##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  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
 x o
  o o x o
 o x




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TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets  December 31, 2007
(Unaudited) and September 30, 2007
    
    
    1Condensed Consolidated Statements of Operations (Unaudited) 
Quarters Ended December 31, 2007 and 2006
    
    
    2Condensed Consolidated Statements of Cash Flows (Unaudited) 
Quarters Ended December 31, 2007 and 2006
    
    
    3Notes to Condensed Consolidated Financial Statements
(Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    35Item 4T. Controls and Procedures
    
    
    35PART II. OTHER INFORMATION
    
    
    37Item 6. Exhibits
    
    
    37Ex-31.1 Section 302 Certification of the PEO.Ex-31.2 Section 302 Certification of the PFO.
  i




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PART I.
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In Thousands)
 December 31,
    
    
    September 30,2007
    
    
    2007(Unaudited)ASSETSCurrent assets:Accounts receivable, net
    
    $
    247,663
    
    
    $
    248,281Inventories
    
    
    45,152
    
    
    
    43,697Deferred income taxes
    
    
    39,168
    
    
    
    29,629Prepaid expenses and other current assets
    
    
    43,594
    
    
    
    45,023Total current assets
    
    
    375,577
    
    
    
    366,630Property and equipment, net
    
    
    988,433
    
    
    
    980,437Goodwill
    
    
    756,593
    
    
    
    756,593Other intangible assets, net
    
    
    35,250
    
    
    
    36,000Other assets, net
    
    
    45,311
    
    
    
    46,762Total assets
    
    $
    2,201,164
    
    
    $
    2,186,422LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Accounts payable
    
    $
    76,847
    
    
    $
    98,488Salaries and benefits payable
    
    
    47,116
    
    
    
    40,124Accrued interest payable
    
    
    8,439
    
    
    
    18,865Medical claims payable
    
    
    82,489
    
    
    
    81,309Other accrued expenses and other current liabilities
    
    
    39,351
    
    
    
    44,276Current portion of long-term debt and capital lease obligations
    
    
    7,368
    
    
    
    8,036Total current liabilities
    
    
    261,610
    
    
    
    291,098Long-term debt and capital lease obligations
    
    
    1,050,016
    
    
    
    1,023,621Deferred income taxes
    
    
    99,503
    
    
    
    93,402Other long-term liabilities
    
    
    50,554
    
    
    
    50,831Minority interests
    
    
    37,311
    
    
    
    35,956Members equity
    
    
    702,170
    
    
    
    691,514Total liabilities and members equity
    
    $
    2,201,164
    
    
    $
    2,186,422
  1




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (In Thousands)
 Quarter
EndedDecember 31,2007
    
    
    2006Net revenue:Acute care revenue
    
    $
    385,467
    
    
    $
    309,048Premium revenue
    
    
    126,627
    
    
    
    107,786Total net revenue
    
    
    512,094
    
    
    
    416,834Costs and expenses:Salaries and benefits
    
    
    163,626
    
    
    
    125,394Supplies
    
    
    60,139
    
    
    
    47,245Medical claims
    
    
    102,880
    
    
    
    89,695Other operating expenses
    
    
    70,189
    
    
    
    60,858Provision for bad debts
    
    
    40,597
    
    
    
    31,748Rentals and leases
    
    
    9,760
    
    
    
    8,450Interest expense, net
    
    
    21,804
    
    
    
    17,286Depreciation and amortization
    
    
    23,155
    
    
    
    16,907Management fees
    
    
    1,187
    
    
    
    1,047Business interruption insurance recoveries
    
    
    
    
    
    
    (1,918
    )Total costs and expenses
    
    
    493,337
    
    
    
    396,712Earnings before gain (loss) on disposal of
assets, minority interests and income taxes
    
    
    18,757
    
    
    
    20,122Gain (loss) on disposal of assets, net
    
    
    62
    
    
    
    (1,537
    )Minority interests
    
    
    (758
    )
    
    
    (1,341
    )Earnings before income taxes
    
    
    18,061
    
    
    
    17,244Income tax expense
    
    
    7,346
    
    
    
    6,661Net earnings
    
    $
    10,715
    
    
    $
    10,583
  2




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 (In Thousands)
 Quarter
EndedDecember 31,2007
    
    
    2006Cash flows from operating activitiesNet earnings
    
    $
    10,715
    
    
    $
    10,583Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation and amortization
    
    
    23,155
    
    
    
    16,907Amortization of loan costs
    
    
    718
    
    
    
    753Minority interests
    
    
    758
    
    
    
    1,341Deferred income taxes
    
    
    6,233
    
    
    
    5,504Loss (gain) on disposal of assets, net
    
    
    (62
    )
    
    
    1,537Changes in operating assets and liabilities:Accounts receivable, net
    
    
    618
    
    
    
    (3,360
    )Inventories, prepaid expenses and other current assets
    
    
    (1,148
    )
    
    
    (304
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    (38,071
    )
    
    
    (12,986
    )Net cash provided by operating activities
    
    
    2,916
    
    
    
    19,975Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    (30,896
    )
    
    
    (43,800
    )Proceeds from sale of assets
    
    
    349
    
    
    
    Change in other assets, net
    
    
    1,308
    
    
    
    1,489Net cash used in investing activities
    
    
    (29,239
    )
    
    
    (42,311
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (105,574
    )
    
    
    (1,932
    )Proceeds from debt borrowings
    
    
    131,300
    
    
    
    Distribution of minority interests
    
    
    (1,669
    )
    
    
    (1,240
    )Proceeds received from sale of partnership interests
    
    
    2,266
    
    
    
    200Net cash provided by (used in) financing activities
    
    
    26,323
    
    
    
    (2,972
    )Change in cash and cash equivalents
    
    
    
    
    
    
    (25,308
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    95,415Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    70,107Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    31,777
    
