##### 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 December 31, 2009
 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)DOVER CENTRE117 SEABOARD LANE, BUILDING EFRANKLIN, TENNESSEE
    
    37067(Address of principal executive offices)
    
    (Zip Code)
 (615) 844-2747
 Not Applicable
 þ o
 o 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)  December 31, 2009 and September 30, 2009
    
    
    1Condensed Consolidated Statements of Operations (Unaudited)  Quarters Ended December 31,
2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows (Unaudited)  Quarters Ended December 31,
2009 and 2008
    
    
    3Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATION
    
    
    36Item 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    36Item 6. Exhibits
    
    
    37Exhibit 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)
 December 31,
    
    
    September 30,2009
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    197,075
    
    
    $
    206,528Accounts receivable, less allowance for doubtful accounts of
$127,501 and $126,132 at December 31, 2009 and September 30,
2009, respectively
    
    
    234,802
    
    
    
    230,198Inventories
    
    
    51,553
    
    
    
    50,492Deferred income taxes
    
    
    37,768
    
    
    
    39,038Prepaid expenses and other current assets
    
    
    43,907
    
    
    
    49,453Total current assets
    
    
    565,105
    
    
    
    575,709Property and equipment, net
    
    
    986,482
    
    
    
    997,353Goodwill
    
    
    717,920
    
    
    
    717,920Other intangible assets, net
    
    
    29,250
    
    
    
    30,000Other assets, net
    
    
    35,611
    
    
    
    36,222Total assets
    
    $
    2,334,368
    
    
    $
    2,357,204LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    66,466
    
    
    $
    68,552Salaries and benefits payable
    
    
    30,924
    
    
    
    42,548Accrued interest payable
    
    
    2,105
    
    
    
    12,511Medical claims payable
    
    
    111,325
    
    
    
    113,519Other accrued expenses and other current liabilities
    
    
    55,886
    
    
    
    65,701Current portion of long-term debt and capital lease obligations
    
    
    6,683
    
    
    
    8,366Total current liabilities
    
    
    273,389
    
    
    
    311,197Long-term debt and capital lease obligations
    
    
    1,049,703
    
    
    
    1,051,471Deferred income taxes
    
    
    108,704
    
    
    
    106,425Other long-term liabilities
    
    
    50,722
    
    
    
    54,222Non-controlling interests with redemption rights
    
    
    72,527
    
    
    
    72,527Equity:Members equity
    
    
    768,915
    
    
    
    750,932Non-controlling interests
    
    
    10,408
    
    
    
    10,430Total equity
    
    
    779,323
    
    
    
    761,362Total liabilities and equity
    
    $
    2,334,368
    
    
    $
    2,357,204
   1




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (In Thousands)
 Quarter EndedDecember 31,2009
    
    
    2008Net revenue:Acute care revenue
    
    $
    424,660
    
    
    $
    398,447Premium revenue
    
    
    204,297
    
    
    
    163,177Total net revenue
    
    
    628,957
    
    
    
    561,624Costs and expenses:Salaries and benefits
    
    
    170,482
    
    
    
    162,136Supplies
    
    
    65,409
    
    
    
    59,826Medical claims
    
    
    178,567
    
    
    
    137,002Other operating expenses
    
    
    84,592
    
    
    
    79,350Provision for bad debts
    
    
    47,949
    
    
    
    47,131Rentals and leases
    
    
    10,275
    
    
    
    9,479Interest expense, net
    
    
    16,732
    
    
    
    18,978Depreciation and amortization
    
    
    23,877
    
    
    
    24,996Management fees
    
    
    1,250
    
    
    
    1,250Total costs and expenses
    
    
    599,133
    
    
    
    540,148Earnings from continuing operations before gain on disposal of assets and income taxes
    
    
    29,824
    
    
    
    21,476Gain on disposal of assets, net
    
    
    104
    
    
    
    1,293Earnings from continuing operations before income taxes
    
    
    29,928
    
    
    
    22,769Income tax expense
    
    
    10,591
    
    
    
    8,811Net earnings from continuing operations
    
    
    19,337
    
    
    
    13,958Earnings (loss) from discontinued operations, net of income taxes
    
    
    46
    
    
    
    (711
    )Net earnings
    
    
    19,383
    
    
    
    13,247Net earnings attributable to non-controlling interests
    
    
    (2,028
    )
    
    
    (1,597
    )Net earnings attributable to IASIS Healthcare LLC
    
    $
    17,355
    
    
    $
    11,650
   2




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 (In Thousands)
 Quarter EndedDecember 31,2009
    
    
    2008Cash flows from operating activitiesNet earnings
    
    $
    19,383
    
    
    $
    13,247Adjustments to reconcile net earnings to net cash provided by operating activities:Loss (earnings) from discontinued operations
    
    
    (46
    )
    
    
    711Depreciation and amortization
    
    
    23,877
    
    
    
    24,996Amortization of loan costs
    
    
    775
    
    
    
    743Deferred income taxes
    
    
    2,652
    
    
    
    1,050Income tax benefit from parent company interest
    
    
    2,224
    
    
    
    Gain on disposal of assets, net
    
    
    (104
    )
    
    
    (1,293
    )Stock compensation costs
    
    
    121
    
    
    
    141Changes in operating assets and liabilities, net of the effect of dispositions:Accounts receivable, net
    
    
    (4,332
    )
    
    
    (8,724
    )Inventories, prepaid expenses and other current assets
    
    
    4,486
    
    
    
    (1,139
    )Accounts payable, other accrued expenses and other accrued liabilities
    
    
    (39,373
    )
    
    
    12,551Net cash provided by operating activities  continuing operations
    
    
    9,663
    
    
    
    42,283Net cash provided by (used in) operating activities  discontinued operations
    
    
    (125
    )
    
