
    
    
    (7,240
    )Net earnings (loss)
attributable to IASIS
Healthcare LLC
    
    $
    24,743
    
    
    $
    (25,169
    )
    
    $
    142,503
    
    
    $
    (84,097
    )
    
    $
    57,980
  20




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    25,892
    
    
    $
    (6,874
    )
    
    $
    128,972
    
    
    $
    (85,149
    )
    
    $
    62,841Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    
    
    
    
    30,129
    
    
    
    41,780
    
    
    
    
    
    
    
    71,909Amortization of loan costs
    
    
    2,356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,356Stock compensation costs
    
    
    2,367
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,367Deferred income taxes
    
    
    23,839
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,839Income tax benefit from stock compensation
    
    
    (1,770
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,770
    )Income tax benefit from parent company
interest
    
    
    4,989
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,989Loss (gain) on disposal of assets, net
    
    
    
    
    
    
    (28
    )
    
    
    234
    
    
    
    
    
    
    
    206Loss (earnings) from discontinued operations
    
    
    (216
    )
    
    
    571
    
    
    
    8
    
    
    
    
    
    
    
    363Equity in earnings of affiliates
    
    
    (116,035
    )
    
    
    
    
    
    
    
    
    
    
    116,035
    
    
    
    Changes in operating assets and liabilities,
net of the effect of acquisitions and
dispositions:Accounts receivable, net
    
    
    
    
    
    
    1,385
    
    
    
    7,769
    
    
    
    
    
    
    
    9,154Inventories, prepaid expenses and other
current assets
    
    
    
    
    
    
    (3,798
    )
    
    
    (71,111
    )
    
    
    
    
    
    
    (74,909
    )Accounts payable, other accrued expenses
and other accrued liabilities
    
    
    (8,613
    )
    
    
    13,557
    
    
    
    8,193
    
    
    
    
    
    
    
    13,137Net cash provided by (used in) operating
activities  continuing operations
    
    
    (67,191
    )
    
    
    34,942
    
    
    
    115,845
    
    
    
    30,886
    
    
    
    114,482Net cash used in operating
activities  discontinued operations
    
    
    (216
    )
    
    
    (351
    )
    
    
    
    
    
    
    
    
    
    
    (567
    )Net cash provided by (used in) operating
activities
    
    
    (67,407
    )
    
    
    34,591
    
    
    
    115,845
    
    
    
    30,886
    
    
    
    113,915Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (31,626
    )
    
    
    (21,839
    )
    
    
    
    
    
    
    (53,465
    )Proceeds from sale of assets
    
    
    
    
    
    
    19
    
    
    
    31
    
    
    
    
    
    
    
    50Change in other assets, net
    
    
    
    
    
    
    1,960
    
    
    
    (104
    )
    
    
    
    
    
    
    1,856Net cash used in investing activities
    
    
    
    
    
    
    (29,647
    )
    
    
    (21,912
    )
    
    
    
    
    
    
    (51,559
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (6,079
    )
    
    
    
    
    
    
    (693
    )
    
    
    
    
    
    
    (6,772
    )Distribution to parent company in connection
with the repurchase of equity, net
    
    
    (124,962
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124,962
    )Distributions to
non-controlling interests
    
    
    
    
    
    
    (179
    )
    
  

    (6,742
    )
    
    
    
    
    

    
    (6,921
    )Costs paid for repurchase of partnership
interests, net
    
    
    
    
    
    
    (69
    )
    
    
    
    
    
    
    
    
    
    
    (69
    )Change in intercompany balances with
affiliates, net
    
    
    198,448
    
    
    
    (81,064
    )
    
    
    (86,498
    )
    
    
    (30,886
    )
    
    
    Net cash provided by (used in) financing
activities
    
    
    67,407
    
    
    
    (81,312
    )
    
    
    (93,933
    )
    
    
    (30,886
    )
    
    
    (138,724
    )Change in cash and cash equivalents
    
    
    
    
    
    
    (76,368
    )
    
    
    
    
    
    
    
    
    
    
    (76,368
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    206,331
    
    
    
    197
    
    
    
    
    
    
    
    206,528Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    129,963
    
    
    $
    197
    
    
    $
    
    
    