    
    $
    29,326Cash paid for income taxes, net
    
    $
    31
    
    
    $
    316
  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.
        4




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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 30,2007
    
    
    2007Senior secured credit facilities
    
    $
    574,808
    
    
    $
    547,805Senior subordinated notes
    
    
    475,000
    
    
    
    475,000Capital lease and other obligations
    
    
    7,576
    
    
    
    8,8521,057,384
    
    
    
    1,031,657Less current maturities
    
    
    7,368
    
    
    
    8,036$
    1,050,016
    
    
    $
    1,023,621
 Senior Secured Credit Facilities
      5




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  8 3/4% Senior Subordinated Notes
  $300.0 Million Holdings Senior Paid-in-Kind Loans
  3. MINIMUM REVENUE GUARANTEES
     6




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 4. INCOME TAXES
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No.
109
    5. CONTINGENCIES
 Net Revenue
  Professional, General and Workers Compensation Liability Risks
  7




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   Health Choice
  Capital Expenditure Commitments
  8




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Acquisitions
  Other
 qui tam qui tam
 qui tam qui tam qui tam qui tam qui tam
 qui tam
 6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
 9




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 7. SEGMENT AND GEOGRAPHIC INFORMATION
  For the Quarter Ended December 31, 2007Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    385,467
    
    
    $
    
    
    
    $
    
    
    
    $
    385,467Premium revenue
    
    
    
    
    
    
    126,627
    
    
    
    
    
    
    
    126,627Revenue between segments
    
    
    3,330
    
    
    
    
    
    
    
    (3,330
    )
    
    
    Net revenue
    
    
    388,797
    
    
    
    126,627
    
    
    
    (3,330
    )
    
    
    512,094Salaries and benefits
    
    
    159,583
    
    
    
    4,043
    
    
    
    
    
    
    
    163,626Supplies
    
    
    60,062
    
    
    
    77
    
    
    
    
    
    
    
    60,139Medical claims
    
    
    
    
    
    
    106,210
    
    
    
    (3,330
    )
    
    
    102,880Other operating expenses
    
    
    65,717
    
    
    
    4,472
    
    
    
    
    
    
    
    70,189Provision for bad debts
    
    
    40,597
    
    
    
    
    
    
    
    
    
    
    
    40,597Rentals and leases
    
    
    9,475
    
    
    
    285
    
    
    
    
    
    
    
    9,760Adjusted EBITDA(1)
    
    
    53,363
    
    
    
    11,540
    
    
    
    
    
    
    
    64,903Interest expense, net
    
    
    21,804
    
    
    
    
    
    
    
    
    
    
    
    21,804Depreciation and amortization
    
    
    22,260
    
    
    
    895
    
    
    
    
    
    
    
    23,155Management fees
    
    
    1,187
    
    
    
    
    
    
    
    
    
    
    
    1,187Earnings before gain on disposal
of assets, minority interests and
income taxes
    
    
    8,112
    
    
    
    10,645
    
    
    
    
    
    
    
    18,757Gain on disposal of assets, net
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    62Minority interests
    
    
    (758
    )
    
    
    
    
    
    
    
    
    
    
    (758
    )Earnings before income taxes
    
    $
    7,416
    
    
    $
    10,645
    
    
    $
    
    
    
    $
    18,061Segment assets
    
    $
    2,042,785
    
    
    $
    158,379
    
    
    
    
    
    
    $
    2,201,164Capital expenditures
    
    $
    30,800
    
    
    $
    96
    
    
    
    
    
    
    $
    30,896Goodwill
    
    $
    750,836
    
    
    $
    5,757
    
    
    
    
    
    
    $
    756,593
 10




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 For the Quarter Ended December 31, 2006Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    309,048
    
    
    $
    
    
    
    $
    
    
    
    $
    309,048Premium revenue
    
    
    
    
    
    
    107,786
    
    
    
    
    
    
    
    107,786Revenue between segments
    
    
    2,678
    
    
    
    
    
    
    
    (2,678
    )
    
    
    Net revenue
    
    
    311,726
    
    
    
    107,786
    
    
    
    (2,678
    )
    
    
    416,834Salaries and benefits
    
    
    121,983
    
    
    
    3,411
    
    
    
    
    
    
    
    125,394Supplies
    
    
    47,161
    
    
    
    84
    
    
    
    
    
    
    
    47,245Medical claims
    
    
    
    
    
    
    92,373
    
    
    
    (2,678
    )
    
    
    89,695Other operating expenses
    
    
    57,144
    
    
    
    3,714
    
    
    
    
    
    
    
    60,858Provision for bad debts
    
    
    31,748
    
    
    
    
    
    
    
    
    
    
    
    31,748Rentals and leases
    
    
    8,195
    
    
    
    255
    
    
    
    
    
    
    
    8,450Business interruption insurance recoveries
    
    
    (1,918
    )
    
    
    
    
    
    
    
    
    
    
    (1,918
    )Adjusted EBITDA(1)
    
    
    47,413
    
    
    
    7,949
    
    
    
    
    
    
    
    55,362Interest expense, net
    
    
    17,286
    
    
    
    
    
    
    
    
    
    
    
    17,286Depreciation and amortization
    
    
    16,020
    
    
    
    887
    
    
    
    
    
    
    
    16,907Management fees
    
    
    1,047
    
    
    
    
    
    
    
    
    
    
    
    1,047Earnings before loss on disposal of
assets, minority interests and income
taxes
    
    
    13,060
    
    
    
    7,062
    
    
    
    
    
    
    
    20,122Loss on disposal of assets, net
    
    
    (1,537
    )
    
    
    
    
    
    
    
    
    
    
    (1,537
    )Minority interests
    
    
    (1,341
    )
    
    
    
    
    
    
    
    
    
    
    (1,341
    )Earnings before income taxes
    
    $
    10,182
    
    
    $
    7,062
    
    
    $
    
    
    
