##### 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 March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to  .
 COMMISSION FILE NUMBER: 333-117362
 IASIS HEALTHCARE LLC
  DELAWARE
    
    20-1150104(State or other jurisdiction of
    
    (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
 YES
o NO o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 YES o NO þ




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##### 



TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Condensed Consolidated Balance Sheets (Unaudited)  March 31, 2010 and September 30, 2009
    
    
    1Condensed Consolidated Statements of Operations (Unaudited)  Quarters and Six Months
Ended March 31, 2010 and 2009
    
    
    2Condensed Consolidated Statements of Cash Flows (Unaudited)  Six Months Ended March 31,
2010 and 2009
    
    
    3Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    41PART II. OTHER INFORMATION
    
    
    41Item 1. Legal Proceedings
    
    
    41Item 1A. Risk Factors
    
    
    42Item 6. Exhibits
    
    
    45Exhibit 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)
 March 31,
    
    
    September 30,2010
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    158,511
    
    
    $
    206,528Accounts receivable, less allowance for doubtful accounts of
$119,275 and $126,132 at March 31, 2010 and September 30,
2009, respectively
    
    
    228,907
    
    
    
    230,198Inventories
    
    
    52,601
    
    
    
    50,492Deferred income taxes
    
    
    20,872
    
    
    
    39,038Prepaid expenses and other current assets
    
    
    53,510
    
    
    
    49,453Total current assets
    
    
    514,401
    
    
    
    575,709Property and equipment, net
    
    
    980,916
    
    
    
    997,353Goodwill
    
    
    717,920
    
    
    
    717,920Other intangible assets, net
    
    
    28,500
    
    
    
    30,000Other assets, net
    
    
    36,621
    
    
    
    36,222Total assets
    
    $
    2,278,358
    
    
    $
    2,357,204LIABILITIES AND EQUITYCurrent liabilities:Accounts payable
    
    $
    70,234
    
    
    $
    68,552Salaries and benefits payable
    
    
    37,421
    
    
    
    42,548Accrued interest payable
    
    
    12,503
    
    
    
    12,511Medical claims payable
    
    
    122,606
    
    
    
    113,519Other accrued expenses and other current liabilities
    
    
    68,210
    
    
    
    65,701Current portion of long-term debt and capital lease obligations
    
    
    6,672
    
    
    
    8,366Total current liabilities
    
    
    317,646
    
    
    
    311,197Long-term debt and capital lease obligations
    
    
    1,048,146
    
    
    
    1,051,471Deferred income taxes
    
    
    108,240
    
    
    
    106,425Other long-term liabilities
    
    
    54,443
    
    
    
    54,222Non-controlling interests with redemption rights
    
    
    72,527
    
    
    
    72,527Equity:Members equity
    
    
    666,954
    
    
    
    750,932Non-controlling interests
    
    
    10,402
    
    
    
    10,430Total equity
    
    
    677,356
    
    
    
    761,362Total liabilities and equity
    
    $
    2,278,358
    
    
    $
    2,357,204
   1




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (UNAUDITED)
 (In Thousands)
 Quarter Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net revenue:Acute care revenue
    
    $
    437,574
    
    
    $
    421,179
    
    
    $
    862,234
    
    
    $
    819,626Premium revenue
    
    
    186,948
    
    
    
    157,495
    
    
    
    391,245
    
    
    
    320,672Total net revenue
    
    
    624,522
    
    
    
    578,674
    
    
    
    1,253,479
    
    
    
    1,140,298Costs and expenses:Salaries and benefits (includes
stock compensation of $2,128, $138,
$2,249 and $279, respectively)
    
    
    174,171
    
    
    
    168,372
    
    
    
    344,653
    
    
    
    330,508Supplies
    
    
    68,425
    
    
    
    63,753
    
    
    
    133,834
    
    
    
    123,579Medical claims
    
    
    160,094
    
    
    
    126,598
    
    
    
    338,661
    
    
    
    263,600Other operating expenses
    
    
    88,683
    
    
    
    77,953
    
    
    
    173,275
    
    
    
    157,303Provision for bad debts
    
    
    45,536
    
    
    
    45,167
    
    
    
    93,485
    
    
    
    92,298Rentals and leases
    
    
    10,145
    
    
    
    9,734
    
    
    
    20,420
    
    
    
    19,213Interest expense, net
    
    
    16,622
    
    
    
    15,817
    
    
    
    33,354
    
    
    
    34,795Depreciation and amortization
    
    
    24,025
    
    
    
    24,296
    
    
    
    47,902
    
    
    
    49,292Management fees
    
    
    1,250
    
    
    
    1,250
    
    
    
    2,500
    
    
    
    2,500Hurricane-related property damage
    
    
    
    
    
    
    938
    
    
    
    
    
    
    
    938Total costs and expenses
    
    
    588,951
    
    
    
    533,878
    
    
    
    1,188,084
    
    
    
    1,074,026Earnings from continuing operations
before gain (loss) on disposal of
assets and income taxes
    
    
    35,571
    
    
    
    44,796
    
    
    
    65,395
    
    
    
    66,272Gain (loss) on disposal of assets, net
    
    
    (161
    )
    
    
    20
    
    
    
    (57
    )
    
    
    1,313Earnings from continuing operations
before income taxes
    
    
    35,410
    
    
    
    44,816
    
    
    
    65,338
    
    
    
    67,585Income tax expense
    
    
    13,270
    
    
    
    16,449
    
    
    
    23,861
    
    
    
    25,260Net earnings from continuing operations
    
    
    22,140
    
    
    
    28,367
    
    
    
    41,477
    
    
    
    42,325Earnings (loss) from discontinued
operations, net of income taxes
    
    
    (25
    )
    
    
    211
    
    
    
    21
    
    
    
    (500
    )Net earnings
    
    
    22,115
    
    
    
    28,578
    
    
    
    41,498
    
    
    
    41,825Net earnings attributable to
non-controlling interests
    
    
    (2,033
    )
    
    
    (2,977
    )
    
    
    (4,061
    )
    
    
    (4,574
    )Net earnings attributable to IASIS
Healthcare LLC
    
    $
    20,082
    
    
    $
    25,601
    
    
    $
    37,437
    
    
    $
    37,251
   2




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##### Table of Contents



IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
 (In Thousands)
 Six Months EndedMarch 31,2010
    
    
    2009Cash flows from operating activitiesNet earnings
    
    $
    41,498
    
    
    $
    41,825Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization
    
    
    47,902
    
    
    
    49,292Amortization of loan costs
    
    
    1,564
    
    
    
    1,498Stock compensation costs
    
    
    2,249
    
    
    
    279Deferred income taxes
    
    
    19,589
    
    
    
    9,530Income tax benefit from stock compensation
    
    
    (1,770
    )
    
    
    Income tax benefit from parent company interest
    
    
    3,275
    
    
    
    Loss (gain) on disposal of assets, net
    
    
    57
    
    
    
    (1,313
    )Loss (earnings) from discontinued operations, net
    
    
    (21
    )
    
    
    500Hurricane-related property damage
    
    
    
    
    
    
    938Changes in operating assets and liabilities, net of the effect of dispositions:Accounts receivable, net
    
    
    1,578
    
    
    
    (29,695
    )Inventories, prepaid expenses and other current assets
    
    
    (6,165
    )
    
    
    6,383Accounts payable, other accrued expenses and other accrued liabilities
    
    
    7,010
    
    
    
    14,170Net cash provided by operating activities  continuing operations
    
    
    116,766
    
    
    
    93,407Net cash provided by (used in) operating activities  discontinued operations
    
    
    (199
    )
    
    
    1,124Net cash provided by operating activities
    
    
    116,567
    
    
    
    94,531Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    (30,187
    )
    
    
    (49,272
    )Proceeds from sale of assets
    
    
    36
    
    
    
    4,973Change in other assets, net
    
    
    1,013
    
    
    
    1,595Net cash used in investing activities  continuing operations
    
    
    (29,138
    )
    
    
    (42,704
    )Net cash provided by investing activities  discontinued operations
    
    
    
    
    
    
    10Net cash used in investing activities
    
    
    (29,138
    )
    
    
    (42,694
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (5,138
    )
    
    
    (6,379
    )Distribution to parent company in connection with the repurchase of equity, net
    
    
    (124,962
    )
    
    
    Distributions to non-controlling interests
    
    
    (5,277
    )
    
    
    (2,919
    )Costs paid for the repurchase of partnership interest, net
    
    
    (69
    )
    
    
    (1,341
    )Net cash used in financing activities
    
    
    (135,446
    )
    
    
    (10,639
    )Change in cash and cash equivalents
    
    
    (48,017
    )
    