    $
    130,160
  21




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    24,743
    
    
    $
    (17,929
    )
    
    $
    142,503
    
    
    $
    (84,097
    )
    
    $
    65,220Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating
activities:Depreciation and amortization
    
    
    
    
    
    
    31,827
    
    
    
    41,682
    
    
    
    
    
    
    
    73,509Amortization of loan costs
    
    
    2,257
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,257Stock compensation costs
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420Deferred income taxes
    
    
    11,792
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,792Gain on disposal of assets, net
    
    
    
    
    
    
    (1,479
    )
    
    
    (18
    )
    
    
    
    
    
    
    (1,497
    )Loss (earnings) from discontinued operations
    
    
    (198
    )
    
    
    561
    
    
    
    (30
    )
    
    
    
    
    
    
    333Hurricane-related property damage
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    
    
    
    
    938Equity in earnings of affiliates
    
    
    (117,334
    )
    
    
    
    
    
    
    
    
    
    
    117,334
    
    
    
    Changes in operating assets and liabilities,
net of the effect of acquisitions and
dispositions:Accounts receivable, net
    
    
    
    
    
    
    4,724
    
    
    
    (23,578
    )
    
    
    
    
    
    
    (18,854
    )Inventories, prepaid expenses and other
current assets
    
    
    
    
    
    
    (505
    )
    
    
    (1,986
    )
    
    
    
    
    
    
    (2,491
    )Accounts payable, other accrued expenses
and other accrued liabilities
    
    
    (10,346
    )
    
    
    42,896
    
    
    
    6,681
    
    
    
    
    
    
    
    39,231Net cash provided by (used in) operating
activities  continuing operations
    
    
    (88,666
    )
    
    
    60,095
    
    
    
    166,192
    
    
    
    33,237
    
    
    
    170,858Net cash provided by (used in) operating
activities  discontinued operations
    
    
    (198
    )
    
    
    1,905
    
    
    
    (159
    )
    
    
    
    
    
    
    1,548Net cash provided by (used in) operating
activities
    
    
    (88,864
    )
    
    
    62,000
    
    
    
    166,033
    
    
    
    33,237
    
    
    
    172,406Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (18,835
    )
    
    
    (47,773
    )
    
    
    
    
    
    
    (66,608
    )Cash paid for acquisition, net
    
    
    
    
    
    
    (1,521
    )
    
    
    
    
    
    
    
    
    
    
    (1,521
    )Proceeds from sale of assets
    
    
    
    
    
    
    3,007
    
    
    
    2,233
    
    
    
    
    
    
    
    5,240Change in other assets, net
    
    
    
    
    
    
    (173
    )
    
    
    2,005
    
    
    
    
    
    
    
    1,832Net cash used in investing activities 
continuing operations
    
    
    
    
    
    
    (17,522
    )
    
    
    (43,535
    )
    
    
    
    
    
    
    (61,057
    )Net cash provided by investing activities 
discontinued operations
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Net cash used in investing activities
    
    
    
    
    
    
    (17,512
    )
    
    
    (43,535
    )
    
    
    
    
    
    
    (61,047
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (52,813
    )
    
    
    125
    
    
    
    (984
    )
    
    
    
    
    
    
    (53,672
    )Distributions to non-controlling interests
    
    
    
    
    
    
    
    
    
    
    (4,721
    )
    
    
     
    
    
    
    (4,721
    )Costs paid for repurchase of partnership
interests, net
    
    
    
    
    
    
    (1,379
    )
    
    
    
    
    
    
    
    
    
    
    (1,379
    )Change in intercompany balances with
affiliates, net
    
    
    141,677
    
    
    
    8,508
    
    
    
    (116,948
    )
    
    
    (33,237
    )
    
    
    Net cash provided by (used in) financing
activities
    
    
    88,864
    
    
    
    7,254
    
    
    
    (122,653
    )
    
    
    (33,237
    )
    
    
    (59,772
    )Change in cash and cash equivalents
    
    
    
    
    
    
    51,742
    
    
    
    (155
    )
    
    
    
    
    
    
    51,587Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    80,336
    
    
    
    402
    
    
    
    
    
    
    
    80,738Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    132,078
    
    
    $
    247
    
    
    $
    
    
    