    $
    17,244Segment assets
    
    $
    1,819,795
    
    
    $
    142,400
    
    
    
    
    
    
    $
    1,962,195Capital expenditures
    
    $
    43,711
    
    
    $
    89
    
    
    
    
    
    
    $
    43,800Goodwill
    
    $
    750,722
    
    
    $
    5,757
    
    
    
    
    
    
    $
    756,479
 (1)
    
    Adjusted EBITDA represents net earnings before interest expense, income tax expense,
depreciation and amortization, gain (loss) on disposal of assets, minority interests 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, sole 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 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.
 8. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
   11




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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
    
    $
    
    
    
    $
    (410
    )
    
    $
    410
    
    
    $
    
    
    
    $
    Accounts receivable, net
    
    
    
    
    
    
    137,063
    
    
    
    110,600
    
    
    
    
    
    
    
    247,663Inventories
    
    
    
    
    
    
    23,939
    
    
    
    21,213
    
    
    
    
    
    
    
    45,152Deferred income taxes
    
    
    39,168
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,168Prepaid expenses and other current assets
    
    
    
    
    
    
    25,981
    
    
    
    17,613
    
    
    
    
    
    
    
    43,594Total current assets
    
    
    39,168
    
    
    
    186,573
    
    
    
    149,836
    
    
    
    
    
    
    
    375,577Property and equipment, net
    
    
    
    
    
    
    435,318
    
    
    
    553,115
    
    
    
    
    
    
    
    988,433Intercompany
    
    
    
    
    
    
    9,359
    
    
    
    (9,359
    )
    
    
    
    
    
    
    Net investment in and advances to subsidiaries
    
    
    1,641,646
    
    
    
    
    
    
    
    
    
    
    
    (1,641,646
    )
    
    
    Goodwill
    
    
    21,774
    
    
    
    161,431
    
    
    
    573,388
    
    
    
    
    
    
    
    756,593Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    35,250
    
    
    
    
    
    
    
    35,250Other assets, net
    
    
    20,378
    
    
    
    19,980
    
    
    
    4,953
    
    
    
    
    
    
    
    45,311Total assets
    
    $
    1,722,966
    
    
    $
    812,661
    
    
    $
    1,307,183
    
    
    $
    (1,641,646
    )
    
    $
    2,201,164Liabilities and Members EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    41,673
    
    
    $
    35,174
    
    
    $
    
    
    
    $
    76,847Salaries and benefits payable
    
    
    
    
    
    
    30,156
    
    
    
    16,960
    
    
    
    
    
    
    
    47,116Accrued interest payable
    
    
    8,439
    
    
    
    (2,511
    )
    
    
    2,511
    
    
    
    
    
    
    
    8,439Medical claims payable
    
    
    
    
    
    
    
    
    
    
    82,489
    
    
    
    
    
    
    
    82,489Other accrued expenses and other current liabilities
    
    
    
    
    
    
    30,685
    
    
    
    8,666
    
    
    
    
    
    
    
    39,351Current portion of long-term debt and capital lease
obligations
    
    
    4,542
    
    
    
    2,826
    
    
    
    11,475
    
    
    
    (11,475
    )
    
    
    7,368Total current liabilities
    
    
    12,981
    
    
    
    102,829
    
    
    
    157,275
    
    
    
    (11,475
    )
    
    
    261,610Long-term debt and capital lease obligations
    
    
    1,045,418
    
    
    
    4,598
    
    
    
    387,892
    
    
    
    (387,892
    )
    
    
    1,050,016Deferred income taxes
    
    
    99,503
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,503Other long-term liabilities
    
    
    
    
    
    
    49,363
    
    
    
    1,191
    
    
    
    
    
    
    
    50,554Minority interests
    
    
    
    
    
    
    37,311
    
    
    
    
    
    
    
    
    
    
    
    37,311Total liabilities
    
    
    1,157,902
    
    
    
    194,101
    
    
    
    546,358
    
    
    
    (399,367
    )
    
    
    1,498,994Members equity
    
    
    565,064
    
    
    
    618,560
    
    
    
    760,825
    
    
    
    (1,242,279
    )
    
    
    702,170Total liabilities and members equity
    
    $
    1,722,966
    
    
    $
    812,661
    
    
    $
    1,307,183
    
    
    $
    (1,641,646
    )
    
    $
    2,201,164
 12




---



##### 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
    
    $
    
    
    
    $
    (4,052
    )
    
    $
    4,052
    
    
    $
    
    
    
    $
    Accounts receivable, net
    
    
    
    
    
    
    146,603
    
    
    
    101,678
    
    
    
    
    
    
    
    248,281Inventories
    
    
    
    
    
    
    23,473
    
    
    
    20,224
    
    
    
    
    
    
    
    43,697Deferred income taxes
    
    
    29,629
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,629Prepaid expenses and other current assets
    
    
    
    
    
    
    25,165
    
    
    
    19,858
    
    
    
    
    
    
    
    45,023Total current assets
    
    
    29,629
    
    
    
    191,189
    
    
    
    145,812
    
    
    
    
    
    
    
    366,630Property and equipment, net
    
    
    
    
    
    
    430,223
    
    
    
    550,214
    
    
    
    
    
    
    
    980,437Intercompany
    
    
    
    
    
    
    (8,437
    )
    
    
    8,437
    
    
    
    
    
    
    
    Net investment in and advances to subsidiaries
    
    
    1,627,879
    
    
    
    
    
    
    
    
    
    
    
    (1,627,879
    )
    
    
    Goodwill
    
    
    21,774
    
    
    
    161,431
    
    
    
    573,388
    
    
    
    
    
    
    
    756,593Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    36,000
    
    
    
    
    
    
    
    36,000Other assets, net
    
    
    21,006
    
    
    
    20,599
    
    
    
    5,157
    
    
    
    
    
    
    