    
    41,198Cash and cash equivalents at beginning of period
    
    
    206,528
    
    
    
    80,738Cash and cash equivalents at end of period
    
    $
    158,511
    
    
    $
    121,936Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    31,837
    
    
    $
    33,969Cash paid (received) for income taxes, net
    
    $
    6,188
    
    
    $
    (566
    )
   3




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##### Table of Contents



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




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##### Table of Contents



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-Redemption
    
    
    Members
    
    
    controllingRights
    
    
    Equity
    
    
    Interests
    
    
    Total EquityBalance at September 30,
2009 (as previously
reported)
    
    $
    
    
    
    $
    780,847
    
    
    $
    
    
    
    $
    780,847Adjustment to non-controlling interests from adoption of FASB authoritative guidance
    
    
    72,527
    
    
    
    (29,915
    )
    
    
    10,430
    
    
    
    (19,485
    )Balance at September
30, 2009 (as adjusted)
    
    
    72,527
    
    
    
    750,932
    
    
    
    10,430
    
    
    
    761,362Net earnings
    
    
    3,968
    
    
    
    37,437
    
    
    
    93
    
    
    
    37,530Distributions to, and
repurchases of,
non-controlling
interests
    
    
    (5,225
    )
    
    
    
    
    
    
    (121
    )
    
    
    (121
    )Stock compensation
    
    
    
    
    
    
    2,249
    
    
    
    
    
    
    
    2,249Other comprehensive loss
    
    
    
    
    
    
    (720
    )
    
    
    
    
    
    
    (720
    )Distribution to parent
company in connection
with the repurchase of
equity, net
    
    
    
    
    
    
    (124,962
    )
    
    
    
    
    
    
    (124,962
    )Contribution from
parent related to tax
benefit from Holdings
Senior PIK Loans
interest
    
    
    
    
    
    
    3,275
    
    
    
    
    
    
    
    3,275Adjustment to
redemption value of
non-controlling
interests with
redemption rights
    
    
    1,257
    
    
    
    (1,257
    )
    
    
    
    
    
    
    (1,257
    )Balance at March 31, 2010
    
    $
    72,527
    
    
    $
    666,954
    
    
    $
    10,402
    
    
    $
    677,356
    6




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Subsequent Events Consideration
  2. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
  March 31,
    
    
    September 30,2010
    
    
    2009Senior secured credit facilities
    
    $
    573,205
    
    
    $
    576,150Senior subordinated notes
    
    
    475,000
    
    
    
    475,000Capital leases and other obligations
    
    
    6,613
    
    
    
    8,6871,054,818
    
    
    
    1,059,837Less current maturities
    
    
    6,672
    
    
    
    8,366$
    1,048,146
    
    
    $
    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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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   4. COMPREHENSIVE INCOME
  Quarter Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Net earnings
    
    $
    22,115
    
    
    $
    28,578
    
    
    $
    41,498
    
    
    $
    41,825Change in fair value of interest rate swaps
    
    
    (1,439
    )
    
    
    (5,069
    )
    
    
    (1,148
    )
    
    
    (5,069
    )Change in income tax benefit
    
    
    539
    
    
    
    1,897
    
    
    
    428
    
    
    
    1,897Comprehensive income
    
    $
    21,215
    
    
    $
    25,406
    
    
    $
    40,778
    
    
    $
    38,653
  March 31,
    
    
    September 30,2010
    
    
    2009Fair value of interest rate swaps
    
    $
    (5,808
    )
    
    $
    (4,660
    )Income tax benefit
    
    
    2,162
    
    
    
    1,734Accumulated other comprehensive loss
    
    $
    (3,646
    )
    
    $
    (2,926
    )
 5. DISTRIBUTION TO PARENT
   9




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




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




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IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 7. SEGMENT AND GEOGRAPHIC INFORMATION
  For the Quarter Ended March 31, 2010Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    437,574
    
    
    $
    
    
    
    $
    
    
    
    $
    437,574Premium revenue
    
    
    
    
    
    
    186,948
    
    
    
    
    
    
    
    186,948Revenue between segments
    
    
    3,336
    
    
    
    
    
    
    
    (3,336
    )
    
    
    Net revenue
    
    
    440,910
    
    
    
    186,948
    
    
    
    (3,336
    )
    
    
    624,522Salaries and benefits (excludes
stock compensation)
    
    
    167,096
    
    
    
    4,947
    
    
    
    
    
    
    
    172,043Supplies
    
    
    68,375
    
    
    
    50
    
    
    
    
    
    
    
    68,425Medical claims
    
    
    
    
    
    
    163,430
    
    
    
    (3,336
    )
    
    
    160,094Other operating expenses
    
    
    82,604
    
    
    
    6,079
    
    
    
    
    
    
    
    88,683Provision for bad debts
    
    
    45,536
    
    
    
    
    
    
    
    
    
    
    
    45,536Rentals and leases
    
    
    9,780
    
    
    
    365
    
    
    
    
    
    
    
    10,145Adjusted EBITDA(1)
    
    
    67,519
    
    
    
    12,077
    
    
    
    
    
    
    
    79,596Interest expense, net
    
    
    16,622
    
    
    
    
    
    
    
    
    
    
    
    16,622Depreciation and amortization
    
    
    23,137
    
    
    
    888
    
    
    
    
    
    
    
    24,025Stock compensation
    
    
    2,128
    
    
    
    
    
    
    
    
    
    
    
    2,128Management fees
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Earnings from continuing
operations before loss on
disposal of assets and income
taxes
    
    
    24,382
    
    
    
    11,189
    
    
    
    
    
    
    
    35,571Loss on disposal of assets, net
    
    
    (161
    )
    
    
    
    
    
    
    
    
    
    
    (161
    )Earnings from continuing
operations before income
taxes
    
    $
    24,221
    
    
    $
    11,189
    
    
    $
    
    
    
    $
    35,410
 For the Quarter Ended March 31, 2009Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    421,179
    
    
    $
    
    
    
    $
    
    
    
    $
    421,179Premium revenue
    
    
    
    
    
    
    157,495
    
    
    
    
    
    
    
    157,495Revenue between segments
    
    
    2,312
    
    
    
    
    
    
    
    (2,312
    )
    
    
    Net revenue
    
    
    423,491
    
    
    
    157,495
    
    
    
    (2,312
    )
    
    
    578,674Salaries and benefits (excludes
stock compensation)
    
    
    163,285
    
    
    
    4,949
    
    
    
    
    
    
    
    168,234Supplies
    
    
    63,670
    
    
    
    83
    
    
    
    
    
    
    
    63,753Medical claims
    
    
    
    
    
    
    128,910
    
    
    
    (2,312
    )
    
    
    126,598Other operating expenses
    
    
    70,611
    
    
    
    7,342
    
    
    
    
    
    
    
    77,953Provision for bad debts
    
    
    45,167
    
    
    
    
    
    
    
    
    
    
    
    45,167Rentals and leases
    
    
    9,302
    
    
    
    432
    
    
    
    
    
    
    
    9,734Hurricane-related property damage
    
    
    938
    
    
    
    
    
    
    
    
    
    
    
    938Adjusted EBITDA(1)
    
    
    70,518
    
    
    
    15,779
    
    
    
    
    
    
    
    86,297Interest expense, net
    
    
    15,817
    
    
    
    
    
    
    
    
    
    
    
    15,817Depreciation and amortization
    
    
    23,415
    
    
    
    881
    
    
    
    
    
    
    
    24,296Stock compensation
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    138Management fees
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Earnings from continuing
operations before gain on
disposal of assets and income
taxes
    
    
    29,898
    
    
    
    14,898
    
    
    
    
    
    
    
    44,796Gain on disposal of assets, net
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    20Earnings from continuing
operations before income
taxes
    
    $
    29,918
    
    
    $
    14,898
    
    
    $
    
    
    
    $
    44,816
  12




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (1)
    
    Adjusted EBITDA represents net earnings from continuing operations before interest expense,
income tax expense, depreciation and amortization, stock compensation, gain (loss) on disposal
of assets and management fees. Management fees represent monitoring and advisory fees paid to
TPG, the Companys majority financial sponsor, and certain other members of IASIS Investment
LLC, majority shareholder of IAS. Management routinely calculates and communicates adjusted
EBITDA and believes that it is useful to investors because it is commonly used as an
analytical indicator within the healthcare industry to evaluate hospital performance, allocate
resources and measure leverage capacity and debt service ability. In addition, the Company
uses adjusted EBITDA as a measure of performance for its business segments and for incentive
compensation purposes. Adjusted EBITDA should not be considered as a measure of financial
performance under GAAP, and the items excluded from adjusted EBITDA are significant components
in understanding and assessing financial performance. Adjusted EBITDA should not be considered
in isolation or as an alternative to net earnings, cash flows generated by operating,
investing, or financing activities or other financial statement data presented in the
condensed consolidated financial statements as an indicator of financial performance or
liquidity. Adjusted EBITDA, as presented, differs from what is defined under the Companys
senior secured credit facilities and may not be comparable to similarly titled measures of
other companies. For the Six Months Ended March 31, 2010Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    862,234
    
