##### 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, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to  .
 COMMISSION FILE NUMBER: 333-117362
 IASIS HEALTHCARE LLC
  DELAWARE
    
    20-1150104(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)DOVER CENTRE 
117 SEABOARD LANE, BUILDING E 
FRANKLIN, TENNESSEE
(Address of principal executive offices)
    
    37067


(Zip Code)
 (615) 844-2747
 Not Applicable
 þ 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  March 31, 2008 (Unaudited)
and September 30, 2007
    
    
    1Condensed Consolidated Statements of Operations (Unaudited) 
Quarters and Six Months Ended March 31, 2008 and 2007
    
    
    2Condensed Consolidated Statements of Cash Flows (Unaudited)  Six
Months Ended March 31, 2008 and 2007
    
    
    3Notes to Condensed Consolidated Financial Statements
(Unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    43Item 4T. Controls and Procedures
    
    
    44PART II. OTHER INFORMATION
    
    
    45Item 1. Legal Proceedings
    
    
    45Item 1A. Risk Factors
    
    
    45Item 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 (In Thousands)
 March 31,
    
    
    September 30,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,661
    
    
    $
    Accounts receivable, net
    
    
    253,967
    
    
    
    248,281Inventories
    
    
    45,925
    
    
    
    43,697Deferred income taxes
    
    
    35,770
    
    
    
    29,629Prepaid expenses and other current assets
    
    
    53,976
    
    
    
    45,023Total current assets
    
    
    395,299
    
    
    
    366,630Property and equipment, net
    
    
    997,222
    
    
    
    980,437Goodwill
    
    
    770,205
    
    
    
    756,593Other intangible assets, net
    
    
    34,500
    
    
    
    36,000Other assets, net
    
    
    43,915
    
    
    
    46,762Total assets
    
    $
    2,241,141
    
    
    $
    2,186,422LIABILITIES AND MEMBERS EQUITYCurrent liabilities:Accounts payable
    
    $
    74,208
    
    
    $
    98,488Salaries and benefits payable
    
    
    31,147
    
    
    
    40,124Accrued interest payable
    
    
    16,801
    
    
    
    18,865Medical claims payable
    
    
    85,987
    
    
    
    81,309Other accrued expenses and other current liabilities
    
    
    42,177
    
    
    
    44,276Current portion of long-term debt and capital lease obligations
    
    
    7,356
    
    
    
    8,036Total current liabilities
    
    
    257,676
    
    
    
    291,098Long-term debt and capital lease obligations
    
    
    1,063,770
    
    
    
    1,023,621Deferred income taxes
    
    
    99,399
    
    
    
    93,402Other long-term liabilities
    
    
    50,729
    
    
    
    50,831Minority interests
    
    
    52,681
    
    
    
    35,956Members equity
    
    
    716,886
    
    
    
    691,514Total liabilities and members equity
    
    $
    2,241,141
    
    
    $
    2,186,422
   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 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net revenue:Acute care revenue
    
    $
    410,764
    
    
    $
    363,911
    
    
    $
    796,231
    
    
    $
    672,958Premium revenue
    
    
    132,172
    
    
    
    108,791
    
    
    
    258,799
    
    
    
    216,578Total net revenue
    
    
    542,936
    
    
    
    472,702
    
    
    
    1,055,030
    
    
    
    889,536Costs and expenses:Salaries and benefits
    
    
    168,383
    
    
    
    139,954
    
    
    
    332,009
    
    
    
    265,349Supplies
    
    
    64,901
    
    
    
    55,382
    
    
    
    125,040
    
    
    
    102,627Medical claims
    
    
    109,439
    
    
    
    90,539
    
    
    
    212,319
    
    
    
    180,234Other operating expenses
    
    
    73,466
    
    
    
    77,475
    
    
    
    143,655
    
    
    
    138,333Provision for bad debts
    
    
    44,592
    
    
    
    34,117
    
    
    
    85,189
    
    
    
    65,865Rentals and leases
    
    
    10,400
    
    
    
    9,240
    
    
    
    20,160
    
    
    
    17,690Interest expense, net
    
    
    20,289
    
    
    
    16,955
    
    
    
    42,093
    
    
    
    34,241Depreciation and amortization
    
    
    24,485
    
    
    
    18,193
    
    
    
    47,640
    
    
    
    35,100Management fees
    
    
    1,313
    
    
    
    1,326
    
    
    
    2,500
    
    
    
    2,373Business interruption insurance recoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,918
    )Total costs and expenses
    