    
    1,004Net cash provided by operating activities
    
    
    9,538
    
    
    
    43,287Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    (12,282
    )
    
    
    (29,452
    )Proceeds from sale of assets
    
    
    31
    
    
    
    4,880Change in other assets, net
    
    
    659
    
    
    
    878Net cash used in investing activities  continuing operations
    
    
    (11,592
    )
    
    
    (23,694
    )Net cash provided by investing activities  discontinued operations
    
    
    
    
    
    
    7Net cash used in investing activities
    
    
    (11,592
    )
    
    
    (23,687
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (3,452
    )
    
    
    (4,429
    )Distributions to non-controlling interests
    
    
    (3,934
    )
    
    
    (1,686
    )Costs paid for the repurchase of partnership interest, net
    
    
    (13
    )
    
    
    (1,384
    )Net cash used in financing activities
    
    
    (7,399
    )
    
    
    (7,499
    )Change in cash and cash equivalents
    
    
    (9,453
    )
    
    
    12,101Cash and cash equivalents at beginning of period
    
    
    206,528
    
    
    
    80,738Cash and cash equivalents at end of period
    
    $
    197,075
    
    
    $
    92,839Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    26,393
    
    
    $
    26,888Cash paid for income taxes, net
    
    $
    4,000
    
    
    $
    
   3




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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
  Use of Estimates
   4




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 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-Redeemable
    
    
    Members
    
    
    controllingRights
    
    
    Equity
    
    
    Interests
    
    
    Total EquityBalance at September 30, 2009 (as
previously reported)
    
    $
    
    
    
    $
    780,847
    
    
    $
    
    
    
    $
    780,847October 1, 2009 adjustment to
non-controlling interests from adoption of
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
    
    
    1,984
    
    
    
    17,355
    
    
    
    44
    
    
    
    17,399Distributions to, and repurchases of,
non-controlling interests
    
    
    (3,881
    )
    
    
    
    
    
    
    (66
    )
    
    
    (66
    )Stock compensation costs
    
    
    
    
    
    
    121
    
    
    
    
    
    
    
    121Other
comprehensive income
    
    
    
    
    
    
    180
    
    
    
    
    
    
    
    180Contribution from parent related to tax
benefit from Holdings Senior PIK Loans
interest
    
    
    
    
    
    
    2,224
    
    
    
    
    
    
    
    2,224Adjustment to redemption value of
non-controlling interests with redeemable
rights
    
    
    1,897
    
    
    
    (1,897
    )
    
    
    
    
    
    
    (1,897
    )Balance at December 31, 2009
    
    $
    72,527
    
    
    $
    768,915
    
    
    $
    10,408
    
    
    $
    779,323
  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
  December 31,
    
    
    September 30,2009
    
    
    2009Senior secured credit facilities
    
    $
    574,678
    
    
    $
    576,150Senior subordinated notes
    
    
    475,000
    
    
    
    475,000Capital leases and other obligations
    
    
    6,708
    
    
    
    8,6871,056,386
    
    
    
    1,059,837Less current maturities
    
    
    6,683
    
    
    
    8,366$
    1,049,703
    
    
    $
    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.
ACCUMULATED OTHER COMPREHENSIVE LOSS
  Balance at September 30, 2009
    
    $
    (2,926
    )Change in fair value of interest rate swaps, net of income tax effect of $109
    
    
    180Balance at December 31, 2009
    
    $
    (2,746
    )
  9




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 5. DISCONTINUED OPERATIONS
  Quarter ended
    
    
    Quarter endedDecember 31, 2009
    
    
    December 31, 2008Total net revenue
    
    $
    93
    
    
    $
    228Operating expenses
    
    
    19
    
    
    
    1,363Income tax expense (benefit)
    
    
    28
    
    
    
    (424
    )Earnings (loss) from
discontinued operations,
net of income taxes
    
    $
    46
    
    
    $
    (711
    )
  6. COMMITMENTS AND CONTINGENCIES
 Net Revenue
  Professional, General and Workers Compensation Liability Risks
    10




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Health Choice
  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. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
   12




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 8. SEGMENT AND GEOGRAPHIC INFORMATION
  For the Quarter Ended December 31, 2009Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    424,660
    
    
    $
    
    
    
    $
    
    
    
    $
    424,660Premium revenue
    
    
    
    
    
    
    204,297
    
    
    
    
    
    
    
    204,297Revenue between segments
    
    
    2,676
    
    
    
    
    
    
    
    (2,676
    )
    
    
    Net revenue
    
    
    427,336
    
    
    
    204,297
    
    
    
    (2,676
    )
    
    
    628,957Salaries and benefits
    
    
    165,890
    
    
    
    4,592
    
    
    
    
    
    
    
    170,482Supplies
    
    
    65,362
    
    
    
    47
    
    
    
    
    
    
    
    65,409Medical claims
    
    
    
    
    
    
    181,243
    
    
    
    (2,676
    )
    
    
    178,567Other operating expenses
    
    
    78,325
    
    
    
    6,267
    
    
    
    
    
    
    
    84,592Provision for bad debts
    
    
    47,949
    
    
    
    
    
    
    
    
    
    
    
    47,949Rentals and leases
    
    
    9,904
    
    
    
    371
    
    
    
    
    
    
    
    10,275Adjusted EBITDA(1)
    
    
    59,906
    
    
    
    11,777
    
    
    
    
    
    
    
    71,683Interest expense, net
    
    
    16,732
    
    
    
    
    
    
    
    
    
    
    
    16,732Depreciation and amortization
    
    
    22,988
    
    
    
    889
    
    
    
    
    
    
    
    23,877Management fees
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Earnings from continuing
operations before gain on
disposal of assets and income
taxes
    
    
    18,936
    
    
    
    10,888
    
    
    
    
    
    
    
    29,824Gain on disposal of assets, net
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    104Earnings from continuing
operations before income
taxes
    