    
    $
    
    
    
    $
    
    
    
    $
    862,234Premium revenue
    
    
    
    
    
    
    391,245
    
    
    
    
    
    
    
    391,245Revenue between segments
    
    
    6,012
    
    
    
    
    
    
    
    (6,012
    )
    
    
    Net revenue
    
    
    868,246
    
    
    
    391,245
    
    
    
    (6,012
    )
    
    
    1,253,479Salaries and benefits (excludes
stock compensation)
    
    
    332,865
    
    
    
    9,539
    
    
    
    
    
    
    
    342,404Supplies
    
    
    133,737
    
    
    
    97
    
    
    
    
    
    
    
    133,834Medical claims
    
    
    
    
    
    
    344,673
    
    
    
    (6,012
    )
    
    
    338,661Other operating expenses
    
    
    160,929
    
    
    
    12,346
    
    
    
    
    
    
    
    173,275Provision for bad debts
    
    
    93,485
    
    
    
    
    
    
    
    
    
    
    
    93,485Rentals and leases
    
    
    19,684
    
    
    
    736
    
    
    
    
    
    
    
    20,420Adjusted EBITDA(1)
    
    
    127,546
    
    
    
    23,854
    
    
    
    
    
    
    
    151,400Interest expense, net
    
    
    33,354
    
    
    
    
    
    
    
    
    
    
    
    33,354Depreciation and amortization
    
    
    46,125
    
    
    
    1,777
    
    
    
    
    
    
    
    47,902Stock compensation
    
    
    2,249
    
    
    
    
    
    
    
    
    
    
    
    2,249Management fees
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    2,500Earnings from continuing
operations before loss on
disposal of assets and income
taxes
    
    
    43,318
    
    
    
    22,077
    
    
    
    
    
    
    
    65,395Loss on disposal of assets, net
    
    
    (57
    )
    
    
    
    
    
    
    
    
    
    
    (57
    )Earnings from continuing
operations before income
taxes
    
    $
    43,261
    
    
    $
    22,077
    
    
    $
    
    
    
    $
    65,338Segment assets
    
    $
    1,991,583
    
    
    $
    286,775
    
    
    
    
    
    
    $
    2,278,358Capital expenditures
    
    $
    30,073
    
    
    $
    114
    
    
    
    
    
    
    $
    30,187Goodwill
    
    $
    712,163
    
    
    $
    5,757
    
    
    
    
    
    
    $
    717,920
  13




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 For the Six Months Ended March 31, 2009Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    819,626
    
    
    $
    
    
    
    $
    
    
    
    $
    819,626Premium revenue
    
    
    
    
    
    
    320,672
    
    
    
    
    
    
    
    320,672Revenue between segments
    
    
    4,009
    
    
    
    
    
    
    
    (4,009
    )
    
    
    Net revenue
    
    
    823,635
    
    
    
    320,672
    
    
    
    (4,009
    )
    
    
    1,140,298Salaries and benefits (excludes
stock compensation)
    
    
    320,376
    
    
    
    9,853
    
    
    
    
    
    
    
    330,229Supplies
    
    
    123,411
    
    
    
    168
    
    
    
    
    
    
    
    123,579Medical claims
    
    
    
    
    
    
    267,609
    
    
    
    (4,009
    )
    
    
    263,600Other operating expenses
    
    
    144,396
    
    
    
    12,907
    
    
    
    
    
    
    
    157,303Provision for bad debts
    
    
    92,298
    
    
    
    
    
    
    
    
    
    
    
    92,298Rentals and leases
    
    
    18,403
    
    
    
    810
    
    
    
    
    
    
    
    19,213Hurricane-related property damage
    
    
    938
    
    
    
    
    
    
    
    
    
    
    
    938Adjusted EBITDA(1)
    
    
    123,813
    
    
    
    29,325
    
    
    
    
    
    
    
    153,138Interest expense, net
    
    
    34,795
    
    
    
    
    
    
    
    
    
    
    
    34,795Depreciation and amortization
    
    
    47,540
    
    
    
    1,752
    
    
    
    
    
    
    
    49,292Stock compensation
    
    
    279
    
    
    
    
    
    
    
    
    
    
    
    279Management fees
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    2,500Earnings from continuing
operations before gain on
disposal of assets and income
taxes
    
    
    38,699
    
    
    
    27,573
    
    
    
    
    
    
    
    66,272Gain on disposal of assets, net
    
    
    1,313
    
    
    
    
    
    
    
    
    
    
    
    1,313Earnings from continuing
operations before income
taxes
    
    $
    40,012
    
    
    $
    27,573
    
    
    $
    
    
    
    $
    67,585Segment assets
    
    $
    2,156,408
    
    
    $
    207,451
    
    
    
    
    
    
    $
    2,363,859Capital expenditures
    
    $
    48,486
    
    
    $
    786
    
    
    
    
    
    
    $
    49,272Goodwill
    
    $
    774,821
    
    
    $
    5,757
    
    
    
    
    
    
    $
    780,578
 (1)
    
    Adjusted EBITDA represents net earnings from continuing operations before interest expense,
income tax expense, depreciation and amortization, stock compensation, gain (loss) on disposal
of assets and management fees. Management fees represent monitoring and advisory fees paid to
TPG, the Companys majority financial sponsor, and certain other members of IASIS Investment
LLC, majority shareholder of IAS. Management routinely calculates and communicates adjusted
EBITDA and believes that it is useful to investors because it is commonly used as an
analytical indicator within the healthcare industry to evaluate hospital performance, allocate
resources and measure leverage capacity and debt service ability. In addition, the Company
uses adjusted EBITDA as a measure of performance for its business segments and for incentive
compensation purposes. Adjusted EBITDA should not be considered as a measure of financial
performance under GAAP, and the items excluded from adjusted EBITDA are significant components
in understanding and assessing financial performance. Adjusted EBITDA should not be considered
in isolation or as an alternative to net earnings, cash flows generated by operating,
investing, or financing activities or other financial statement data presented in the
condensed consolidated financial statements as an indicator of financial performance or
liquidity. Adjusted EBITDA, as presented, differs from what is defined under the Companys
senior secured credit facilities and may not be comparable to similarly titled measures of
other companies. 8. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
 3 4
   14




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    158,314
    
    
    $
    197
    
    
    $
    
    
    
    $
    158,511Accounts receivable, net
    
    
    
    
    
    
    92,905
    
    
    
    136,002
    
    
    
    
    
    
    
    228,907Inventories
    
    
    
    
    
    
    22,958
    
    
    
    29,643
    
    
    
    
    
    
    
    52,601Deferred income taxes
    
    
    20,872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,872Prepaid expenses and other
current assets
    
    
    
    
    
    
    22,019
    
    
    
    31,491
    
    
    
    
    
    
    
    53,510Total current assets
    
    
    20,872
    
    
    
    296,196
    
    
    
    197,333
    
    
    
    
    
    
    
    514,401Property and equipment, net
    
    
    
    
    
    
    346,123
    
    
    
    634,793
    
    
    
    
    
    
    
    980,916Intercompany
    
    
    
    
    
    
    (267,434
    )
    
    
    267,434
    
    
    
    
    
    
    
    Net investment in and advances
to subsidiaries
    
    
    1,784,081
    
    
    
    
    
    
    
    
    
    
    
    (1,784,081
    )
    
    
    Goodwill
    
    
    17,331
    
    
    
    67,445
    
    
    
    633,144
    
    
    
    
    
    
    
    717,920Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    28,500
    
    
    
    
    
    
    
    28,500Other assets, net
    
    
    13,618
    
    
    
    18,254
    
    
    
    4,749
    
    
    
    
    
    
    
    36,621Total assets
    
    $
    1,835,902
    
    
    $
    460,584
    
    
    $
    1,765,953
    
    
    $
    (1,784,081
    )
    
    $
    2,278,358Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    29,032
    
    
    $
    41,202
    
    
    $
    
    
    
    $
    70,234Salaries and benefits payable
    
    
    
    
    
    
    19,468
    
    
    
    17,953
    
    
    
    
    
    
    
    37,421Accrued interest payable
    
    
    12,503
    
    
    
    (3,237
    )
    
    
    3,237
    
    
    
    
    