    $
    132,325
  22




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  FORWARD LOOKING STATEMENTS
 qui tam
  23




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##### Table of Contents



EXECUTIVE OVERVIEW
  
    
    Salt Lake City, Utah;
 
    
    Phoenix, Arizona;
 
    
    Tampa-St. Petersburg, Florida;
 
    
    three cities in Texas, including San Antonio;
 
    
    Las Vegas, Nevada; and
 
    
    West Monroe, Louisiana.
  Recently Enacted Health Reform Law
     24




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##### Table of Contents



Revenue and Volume Trends
  Acute Care Revenue
    25




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##### Table of Contents



Quarter Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Medicare
    
    
    30.9
    %
    
    
    30.2
    %
    
    
    31.4
    %
    
    
    31.6
    %Managed Medicare
    
    
    12.7
    %
    
    
    11.8
    %
    
    
    12.3
    %
    
    
    11.6
    %Medicaid
    
    
    8.5
    %
    
    
    8.3
    %
    
    
    8.3
    %
    
    
    8.1
    %Managed Medicaid
    
    
    12.2
    %
    
    
    10.8
    %
    
    
    12.2
    %
    
    
    10.6
    %Managed care and other
    
    
    30.3
    %
    
    
    34.0
    %
    
    
    30.8
    %
    
    
    33.2
    %Self-pay
    
    
    5.4
    %
    
    
    4.9
    %
    
    
    5.0
    %
    
    
    4.9
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    26




---



##### Table of Contents



Premium Revenue
   27




---



##### Table of Contents



Significant Industry Trends
  Value-Based Reimbursement
   28




---



##### Table of Contents



Physician Integration
   29




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##### Table of Contents



Uncompensated Care
       30




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##### Table of Contents



June 30,
    
    
    September 30,2010
    
    
    2009Insured receivables
    
    
    63.3
    %
    
    
    62.0
    %Uninsured receivables
    
    
    36.7
    %
    
    
    38.0
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
   June 30,
    
    
    September 30,2010
    
    
    20090 to 90 days
    
    
    72.6
    %
    
    
    69.4
    %91 to 180 days
    
    
    16.8
    %
    
    
    18.1
    %Over 180 days
    
    
    10.6
    %
    
    
    12.5
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   31




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##### Table of Contents



SELECTED OPERATING DATA
  Quarter Ended
    
    
    Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Acute CareNumber of acute care hospital facilities
at end of period
    
    
    15
    
    
    
    15
    
    
    
    15
    
    
    
    15Beds in service at end of period (1)
    
    
    2,886
    
    
    
    2,789
    
    
    
    2,886
    
    
    
    2,789Average length of stay (days) (2)
    
    
    4.8
    
    
    
    4.7
    
    
    
    4.8
    
    
    
    4.7Occupancy rates (average beds in service)
    
    
    45.9
    %
    
    
    46.2
    %
    
    
    46.9
    %
    
    
    47.5
    %Admissions (3)
    
    
    24,968
    
    
    
    25,229
    
    
    
    76,679
    
    
    
    75,628Adjusted admissions (4)
    
    
    42,655
    
    
    
    42,780
    
    
    
    127,654
    
    
    
    126,615Patient days (5)
    
    
    120,515
    
    
    
    117,378
    
    
    
    369,402
    
    
    
    354,332Adjusted patient days (4)
    
    
    198,439
    
    
    
    191,157
    
    
    
    593,277
    
    
    
    569,299Net patient revenue per adjusted admission
    
    $
    10,197
    
    
    $
    9,668
    
    
    $
    10,118
    
    
    $
    9,671Outpatient revenue as a % of gross
patient revenue
    
    
    40.7
    %
    
    
    39.6
    %
    
    
    39.1
    %
    
    
    38.8
    %Health ChoiceMedicaid covered lives
    
    
    195,183
    
    
    
    177,933
    
    
    
    195,183
    
    
    
    177,933Dual-eligible lives (6)
    
    
    4,256
    
    
    
    3,580
    
    
    
    4,256
    
    
    
    3,580Medical loss ratio (7)
    
    
    87.3
    %
    
    
    87.9
    %
    
    
    87.8
    %
    
    
    85.1
    %
 (1)
    