    46,762Total assets
    
    $
    1,700,288
    
    
    $
    795,005
    
    
    $
    1,319,008
    
    
    $
    (1,627,879
    )
    
    $
    2,186,422Liabilities and Members EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    61,170
    
    
    $
    37,318
    
    
    $
    
    
    
    $
    98,488Salaries and benefits payable
    
    
    
    
    
    
    26,104
    
    
    
    14,020
    
    
    
    
    
    
    
    40,124Accrued interest payable
    
    
    18,865
    
    
    
    (2,301
    )
    
    
    2,301
    
    
    
    
    
    
    
    18,865Medical claims payable
    
    
    
    
    
    
    
    
    
    
    81,309
    
    
    
    
    
    
    
    81,309Other accrued expenses and other current liabilities
    
    
    
    
    
    
    25,176
    
    
    
    19,100
    
    
    
    
    
    
    
    44,276Current portion of long-term debt and capital lease
obligations
    
    
    4,542
    
    
    
    3,494
    
    
    
    10,929
    
    
    
    (10,929
    )
    
    
    8,036Total current liabilities
    
    
    23,407
    
    
    
    113,643
    
    
    
    164,977
    
    
    
    (10,929
    )
    
    
    291,098Long-term debt and capital lease obligations
    
    
    1,018,415
    
    
    
    5,206
    
    
    
    410,042
    
    
    
    (410,042
    )
    
    
    1,023,621Deferred income taxes
    
    
    93,402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    93,402Other long-term liabilities
    
    
    
    
    
    
    49,809
    
    
    
    1,022
    
    
    
    
    
    
    
    50,831Minority interests
    
    
    
    
    
    
    35,956
    
    
    
    
    
    
    
    
    
    
    
    35,956Total liabilities
    
    
    1,135,224
    
    
    
    204,614
    
    
    
    576,041
    
    
    
    (420,971
    )
    
    
    1,494,908Members equity
    
    
    565,064
    
    
    
    590,391
    
    
    
    742,967
    
    
    
    (1,206,908
    )
    
    
    691,514Total liabilities and members equity
    
    $
    1,700,288
    
    
    $
    795,005
    
    
    $
    1,319,008
    
    
    $
    (1,627,879
    )
    
    $
    2,186,422
 13




---



##### 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
    
    $
    
    
    
    $
    201,280
    
    
    $
    187,517
    
    
    $
    (3,330
    )
    
    $
    385,467Premium revenue
    
    
    
    
    
    
    
    
    
    
    126,627
    
    
    
    
    
    
    
    126,627Total net revenue
    
    
    
    
    
    
    201,280
    
    
    
    314,144
    
    
    
    (3,330
    )
    
    
    512,094Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    93,688
    
    
    
    69,938
    
    
    
    
    
    
    
    163,626Supplies
    
    
    
    
    
    
    34,102
    
    
    
    26,037
    
    
    
    
    
    
    
    60,139Medical claims
    
    
    
    
    
    
    
    
    
    
    106,210
    
    
    
    (3,330
    )
    
    
    102,880Other operating expenses
    
    
    
    
    
    
    36,027
    
    
    
    34,162
    
    
    
    
    
    
    
    70,189Provision for bad debts
    
    
    
    
    
    
    22,690
    
    
    
    17,907
    
    
    
    
    
    
    
    40,597Rentals and leases
    
    
    
    
    
    
    4,460
    
    
    
    5,300
    
    
    
    
    
    
    
    9,760Interest expense, net
    
    
    21,804
    
    
    
    
    
    
    
    12,607
    
    
    
    (12,607
    )
    
    
    21,804Depreciation and amortization
    
    
    
    
    
    
    12,077
    
    
    
    11,078
    
    
    
    
    
    
    
    23,155Management fees
    
    
    1,187
    
    
    
    (4,032
    )
    
    
    4,032
    
    
    
    
    
    
    
    1,187Equity in earnings of affiliates
    
    
    (28,445
    )
    
    
    
    
    
    
    
    
    
    
    28,445
    
    
    
    Total costs and expenses
    
    
    (5,454
    )
    
    
    199,012
    
    
    
    287,271
    
    
    
    12,508
    
    
    
    493,337Earnings (loss) before gain (loss) on
disposal of assets, minority
interests and income taxes
    
    
    5,454
    
    
    
    2,268
    
    
    
    26,873
    
    
    
    (15,838
    )
    
    
    18,757Gain (loss) on disposal of assets, net
    
    
    
    
    
    
    65
    
    
    
    (3
    )
    
    
    
    
    
    
    62Minority interests
    
    
    
    
    
    
    (758
    )
    
    
    
    
    
    
    
    
    
    
    (758
    )Earnings (loss) before income taxes
    
    
    5,454
    
    
    
    1,575
    
    
    
    26,870
    
    
    
    (15,838
    )
    
    
    18,061Income tax expense
    
    
    7,346
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,346Net earnings (loss)
    
    $
    (1,892
    )
    
    $
    1,575
    
    
    $
    26,870
    
    
    $
    (15,838
    )
    
    $
    10,715
 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
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    166,482
    
    
    $
    145,244
    
    
    $
    (2,678
    )
    
    $
    309,048Premium revenue
    
    
    
    
    
    
    
    
    
    
    107,786
    
    
    
    
    
    
    
    107,786Total net revenue
    
    
    
    
    
    
    166,482
    
    
    
    253,030
    
    
    
    (2,678
    )
    
    
    416,834Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    73,936
    
    
    
    51,458
    
    
    
    
    
    
    
    125,394Supplies
    
    
    
    
    
    
    28,995
    
    
    
    18,250
    
    
    
    
    
    
    
    47,245Medical claims
    
    
    
    
    
    
    
    
    
    
    92,373
    
    
    
    (2,678
    )
    
    
    89,695Other operating expenses
    
    
    
    
    
    
    34,084
    
    
    
    26,774
    
    
    