    
    
    12,503Medical claims payable
    
    
    
    
    
    
    
    
    
    
    122,606
    
    
    
    
    
    
    
    122,606Other accrued expenses and
other current liabilities
    
    
    
    
    
    
    30,761
    
    
    
    37,449
    
    
    
    
    
    
    
    68,210Current portion of long-term
debt and capital lease
obligations
    
    
    5,890
    
    
    
    782
    
    
    
    19,897
    
    
    
    (19,897
    )
    
    
    6,672Total current liabilities
    
    
    18,393
    
    
    
    76,806
    
    
    
    242,344
    
    
    
    (19,897
    )
    
    
    317,646Long-term debt and capital
lease obligations
    
    
    1,042,315
    
    
    
    5,831
    
    
    
    557,619
    
    
    
    (557,619
    )
    
    
    1,048,146Deferred income taxes
    
    
    108,240
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,240Other long-term liabilities
    
    
    
    
    
    
    53,803
    
    
    
    640
    
    
    
    
    
    
    
    54,443Total liabilities
    
    
    1,168,948
    
    
    
    136,440
    
    
    
    800,603
    
    
    
    (577,516
    )
    
    
    1,528,475Non-controlling interests with
redemption rights
    
    
    
    
    
    
    72,527
    
    
    
    
    
    
    
    
    
    
    
    72,527Equity:Members equity
    
    
    666,954
    
    
    
    241,215
    
    
    
    965,350
    
    
    
    (1,206,565
    )
    
    
    666,954Non-controlling interests
    
    
    
    
    
    
    10,402
    
    
    
    
    
    
    
    
    
    
    
    10,402Total equity
    
    
    666,954
    
    
    
    251,617
    
    
    
    965,350
    
    
    
    (1,206,565
    )
    
    
    677,356Total liabilities and equity
    
    $
    1,835,902
    
    
    $
    460,584
    
    
    $
    1,765,953
    
    
    $
    (1,784,081
    )
    
    $
    2,278,358
  15




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##### Table of Contents



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




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    174,795
    
    
    $
    266,115
    
    
    $
    (3,336
    )
    
    $
    437,574Premium revenue
    
    
    
    
    
    
    
    
    
    
    186,948
    
    
    
    
    
    
    
    186,948Total net revenue
    
    
    
    
    
    
    174,795
    
    
    
    453,063
    
    
    
    (3,336
    )
    
    
    624,522Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    88,167
    
    
    
    86,004
    
    
    
    
    
    
    
    174,171Supplies
    
    
    
    
    
    
    28,704
    
    
    
    39,721
    
    
    
    
    
    
    
    68,425Medical claims
    
    
    
    
    
    
    
    
    
    
    163,430
    
    
    
    (3,336
    )
    
    
    160,094Other operating expenses
    
    
    
    
    
    
    27,340
    
    
    
    61,343
    
    
    
    
    
    
    
    88,683Provision for bad debts
    
    
    
    
    
    
    21,440
    
    
    
    24,096
    
    
    
    
    
    
    
    45,536Rentals and leases
    
    
    
    
    
    
    4,056
    
    
    
    6,089
    
    
    
    
    
    
    
    10,145Interest expense, net
    
    
    16,622
    
    
    
    
    
    
    
    10,635
    
    
    
    (10,635
    )
    
    
    16,622Depreciation and amortization
    
    
    
    
    
    
    9,948
    
    
    
    14,077
    
    
    
    
    
    
    
    24,025Management fees
    
    
    1,250
    
    
    
    (5,752
    )
    
    
    5,752
    
    
    
    
    
    
    
    1,250Equity in earnings of affiliates
    
    
    (40,574
    )
    
    
    
    
    
    
    
    
    
    
    40,574
    
    
    
    Total costs and expenses
    
    
    (22,702
    )
    
    
    173,903
    
    
    
    411,147
    
    
    
    26,603
    
    
    
    588,951Earnings (loss) from continuing
operations before loss on disposal
of assets and income taxes
    
    
    22,702
    
    
    
    892
    
    
    
    41,916
    
    
    
    (29,939
    )
    
    
    35,571Loss on disposal of assets, net
    
    
    
    
    
    
    (17
    )
    
    
    (144
    )
    
    
    
    
    
    
    (161
    )Earnings (loss) from continuing
operations before income taxes
    
    
    22,702
    
    
    
    875
    
    
    
    41,772
    
    
    
    (29,939
    )
    
    
    35,410Income tax expense
    
    
    13,270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,270Net earnings (loss) from
continuing operations
    
    
    9,432
    
    
    
    875
    
    
    
    41,772
    
    
    
    (29,939
    )
    
    
    22,140Earnings (loss) from discontinued
operations, net of income taxes
    
    
    15
    
    
    
    (38
    )
    
    
    (2
    )
    
    
    
    
    
    
    (25
    )Net earnings (loss)
    
    
    9,447
    
    
    
    837
    
    
    
    41,770
    
    
    
    (29,939
    )
    
    
    22,115Net earnings attributable to
non-controlling interests
    
    
    
    
    
    
    (2,033
    )
    
    
    
    
    
    
    
    
    
    
    (2,033
    )Net earnings (loss) attributable
to IASIS Healthcare LLC
    
    $
    9,447
    
    
    $
    (1,196
    )
    
    $
    41,770
    
    
    $
    (29,939
    )
    
    $
    20,082
  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
    
    $
    
    
    
    $
    163,677
    
    
    $
    259,814
    
    
    $
    (2,312
    )
    
    $
    421,179Premium revenue
    
    
    
    
    
    
    
    
    
    
    157,495
    
    
    
    
    
    
    
    157,495Total net revenue
    
    
    
    
    
    
    163,677
    
    
    
    417,309
    
    
    
    (2,312
    )
    
    
    578,674Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    84,594
    
    
    
    83,778
    
    
    
    
    
    
    
    168,372Supplies
    
    
    
    
    
    
    26,497
    
    
    
    37,256
    
    
    
    
    
    
    
    63,753Medical claims
    
    
    
    
    
    
    
    
    
    
    128,910
    
    
    
    (2,312
    )
    
    
    126,598Other operating expenses
    
    
    
    
    
    
    26,497
    
    
    
    51,456
    
    
    
    
    
    
    
    77,953Provision for bad debts
    
    
    
    
    
    
    21,660
    
    
    
    23,507
    
    
    
    
    
    
    
    45,167Rentals and leases
    
    
    
    
    
    
    3,970
    
    
    
    5,764
    
    
    
    
    
    
    
    9,734Interest expense, net
    
    
    15,817
    
    
    
    
    
    
    
    9,929
    
    
    
    (9,929
    )
    
    
    15,817Depreciation and amortization
    
    
    
    
    
    
    10,495
    
    
    
    13,801
    
    
    
    
    
    
    
    24,296Management fees
    
    
    1,250
    
    
    
    (5,597
    )
    
    
    5,597
    
    
    
    
    
    
    
    1,250Hurricane-related property
damage
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    
    
    
    
    938Equity in earnings of affiliates
    
    
    (49,314
    )
    
    
    
    
    
    
    
    
    
    
    49,314
    
    
    
    Total costs and expenses
    
    
    (32,247
    )
    
    
    168,116
    
    
    
    360,936
    
    
    
    37,073
    
    
    
    533,878Earnings (loss) from continuing
operations before gain (loss) on
disposal of assets and income
taxes
    
    
    32,247
    
    
    
    (4,439
    )
    
    
    56,373
    
    
    
    (39,385
    )
    
    
    44,796Gain (loss) on disposal of assets,
net
    
    
    
    
    
    
    21
    
    
    
    (1
    )
    
    
    
    
    
    
    20Earnings (loss) from continuing
operations before income taxes
    
    
    32,247
    
    
    
    (4,418
    )
    
    
    56,372
    
    
    
    (39,385
    )
    
    
    44,816Income tax expense
    
    
    16,449
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,449Net earnings (loss) from
continuing operations
    
    
    15,798
    
    
    
    (4,418
    )
    
    
    56,372
    
    
    
    (39,385
    )
    
    
    28,367Earnings (loss) from discontinued
operations, net of income taxes
    
    
    (126
    )
    
    
    336
    
    
    
    1
    
    
    
    
    
    
    
    211Net earnings (loss)
    
    
    15,672
    
    
    
    (4,082
    )
    
    
    56,373
    
    
    
    (39,385
    )
    
    
    28,578Net earnings attributable to
non-controlling interests
    
    
    
    
    
    
    (2,977
    )
    
    
    
    
    
    
    
    
    
    
    (2,977
    )Net earnings (loss) attributable
to IASIS Healthcare LLC
    
    $
    15,672
    
    
    $
    (7,059
    )
    