    Includes St. Lukes Behavioral Hospital.(2)
    
    Represents the average number of days that a patient stayed in our hospitals.(3)
    
    Represents the total number of patients admitted to our hospitals for stays in excess of 23
hours. Management and investors use this number as a general measure of inpatient volume.(4)
    
    Adjusted admissions and adjusted patient days are general measures of combined inpatient and
outpatient volume. We compute adjusted admissions/patient days by multiplying admissions/patient
days by gross patient revenue and then dividing that number by gross inpatient revenue.(5)
    
    Represents the number of days our beds were occupied by inpatients over the period.(6)
    
    Represents members eligible for Medicare and Medicaid benefits under Health Choices contract
with CMS to provide coverage as a MAPD SNP.(7)
    
    Represents medical claims expense as a percentage of premium revenue, including claims paid to
our hospitals.  32




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##### Table of Contents



RESULTS OF OPERATIONS SUMMARY
 Consolidated
  Quarter Ended
    
    
    Quarter Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenueAcute care revenue
    
    $
    438,211
    
    
    
    68.7
    %
    
    $
    417,880
    
    
    
    69.5
    %
    
    $
    1,300,445
    
    
    
    68.8
    %
    
    $
    1,237,506
    
    
    
    71.0
    %Premium revenue
    
    
    199,777
    
    
    
    31.3
    %
    
    
    183,738
    
    
    
    30.5
    %
    
    
    591,022
    
    
    
    31.2
    %
    
    
    504,410
    
    
    
    29.0
    %Total net revenue
    
    
    637,988
    
    
    
    100.0
    %
    
    
    601,618
    
    
    
    100.0
    %
    
    
    1,891,467
    
    
    
    100.0
    %
    
    
    1,741,916
    
    
    
    100.0
    %Costs and expensesSalaries and benefits
    
    
    170,035
    
    
    
    26.7
    %
    
    
    164,879
    
    
    
    27.4
    %
    
    
    514,688
    
    
    
    27.2
    %
    
    
    495,387
    
    
    
    28.4
    %Supplies
    
    
    66,333
    
    
    
    10.4
    %
    
    
    63,950
    
    
    
    10.6
    %
    
    
    200,167
    
    
    
    10.6
    %
    
    
    187,529
    
    
    
    10.8
    %Medical claims
    
    
    172,031
    
    
    
    27.0
    %
    
    
    158,919
    
    
    
    26.4
    %
    
    
    510,692
    
    
    
    27.0
    %
    
    
    422,519
    
    
    
    24.3
    %Other operating expenses
    
    
    93,579
    
    
    
    14.7
    %
    
    
    79,708
    
    
    
    13.3
    %
    
    
    266,854
    
    
    
    14.1
    %
    
    
    237,011
    
    
    
    13.6
    %Provision for bad debts
    
    
    49,416
    
    
    
    7.7
    %
    
    
    45,594
    
    
    
    7.6
    %
    
    
    142,901
    
    
    
    7.6
    %
    
    
    137,892
    
    
    
    7.9
    %Rentals and leases
    
    
    10,067
    
    
    
    1.6
    %
    
    
    10,008
    
    
    
    1.7
    %
    
    
    30,487
    
    
    
    1.6
    %
    
    
    29,221
    
    
    
    1.7
    %Interest expense, net
    
    
    16,711
    
    
    
    2.6
    %
    
    
    16,334
    
    
    
    2.7
    %
    
    
    50,065
    
    
    
    2.7
    %
    
    
    51,129
    
    
    
    2.9
    %Depreciation and amortization
    
    
    24,007
    
    
    
    3.7
    %
    
    
    24,217
    
    
    
    4.0
    %
    
    
    71,909
    
    
    
    3.8
    %
    
    
    73,509
    
    
    
    4.2
    %Management fees
    
    
    1,250
    
    
    
    0.2
    %
    
    
    1,250
    
    
    
    0.2
    %
    
    
    3,750
    
    
    
    0.2
    %
    
    
    3,750
    
    
    
    0.2
    %Hurricane-related property damage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    0.1
    %Total costs and expenses
    
    
    603,429
    
    
    