    
    517,268
    
    
    
    443,181
    
    
    
    1,010,605
    
    
    
    839,894Earnings before gain (loss) on disposal of
assets, minority interests and income taxes
    
    
    25,668
    
    
    
    29,521
    
    
    
    44,425
    
    
    
    49,642Gain (loss) on disposal of assets, net
    
    
    3
    
    
    
    225
    
    
    
    65
    
    
    
    (1,312
    )Minority interests
    
    
    (1,112
    )
    
    
    (1,515
    )
    
    
    (1,870
    )
    
    
    (2,855
    )Earnings before income taxes
    
    
    24,559
    
    
    
    28,231
    
    
    
    42,620
    
    
    
    45,475Income tax expense
    
    
    9,843
    
    
    
    11,276
    
    
    
    17,189
    
    
    
    17,937Net earnings
    
    $
    14,716
    
    
    $
    16,955
    
    
    $
    25,431
    
    
    $
    27,538
    2




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IASIS HEALTHCARE LLC
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In Thousands)
 Six Months EndedMarch 31,2008
    
    
    2007Cash flows from operating activitiesNet earnings
    
    $
    25,431
    
    
    $
    27,538Adjustments to reconcile net earnings to net cash
provided by operating activities:Depreciation and amortization
    
    
    47,640
    
    
    
    35,100Amortization of loan costs
    
    
    1,446
    
    
    
    1,517Minority interests
    
    
    1,870
    
    
    
    2,855Deferred income taxes
    
    
    14,422
    
    
    
    16,274Loss (gain) on disposal of assets, net
    
    
    (65
    )
    
    
    1,312Changes in operating assets and liabilities, net of the
effect of acquisitions:Accounts receivable, net
    
    
    (4,726
    )
    
    
    (17,771
    )Inventories, prepaid expenses and other current assets
    
    
    (12,026
    )
    
    
    (9,972
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    (43,464
    )
    
    
    22,676Net cash provided by operating activities
    
    
    30,528
    
    
    
    79,529Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    (57,856
    )
    
    
    (97,170
    )Cash paid for acquisitions, net
    
    
    (16,822
    )
    
    
    (79,753
    )Proceeds from sale of assets
    
    
    353
    
    
    
    986Change in other assets, net
    
    
    2,070
    
    
    
    4,010Net cash used in investing activities
    
    
    (72,255
    )
    
    
    (171,927
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (302,785
    )
    
    
    (56,888
    )Proceeds from debt borrowings
    
    
    337,200
    
    
    
    56,000Distribution of minority interests
    
    
    (2,779
    )
    
    
    (2,352
    )Proceeds from sale of partnership interests
    
    
    15,752
    
    
    
    223Net cash provided by (used in) financing activities
    
    
    47,388
    
    
    
    (3,017
    )Change in cash and cash equivalents
    
    
    5,661
    
    
    
    (95,415
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    95,415Cash and cash equivalents at end of period
    
    $
    5,661
    
    
    $
    Supplemental disclosure of cash flow informationCash paid for interest
    
    $
    43,082
    
    
    $
    38,146Cash paid (received) for income taxes, net
    
    $
    (4,913
    )
    
    $
    6,321
   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.
         4




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IASIS HEALTHCARE LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 2. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
  March 31,
    
    
    September 30,2008
    
    
    2007Senior secured credit facilities
    
    $
    584,610
    
    
    $
    547,805Senior subordinated notes
    
    
    475,000
    
    
    
    475,000Capital lease and other obligations
    
    
    11,516
    
    
    
    8,8521,071,126
    
    
    
    1,031,657Less current maturities
    
    
    7,356
    
    
    
    8,036$
    1,063,770
    
    
    $
    1,023,621
 Senior Secured Credit Facilities
       5




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##### Table of Contents



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. ACQUISITIONS
  4. MINIMUM REVENUE GUARANTEES
     6




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##### Table of Contents



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




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##### Table of Contents



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




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IASIS HEALTHCARE LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  7. RECENTLY ISSUED 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
 8. SEGMENT AND GEOGRAPHIC INFORMATION
  For the Quarter Ended March 31, 2008Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    410,764
    
    
    $
    
    
    
    $
    
    
    
    $
    410,764Premium revenue
    
    
    
    
    
    
    132,172
    
    
    
    
    
    
    
    132,172Revenue between segments
    
    
    3,493
    
    
    
    
    
    
    
    (3,493
    )
    