    $
    56,373
    
    
    $
    (39,385
    )
    
    $
    25,601
  18




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    346,096
    
    
    $
    522,150
    
    
    $
    (6,012
    )
    
    $
    862,234Premium revenue
    
    
    
    
    
    
    
    
    
    
    391,245
    
    
    
    
    
    
    
    391,245Total net revenue
    
    
    
    
    
    
    346,096
    
    
    
    913,395
    
    
    
    (6,012
    )
    
    
    1,253,479Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    174,776
    
    
    
    169,877
    
    
    
    
    
    
    
    344,653Supplies
    
    
    
    
    
    
    56,142
    
    
    
    77,692
    
    
    
    
    
    
    
    133,834Medical claims
    
    
    
    
    
    
    
    
    
    
    344,673
    
    
    
    (6,012
    )
    
    
    338,661Other operating expenses
    
    
    
    
    
    
    57,229
    
    
    
    116,046
    
    
    
    
    
    
    
    173,275Provision for bad debts
    
    
    
    
    
    
    43,763
    
    
    
    49,722
    
    
    
    
    
    
    
    93,485Rentals and leases
    
    
    
    
    
    
    8,482
    
    
    
    11,938
    
    
    
    
    
    
    
    20,420Interest expense, net
    
    
    33,354
    
    
    
    
    
    
    
    20,379
    
    
    
    (20,379
    )
    
    
    33,354Depreciation and amortization
    
    
    
    
    
    
    19,858
    
    
    
    28,044
    
    
    
    
    
    
    
    47,902Management fees
    
    
    2,500
    
    
    
    (11,316
    )
    
    
    11,316
    
    
    
    
    
    
    
    2,500Equity in earnings of affiliates
    
    
    (76,786
    )
    
    
    
    
    
    
    
    
    
    
    76,786
    
    
    
    Total costs and expenses
    
    
    (40,932
    )
    
    
    348,934
    
    
    
    829,687
    
    
    
    50,395
    
    
    
    1,188,084Earnings (loss) from continuing
operations before gain (loss) on
disposal of assets and income
taxes
    
    
    40,932
    
    
    
    (2,838
    )
    
    
    83,708
    
    
    
    (56,407
    )
    
    
    65,395Gain (loss) on disposal of assets,
net
    
    
    
    
    
    
    59
    
    
    
    (116
    )
    
    
    
    
    
    
    (57
    )Earnings (loss) from continuing
operations before income taxes
    
    
    40,932
    
    
    
    (2,779
    )
    
    
    83,592
    
    
    
    (56,407
    )
    
    
    65,338Income tax expense
    
    
    23,861
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,861Net earnings (loss) from
continuing operations
    
    
    17,071
    
    
    
    (2,779
    )
    
    
    83,592
    
    
    
    (56,407
    )
    
    
    41,477Earnings (loss) from discontinued
operations, net of income taxes
    
    
    (13
    )
    
    
    37
    
    
    
    (3
    )
    
    
    
    
    
    
    21Net earnings (loss)
    
    
    17,058
    
    
    
    (2,742
    )
    
    
    83,589
    
    
    
    (56,407
    )
    
    
    41,498Net earnings attributable to
non-controlling interests
    
    
    
    
    
    
    (4,061
    )
    
    
    
    
    
    
    
    
    
    
    (4,061
    )Net earnings (loss) attributable
to IASIS Healthcare LLC
    
    $
    17,058
    
    
    $
    (6,803
    )
    
    $
    83,589
    
    
    $
    (56,407
    )
    
    $
    37,437
  19




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    325,435
    
    
    $
    498,200
    
    
    $
    (4,009
    )
    
    $
    819,626Premium revenue
    
    
    
    
    
    
    
    
    
    
    320,672
    
    
    
    
    
    
    
    320,672Total net revenue
    
    
    
    
    
    
    325,435
    
    
    
    818,872
    
    
    
    (4,009
    )
    
    
    1,140,298Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    165,188
    
    
    
    165,320
    
    
    
    
    
    
    
    330,508Supplies
    
    
    
    
    
    
    51,571
    
    
    
    72,008
    
    
    
    
    
    
    
    123,579Medical claims
    
    
    
    
    
    
    
    
    
    
    267,609
    
    
    
    (4,009
    )
    
    
    263,600Other operating expenses
    
    
    
    
    
    
    55,595
    
    
    
    101,708
    
    
    
    
    
    
    
    157,303Provision for bad debts
    
    
    
    
    
    
    45,740
    
    
    
    46,558
    
    
    
    
    
    
    
    92,298Rentals and leases
    
    
    
    
    
    
    8,017
    
    
    
    11,196
    
    
    
    
    
    
    
    19,213Interest expense, net
    
    
    34,795
    
    
    
    
    
    
    
    23,773
    
    
    
    (23,773
    )
    
    
    34,795Depreciation and amortization
    
    
    
    
    
    
    21,763
    
    
    
    27,529
    
    
    
    
    
    
    
    49,292Management fees
    
    
    2,500
    
    
    
    (10,736
    )
    
    
    10,736
    
    
    
    
    
    
    
    2,500Hurricane-related property
damage
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    
    
    
    
    938Equity in earnings of affiliates
    
    
    (75,735
    )
    
    
    
    
    
    
    
    
    
    
    75,735
    
    
    
    Total costs and expenses
    
    
    (38,440
    )
    
    
    337,138
    
    
    
    727,375
    
    
    
    47,953
    
    
    
    1,074,026Earnings (loss) from continuing
operations before gain on disposal
of assets and income taxes
    
    
    38,440
    
    
    
    (11,703
    )
    
    
    91,497
    
    
    
    (51,962
    )
    
    
    66,272Gain on disposal of assets, net
    
    
    
    
    
    
    1,292
    
    
    
    21
    
    
    
    
    
    
    
    1,313Earnings (loss) from continuing
operations before income taxes
    
    
    38,440
    
    
    
    (10,411
    )
    
    
    91,518
    
    
    
    (51,962
    )
    
    
    67,585Income tax expense
    
    
    25,260
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,260Net earnings (loss) from
continuing operations
    
    
    13,180
    
    
    
    (10,411
    )
    
    
    91,518
    
    
    
    (51,962
    )
    
    
    42,325Earnings (loss) from discontinued
operations, net of income taxes
    
    
    298
    
    
    
    (814
    )
    
    
    16
    
    
    
    
    
    
    
    (500
    )Net earnings (loss)
    
    
    13,478
    
    
    
    (11,225
    )
    
    
    91,534
    
    
    
    (51,962
    )
    
    
    41,825Net earnings attributable to
non-controlling interests
    
    
    
    
    
    
    (4,574
    )
    
    
    
    
    
    
    
    
    
    
    (4,574
    )Net earnings (loss) attributable
to IASIS Healthcare LLC
    
    $
    13,478
    
    
    $
    (15,799
    )
    
    $
    91,534
    
    
    $
    (51,962
    )
    
    $
    37,251
  20




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    17,058
    
    
    $
    (2,742
    )
    
    $
    83,589
    
    
    $
    (56,407
    )
    
    $
    41,498Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    
    
    
    
    19,858
    
    
    
    28,044
    
    
    
    
    
    
    
    47,902Amortization of loan costs
    
    
    1,564
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,564Stock compensation costs
    
    
    2,249
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,249Deferred income taxes
    
    
    19,589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,589Income tax benefit from stock
compensation
    
    
    (1,770
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,770
    )Income tax benefit from parent company
interest
    
    
    3,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,275Loss (gain) on disposal of assets, net
    
    
    
    
    
    
    (59
    )
    
    
    116
    
    
    
    
    
    
    
    57Loss (earnings) from discontinued
operations, net
    
    
    13
    
    
    
    (37
    )
    
    
    3
    
    
    
    
    
    
    
    (21
    )Equity in earnings of affiliates
    
    
    (76,786
    )
    
    
    
    
    
    
    
    
    
    
    76,786
    
    
    
    Changes in operating assets and
liabilities, net of the effect of
dispositions:Accounts receivable, net
    
    
    
    
    
    
    (1,735
    )
    
    
    3,313
    
    
    
    
    
    
    
    1,578Inventories, prepaid expenses and
other current assets
    
    
    
    
    
    
    (7,050
    )
    
    
    885
    
    
    
    
    
    
    
    (6,165
    )Accounts payable, other accrued
expenses and other accrued
liabilities
    
    
    1,762
    
    
    
    (4,873
    )
    
    
    10,121
    
    
    
    
    
    
    
    7,010Net cash provided by (used in)
operating activities  continuing
operations
    
    
    (33,046
    )
    