    
    
    
    
    60,858Provision for bad debts
    
    
    
    
    
    
    18,694
    
    
    
    13,054
    
    
    
    
    
    
    
    31,748Rentals and leases
    
    
    
    
    
    
    3,296
    
    
    
    5,154
    
    
    
    
    
    
    
    8,450Interest expense, net
    
    
    17,286
    
    
    
    
    
    
    
    5,543
    
    
    
    (5,543
    )
    
    
    17,286Depreciation and amortization
    
    
    
    
    
    
    9,806
    
    
    
    7,101
    
    
    
    
    
    
    
    16,907Management fees
    
    
    1,047
    
    
    
    (3,148
    )
    
    
    3,148
    
    
    
    
    
    
    
    1,047Business interruption insurance recoveries
    
    
    
    
    
    
    
    
    
    
    (1,918
    )
    
    
    
    
    
    
    (1,918
    )Equity in earnings of affiliates
    
    
    (30,060
    )
    
    
    
    
    
    
    
    
    
    
    30,060
    
    
    
    Total costs and expenses
    
    
    (11,727
    )
    
    
    165,663
    
    
    
    220,937
    
    
    
    21,839
    
    
    
    396,712Earnings (loss) before loss on disposal of
assets, minority interests and income taxes
    
    
    11,727
    
    
    
    819
    
    
    
    32,093
    
    
    
    (24,517
    )
    
    
    20,122Loss on disposal of assets, net
    
    
    
    
    
    
    (1,332
    )
    
    
    (205
    )
    
    
    
    
    
    
    (1,537
    )Minority interests
    
    
    
    
    
    
    (1,341
    )
    
    
    
    
    
    
    
    
    
    
    (1,341
    )Earnings (loss) before income taxes
    
    
    11,727
    
    
    
    (1,854
    )
    
    
    31,888
    
    
    
    (24,517
    )
    
    
    17,244Income tax expense
    
    
    6,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,661Net earnings (loss)
    
    $
    5,066
    
    
    $
    (1,854
    )
    
    $
    31,888
    
    
    $
    (24,517
    )
    
    $
    10,583
 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
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    (1,892
    )
    
    $
    1,575
    
    
    $
    26,870
    
    
    $
    (15,838
    )
    
    $
    10,715Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    12,077
    
    
    
    11,078
    
    
    
    
    
    
    
    23,155Amortization of loan costs
    
    
    718
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    718Minority interests
    
    
    
    
    
    
    758
    
    
    
    
    
    
    
    
    
    
    
    758Deferred income taxes
    
    
    6,233
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,233Loss (gain) on disposal of assets, net
    
    
    
    
    
    
    (65
    )
    
    
    3
    
    
    
    
    
    
    
    (62
    )Equity in earnings of affiliates
    
    
    (28,445
    )
    
    
    
    
    
    
    
    
    
    
    28,445
    
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    
    
    
    
    9,541
    
    
    
    (8,923
    )
    
    
    
    
    
    
    618Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    (2,404
    )
    
    
    1,256
    
    
    
    
    
    
    
    (1,148
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    (14,968
    )
    
    
    (17,696
    )
    
    
    (5,407
    )
    
    
    
    
    
    
    (38,071
    )Net cash provided by (used in) operating activities
    
    
    (38,354
    )
    
    
    3,786
    
    
    
    24,877
    
    
    
    12,607
    
    
    
    2,916Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (13,224
    )
    
    
    (17,672
    )
    
    
    
    
    
    
    (30,896
    )Proceeds from sale of assets
    
    
    
    
    
    
    83
    
    
    
    266
    
    
    
    
    
    
    
    349Change in other assets, net
    
    
    
    
    
    
    1,277
    
    
    
    31
    
    
    
    
    
    
    
    1,308Net cash used in investing activities
    
    
    
    
    
    
    (11,864
    )
    
    
    (17,375
    )
    
    
    
    
    
    
    (29,239
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (104,383
    )
    
    
    (301
    )
    
    
    (890
    )
    
    
    
    
    
    
    (105,574
    )Proceeds from debt borrowings
    
    
    131,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,300Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (1,669
    )
    
    
    
    
    
    
    (1,669
    )Proceeds received from sale of partnership interests
    
    
    
    
    
    
    2,266
    
    
    
    
    
    
    
    
    
    
    
    2,266Change in intercompany balances with affiliates, net
    
    
    11,437
    
    
    
    9,755
    
    
    
    (8,585
    )
    
    
    (12,607
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    38,354
    
    
    
    11,720
    
    
    
    (11,144
    )
    
    
    (12,607
    )
    
    
    26,323Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    3,642
    
    
    
    (3,642
    )
    
    
    
    
    
    
    Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    (4,052
    )
    
    
    4,052
    
    
    
    
    
    
    
    Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    (410
    )
    
    $
    410
    
    
    $
    
    
    
    $
    
 16




---



##### 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)
    
    $
    5,066
    
    
    $
    (1,854
    )
    
    $
    31,888
    
    
    $
    (24,517
    )
    
    $
    10,583Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    9,806
    
    
    
    7,101
    
    
    
    
    
    
    
    16,907Amortization of loan costs
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    753Minority interests
    
    
    
    
    
    
    1,341
    
    
    
    
    
    
    
    
    
    
    
    1,341Deferred income taxes
    
    
    5,504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,504Loss on disposal of assets, net
    
    
    
    
    
    
    1,332
    
    
    
    205
    
    
    
    
    
    
    
    1,537Equity in earnings of affiliates
    
    
    (30,060
    )
    
    
    
    
    
    
    
    
    
    
    30,060
    
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    
    
    
    
    150
    
    
    
    (3,510
    )
    
    
    
    
    
    
    (3,360
    )Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    (2,874
    )
    
    
    2,570
    
    
    
    
    
    
    
    (304
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    (10,146
    )
    
    
    (3,949
    )
    