    $
    19,040
    
    
    $
    10,888
    
    
    $
    
    
    
    $
    29,928Segment assets
    
    $
    2,085,057
    
    
    $
    249,311
    
    
    
    
    
    
    $
    2,334,368Capital expenditures
    
    $
    12,272
    
    
    $
    10
    
    
    
    
    
    
    $
    12,282Goodwill
    
    $
    712,163
    
    
    $
    5,757
    
    
    
    
    
    
    $
    717,920
 For the Quarter Ended December 31, 2008Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    398,447
    
    
    $
    
    
    
    $
    
    
    
    $
    398,447Premium revenue
    
    
    
    
    
    
    163,177
    
    
    
    
    
    
    
    163,177Revenue between segments
    
    
    1,697
    
    
    
    
    
    
    
    (1,697
    )
    
    
    Net revenue
    
    
    400,144
    
    
    
    163,177
    
    
    
    (1,697
    )
    
    
    561,624Salaries and benefits
    
    
    157,232
    
    
    
    4,904
    
    
    
    
    
    
    
    162,136Supplies
    
    
    59,741
    
    
    
    85
    
    
    
    
    
    
    
    59,826Medical claims
    
    
    
    
    
    
    138,699
    
    
    
    (1,697
    )
    
    
    137,002Other operating expenses
    
    
    73,785
    
    
    
    5,565
    
    
    
    
    
    
    
    79,350Provision for bad debts
    
    
    47,131
    
    
    
    
    
    
    
    
    
    
    
    47,131Rentals and leases
    
    
    9,101
    
    
    
    378
    
    
    
    
    
    
    
    9,479Adjusted EBITDA(1)
    
    
    53,154
    
    
    
    13,546
    
    
    
    
    
    
    
    66,700Interest expense, net
    
    
    18,978
    
    
    
    
    
    
    
    
    
    
    
    18,978Depreciation and amortization
    
    
    24,125
    
    
    
    871
    
    
    
    
    
    
    
    24,996Management fees
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Earnings from continuing
operations before gain on
disposal of assets and income
taxes
    
    
    8,801
    
    
    
    12,675
    
    
    
    
    
    
    
    21,476Gain on disposal of assets, net
    
    
    1,293
    
    
    
    
    
    
    
    
    
    
    
    1,293Earnings from continuing
operations before income
taxes
    
    $
    10,094
    
    
    $
    12,675
    
    
    $
    
    
    
    $
    22,769Segment assets
    
    $
    2,121,659
    
    
    $
    208,895
    
    
    
    
    
    
    $
    2,330,554Capital expenditures
    
    $
    28,818
    
    
    $
    634
    
    
    
    
    
    
    $
    29,452Goodwill
    
    $
    774,806
    
    
    $
    5,757
    
    
    
    
    
    
    $
    780,563
  13




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(1)
    
    Adjusted EBITDA represents net earnings from continuing operations before interest expense,
income tax expense, depreciation and amortization, gain 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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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
    
    $
    
    
    
    $
    196,878
    
    
    $
    197
    
    
    $
    
    
    
    $
    197,075Accounts receivable, net
    
    
    
    
    
    
    91,814
    
    
    
    142,988
    
    
    
    
    
    
    
    234,802Inventories
    
    
    
    
    
    
    22,701
    
    
    
    28,852
    
    
    
    
    
    
    
    51,553Deferred income taxes
    
    
    37,768
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,768Prepaid expenses and other
current assets
    
    
    
    
    
    
    18,635
    
    
    
    25,272
    
    
    
    
    
    
    
    43,907Total current assets
    
    
    37,768
    
    
    
    330,028
    
    
    
    197,309
    
    
    
    
    
    
    
    565,105Property and equipment, net
    
    
    
    
    
    
    343,768
    
    
    
    642,714
    
    
    
    
    
    
    
    986,482Intercompany
    
    
    
    
    
    
    (221,597
    )
    
    
    221,597
    
    
    
    
    
    
    
    Net investment in and advances
to subsidiaries
    
    
    1,653,990
    
    
    
    
    
    
    
    
    
    
    
    (1,653,990
    )
    
    
    Goodwill
    
    
    17,331
    
    
    
    67,445
    
    
    
    633,144
    
    
    
    
    
    
    
    717,920Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    29,250
    
    
    
    
    
    
    
    29,250Other assets, net
    
    
    14,407
    
    
    
    17,248
    
    
    
    3,956
    
    
    
    
    
    
    
    35,611Total assets
    
    $
    1,723,496
    
    
    $
    536,892
    
    
    $
    1,727,970
    
    
    $
    (1,653,990
    )
    
    $
    2,334,368Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    20,892
    
    
    $
    45,574
    
    
    $
    
    
    
    $
    66,466Salaries and benefits payable
    
    
    
    
    
    
    16,622
    
    
    
    14,302
    
    
    
    
    
    
    
    30,924Accrued interest payable
    
    
    2,105
    
    
    
    (3,223
    )
    
    
    3,223
    
    
    
    
    
    
    
    2,105Medical claims payable
    
    
    
    
    
    
    
    
    
    
    111,325
    
    
    
    
    
    
    
    111,325Other accrued expenses and
other current liabilities
    
    
    
    
    
    
    37,724
    
    
    
    18,162
    
    
    
    
    
    
    
    55,886Current portion of long-term
debt and capital lease
obligations
    
    
    5,890
    
    
    
    793
    
    
    
    20,728
    
    
    
    (20,728
    )
    
    
    6,683Total current liabilities
    
    
    7,995
    
    
    
    72,808
    
    
    
    213,314
    
    
    
    (20,728
    )
    
    
    273,389Long-term debt and capital
lease obligations
    
    
    1,043,788
    
    
    
    5,915
    
    
    
    561,611
    
    
    