    94.6
    %
    
    
    564,859
    
    
    
    93.9
    %
    
    
    1,791,513
    
    
    
    94.8
    %
    
    
    1,638,885
    
    
    
    94.1
    %Earnings from continuing operations before gain (loss) on disposal of assets and income taxes
    
    
    34,559
    
    
    
    5.4
    %
    
    
    36,759
    
    
    
    6.1
    %
    
    
    99,954
    
    
    
    5.2
    %
    
    
    103,031
    
    
    
    5.9
    %Gain (loss) on disposal of assets, net
    
    
    (149
    )
    
    
    0.0
    %
    
    
    184
    
    
    
    0.0
    %
    
    
    (206
    )
    
    
    0.0
    %
    
    
    1,497
    
    
    
    0.1
    %Earnings from continuing operations before income taxes
    
    
    34,410
    
    
    
    5.4
    %
    
    
    36,943
    
    
    
    6.1
    %
    
    
    99,748
    
    
    
    5.2
    %
    
    
    104,528
    
    
    
    6.0
    %Income tax expense
    
    
    12,683
    
    
    
    2.0
    %
    
    
    13,715
    
    
    
    2.3
    %
    
    
    36,544
    
    
    
    1.9
    %
    
    
    38,975
    
    
    
    2.3
    %Net earnings from continuing operations
    
    
    21,727
    
    
    
    3.4
    %
    
    
    23,228
    
    
    
    3.8
    %
    
    
    63,204
    
    
    
    3.3
    %
    
    
    65,553
    
    
    
    3.7
    %Earnings (loss) from discontinued operations, net of income taxes
    
    
    (384
    )
    
    
    (0.1
    )%
    
    
    167
    
    
    
    0.0
    %
    
    
    (363
    )
    
    
    0.0
    %
    
    
    (333
    )
    
    
    0.0
    %Net earnings
    
    
    21,343
    
    
    
    3.3
    %
    
    
    23,395
    
    
    
    3.8
    %
    
    
    62,841
    
    
    
    3.3
    %
    
    
    65,220
    
    
    
    3.7
    %Net earnings attributable to non-controlling interests
    
    
    (2,002
    )
    
    
    (0.3
    )%
    
    
    (2,666
    )
    
    
    (0.4
    )%
    
    
    (6,063
    )
    
    
    (0.3
    )%
    
    
    (7,240
    )
    
    
    (0.4
    )%Net earnings attributable to IASIS Healthcare LLC
    
    $
    19,341
    
    
    
    3.0
    %
    
    $
    20,729
    
    
    
    3.4
    %
    
    $
    56,778
    
    
    
    3.0
    %
    
    $
    57,980
    
    
    
    3.3
    %
  33




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##### Table of Contents



Acute Care
  Quarter Ended
    
    
    Quarter Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageAcute care revenueAcute care revenue
    
    $
    438,211
    
    
    
    99.5
    %
    
    $
    417,880
    
    
    
    99.4
    %
    
    $
    1,300,445
    
    
    
    99.4
    %
    
    $
    1,237,506
    
    
    
    99.5
    %Revenue between segments (1)
    
    
    2,319
    
    
    
    0.5
    %
    
    
    2,542
    
    
    
    0.6
    %
    
    
    8,331
    
    
    
    0.6
    %
    
    
    6,551
    
    
    
    0.5
    %Total acute care revenue
    
    
    440,530
    
    
    
    100.0
    %
    
    
    420,422
    
    
    
    100.0
    %
    
    
    1,308,776
    
    
    
    100.0
    %
    
    
    1,244,057
    
    
    
    100.0
    %Costs and expensesSalaries and benefits
    
    
    165,169
    
    
    
    37.5
    %
    
    
    159,979
    
    
    
    38.1
    %
    
    
    500,283
    
    
    
    38.2
    %
    
    
    480,634
    
    
    
    38.6
    %Supplies
    
    
    66,293
    
    
    
    15.0
    %
    
    
    63,905
    
    
    
    15.2
    %
    
    
    200,030
    
    
    
    15.3
    %
    
    
    187,316
    
    
    
    15.1
    %Other operating expenses
    
    
    87,451
    
    
    
    19.9
    %
    
    
    75,876
    
    
    