    
    1,109
    
    
    
    
    
    
    
    (12,986
    )Net cash provided by (used in) operating activities
    
    
    (28,883
    )
    
    
    3,952
    
    
    
    39,363
    
    
    
    5,543
    
    
    
    19,975Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (6,935
    )
    
    
    (36,865
    )
    
    
    
    
    
    
    (43,800
    )Change in other assets, net
    
    
    
    
    
    
    583
    
    
    
    906
    
    
    
    
    
    
    
    1,489Net cash used in investing activities
    
    
    
    
    
    
    (6,352
    )
    
    
    (35,959
    )
    
    
    
    
    
    
    (42,311
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (1,101
    )
    
    
    (528
    )
    
    
    (303
    )
    
    
    
    
    
    
    (1,932
    )Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (1,240
    )
    
    
    
    
    
    
    (1,240
    )Proceeds received from sale of partnership interests
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    
    
    
    
    200Change in intercompany balances with affiliates, net
    
    
    29,984
    
    
    
    (22,771
    )
    
    
    (1,670
    )
    
    
    (5,543
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    28,883
    
    
    
    (23,099
    )
    
    
    (3,213
    )
    
    
    (5,543
    )
    
    
    (2,972
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (25,499
    )
    
    
    191
    
    
    
    
    
    
    
    (25,308
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    94,518
    
    
    
    897
    
    
    
    
    
    
    
    95,415Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    69,019
    
    
    $
    1,088
    
    
    $
    
    
    
    $
    70,107
 9. SUBSEQUENT EVENT
  17




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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
 18




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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
  19




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##### Table of Contents



Acute Care Revenue
      QuarterEnded December 31,2007
    
    
    2006Medicare
    
    
    32.7
    %
    
    
    31.1
    %Medicaid
    
    
    16.2
    %
    
    
    17.0
    %Managed care
    
    
    43.2
    %
    
    
    44.4
    %Self-pay and other
    
    
    7.9
    %
    
    
    7.5
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  20




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##### Table of Contents




    
    a provision allocating $250.0 million per year for federal years 2006-2008 to
pay for healthcare costs of undocumented aliens;
    
    provisions generally providing hospitals with more reimbursement for outpatient
drugs;
    
    a provision increasing our reimbursement by reducing the labor share percentage
from 71% to 62% for hospitals with wage indices less than 1.0; and
    
    a provision eliminating the requirement that hospitals must obtain secondary
payment information from all Medicare beneficiaries receiving reference laboratory
services.
     21




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##### Table of Contents



Premium Revenue
     Significant Industry Trends
  Pay for Performance Reimbursement
  22




---



##### Table of Contents



Growth in Bad Debts Resulting From Increased Self-Pay Volume and Revenue
   December 31,
    
    
    September 30,2007
    
    
    2007Insured receivables
    
    
    66.0
    %
    
    
    66.7
    %Uninsured receivables
    
    
    34.0
    %
    
    
    33.3
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  23




---



##### Table of Contents



December 31,
    
    
    September 30,2007
    
    
    20070 to 90 days
    
    
    69.4
    %
    
    
    71.8
    %91 to 180 days
    
    
    17.7
    %
    
    
    15.5
    %Over 180 days
    
    
    12.9
    %
    
    
    12.7
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  Additional Charity Care and Charges to the Uninsured
  Sub-Acute Care Services
  Implementation of Our Quality Initiatives
  
    
    Deployment of proprietary information systems to provide daily tracking of care
provided to patients in any core measures category;
    
    Implementation of a strategy to retain nurses, ultimately providing an improved
continuum of care through continuity;
    
    Development and implementation of a hospital medical management program;
    
    Ongoing training and education of medical and non-medical personnel related to
quality performance indicators;
    
    Monthly review of the 30 quality indicators prescribed by CMS for reporting
beginning January 1, 2008;
    
    Monitoring of additional quality measures above the requirement to receive the
full annual payment update;
 
    
    Rapid response teams in place at all of our hospitals to provide more timely
and efficient care;
 24




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##### Table of Contents




    
    Engagement of an external group to conduct unannounced mock Joint Commission
surveys;
    
    Alignment of hospital management incentive compensation with quality
performance indicators; and
 
    
    Additional staffing to collect and report quality information and to facilitate
action plans to address areas for improvement.
 Physician Integration
    Nursing Shortage
  Decreased Federal and State Funding for Medicaid Programs
  25




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##### Table of Contents



Changes in Patient Service Mix
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Income Taxes.
 Accounting for Uncertainty in Income Taxes  An Interpretation of FASB
Statement No. 109 Accounting for Income Taxes
  Selected Operating Data
  QuarterEnded December 31,2007
    
    
    2006Acute Care:Number of
acute care hospital facilities at end of period (1)
    
    
    16
    
    
    
    14Beds in service at end of period (2)
    
    
    2,737
    
    
    
    2,206Average length of stay (days) (3)
    
    
    4.6
    
    
    
    4.5Occupancy rates (average beds in service)
    
    
    48.0
    %
    
    
    49.7
    %Admissions (4)
    
    
    26,429
    
    
    
    22,304Adjusted admissions (5)
    
    
    42,610
    
    
    
    36,193Patient days (6)
    
    
    120,872
    
    
    
    100,768Adjusted patient days (5)
    
    
    187,377
    
    
    
    157,624Net patient revenue per adjusted admission
    
    $
    8,976
    
    
    $
    8,471Same Facility(7):Number of
acute care hospital facilities at end of period
    
    
    14
    
    
    
    14Beds in service at end of period (2)
    
    
    2,331
    
    
    
    2,206Average length of stay (days) (3)
    
    
    4.6
    
    
    
    4.5Occupancy rates (average beds in service)
    
    
    48.0
    %
    
    
    49.7
    %Admissions (4)
    
    
    22,569
    
    
    
    22,304Adjusted admissions (5)
    