    
    3,362
    
    
    
    126,071
    
    
    
    20,379
    
    
    
    116,766Net cash used in operating activities
 discontinued operations
    
    
    (13
    )
    
    
    (186
    )
    
    
    
    
    
    
    
    
    
    
    (199
    )Net cash provided by (used in)
operating activities
    
    
    (33,059
    )
    
    
    3,176
    
    
    
    126,071
    
    
    
    20,379
    
    
    
    116,567Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (17,975
    )
    
    
    (12,212
    )
    
    
    
    
    
    
    (30,187
    )Proceeds from sale of assets
    
    
    
    
    
    
    8
    
    
    
    28
    
    
    
    
    
    
    
    36Change in other assets, net
    
    
    
    
    
    
    1,588
    
    
    
    (575
    )
    
    
    
    
    
    
    1,013Net cash used in investing activities
    
    
    
    
    
    
    (16,379
    )
    
    
    (12,759
    )
    
    
    
    
    
    
    (29,138
    )Cash flows from financing activitiesPayment of debt and capital lease
obligations
    
    
    (4,607
    )
    
    
    48
    
    
    
    (579
    )
    
    
    
    
    
    
    (5,138
    )Distribution to parent company in
connection with the repurchase of
equity, net
    
    
    (124,962
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124,962
    )Distributions to non-controlling interests
    
    
    
    
    
    
    (121
    )
    
    
    (5,156
    )
    
    
    
    
    
    
    (5,277
    )Costs paid for repurchase of partnership
interests, net
    
    
    
    
    
    
    (69
    )
    
    
    
    
    
    
    
    
    
    
    (69
    )Change in intercompany balances with
affiliates, net
    
    
    162,628
    
    
    
    (34,672
    )
    
    
    (107,577
    )
    
    
    (20,379
    )
    
    
    Net cash provided by (used in)
financing activities
    
    
    33,059
    
    
    
    (34,814
    )
    
    
    (113,312
    )
    
    
    (20,379
    )
    
    
    (135,446
    )Change in cash and cash equivalents
    
    
    
    
    
    
    (48,017
    )
    
    
    
    
    
    
    
    
    
    
    (48,017
    )Cash and cash equivalents at beginning of
period
    
    
    
    
    
    
    206,331
    
    
    
    197
    
    
    
    
    
    
    
    206,528Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    158,314
    
    
    $
    197
    
    
    $
    
    
    
    $
    158,511
  21




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##### Table of Contents



IASIS HEALTHCARE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    13,478
    
    
    $
    (11,225
    )
    
    $
    91,534
    
    
    $
    (51,962
    )
    
    $
    41,825Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    
    
    
    
    21,763
    
    
    
    27,529
    
    
    
    
    
    
    
    49,292Amortization of loan costs
    
    
    1,498
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,498Stock compensation costs
    
    
    279
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    279Deferred income taxes
    
    
    9,530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,530Gain on disposal of assets, net
    
    
    
    
    
    
    (1,292
    )
    
    
    (21
    )
    
    
    
    
    
    
    (1,313
    )Loss (earnings) from discontinued
operations, net
    
    
    (298
    )
    
    
    814
    
    
    
    (16
    )
    
    
    
    
    
    
    500Hurricane-related property damage
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    
    
    
    
    938Equity in earnings of affiliates
    
    
    (75,735
    )
    
    
    
    
    
    
    
    
    
    
    75,735
    
    
    
    Changes in operating assets and
liabilities, net of the effect of
dispositions:Accounts receivable, net
    
    
    
    
    
    
    (2,161
    )
    
    
    (27,534
    )
    
    
    
    
    
    
    (29,695
    )Inventories, prepaid expenses and
other current assets
    
    
    
    
    
    
    (1,352
    )
    
    
    7,735
    
    
    
    
    
    
    
    6,383Accounts payable, other accrued
expenses and other accrued
liabilities
    
    
    63
    
    
    
    28,585
    
    
    
    (14,478
    )
    
    
    
    
    
    
    14,170Net cash provided by (used in)
operating activities  continuing
operations
    
    
    (51,185
    )
    
    
    35,132
    
    
    
    85,687
    
    
    
    23,773
    
    
    
    93,407Net cash provided by (used in)
operating activities  discontinued
operations
    
    
    (298
    )
    
    
    1,611
    
    
    
    (189
    )
    
    
    
    
    
    
    1,124Net cash provided by (used in)
operating activities
    
    
    (51,483
    )
    
    
    36,743
    
    
    
    85,498
    
    
    
    23,773
    
    
    
    94,531Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (14,835
    )
    
    
    (34,437
    )
    
    
    
    
    
    
    (49,272
    )Proceeds from sale of assets
    
    
    
    
    
    
    2,741
    
    
    
    2,232
    
    
    
    
    
    
    
    4,973Change in other assets, net
    
    
    
    
    
    
    (309
    )
    
    
    1,904
    
    
    
    
    
    
    
    1,595Net cash used in investing activities
 continuing operations
    
    
    
    
    
    
    (12,403
    )
    
    
    (30,301
    )
    
    
    
    
    
    
    (42,704
    )Net cash provided by investing
activities  discontinued operations
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10Net cash used in investing activities
    
    
    
    
    
    
    (12,393
    )
    
    
    (30,301
    )
    
    
    
    
    
    
    (42,694
    )Cash flows from financing activitiesPayment of debt and capital lease
obligations
    
    
    (5,723
    )
    
    
    158
    
    
    
    (814
    )
    
    
    
    
    
    
    (6,379
    )Distributions to non-controlling interests
    
    
    
    
    
    
    (140
    )
    
    
    (2,779
    )
    
    
    
    
    
    
    (2,919
    )Costs paid for repurchase of partnership
interests, net
    
    
    
    
    
    
    (1,341
    )
    
    
    
    
    
    
    
    
    
    
    (1,341
    )Change in intercompany balances with
affiliates, net
    
    
    57,206
    
    
    
    17,340
    
    
    
    (50,773
    )
    
    
    (23,773
    )
    
    
    Net cash provided by (used in)
financing activities
    
    
    51,483
    
    
    
    16,017
    
    
    
    (54,366
    )
    
    
    (23,773
    )
    
    
    (10,639
    )Change in cash and cash equivalents
    
    
    
    
    
    
    40,367
    
    
    
    831
    
    
    
    
    
    
    
    41,198Cash and cash equivalents at beginning of
period
    
    
    
    
    
    
    80,336
    
    
    
    402
    
    
    
    
    
    
    
    80,738Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    120,703
    
    
    $
    1,233
    
    
    $
    
    
    
    $
    121,936
  22




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



Revenue and Volume Trends
  Acute Care Revenue
    25




---



##### Table of Contents



26




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##### Table of Contents



Quarter
    
    
    Six MonthsEnded March 31,
    
    
    Ended March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Medicare
    
    
    33.0
    %
    
    
    32.8
    %
    
    
    31.7
    %
    
    
    32.3
    %Managed Medicare
    
    
    12.9
    %
    
    
    12.1
    %
    
    
    12.1
    %
    
    
    11.6
    %Medicaid
    
    
    7.9
    %
    
    
    8.1
    %
    
    
    8.4
    %
    
    
    7.8
    %Managed Medicaid
    
    
    12.0
    %
    
    
    10.0
    %
    
    
    12.0
    %
    
    
    10.3
    %Managed care
    
    
    29.6
    %
    
    
    32.2
    %
    
    
    31.1
    %
    
    
    33.1
    %Self-pay
    
    
    4.6
    %
    
    
    4.8
    %
    
    
    4.7
    %
    
    
    4.9
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Premium Revenue
   27




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##### Table of Contents



Significant Industry Trends
  Value-Based Reimbursement
    28




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##### Table of Contents



Physician Integration
     29




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##### Table of Contents



Uncompensated Care
    March 31,
    
    
    September 30,2010
    
    
    2009Insured receivables
    
    
    65.1
    %
    
    
    62.0
    %Uninsured receivables
    
    
    34.9
    %
    
    
    38.0
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
   March 31,
    
    
    September 30,2010
    
    
    20090 to 90 days
    
    
    72.5
    %
    
    
    69.4
    %91 to 180 days
    
    
    16.7
    %
    
    
    18.1
    %Over 180 days
    
    
    10.8
    %
    
    
    12.5
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
   30




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##### Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  SELECTED OPERATING DATA
  Quarter
    
    
    Six MonthsEnded March 31,
    
    
    Ended March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Acute Care:Number of acute care hospital facilities
at end of period
    
    
    15
    
    
    
    15
    
    
    
    15
    
    
    
    15Beds in service at end of period (1)
    
    
    2,884
    
    
    
    2,796
    
    
    