    18.0
    %
    
    
    248,380
    
    
    
    19.0
    %
    
    
    220,272
    
    
    
    17.7
    %Provision for bad debts
    
    
    49,416
    
    
    
    11.2
    %
    
    
    45,594
    
    
    
    10.8
    %
    
    
    142,901
    
    
    
    10.9
    %
    
    
    137,892
    
    
    
    11.1
    %Rentals and leases
    
    
    9,650
    
    
    
    2.2
    %
    
    
    9,635
    
    
    
    2.3
    %
    
    
    29,334
    
    
    
    2.2
    %
    
    
    28,038
    
    
    
    2.2
    %Interest expense, net
    
    
    16,711
    
    
    
    3.8
    %
    
    
    16,334
    
    
    
    3.9
    %
    
    
    50,065
    
    
    
    3.8
    %
    
    
    51,129
    
    
    
    4.1
    %Depreciation and amortization
    
    
    23,115
    
    
    
    5.2
    %
    
    
    23,320
    
    
    
    5.6
    %
    
    
    69,240
    
    
    
    5.3
    %
    
    
    70,860
    
    
    
    5.7
    %Management fees
    
    
    1,250
    
    
    
    0.3
    %
    
    
    1,250
    
    
    
    0.3
    %
    
    
    3,750
    
    
    
    0.3
    %
    
    
    3,750
    
    
    
    0.3
    %Hurricane-related property damage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    0.1
    %Total costs and expenses
    
    
    419,055
    
    
    
    95.1
    %
    
    
    395,893
    
    
    
    94.2
    %
    
    
    1,243,983
    
    
    
    95.0
    %
    
    
    1,180,829
    
    
    
    94.9
    %Earnings from continuing operations before gain (loss) on disposal of assets and income taxes
    
    
    21,475
    
    
    
    4.9
    %
    
    
    24,529
    
    
    
    5.8
    %
    
    
    64,793
    
    
    
    5.0
    %
    
    
    63,228
    
    
    
    5.1
    %Gain (loss) on disposal of assets, net
    
    
    (149
    )
    
    
    0.0
    %
    
    
    184
    
    
    
    0.0
    %
    
    
    (206
    )
    
    
    0.0
    %
    
    
    1,497
    
    
    
    0.1
    %Earnings from continuing operations before income taxes
    
    $
    21,326
    
    
    
    4.9
    %
    
    $
    24,713
    
    
    
    5.8
    %
    
    $
    64,587
    
    
    
    5.0
    %
    
    $
    64,725
    
    
    
    5.2
    %
 (1)
    
    Revenue between segments is eliminated in our consolidated results. Quarters Ended June 30, 2010 and 2009
 Acute care revenue
  Salaries and benefits
 Other operating expenses
 Provision for bad debts
 Nine Months Ended June 30, 2010 and 2009
 Acute care revenue
  34




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##### Table of Contents



Salaries and benefits
 Other operating expenses
 Provision for bad debts
 Health Choice
  Quarter Ended
    
    
    Quarter Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedJune 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentagePremium revenuePremium revenue
    
    $
    199,777
    
    
    
    100.0
    %
    
    $
    183,738
    
    
    
    100.0
    %
    
    $
    591,022
    
    
    
    100.0
    %
    
    $
    504,410
    
    
    
    100.0
    %Costs and expensesSalaries and benefits
    
    
    4,866
    
    
    
    2.4
    %
    
    
    4,900
    
    
    
    2.6
    %
    
    
    14,405
    
    
    
    2.4
    %
    
    
    14,753
    
    
    
    3.0
    %Supplies
    
    
    40
    
    
    
    0.0
    %
    
    
    45
    
    
    
    0.0
    %
    
    
    137
    
    
    
    0.0
    %
    
    
    213
    
    
    
    0.0
    %Medical claims (1)
    
    
    174,350
    
    
    
    87.3
    %
    
    
    161,461
    
    
    
    87.9
    %
    
    
    519,023
    
    
    
    87.8
    %
    
    
    429,070
    
    
    
    85.1
    %Other operating expenses
    
    
    6,128
    
    
    
    3.1
    %
    
    
    3,832
    
    
    