    
    Net revenue
    
    
    414,257
    
    
    
    132,172
    
    
    
    (3,493
    )
    
    
    542,936Salaries and benefits
    
    
    164,050
    
    
    
    4,333
    
    
    
    
    
    
    
    168,383Supplies
    
    
    64,857
    
    
    
    44
    
    
    
    
    
    
    
    64,901Medical claims
    
    
    
    
    
    
    112,932
    
    
    
    (3,493
    )
    
    
    109,439Other operating expenses
    
    
    69,128
    
    
    
    4,338
    
    
    
    
    
    
    
    73,466Provision for bad debts
    
    
    44,592
    
    
    
    
    
    
    
    
    
    
    
    44,592Rentals and leases
    
    
    10,111
    
    
    
    289
    
    
    
    
    
    
    
    10,400Adjusted EBITDA(1)
    
    
    61,519
    
    
    
    10,236
    
    
    
    
    
    
    
    71,755Interest expense, net
    
    
    20,289
    
    
    
    
    
    
    
    
    
    
    
    20,289Depreciation and amortization
    
    
    23,586
    
    
    
    899
    
    
    
    
    
    
    
    24,485Management fees
    
    
    1,313
    
    
    
    
    
    
    
    
    
    
    
    1,313Earnings before gain on disposal
of assets, minority interests and
income taxes
    
    
    16,331
    
    
    
    9,337
    
    
    
    
    
    
    
    25,668Gain on disposal of assets, net
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Minority interests
    
    
    (1,112
    )
    
    
    
    
    
    
    
    
    
    
    (1,112
    )Earnings before income taxes
    
    $
    15,222
    
    
    $
    9,337
    
    
    $
    
    
    
    $
    24,559
  9




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IASIS HEALTHCARE LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 For the Quarter Ended March 31, 2007Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    363,911
    
    
    $
    
    
    
    $
    
    
    
    $
    363,911Premium revenue
    
    
    
    
    
    
    108,791
    
    
    
    
    
    
    
    108,791Revenue between segments
    
    
    3,092
    
    
    
    
    
    
    
    (3,092
    )
    
    
    Net revenue
    
    
    367,003
    
    
    
    108,791
    
    
    
    (3,092
    )
    
    
    472,702Salaries and benefits
    
    
    136,330
    
    
    
    3,624
    
    
    
    
    
    
    
    139,954Supplies
    
    
    55,298
    
    
    
    84
    
    
    
    
    
    
    
    55,382Medical claims
    
    
    
    
    
    
    93,631
    
    
    
    (3,092
    )
    
    
    90,539Other operating expenses
    
    
    73,592
    
    
    
    3,883
    
    
    
    
    
    
    
    77,475Provision for bad debts
    
    
    34,117
    
    
    
    
    
    
    
    
    
    
    
    34,117Rentals and leases
    
    
    8,969
    
    
    
    271
    
    
    
    
    
    
    
    9,240Adjusted EBITDA(1)
    
    
    58,697
    
    
    
    7,298
    
    
    
    
    
    
    
    65,995Interest expense, net
    
    
    16,955
    
    
    
    
    
    
    
    
    
    
    
    16,955Depreciation and amortization
    
    
    17,305
    
    
    
    888
    
    
    
    
    
    
    
    18,193Management fees
    
    
    1,326
    
    
    
    
    
    
    
    
    
    
    
    1,326Earnings before gain on disposal
of assets, minority interests and
income taxes
    
    
    23,111
    
    
    
    6,410
    
    
    
    
    
    
    
    29,521Gain on disposal of assets, net
    
    
    225
    
    
    
    
    
    
    
    
    
    
    
    225Minority interests
    
    
    (1,515
    )
    
    
    
    
    
    
    
    
    
    
    (1,515
    )Earnings before income taxes
    
    $
    21,821
    
    
    $
    6,410
    
    
    $
    
    
    
    $
    28,231
 (1)
    
    Adjusted EBITDA represents net earnings before interest expense, income tax expense,
depreciation and amortization, gain 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.  10




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IASIS HEALTHCARE LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 For the Six Months Ended March 31, 2008Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    796,231
    
    
    $
    
    
    
    $
    
    
    
    $
    796,231Premium revenue
    
    
    
    
    
    
    258,799
    
    
    
    
    
    
    
    258,799Revenue between segments
    
    
    6,823
    
    
    
    
    
    
    
    (6,823
    )
    
    
    Net revenue
    
    
    803,054
    
    
    