    (561,611
    )
    
    
    1,049,703Deferred income taxes
    
    
    108,704
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,704Other long-term liabilities
    
    
    
    
    
    
    50,080
    
    
    
    642
    
    
    
    
    
    
    
    50,722Total liabilities
    
    
    1,160,487
    
    
    
    128,803
    
    
    
    775,567
    
    
    
    (582,339
    )
    
    
    1,482,518Non-controlling interests with
redemption rights
    
    
    
    
    
    
    72,527
    
    
    
    
    
    
    
    
    
    
    
    72,527Equity:Members equity
    
    
    563,009
    
    
    
    325,154
    
    
    
    952,403
    
    
    
    (1,071,651
    )
    
    
    768,915Non-controlling interests
    
    
    
    
    
    
    10,408
    
    
    
    
    
    
    
    
    
    
    
    10,408Total equity
    
    
    563,009
    
    
    
    335,562
    
    
    
    952,403
    
    
    
    (1,071,651
    )
    
    
    779,323Total liabilities and equity
    
    $
    1,723,496
    
    
    $
    536,892
    
    
    $
    1,727,970
    
    
    $
    (1,653,990
    )
    
    $
    2,334,368
  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
    
    
    1,690,127
    
    
    
    
    
    
    
    
    
    
    
    (1,690,127
    )
    
    
    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
    
    $
    1,761,678
    
    
    $
    523,066
    
    
    $
    1,762,587
    
    
    $
    (1,690,127
    )
    
    $
    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
    
    
    590,051
    
    
    
    292,789
    
    
    
    970,625
    
    
    
    (1,102,533
    )
    
    
    750,932Non-controlling interests
    
    
    
    
    
    
    10,430
    
    
    
    
    
    
    
    
    
    
    
    10,430Total equity
    
    
    590,051
    
    
    
    303,219
    
    
    
    970,625
    
    
    
    (1,102,533
    )
    
    
    761,362Total liabilities and equity
    
    $
    1,761,678
    
    
    $
    523,066
    
    
    $
    1,762,587
    
    
    $
    (1,690,127
    )
    
    $
    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 revenue:Acute care revenue
    
    $
    
    
    
    $
    171,301
    
    
    $
    256,035
    
    
    $
    (2,676
    )
    
    $
    424,660Premium revenue
    
    
    
    
    
    
    
    
    
    
    204,297
    
    
    
    
    
    
    
    204,297Total net revenue
    
    
    
    
    
    
    171,301
    
    
    
    460,332
    
    
    
    (2,676
    )
    
    
    628,957Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    86,609
    
    
    
    83,873
    
    
    
    
    
    
    
    170,482Supplies
    
    
    
    
    
    
    27,438
    
    
    
    37,971
    
    
    
    
    
    
    
    65,409Medical claims
    
    
    
    
    
    
    
    
    
    
    181,243
    
    
    
    (2,676
    )
    
    
    178,567Other operating expenses
    
    
    
    
    
    
    29,889
    
    
    
    54,703
    
    
    
    
    
    
    
    84,592Provision for bad debts
    
    
    
    
    
    
    22,323
    
    
    
    25,626
    
    
    
    
    
    
    
    47,949Rentals and leases
    
    
    
    
    
    
    4,426
    
    
    
    5,849
    
    
    
    
    
    
    
    10,275Interest expense, net
    
    
    16,732
    
    
    
    
    
    
    
    9,744
    
    
    
    (9,744
    )
    
    
    16,732Depreciation and
amortization
    
    
    
    
    
    
    9,910
    
    
    
    13,967
    
    
    
    
    
    
    
    23,877Management fees
    
    
    1,250
    
    
    
    (5,564
    )
    
    
    5,564
    
    
    
    
    
    
    
    1,250Equity in earnings of
affiliates
    
    
    (36,212
    )
    
    
    
    
    
    
    
    
    
    
    36,212
    
    
    
    Total costs and expenses
    
    
    (18,230
    )
    
    
    175,031
    
    
    
    418,540
    
    
    
    23,792
    
    
    
    599,133Earnings (loss) from
continuing operations before
gain on disposal of assets and
income taxes
    
    
    18,230
    
    
    
    (3,730
    )
    
    
    41,792
    
    
    
    (26,468
    )
    
    
    29,824Gain on disposal of assets, net
    
    
    
    
    
    
    76
    
    
    
    28
    
    
    
    
    
    
    
    104Earnings (loss) from
continuing operations before
income taxes
    
    
    18,230
    
    
    
    (3,654
    )
    
    
    41,820
    
    
    
    (26,468
    )
    
    
    29,928Income tax expense
    
    
    10,591
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,591Net earnings (loss) from
continuing operations
    
    
    7,639
    
    
    
    (3,654
    )
    
    
    41,820
    
    
    
    (26,468
    )
    
    
    19,337Earnings (loss) from
discontinued operations, net
of income taxes
    
    
    (28
    )
    
    
    75
    
    
    
    (1
    )
    
    
    
    
    
    
    46Net earnings (loss)
    
    
    7,611
    
    
    
    (3,579
    )
    
    
    41,819
    
    
    
    (26,468
    )
    
    
    19,383Net earnings attributable to
non-controlling interests
    
    
    
    
    
    
    (2,028
    )
    
    
    
    
    
    
    
    
    
    
    (2,028
    )Net earnings (loss)
attributable to IASIS
Healthcare LLC
    
    $
    7,611
    
    
    $
    (5,607
    )
    
    $
    41,819
    
    
    $
    (26,468
    )
    
    $
    17,355
  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 revenue:Acute care revenue
    
    $
    
    
    
    $
    161,758
    
    
    $
    238,386
    
    
    $
    (1,697
    )
    
    $
    398,447Premium revenue
    
    
    
    
    
    
    
    
    
    
    163,177
    
    
    