    
    36,998
    
    
    
    36,193
 26




---



##### Table of Contents



QuarterEnded December 31,2007
    
    
    2006Patient days (6)
    
    
    102,896
    
    
    
    100,768Adjusted patient days (5)
    
    
    161,171
    
    
    
    157,624Net patient revenue per adjusted admission
    
    $
    9,110
    
    
    $
    8,471Health Choice:Medicaid covered lives
    
    
    124,143
    
    
    
    111,679Dual-eligible lives (8)
    
    
    3,457
    
    
    
    3,980Medical loss ratio (9)
    
    
    83.9
    %
    
    
    85.7
    %
 (1)
    
    Includes Glenwood, which was acquired effective January 31, 2007, and Mountain Vista, which
opened on July 23, 2007.(2)
    
    Includes St. Lukes Behavioral Hospital.(3)
    
    Represents the average number of days that a patient stayed in our hospitals.(4)
    
    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.(5)
    
    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.(6)
    
    Represents the number of days our beds were occupied by inpatients over the period.(7)
    
    Includes Alliance in Odessa, Texas, which was acquired effective May 31, 2007, and
immediately merged into Odessa Regional Hospital to form Odessa Regional Medical Center.(8)
    
    Represents members eligible for Medicare and Medicaid benefits under Health Choices contract
with CMS to provide coverage as a MAPD SNP.(9)
    
    Represents medical claims expense as a percentage of premium revenue, including claims paid
to our hospitals.
 RESULTS OF OPERATIONS SUMMARY
  Quarter Ended
    
    
    Quarter EndedConsolidated ($ in thousands):
    
    December 31, 2007
    
    
    December 31, 2006Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    385,467
    
    
    
    75.3
    %
    
    $
    309,048
    
    
    
    74.1
    %Premium revenue
    
    
    126,627
    
    
    
    24.7
    %
    
    
    107,786
    
    
    
    25.9
    %Total net revenue
    
    
    512,094
    
    
    
    100.0
    %
    
    
    416,834
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    163,626
    
    
    
    32.0
    %
    
    
    125,394
    
    
    
    30.1
    %Supplies
    
    
    60,139
    
    
    
    11.7
    %
    
    
    47,245
    
    
    
    11.3
    %Medical claims
    
    
    102,880
    
    
    
    20.1
    %
    
    
    89,695
    
    
    
    21.5
    %Other operating expenses
    
    
    70,189
    
    
    
    13.7
    %
    
    
    60,858
    
    
    
    14.6
    %Provision for bad debts
    
    
    40,597
    
    
    
    7.9
    %
    
    
    31,748
    
    
    
    7.6
    %Rentals and leases
    
    
    9,760
    
    
    
    1.9
    %
    
    
    8,450
    
    
    
    2.0
    %Interest expense, net
    
    
    21,804
    
    
    
    4.3
    %
    
    
    17,286
    
    
    
    4.2
    %Depreciation and amortization
    
    
    23,155
    
    
    
    4.5
    %
    
    
    16,907
    
    
    
    4.1
    %Management fees
    
    
    1,187
    
    
    
    0.2
    %
    
    
    1,047
    
    
    
    0.3
    %Business interruption insurance recoveries
    
    
    
    
    
    
    
    
    
    
    (1,918
    )
    
    
    (0.5
    )%Total costs and expenses
    
    
    493,337
    
    
    
    96.3
    %
    
    
    396,712
    
    
    
    95.2
    %Earnings before gain (loss) on disposal of
assets, minority interests and income taxes
    
    
    18,757
    
    
    
    3.7
    %
    
    
    20,122
    
    
    
    4.8
    %Gain (loss) on disposal of assets, net
    
    
    62
    
    
    
    0.0
    %
    
    
    (1,537
    )
    
    
    (0.4
    )%Minority interests
    
    
    (758
    )
    
    
    (0.2
    )%
    
    
    (1,341
    )
    
    
    (0.3
    )%Earnings before income taxes
    
    
    18,061
    
    
    
    3.5
    %
    
    
    17,244
    
    
    
    4.1
    %Income tax expense
    
    
    7,346
    
    
    
    1.4
    %
    
    
    6,661
    
    
    
    1.6
    %Net earnings
    
    $
    10,715
    
    
    
    2.1
    %
    
    $
    10,583
    
    
    
    2.5
    %
 27




---



##### Table of Contents



Quarter Ended
    
    
    Quarter EndedAcute Care ($ in thousands):
    
    December 31, 2007
    
    
    December 31, 2006Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    385,467
    
    
    
    99.1
    %
    
    $
    309,048
    
    
    
    99.1
    %Revenue between segments (1)
    
    
    3,330
    
    
    
    0.9
    %
    
    
    2,678
    
    
    
    0.9
    %Total net revenue
    
    
    388,797
    
    
    
    100.0
    %
    
    
    311,726
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    159,583
    
    
    
    41.0
    %
    
    
    121,983
    
    
    
    39.1
    %Supplies
    
    
    60,062
    
    
    
    15.4
    %
    
    
    47,161
    
    
    
    15.1
    %Other operating expenses
    
    
    65,717
    
    
    
    16.9
    %
    
    
    57,144
    
    
    
    18.3
    %Provision for bad debts
    
    
    40,597
    
    
    
    10.4
    %
    
    
    31,748
    
    
    
    10.2
    %Rentals and leases
    
    
    9,475
    
    
    
    2.5
    %
    
    
    8,195
    
    
    
    2.6
    %Interest expense, net
    
    
    21,804
    
    
    
    5.6
    %
    
    
    17,286
    
    
    
    5.6
    %Depreciation and amortization
    
    
    22,260
    
    
    
    5.8
    %
    
    
    16,020
    
    
    
    5.1
    %Management fees
    
    
    1,187
    
    
    
    0.3
    %
    
    
    1,047
    
    
    