    258,799
    
    
    
    (6,823
    )
    
    
    1,055,030Salaries and benefits
    
    
    323,633
    
    
    
    8,376
    
    
    
    
    
    
    
    332,009Supplies
    
    
    124,919
    
    
    
    121
    
    
    
    
    
    
    
    125,040Medical claims
    
    
    
    
    
    
    219,142
    
    
    
    (6,823
    )
    
    
    212,319Other operating expenses
    
    
    134,845
    
    
    
    8,810
    
    
    
    
    
    
    
    143,655Provision for bad debts
    
    
    85,189
    
    
    
    
    
    
    
    
    
    
    
    85,189Rentals and leases
    
    
    19,586
    
    
    
    574
    
    
    
    
    
    
    
    20,160Adjusted EBITDA(1)
    
    
    114,882
    
    
    
    21,776
    
    
    
    
    
    
    
    136,658Interest expense, net
    
    
    42,093
    
    
    
    
    
    
    
    
    
    
    
    42,093Depreciation and amortization
    
    
    45,846
    
    
    
    1,794
    
    
    
    
    
    
    
    47,640Management fees
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    2,500Earnings before gain on disposal
of assets, minority interests and
income taxes
    
    
    24,443
    
    
    
    19,982
    
    
    
    
    
    
    
    44,425Gain on disposal of assets, net
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    65Minority interests
    
    
    (1,870
    )
    
    
    
    
    
    
    
    
    
    
    (1,870
    )Earnings before income taxes
    
    $
    22,638
    
    
    $
    19,982
    
    
    $
    
    
    
    $
    42,620Segment assets
    
    $
    2,076,715
    
    
    $
    164,426
    
    
    
    
    
    
    $
    2,241,141Capital expenditures
    
    $
    57,679
    
    
    $
    177
    
    
    
    
    
    
    $
    57,856Goodwill
    
    $
    764,448
    
    
    $
    5,757
    
    
    
    
    
    
    $
    770,205
 For the Six Months Ended March 31, 2007Acute Care
    
    
    Health Choice
    
    
    Eliminations
    
    
    ConsolidatedAcute care revenue
    
    $
    672,958
    
    
    $
    
    
    
    $
    
    
    
    $
    672,958Premium revenue
    
    
    
    
    
    
    216,578
    
    
    
    
    
    
    
    216,578Revenue between segments
    
    
    5,769
    
    
    
    
    
    
    
    (5,769
    )
    
    
    Net revenue
    
    
    678,727
    
    
    
    216,578
    
    
    
    (5,769
    )
    
    
    889,536Salaries and benefits
    
    
    258,314
    
    
    
    7,035
    
    
    
    
    
    
    
    265,349Supplies
    
    
    102,459
    
    
    
    168
    
    
    
    
    
    
    
    102,627Medical claims
    
    
    
    
    
    
    186,003
    
    
    
    (5,769
    )
    
    
    180,234Other operating expenses
    
    
    130,736
    
    
    
    7,597
    
    
    
    
    
    
    
    138,333Provision for bad debts
    
    
    65,865
    
    
    
    
    
    
    
    
    
    
    
    65,865Rentals and leases
    
    
    17,164
    
    
    
    526
    
    
    
    
    
    
    
    17,690Business interruption insurance recoveries
    
    
    (1,918
    )
    
    
    
    
    
    
    
    
    
    
    (1,918
    )Adjusted EBITDA(1)
    
    
    106,107
    
    
    
    15,249
    
    
    
    
    
    
    
    121,356Interest expense, net
    
    
    34,241
    
    
    
    
    
    
    
    
    
    
    
    34,241Depreciation and amortization
    
    
    33,325
    
    
    
    1,775
    
    
    
    
    
    
    
    35,100Management fees
    
    
    2,373
    
    
    
    
    
    
    
    
    
    
    
    2,373Earnings before loss on disposal of
assets, minority interests and income
taxes
    
    
    36,168
    
    
    
    13,474
    
    
    
    
    
    
    
    49,642Loss on disposal of assets, net
    
    
    (1,312
    )
    
    
    
    
    
    
    
    
    
    
    (1,312
    )Minority interests
    
    
    (2,855
    )
    
    
    
    
    
    
    
    
    
    
    (2,855
    )Earnings before income taxes
    
    $
    32,001
    
    
    $
    13,474
    
    
    $
    
    
    
    $
    45,475Segment assets
    
    $
    1,880,141
    
    
    $
    146,589
    
    
    