    
    
    
    
    163,177Total net revenue
    
    
    
    
    
    
    161,758
    
    
    
    401,563
    
    
    
    (1,697
    )
    
    
    561,624Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    80,594
    
    
    
    81,542
    
    
    
    
    
    
    
    162,136Supplies
    
    
    
    
    
    
    25,074
    
    
    
    34,752
    
    
    
    
    
    
    
    59,826Medical claims
    
    
    
    
    
    
    
    
    
    
    138,699
    
    
    
    (1,697
    )
    
    
    137,002Other operating expenses
    
    
    
    
    
    
    29,098
    
    
    
    50,252
    
    
    
    
    
    
    
    79,350Provision for bad debts
    
    
    
    
    
    
    24,080
    
    
    
    23,051
    
    
    
    
    
    
    
    47,131Rentals and leases
    
    
    
    
    
    
    4,047
    
    
    
    5,432
    
    
    
    
    
    
    
    9,479Interest expense, net
    
    
    18,978
    
    
    
    
    
    
    
    13,844
    
    
    
    (13,844
    )
    
    
    18,978Depreciation and
amortization
    
    
    
    
    
    
    11,268
    
    
    
    13,728
    
    
    
    
    
    
    
    24,996Management fees
    
    
    1,250
    
    
    
    (5,139
    )
    
    
    5,139
    
    
    
    
    
    
    
    1,250Equity in earnings of
affiliates
    
    
    (26,421
    )
    
    
    
    
    
    
    
    
    
    
    26,421
    
    
    
    Total costs and expenses
    
    
    (6,193
    )
    
    
    169,022
    
    
    
    366,439
    
    
    
    10,880
    
    
    
    540,148Earnings (loss) from
continuing operations before
gain on disposal of assets and
income taxes
    
    
    6,193
    
    
    
    (7,264
    )
    
    
    35,124
    
    
    
    (12,577
    )
    
    
    21,476Gain on disposal of assets, net
    
    
    
    
    
    
    1,271
    
    
    
    22
    
    
    
    
    
    
    
    1,293Earnings (loss) from
continuing operations before
income taxes
    
    
    6,193
    
    
    
    (5,993
    )
    
    
    35,146
    
    
    
    (12,577
    )
    
    
    22,769Income tax expense
    
    
    8,811
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,811Net earnings (loss) from
continuing operations
    
    
    (2,618
    )
    
    
    (5,993
    )
    
    
    35,146
    
    
    
    (12,577
    )
    
    
    13,958Earnings (loss) from
discontinued operations, net
of income taxes
    
    
    424
    
    
    
    (1,150
    )
    
    
    15
    
    
    
    
    
    
    
    (711
    )Net earnings
    
    
    (2,194
    )
    
    
    (7,143
    )
    
    
    35,161
    
    
    
    (12,577
    )
    
    
    13,247Net earnings attributable to
non-controlling interests
    
    
    
    
    
    
    (1,597
    )
    
    
    
    
    
    
    
    
    
    
    (1,597
    )Net earnings (loss)
attributable to IASIS
Healthcare LLC
    
    $
    (2,194
    )
    
    $
    (8,740
    )
    
    $
    35,161
    
    
    $
    (12,577
    )
    
    $
    11,650
  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
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    9,639
    
    
    $
    (3,579
    )
    
    $
    41,819
    
    
    $
    (28,496
    )
    
    $
    19,383Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating
activities:Loss (earnings) from discontinued
operations
    
    
    28
    
    
    
    (75
    )
    
    
    1
    
    
    
    
    
    
    
    (46
    )Depreciation and amortization
    
    
    
    
    
    
    9,910
    
    
    
    13,967
    
    
    
    
    
    
    
    23,877Amortization of loan costs
    
    
    775
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    775Deferred income taxes
    
    
    2,652
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,652Income tax benefit from parent company
interest
    
    
    2,224
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,224Gain on disposal of assets, net
    
    
    
    
    
    
    (76
    )
    
    
    (28
    )
    
    
    
    
    
    
    (104
    )Stock compensation costs
    
    
    121
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121Equity in earnings of affiliates
    
    
    (38,240
    )
    
    
    
    
    
    
    
    
    
    
    38,240
    
    
    
    Changes in operating assets and
liabilities, net of the effect of
dispositions:Accounts receivable, net
    
    
    
    
    
    
    (659
    )
    
    
    (3,673
    )
    
    
    
    
    
    
    (4,332
    )Inventories, prepaid expenses and
other current assets
    
    
    
    
    
    
    (3,409
    )
    
    
    7,895
    
    
    
    
    
    
    
    4,486Accounts payable, other accrued
expenses and other accrued liabilities
    
    
    (10,406
    )
    
    
    (13,783
    )
    
    
    (15,184
    )
    
    
    
    
    
    
    (39,373
    )Net cash provided by (used in) operating
activities  continuing operations
    
    
    (33,207
    )
    
    
    (11,671
    )
    
    
    44,797
    
    
    
    9,744
    
    
    
    9,663Net cash provided by (used in) operating
activities  discontinued operations
    
    
    (28
    )
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    (125
    )Net cash provided by (used in) operating
activities
    
    
    (33,235
    )
    
    
    (11,768
    )
    
    
    44,797
    
    
    
    9,744
    
    
    
    9,538Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (5,620
    )
    
    
    (6,662
    )
    
    
    
    
    
    
    (12,282
    )Proceeds from sale of assets
    
    
    
    
    
    
    3
    
    
    
    28
    
    
    
    
    
    
    
    31Change in other assets, net
    
    
    
    
    
    
    414
    
    
    
    245
    
    
    
    
    
    
    
    659Net cash used in investing activities
    
    
    
    
    
    
    (5,203
    )
    
    
    (6,389
    )
    
    
    
    
    