    2,884
    
    
    
    2,796Average length of stay (days) (2)
    
    
    4.9
    
    
    
    4.7
    
    
    
    4.8
    
    
    
    4.7Occupancy rates (average beds in service)
    
    
    49.0
    %
    
    
    49.7
    %
    
    
    48.0
    %
    
    
    48.2
    %Admissions (3)
    
    
    26,458
    
    
    
    26,249
    
    
    
    51,711
    
    
    
    50,399Adjusted admissions (4)
    
    
    42,932
    
    
    
    43,101
    
    
    
    84,999
    
    
    
    83,835Patient days (5)
    
    
    128,336
    
    
    
    123,257
    
    
    
    248,887
    
    
    
    236,954Adjusted patient days (4)
    
    
    201,615
    
    
    
    194,311
    
    
    
    394,838
    
    
    
    378,142Net patient revenue per adjusted
admission
    
    $
    10,130
    
    
    $
    9,679
    
    
    $
    10,079
    
    
    $
    9,673Health Choice:Medicaid covered lives
    
    
    195,392
    
    
    
    164,551
    
    
    
    195,392
    
    
    
    164,551Dual-eligible lives (6)
    
    
    4,186
    
    
    
    3,417
    
    
    
    4,186
    
    
    
    3,417Medical loss ratio (7)
    
    
    87.4
    %
    
    
    81.9
    %
    
    
    88.1
    %
    
    
    83.5
    %
 (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.  31




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##### Table of Contents



RESULTS OF OPERATIONS SUMMARY
 Consolidated
  Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2010
    
    
    March 31, 2009
    
    
    March 31, 2010
    
    
    March 31, 2009($ in thousands):
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    437,574
    
    
    
    70.1
    %
    
    $
    421,179
    
    
    
    72.8
    %
    
    $
    862,234
    
    
    
    68.8
    %
    
    $
    819,626
    
    
    
    71.9
    %Premium revenue
    
    
    186,948
    
    
    
    29.9
    %
    
    
    157,495
    
    
    
    27.2
    %
    
    
    391,245
    
    
    
    31.2
    %
    
    
    320,672
    
    
    
    28.1
    %Total net revenue
    
    
    624,522
    
    
    
    100.0
    %
    
    
    578,674
    
    
    
    100.0
    %
    
    
    1,253,479
    
    
    
    100.0
    %
    
    
    1,140,298
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    174,171
    
    
    
    27.9
    %
    
    
    168,372
    
    
    
    29.1
    %
    
    
    344,653
    
    
    
    27.5
    %
    
    
    330,508
    
    
    
    29.0
    %Supplies
    
    
    68,425
    
    
    
    11.0
    %
    
    
    63,753
    
    
    
    11.0
    %
    
    
    133,834
    
    
    
    10.7
    %
    
    
    123,579
    
    
    
    10.8
    %Medical claims
    
    
    160,094
    
    
    
    25.6
    %
    
    
    126,598
    
    
    
    21.9
    %
    
    
    338,661
    
    
    
    27.0
    %
    
    
    263,600
    
    
    
    23.1
    %Other operating expenses
    
    
    88,683
    
    
    
    14.2
    %
    
    
    77,953
    
    
    
    13.5
    %
    
    
    173,275
    
    
    
    13.8
    %
    
    
    157,303
    
    
    
    13.8
    %Provision for bad debts
    
    
    45,536
    
    
    
    7.3
    %
    
    
    45,167
    
    
    
    7.8
    %
    
    
    93,485
    
    
    
    7.5
    %
    
    
    92,298
    
    
    
    8.1
    %Rentals and leases
    
    
    10,145
    
    
    
    1.6
    %
    
    
    9,734
    
    
    
    1.7
    %
    
    
    20,420
    
    
    
    1.6
    %
    
    
    19,213
    
    
    
    1.7
    %Interest expense, net
    
    
    16,622
    
    
    
    2.7
    %
    
    
    15,817
    
    
    
    2.7
    %
    
    
    33,354
    
    
    
    2.7
    %
    
    
    34,795
    
    
    
    3.1
    %Depreciation and
amortization
    
    
    24,025
    
    
    
    3.8
    %
    
    
    24,296
    
    
    
    4.2
    %
    
    
    47,902
    
    
    
    3.8
    %
    
    
    49,292
    
    
    
    4.3
    %Management fees
    
    
    1,250
    
    
    
    0.2
    %
    
    
    1,250
    
    
    
    0.2
    %
    
    
    2,500
    
    
    
    0.2
    %
    
    
    2,500
    
    
    
    0.2
    %Hurricane-related
property damage
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    0.2
    %
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    0.1
    %Total costs and
expenses
    
    
    588,951
    
    
    
    94.3
    %
    
    
    533,878
    
    
    
    92.3
    %
    
    
    1,188,084
    
    
    
    94.8
    %
    
    
    1,074,026
    
    
    
    94.2
    %Earnings from continuing
operations before gain
(loss) on disposal of
assets and income taxes
    
    
    35,571
    
    
    
    5.7
    %
    
    
    44,796
    
    
    
    7.7
    %
    
    
    65,395
    
    
    
    5.2
    %
    
    
    66,272
    
    
    
    5.8
    %Gain (loss) on disposal
of assets, net
    
    
    (161
    )
    
    
    (0.0
    %)
    
    
    20
    
    
    
    0.0
    %
    
    
    (57
    )
    
    
    (0.0
    %)
    
    
    1,313
    
    
    
    0.1
    %Earnings from continuing
operations before income
taxes
    
    
    35,410
    
    
    
    5.7
    %
    
    
    44,816
    
    
    
    7.7
    %
    
    
    65,338
    
    
    
    5.2
    %
    
    
    67,585
    
    
    
    5.9
    %Income tax expense
    
    
    13,270
    
    
    
    2.2
    %
    
    
    16,449
    
    
    
    2.8
    %
    
    
    23,861
    
    
    
    1.9
    %
    
    
    25,260
    
    
    
    2.2
    %Net earnings from
continuing operations
    
    
    22,140
    
    
    
    3.5
    %
    
    
    28,367
    
    
    
    4.9
    %
    
    
    41,477
    
    
    
    3.3
    %
    
    
    42,325
    
    
    
    3.7
    %Earnings (loss) from
discontinued operations,
net of income taxes
    
    
    (25
    )
    
    
    (0.0
    %)
    
    
    211
    
    
    
    0.0
    %
    
    
    21
    
    
    
    0.0
    %
    
    
    (500
    )
    
    
    (0.0
    %)Net earnings
    
    
    22,115
    
    
    
    3.5
    %
    
    
    28,578
    
    
    
    4.9
    %
    
    
    41,498
    
    
    
    3.3
    %
    
    
    41,825
    
    
    
    3.7
    %Net earnings attributable
to non-controlling
interests
    
    
    (2,033
    )
    
    
    (0.3
    %)
    
    
    (2,977
    )
    
    
    (0.5
    %)
    
    
    (4,061
    )
    
    
    (0.3
    %)
    
    
    (4,574
    )
    
    
    (0.4
    %)Net earnings attributable
to IASIS Healthcare LLC
    
    $
    20,082
    
    
    
    3.2
    %
    
    $
    25,601
    
    
    
    4.4
    %
    
    $
    37,437
    
    
    
    3.0
    %
    
    $
    37,251
    
    
    
    3.3
    %
  32




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##### Table of Contents



Acute Care
  Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2010
    
    
    March 31, 2009
    
    
    March 31, 2010
    
    
    March 31, 2009($ in thousands):
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageAcute care revenue:Acute care revenue
    
    $
    437,574
    
    
    
    99.3
    %
    
    $
    421,179
    
    
    
    99.5
    %
    
    $
    862,234
    
    
    
    99.3
    %
    
    $
    819,626
    
    
    
    99.5
    %Revenue between segments
(1)
    
    
    3,336
    
    
    
    0.7
    %
    
    
    2,312
    
    
    
    0.5
    %
    
    
    6,012
    
    
    
    0.7
    %
    
    
    4,009
    
    
    
    0.5
    %Total acute care
revenue
    
    
    440,910
    
    
    
    100.0
    %
    
    
    423,491
    
    
    
    100.0
    %
    
    
    868,246
    
    
    
    100.0
    %
    
    
    823,635
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    169,224
    
    
    
    38.4
    %
    
    
    163,423
    
    
    
    38.6
    %
    
    
    335,114
    
    
    
    38.6
    %
    
    
    320,655
    
    
    
    38.9
    %Supplies
    
    
    68,375
    
    
    
    15.5
    %
    
    
    63,670
    
    
    
    15.0
    %
    
    
    133,737
    
    
    