    
    
    
    $
    2,026,730Capital expenditures
    
    $
    96,945
    
    
    $
    225
    
    
    
    
    
    
    $
    97,170Goodwill
    
    $
    766,897
    
    
    $
    5,757
    
    
    
    
    
    
    $
    772,654
  11




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IASIS HEALTHCARE LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (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. 9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
     12




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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
    
    $
    
    
    
    $
    4,023
    
    
    $
    1,638
    
    
    $
    
    
    
    $
    5,661Accounts receivable, net
    
    
    
    
    
    
    125,208
    
    
    
    128,759
    
    
    
    
    
    
    
    253,967Inventories
    
    
    
    
    
    
    20,477
    
    
    
    25,448
    
    
    
    
    
    
    
    45,925Deferred income taxes
    
    
    35,770
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,770Prepaid expenses and other current assets
    
    
    
    
    
    
    20,585
    
    
    
    33,391
    
    
    
    
    
    
    
    53,976Total current assets
    
    
    35,770
    
    
    
    170,293
    
    
    
    189,236
    
    
    
    
    
    
    
    395,299Property and equipment, net
    
    
    
    
    
    
    373,661
    
    
    
    623,561
    
    
    
    
    
    
    
    997,222Intercompany
    
    
    
    
    
    
    (197,412
    )
    
    
    197,412
    
    
    
    
    
    
    
    Net investment in and advances to subsidiaries
    
    
    1,667,575
    
    
    
    
    
    
    
    
    
    
    
    (1,667,575
    )
    
    
    Goodwill
    
    
    18,004
    
    
    
    128,963
    
    
    
    623,238
    
    
    
    
    
    
    
    770,205Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    34,500
    
    
    
    
    
    
    
    34,500Other assets, net
    
    
    19,677
    
    
    
    18,798
    
    
    
    5,440
    
    
    
    
    
    
    
    43,915Total assets
    
    $
    1,741,026
    
    
    $
    494,303
    
    
    $
    1,673,387
    
    
    $
    (1,667,575
    )
    
    $
    2,241,141Liabilities and Members EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    33,820
    
    
    $
    40,388
    
    
    $
    
    
    
    $
    74,208Salaries and benefits payable
    
    
    
    
    
    
    17,036
    
    
    
    14,111
    
    
    
    
    
    
    
    31,147Accrued interest payable
    
    
    16,801
    
    
    
    (2,761
    )
    
    
    2,761
    
    
    
    
    
    
    
    16,801Medical claims payable
    
    
    
    
    
    
    
    
    
    
    85,987
    
    
    
    
    
    
    
    85,987Other accrued expenses and other current liabilities
    
    
    
    
    
    
    34,709
    
    
    
    7,468
    
    
    
    
    
    
    
    42,177Current portion of long-term debt and capital lease
obligations
    
    
    4,542
    
    
    
    2,814
    
    
    
    14,699
    
    
    
    (14,699
    )
    
    
    7,356Total current liabilities
    
    
    21,343
    
    
    
    85,618
    
    
    
    165,414
    
    
    
    (14,699
    )
    
    
    257,676Long-term debt and capital lease obligations
    
    
    1,055,220
    
    
    
    8,550
    
    
    
    596,191
    
    
    
    (596,191
    )
    
    
    1,063,770Deferred income taxes
    
    
    99,399
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,399Other long-term liabilities
    
    
    
    
    
    
    49,552
    
    
    
    1,177
    
    
    
    
    
    
    
    50,729Minority interests
    
    
    
    
    
    
    52,681
    
    
    
    
    
    
    
    
    
    
    
    52,681Total liabilities
    
    
    1,175,962
    
    
    
    196,401
    
    
    
    762,782
    
    
    
    (610,890
    )
    
    
    1,524,255Members equity
    
    
    565,064
    
    
    
    297,902
    
    
    
    910,605
    
    
    
    (1,056,685
    )
    
    
    716,886Total liabilities and members equity
    
    $
    1,741,026
    
    
    $
    494,303
    
    
    $
    1,673,387
    
    
    $
    (1,667,575
    )
    
    $
    2,241,141
  13




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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
    
    $
    
    
    
    $
    (4,052
    )
    
    $
    4,052
    
    
    $
    
    
    
    $
    Accounts receivable, net
    
    
    
    
    
    
    131,180
    
    
    
    117,101
    
    
    
    
    
    
    
    248,281Inventories
    
    
    
    
    
    
    19,961
    
    
    