    
    (11,592
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (3,016
    )
    
    
    (34
    )
    
    
    (402
    )
    
    
    
    
    
    
    (3,452
    )Distribution to non-controlling interests
    
    
    
    
    
    
    (66
    )
    
    
    (3,868
    )
    
    
    
    
    
    
    (3,934
    )Costs paid for partnership interests, net
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )Change in intercompany balances with
affiliates, net
    
    
    36,251
    
    
    
    7,631
    
    
    
    (34,138
    )
    
    
    (9,744
    )
    
    
    Net cash provided by (used in) financing
activities
    
    
    33,235
    
    
    
    7,518
    
    
    
    (38,408
    )
    
    
    (9,744
    )
    
    
    (7,399
    )Decrease in cash and cash equivalents
    
    
    
    
    
    
    (9,453
    )
    
    
    
    
    
    
    
    
    
    
    (9,453
    )Cash and cash equivalents at beginning of
period
    
    
    
    
    
    
    206,331
    
    
    
    197
    
    
    
    
    
    
    
    206,528Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    196,878
    
    
    $
    197
    
    
    $
    
    
    
    $
    197,075
  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
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    (2,194
    )
    
    $
    (7,143
    )
    
    $
    35,161
    
    
    $
    (12,577
    )
    
    $
    13,247Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating
activities:Loss (earnings) from discontinued
operations
    
    
    (424
    )
    
    
    1,150
    
    
    
    (15
    )
    
    
    
    
    
    
    711Depreciation and amortization
    
    
    
    
    
    
    11,268
    
    
    
    13,728
    
    
    
    
    
    
    
    24,996Amortization of loan costs
    
    
    743
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    743Deferred income taxes
    
    
    1,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,050Gain on disposal of assets, net
    
    
    
    
    
    
    (1,271
    )
    
    
    (22
    )
    
    
    
    
    
    
    (1,293
    )Stock compensation costs
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141Equity in earnings of affiliates
    
    
    (26,421
    )
    
    
    
    
    
    
    
    
    
    
    26,421
    
    
    
    Changes in operating assets and
liabilities, net of the effect of
dispositions:Accounts receivable, net
    
    
    
    
    
    
    (2,670
    )
    
    
    (6,054
    )
    
    
    
    
    
    
    (8,724
    )Inventories, prepaid expenses and
other current assets
    
    
    
    
    
    
    (1,160
    )
    
    
    21
    
    
    
    
    
    
    
    (1,139
    )Accounts payable, other accrued
expenses and other accrued liabilities
    
    
    (10,199
    )
    
    
    14,973
    
    
    
    7,777
    
    
    
    
    
    
    
    12,551Net cash provided by (used in) operating
activities  continuing operations
    
    
    (37,304
    )
    
    
    15,147
    
    
    
    50,596
    
    
    
    13,844
    
    
    
    42,283Net cash provided by (used in) operating
activities  discontinued operations
    
    
    (424
    )
    
    
    1,544
    
    
    
    (116
    )
    
    
    
    
    
    
    1,004Net cash provided by (used in) operating
activities
    
    
    (37,728
    )
    
    
    16,691
    
    
    
    50,480
    
    
    
    13,844
    
    
    
    43,287Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (6,654
    )
    
    
    (22,798
    )
    
    
    
    
    
    
    (29,452
    )Proceeds from sale of assets
    
    
    
    
    
    
    2,650
    
    
    
    2,230
    
    
    
    
    
    
    
    4,880Change in other assets, net
    
    
    
    
    
    
    (597
    )
    
    
    1,475
    
    
    
    
    
    
    
    878Net cash used in investing activities 
continuing operations
    
    
    
    
    
    
    (4,601
    )
    
    
    (19,093
    )
    
    
    
    
    
    
    (23,694
    )Net cash provided by investing activities
 discontinued operations
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Net cash used in investing activities
    
    
    
    
    
    
    (4,594
    )
    
    
    (19,093
    )
    
    
    
    
    
    
    (23,687
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (3,734
    )
    
    
    (149
    )
    
    
    (546
    )
    
    
    
    
    
    
    (4,429
    )Distribution to non-controlling interests
    
    
    
    
    
    
    (80
    )
    
    
    (1,606
    )
    
    
    
    
    
    
    (1,686
    )Costs paid for partnership interests, net
    
    
    
    
    
    
    (1,384
    )
    
    
    
    
    
    
    
    
    
    
    (1,384
    )Change in intercompany balances with
affiliates, net
    
    
    41,462
    
    
    
    1,356
    
    
    
    (28,974
    )
    
    
    (13,844
    )
    
    
    Net cash provided by (used in) financing
activities  continuing operations
    
    
    37,728
    
    
    
    (257
    )
    
    
    (31,126
    )
    
    
    (13,844
    )
    
    
    (7,499
    )Net cash provided by financing activities
 discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) financing
activities
    
    
    37,728
    
    
    
    (257
    )
    
    
    (31,126
    )
    
    
    (13,844
    )
    
    
    (7,499
    )Increase in cash and cash equivalents
    
    
    
    
    
    
    11,840
    
    
    
    261
    
    
    
    
    
    
    
    12,101Cash and cash equivalents at beginning of
period
    
    
    
    
    
    
    80,336
    
    
    
    402
    
    
    
    
    
    
    
    80,738Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    92,176
    
    
    $
    663
    
    
    $
    
    
    
    $
    92,839
 10. SUBSEQUENT EVENT
   20




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  FORWARD LOOKING STATEMENTS
 qui tam
   21




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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.
  Revenue and Volume Trends
  Acute Care Revenue
    22