    15.4
    %
    
    
    123,411
    
    
    
    15.0
    %Other operating expenses
    
    
    82,604
    
    
    
    18.7
    %
    
    
    70,611
    
    
    
    16.7
    %
    
    
    160,929
    
    
    
    18.5
    %
    
    
    144,396
    
    
    
    17.6
    %Provision for bad debts
    
    
    45,536
    
    
    
    10.3
    %
    
    
    45,167
    
    
    
    10.7
    %
    
    
    93,485
    
    
    
    10.8
    %
    
    
    92,298
    
    
    
    11.2
    %Rentals and leases
    
    
    9,780
    
    
    
    2.2
    %
    
    
    9,302
    
    
    
    2.2
    %
    
    
    19,684
    
    
    
    2.3
    %
    
    
    18,403
    
    
    
    2.2
    %Interest expense, net
    
    
    16,622
    
    
    
    3.8
    %
    
    
    15,817
    
    
    
    3.7
    %
    
    
    33,354
    
    
    
    3.8
    %
    
    
    34,795
    
    
    
    4.2
    %Depreciation and
amortization
    
    
    23,137
    
    
    
    5.3
    %
    
    
    23,415
    
    
    
    5.5
    %
    
    
    46,125
    
    
    
    5.3
    %
    
    
    47,540
    
    
    
    5.8
    %Management fees
    
    
    1,250
    
    
    
    0.3
    %
    
    
    1,250
    
    
    
    0.3
    %
    
    
    2,500
    
    
    
    0.3
    %
    
    
    2,500
    
    
    
    0.3
    %Hurricane-related
property damage
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    0.2
    %
    
    
    
    
    
    
    
    
    
    
    938
    
    
    
    0.1
    %Total costs and expenses
    
    
    416,528
    
    
    
    94.5
    %
    
    
    393,593
    
    
    
    92.9
    %
    
    
    824,928
    
    
    
    95.0
    %
    
    
    784,936
    
    
    
    95.3
    %Earnings from continuing
operations before gain
(loss) on disposal of
assets and income taxes
    
    
    24,382
    
    
    
    5.5
    %
    
    
    29,898
    
    
    
    7.1
    %
    
    
    43,318
    
    
    
    5.0
    %
    
    
    38,699
    
    
    
    4.7
    %Gain (loss) on disposal of
assets, net
    
    
    (161
    )
    
    
    (0.0
    %)
    
    
    20
    
    
    
    0.0
    %
    
    
    (57
    )
    
    
    (0.0
    %)
    
    
    1,313
    
    
    
    0.2
    %Earnings from continuing
operations before income
taxes
    
    $
    24,221
    
    
    
    5.5
    %
    
    $
    29,918
    
    
    
    7.1
    %
    
    $
    43,261
    
    
    
    5.0
    %
    
    $
    40,012
    
    
    
    4.9
    %
 (1)
    
    Revenue between segments is eliminated in our consolidated results. Quarters Ended March 31, 2010 and 2009
 Acute care revenue
  Salaries and benefits
  33




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##### Table of Contents



Supplies
 Other operating
expenses
 Provision for bad debts
 Six Months Ended March 31, 2010 and 2009
 Acute care revenue
  Salaries and benefits
 Supplies
  34




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##### Table of Contents



Other operating expenses
 Provision for bad debts
 Health Choice
  Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2010
    
    
    March 31, 2009
    
    
    March 31, 2010
    
    
    March 31, 2009($ in thousands):
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentagePremium revenue:Premium revenue
    
    $
    186,948
    
    
    
    100.0
    %
    
    $
    157,495
    
    
    
    100.0
    %
    
    $
    391,245
    
    
    
    100.0
    %
    
    $
    320,672
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    4,947
    
    
    
    2.6
    %
    
    
    4,949
    
    
    
    3.1
    %
    
    
    9,539
    
    
    
    2.4
    %
    
    
    9,853
    
    
    
    3.1
    %Supplies
    
    
    50
    
    
    
    0.0
    %
    
    
    83
    
    
    
    0.0
    %
    
    
    97
    
    
    
    0.0
    %
    
    
    168
    
    
    
    0.0
    %Medical claims (1)
    
    
    163,430
    
    
    
    87.4
    %
    
    
    128,910
    
    
    
    81.9
    %
    
    
    344,673
    
    
    
    88.1
    %
    
    
    267,609
    
    
    
    83.5
    %Other operating expenses
    
    
    6,079
    
    
    
    3.3
    %
    
    
    7,342
    
    
    
    4.7
    %
    
    
    12,346
    
    
    
    3.2
    %
    
    
    12,907
    
    
    
    4.0
    %Rentals and leases
    
    
    365
    
    
    
    0.2
    %
    
    
    432
    
    
    
    0.2
    %
    
    
    736
    
    
    
    0.2
    %
    
    
    810
    
    
    
    0.3
    %Depreciation and amortization
    
    
    888
    
    
    
    0.5
    %
    
    
    881
    
    
    
    0.6
    %
    
    
    1,777
    
    
    
    0.5
    %
    
    
    1,752
    
    
    
    0.5
    %Total costs and expenses
    
    
    175,759
    
    
    
    94.0
    %
    
    
    142,597
    
    
    
    90.5
    %
    
    
    369,168
    
    
    
    94.4
    %
    
    
    293,099
    
    
    
    91.4
    %Earnings before income taxes
    
    $
    11,189
    
    
    
    6.0
    %
    
    $
    14,898
    
    
    
    9.5
    %
    
    $
    22,077
    
    
    
    5.6
    %
    
    $
    27,573
    
    
    
    8.6
    %
 (1)
    
    Medical claims paid to our hospitals of $3.3 million and $2.3 million for the quarters ended
March 31, 2010 and 2009, respectively, and $6.0 million and $4.0 million for the six months
ended March 31, 2010 and 2009, respectively, are eliminated in our consolidated results. Quarters Ended March 31, 2010 and 2009
 Premium revenue
 Medical claims
  35




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##### Table of Contents



Six Months Ended March 31, 2010 and 2009
 Premium revenue
 Medical
claims
 LIQUIDITY AND CAPITAL RESOURCES
 Overview of Cash Flow Activities for the Six Months Ended March 31, 2010 and 2009
  Six MonthsEnded March 31,2010
    
    
    2009Cash flow from operating activities
    
    $
    116,567
    
    
    $
    94,531Cash flow from investing activities
    
    
    (29,138
    )
    
    
    (42,694
    )Cash flow from financing activities
    
    
    (135,446
    )
    
    
    (10,639
    )
 Operating Activities
   Investing Activities
  Financing Activities
   36




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Capital Resources
 $854.0 Million Senior Secured Credit Facilities
       37




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##### Table of Contents



$475.0 Million 8 3 / 4 % Senior Subordinated Notes Due 2014
 pari passu
 Holdings Senior PIK Loans
  Other
   Capital Expenditures
  
    
    $30.0 million to $35.0 million for other growth and new business projects;
    
    $32.0 million to $37.0 million in replacement or maintenance related projects at our
hospitals;
    
    $20.0 million related to the healthcare information technology stimulus mandate; and
    
    $8.0 million in hardware and software costs related to other information systems
projects.
  38




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##### Table of Contents



Liquidity
   Cash and cash equivalents
    
    $
    158.5Available capacity under our senior secured revolving credit facility
    
    
    199.9Net available liquidity at March 31, 2010
    
    $
    358.4
     3 4
  39




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##### Table of Contents



OFF-BALANCE SHEET ARRANGEMENTS
   SEASONALITY
  RECENT ACCOUNTING PRONOUNCEMENTS
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
     40




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##### Table of Contents



3 4 3 4
  
 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
  41




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##### Table of Contents



Item 1A. Risk Factors
  The Health Reform Law, Which Represents Significant Change To The Healthcare Industry, And
Other Changes In Governmental Programs May Reduce Our Revenues.
      42




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##### Table of Contents



The Health Reform Law Imposes Significant New Restrictions On Hospitals That Have Physician Owners,
Including Our Hospitals That Have Physician Owners.
   43




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Significant Changes By AHCCCS In The Payment Structure Of Its Contracts Or The Amount Of Premiums
Paid To Us Could Adversely Affect Our Net Revenue And Profitability.
    44




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 6. Exhibits
  31.1
    
    
    Certification of Principal Executive Officer Pursuant to Rule 15d-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    
    Certification of Principal Financial Officer pursuant to Rule 15d-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
  45




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##### Table of Contents



SIGNATURES
  IASIS HEALTHCARE LLCDate: May 14, 2010
    By:
    /s/ John M. DoyleJohn M. DoyleChief Financial Officer  46




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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.
  47