    0.4
    %Business interruption insurance recoveries
    
    
    
    
    
    
    0.0
    %
    
    
    (1,918
    )
    
    
    (0.6
    )%Total costs and expenses
    
    
    380,685
    
    
    
    97.9
    %
    
    
    298,666
    
    
    
    95.8
    %Earnings before gain (loss) on disposal of
assets, minority interests and income taxes
    
    
    8,112
    
    
    
    2.1
    %
    
    
    13,060
    
    
    
    4.2
    %Gain (loss) on disposal of assets, net
    
    
    62
    
    
    
    0.0
    %
    
    
    (1,537
    )
    
    
    (0.5
    )%Minority interests
    
    
    (758
    )
    
    
    (0.2
    )%
    
    
    (1,341
    )
    
    
    (0.4
    )%Earnings before income taxes
    
    $
    7,416
    
    
    
    1.9
    %
    
    $
    10,182
    
    
    
    3.3
    %
 (1)
    
    Revenue between segments is eliminated in our consolidated results.
 Quarter Ended
    
    
    Quarter EndedHealth Choice ($ in thousands):
    
    December 31, 2007
    
    
    December 31, 2006Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentagePremium revenue
    
    $
    126,627
    
    
    
    100.0
    %
    
    $
    107,786
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    4,043
    
    
    
    3.2
    %
    
    
    3,411
    
    
    
    3.2
    %Supplies
    
    
    77
    
    
    
    0.1
    %
    
    
    84
    
    
    
    0.1
    %Medical claims (1)
    
    
    106,210
    
    
    
    83.9
    %
    
    
    92,373
    
    
    
    85.7
    %Other operating expenses
    
    
    4,472
    
    
    
    3.5
    %
    
    
    3,714
    
    
    
    3.4
    %Rentals and leases
    
    
    285
    
    
    
    0.2
    %
    
    
    255
    
    
    
    0.2
    %Depreciation and amortization
    
    
    895
    
    
    
    0.7
    %
    
    
    887
    
    
    
    0.8
    %Total costs and expenses
    
    
    115,982
    
    
    
    91.6
    %
    
    
    100,724
    
    
    
    93.4
    %Earnings before income taxes
    
    $
    10,645
    
    
    
    8.4
    %
    
    $
    7,062
    
    
    
    6.6
    %
 (1)
    
    Medical claims paid to our hospitals of $3.3 million and $2.7 million for the quarters
ended December 31, 2007 and 2006, respectively, is eliminated in our consolidated results.
 28




---



##### Table of Contents



Quarters Ended December 31, 2007 and 2006
 Net revenue
     Salaries and benefits
 Supplies
 Medical claims
 29




---



##### Table of Contents



Other operating expenses qui tam qui tam
 Provision for bad debts
 Interest expense, net
 Depreciation and amortization
 Income tax expense
 Net
earnings
 LIQUIDITY AND CAPITAL RESOURCES
  30




---



##### Table of Contents



Available cash
    
    $
    Available capacity under our senior secured revolving credit facility
    
    
    194.3Available capacity under our senior secured delayed draw term loan
    
    
    39.0Net available liquidity at December 31, 2007
    
    $
    233.3
    
    
    $58.0 million to $62.0 million for the two patient tower expansions in Utah;
    
    $62.0 million to $68.0 million for other growth and new business projects;
    
    $60.0 million to $65.0 million in replacement or maintenance related projects at our
hospitals; and
    
    $15.0 million in hardware and software related costs in connection with the
implementation of our advanced clinical information system, as well as other information
systems projects.
     31




---



##### Table of Contents



Overview of Cash Flow Activities for the Quarters Ended December 31, 2007 and 2006
  QuarterEnded December 31,2007
    
    
    2006Cash flow from operating activities
    
    $
    2.9
    
    
    $
    20.0Cash flow from investing activities
    
    
    (29.2
    )
    
    
    (42.3
    )Cash flow from financing activities
    
    
    26.3
    
    
    
    (3.0
    )
 Operating Activities
    Investing Activities
  32




---



##### Table of Contents




    
    $5.8 million related to  the construction of the two patient towers in our Utah
market;
    
    $2.8 million for various expansion and renovation projects, including
equipment, at our San Antonio hospital;
    
    $2.4 million in hardware and software related to our advanced clinicals and
other information systems projects; and
    
    $15.0 million for imaging and other diagnostic equipment.
 Financing Activities
  Debt Instruments
  
    
    $854.0 million in senior secured credit facilities; and
    
    $475.0 million in 8 3/4% senior subordinated notes due 2014.
 $854.0 Million Senior Secured Credit Facilities
     33




---



##### Table of Contents



$475.0 Million 8 3/4% Senior Subordinated Notes Due 2014
  $300.0 Million Holdings Senior PIK Loans
  Other
  OFF-BALANCE SHEET ARRANGEMENTS
   Seasonality
  34




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##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 Item 4T. Controls and Procedures
 Evaluations of Disclosure Controls and Procedures
  35




---



##### Table of Contents



Changes in Internal Control Over Financial Reporting
  36




---



##### Table of Contents



PART II.
OTHER INFORMATION
 
 Item 6. Exhibits
  10.1
    
    

First
Amendment to Employment Agreement, dated January 31, 2008, by and
between IASIS Healthcare Corporation and Sandra K. McRee
(incorporated by reference to the Companys Current Report on
Form 8-K filed on February 5, 2008).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




---



##### Table of Contents



SIGNATURES
  IASIS HEALTHCARE LLCDate: February 14, 2008
    By:
    /s/ John M. DoyleJohn M. DoyleChief Accounting Officer 38




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.1
    
    

First
Amendment to Employment Agreement, dated January 31, 2008, by and
between IASIS Healthcare Corporation and Sandra K. McRee
(incorporated by reference to the Companys Current Report on
Form 8-K filed on February 5, 2008).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.
 39