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##### Table of Contents



QuarterEnded December 31,2009
    
    
    2008Medicare
    
    
    30.4
    %
    
    
    31.8
    %Managed Medicare
    
    
    11.2
    %
    
    
    10.8
    %Medicaid
    
    
    8.9
    %
    
    
    7.7
    %Managed Medicaid
    
    
    11.9
    %
    
    
    10.7
    %Managed care
and other
    
    
    32.8
    %
    
    
    33.9
    %Self-pay
    
    
    4.8
    %
    
    
    5.1
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
     23




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##### Table of Contents



Premium Revenue
    Significant Industry Trends
   24




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##### Table of Contents



General Economic Environment
  Value-Based Reimbursement
       25




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##### Table of Contents



Physician Integration
    Growth in Uncompensated Care
   December 31,
    
    
    September 30,2009
    
    
    2009Insured receivables
    
    
    62.9
    %
    
    
    62.0
    %Uninsured receivables
    
    
    37.1
    %
    
    
    38.0
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
   26




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##### Table of Contents



December 31,
    
    
    September 30,2009
    
    
    20090 to 90 days
    
    
    69.3
    %
    
    
    69.4
    %91 to 180 days
    
    
    17.8
    %
    
    
    18.1
    %Over 180 days
    
    
    12.9
    %
    
    
    12.5
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  SELECTED OPERATING DATA
  QuarterEnded December 31,2009
    
    
    2008Acute Care:Number of acute care hospital facilities at end of period
    
    
    15
    
    
    
    15Beds in service at end of period (1)
    
    
    2,848
    
    
    
    2,659Average length of stay (days) (2)
    
    
    4.8
    
    
    
    4.7Occupancy rates (average beds in service)
    
    
    46.0
    %
    
    
    46.5
    %Admissions (3)
    
    
    25,253
    
    
    
    24,150Adjusted admissions (4)
    
    
    42,067
    
    
    
    40,734Patient days (5)
    
    
    120,551
    
    
    
    113,697Adjusted patient days (4)
    
    
    193,223
    
    
    
    183,831Net patient revenue per adjusted admission
    
    $
    10,026
    
    
    $
    9,667Health Choice:Medicaid covered lives
    
    
    194,195
    
    
    
    161,511Dual-eligible lives (6)
    
    
    3,997
    
    
    
    3,356Medical loss ratio (7)
    
    
    88.7
    %
    
    
    85.0
    %
 (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.  27




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##### Table of Contents



RESULTS OF OPERATIONS SUMMARY
 Consolidated
  Quarter Ended
    
    
    Quarter EndedDecember 31, 2009
    
    
    December 31, 2008($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    424,660
    
    
    
    67.5
    %
    
    $
    398,447
    
    
    
    70.9
    %Premium revenue
    
    
    204,297
    
    
    
    32.5
    %
    
    
    163,177
    
    
    
    29.1
    %Total net revenue
    
    
    628,957
    
    
    
    100.0
    %
    
    
    561,624
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    170,482
    
    
    
    27.1
    %
    
    
    162,136
    
    
    
    28.9
    %Supplies
    
    
    65,409
    
    
    
    10.4
    %
    
    
    59,826
    
    
    
    10.7
    %Medical claims
    
    
    178,567
    
    
    
    28.4
    %
    
    
    137,002
    
    
    
    24.4
    %Other operating expenses
    
    
    84,592
    
    
    
    13.4
    %
    
    
    79,350
    
    
    
    14.1
    %Provision for bad debts
    
    
    47,949
    
    
    
    7.6
    %
    
    
    47,131
    
    
    
    8.4
    %Rentals and leases
    
    
    10,275
    
    
    
    1.7
    %
    
    
    9,479
    
    
    
    1.7
    %Interest expense, net
    
    
    16,732
    
    
    
    2.7
    %
    
    
    18,978
    
    
    
    3.4
    %Depreciation and amortization
    
    
    23,877
    
    
    
    3.8
    %
    
    
    24,996
    
    
    
    4.4
    %Management fees
    
    
    1,250
    
    
    
    0.2
    %
    
    
    1,250
    
    
    
    0.2
    %Total costs and expenses
    
    
    599,133
    
    
    
    95.3
    %
    
    
    540,148
    
    
    
    96.2
    %Earnings from continuing operations
before gain on disposal of assets and
income taxes
    
    
    29,824
    
    
    
    4.7
    %
    
    
    21,476
    
    
    
    3.8
    %Gain on disposal of assets, net
    
    
    104
    
    
    
    0.1
    %
    
    
    1,293
    
    
    
    0.2
    %Earnings from continuing operations
before income taxes
    
    
    29,928
    
    
    
    4.8
    %
    
    
    22,769
    
    
    
    4.0
    %Income tax expense
    
    
    10,591
    
    
    
    1.7
    %
    
    
    8,811
    
    
    
    1.6
    %Net earnings from continuing operations
    
    
    19,337
    
    
    
    3.1
    %
    
    
    13,958
    
    
    
    2.4
    %Earnings (loss) from discontinued
operations, net of income taxes
    
    
    46
    
    
    
    0.0
    %
    
    
    (711
    )
    
    
    (0.1
    )%Net earnings
    
    
    19,383
    
    
    
    3.1
    %
    
    
    13,247
    
    
    
    2.3
    %Net earnings attributable to
non-controlling interests
    
    
    (2,028
    )
    
    
    (0.3
    )%
    
    
    (1,597
    )
    
    
    (0.2
    )%Net earnings attributable to IASIS
Healthcare LLC
    
    $
    17,355
    
    
    
    2.8
    %
    
    $
    11,650
    
    
    
    2.1
    %
  Income tax expense
  28




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##### Table of Contents



Acute Care
  Quarter Ended
    
    
    Quarter EndedDecember 31, 2009
    
    
    December 31, 2008($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    424,660
    
    
    
    99.4
    %
    
    $
    398,447
    
    
    
    99.6
    %Revenue between segments (1)
    
    
    2,676
    
    
    
    0.6
    %
    
    
    1,697
    
    
    