    2.1
    %
    
    
    18,474
    
    
    
    3.2
    %
    
    
    16,739
    
    
    
    3.3
    %Rentals and leases
    
    
    417
    
    
    
    0.2
    %
    
    
    373
    
    
    
    0.2
    %
    
    
    1,153
    
    
    
    0.2
    %
    
    
    1,183
    
    
    
    0.2
    %Depreciation and amortization
    
    
    892
    
    
    
    0.5
    %
    
    
    897
    
    
    
    0.5
    %
    
    
    2,669
    
    
    
    0.5
    %
    
    
    2,649
    
    
    
    0.5
    %Total costs and expenses
    
    
    186,693
    
    
    
    93.5
    %
    
    
    171,508
    
    
    
    93.3
    %
    
    
    555,861
    
    
    
    94.1
    %
    
    
    464,607
    
    
    
    92.1
    %Earnings before income taxes
    
    $
    13,084
    
    
    
    6.5
    %
    
    $
    12,230
    
    
    
    6.7
    %
    
    $
    35,161
    
    
    
    5.9
    %
    
    $
    39,803
    
    
    
    7.9
    %
 (1)
    
    Medical claims paid to our hospitals of $2.3 million and $2.5 million for the quarters ended
June 30, 2010 and 2009, respectively, and $8.3 million and $6.6 million for the nine months
ended June 30, 2010 and 2009, respectively, are eliminated in our consolidated results.  35




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##### Table of Contents



Quarters Ended June 30, 2010 and 2009
 Premium revenue
 Medical claims
 Nine Months Ended June 30, 2010 and 2009
 Premium revenue
 Medical claims 
 Income
Taxes
  Quarters Ended June 30, 2010 and 2009
 Income
tax expense
 Nine
Months Ended June 30, 2010 and 2009
 Income
tax expense
 LIQUIDITY AND CAPITAL RESOURCES
 Overview of Cash Flow Activities for the Nine Months Ended June 30, 2010 and 2009
  Nine Months EndedJune 30,2010
    
    
    2009Cash flow from operating activities
    
    $
    113,915
    
    
    $
    172,406Cash flow from investing activities
    
    
    (51,559
    )
    
    
    (61,047
    )Cash flow from financing activities
    
    
    (138,724
    )
    
    
    (59,772
    )
 Operating Activities
    36




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##### Table of Contents



Investing Activities
  Financing Activities
   Capital Resources
 $854.0 Million Senior Secured Credit Facilities
      37




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##### Table of Contents



$475.0 Million 8 3 / 4 % Senior Subordinated Notes Due 2014
 3 4 3 4 pari passu 3 4 3 4 3 4 3 4 3 4
 Holdings Senior PIK Loans
  Other
    38




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##### Table of Contents



Capital Expenditures
  
    
    $25.0 million to $28.0 million for other growth and new business projects;
 
    
    $23.0 million to $25.0 million in replacement or maintenance related projects at our
hospitals;
 
    
    $20.0 million related to the healthcare information technology stimulus mandate; and
 
    
    $12.0 million in hardware and software costs related to other information systems
projects.
 Liquidity
   Cash and cash equivalents
    
    $
    130.2Available capacity under our senior secured revolving credit facility
    
    
    188.8Net available liquidity at June 30, 2010
    
    $
    319.0
      39




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##### Table of Contents



3 4
 3 4
 OFF-BALANCE SHEET ARRANGEMENTS
   SEASONALITY
  RECENT ACCOUNTING PRONOUNCEMENTS
   40




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
    3 4 3 4
  
 Item 4. Controls and Procedures
 Evaluations of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   41




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 6. Exhibits
  31.1
    
    
    Certification of Principal Executive Officer Pursuant to Rule 15d-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    
    Certification of Principal Financial Officer pursuant to Rule 15d-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
  42




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##### Table of Contents



SIGNATURES
  IASIS HEALTHCARE LLCDate: August 11, 2010
    By:
    /s/ John M. DoyleJohn M. DoyleChief Financial Officer  43




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    
    Certification of Principal Executive Officer Pursuant to
Rule 15d-14(a) under the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    
    Certification of Principal Financial Officer pursuant to
Rule 15d-14(a) under the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
  44