    0.4
    %Total net revenue
    
    
    427,336
    
    
    
    100.0
    %
    
    
    400,144
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    165,890
    
    
    
    38.8
    %
    
    
    157,232
    
    
    
    39.3
    %Supplies
    
    
    65,362
    
    
    
    15.3
    %
    
    
    59,741
    
    
    
    14.9
    %Other operating expenses
    
    
    78,325
    
    
    
    18.3
    %
    
    
    73,785
    
    
    
    18.4
    %Provision for bad debts
    
    
    47,949
    
    
    
    11.2
    %
    
    
    47,131
    
    
    
    11.8
    %Rentals and leases
    
    
    9,904
    
    
    
    2.4
    %
    
    
    9,101
    
    
    
    2.3
    %Interest expense, net
    
    
    16,732
    
    
    
    3.9
    %
    
    
    18,978
    
    
    
    4.8
    %Depreciation and amortization
    
    
    22,988
    
    
    
    5.4
    %
    
    
    24,125
    
    
    
    6.0
    %Management fees
    
    
    1,250
    
    
    
    0.3
    %
    
    
    1,250
    
    
    
    0.3
    %Total costs and expenses
    
    
    408,400
    
    
    
    95.6
    %
    
    
    391,343
    
    
    
    97.8
    %Earnings from continuing
operations before gain on
disposal of assets and income
taxes
    
    
    18,936
    
    
    
    4.4
    %
    
    
    8,801
    
    
    
    2.2
    %Gain on disposal of assets, net
    
    
    104
    
    
    
    0.1
    %
    
    
    1,293
    
    
    
    0.3
    %Earnings from continuing
operations before income taxes
    
    $
    19,040
    
    
    
    4.5
    %
    
    $
    10,094
    
    
    
    2.5
    %
 (1)
    
    Revenue between segments is eliminated in our consolidated results. Acute care revenue
  Salaries and benefits
 Supplies
  29




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##### Table of Contents



Provision for bad debts
 Interest expense, net
 Health Choice
  Quarter Ended
    
    
    Quarter EndedDecember 31, 2009
    
    
    December 31, 2008($ in thousands)
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageRevenue:Premium revenue
    
    $
    204,297
    
    
    
    100.0
    %
    
    $
    163,177
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    4,592
    
    
    
    2.2
    %
    
    
    4,904
    
    
    
    3.0
    %Supplies
    
    
    47
    
    
    
    0.0
    %
    
    
    85
    
    
    
    0.1
    %Medical claims (1)
    
    
    181,243
    
    
    
    88.7
    %
    
    
    138,699
    
    
    
    85.0
    %Other operating expenses
    
    
    6,267
    
    
    
    3.1
    %
    
    
    5,565
    
    
    
    3.4
    %Rentals and leases
    
    
    371
    
    
    
    0.2
    %
    
    
    378
    
    
    
    0.2
    %Depreciation and amortization
    
    
    889
    
    
    
    0.5
    %
    
    
    871
    
    
    
    0.5
    %Total costs and expenses
    
    
    193,409
    
    
    
    94.7
    %
    
    
    150,502
    
    
    
    92.2
    %Earnings before income taxes
    
    $
    10,888
    
    
    
    5.3
    %
    
    $
    12,675
    
    
    
    7.8
    %
 (1)
    
    Medical claims paid to our hospitals of $2.7 million and $1.7 million for the quarters ended
December 31, 2009 and 2008, respectively, are eliminated in our consolidated results. Premium revenue
 Medical claims
  30




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LIQUIDITY AND CAPITAL RESOURCES
 Overview of Cash Flow Activities for the Quarters Ended December 31, 2009 and 2008
  QuarterEnded December 31,2009
    
    
    2008Cash flow from operating activities
    
    $
    9,538
    
    
    $
    43,287Cash flow from investing activities
    
    
    (11,592
    )
    
    
    (23,687
    )Cash flow from financing activities
    
    
    (7,399
    )
    
    
    (7,499
    )
 Operating Activities
   Investing Activities
  Financing Activities
   31




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Capital Resources
 $854.0 Million Senior Secured Credit Facilities
       32




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##### Table of Contents



$475.0 Million 8 3 / 4 % Senior Subordinated Notes Due 2014
 3 4 3 4 3 4 3 4 3 4 3 4 3 4
 Holdings Senior PIK Loans
  Other
   Capital Expenditures
  
    
    $60.0 million to $65.0 million for other growth and new business projects;
    
    $45.0 million to $50.0 million in replacement or maintenance related projects at our
hospitals;
    
    $12.0 million related to healthcare IT stimulus funds; and
    
    $8.0 million in hardware and software costs related to other information systems projects.
 Liquidity
   33




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##### Table of Contents



Available cash and cash equivalents
    
    $
    197.1Available capacity under our senior secured revolving credit facility
    
    
    199.7Net available liquidity at December 31, 2009
    
    $
    396.8
    3 4
 3 4
 OFF-BALANCE SHEET ARRANGEMENTS
    34




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SEASONALITY
  RECENT ACCOUNTING PRONOUNCEMENTS
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
    3 4 3 4
   35




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluations of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 qui tam qui tam qui tam qui tam
  36




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##### Table of Contents



Item 1A. Risk Factors
  Healthcare
Reform and Other Changes In Governmental Programs May Significantly
Reduce Government Healthcare Spending And Our Revenue.
       Congress Is Considering And May Enact Legislation That Would Impose Significant Restrictions On
Hospitals That Have Physician Owners, Including Our Hospitals That Have Physician Owners.
   
 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.
  37




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##### Table of Contents



SIGNATURES
  IASIS HEALTHCARE LLCDate: February 12, 2010
    By:
    /s/ John M. DoyleJohn M. DoyleChief Accounting Officer  38




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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.
  39