    23,736
    
    
    
    
    
    
    
    43,697Deferred income taxes
    
    
    29,629
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,629Prepaid expenses and other current assets
    
    
    
    
    
    
    23,509
    
    
    
    21,514
    
    
    
    
    
    
    
    45,023Total current assets
    
    
    29,629
    
    
    
    170,598
    
    
    
    166,403
    
    
    
    
    
    
    
    366,630Property and equipment, net
    
    
    
    
    
    
    363,295
    
    
    
    617,142
    
    
    
    
    
    
    
    980,437Intercompany
    
    
    
    
    
    
    42,981
    
    
    
    (42,981
    )
    
    
    
    
    
    
    Net investment in and advances to subsidiaries
    
    
    1,627,879
    
    
    
    
    
    
    
    
    
    
    
    (1,627,879
    )
    
    
    Goodwill
    
    
    21,774
    
    
    
    111,593
    
    
    
    623,226
    
    
    
    
    
    
    
    756,593Other intangible assets, net
    
    
    
    
    
    
    
    
    
    
    36,000
    
    
    
    
    
    
    
    36,000Other assets, net
    
    
    21,006
    
    
    
    19,668
    
    
    
    6,088
    
    
    
    
    
    
    
    46,762Total assets
    
    $
    1,700,288
    
    
    $
    708,135
    
    
    $
    1,405,878
    
    
    $
    (1,627,879
    )
    
    $
    2,186,422Liabilities and Members EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    55,980
    
    
    $
    42,508
    
    
    $
    
    
    
    $
    98,488Salaries and benefits payable
    
    
    
    
    
    
    24,338
    
    
    
    15,786
    
    
    
    
    
    
    
    40,124Accrued interest payable
    
    
    18,865
    
    
    
    (2,301
    )
    
    
    2,301
    
    
    
    
    
    
    
    18,865Medical claims payable
    
    
    
    
    
    
    
    
    
    
    81,309
    
    
    
    
    
    
    
    81,309Other accrued expenses and other current liabilities
    
    
    
    
    
    
    24,567
    
    
    
    19,709
    
    
    
    
    
    
    
    44,276Current portion of long-term debt and capital lease
obligations
    
    
    4,542
    
    
    
    3,494
    
    
    
    11,054
    
    
    
    (11,054
    )
    
    
    8,036Total current liabilities
    
    
    23,407
    
    
    
    106,078
    
    
    
    172,667
    
    
    
    (11,054
    )
    
    
    291,098Long-term debt and capital lease obligations
    
    
    1,018,415
    
    
    
    5,206
    
    
    
    470,615
    
    
    
    (470,615
    )
    
    
    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
    
    
    
    197,049
    
    
    
    644,304
    
    
    
    (481,669
    )
    
    
    1,494,908Members equity
    
    
    565,064
    
    
    
    511,086
    
    
    
    761,574
    
    
    
    (1,146,210
    )
    
    
    691,514Total liabilities and members equity
    
    $
    1,700,288
    
    
    $
    708,135
    
    
    $
    1,405,878
    
    
    $
    (1,627,879
    )
    
    $
    2,186,422
  14




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IASIS HEALTHCARE LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet revenue:Acute care revenue
    
    $
    
    
    
    $
    185,106
    
    
    $
    229,151
    
    
    $
    (3,493
    )
    
    $
    410,764Premium revenue
    
    
    
    
    
    
    
    
    
    
    132,172
    
    
    
    
    
    
    
    132,172Total net revenue
    
    
    
    
    
    
    185,106
    
    
    
    361,323
    
    
    
    (3,493
    )
    
    
    542,936Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    88,054
    
    
    
    80,329
    
    
    
    
    
    
    
    168,383Supplies
    
    
    
    
    
    
    31,176
    
    
    
    33,725
    
    
    
    
    
    
    
    64,901Medical claims
    
    
    
    
    
    
    
    
    
    
    112,932
    
    
    
    (3,493
    )
    
    
    109,439Other operating expenses
    
    
    
    
    
    
    30,238
    
    
    
    43,228
    
    
    
    
    
    
    
    73,466Provision for bad debts
    
    
    
    
    
    
    25,650
    
    
    
    18,942
    
    
    
    
    
    
    
    44,592Rentals and leases
    
    
    
    
    
    
    4,401
    
    
    
    5,999
    
    
    
    
    
    
    
    10,400Interest expense, net
    
    
    20,289
    
    
    
    
    
    
    
    13,711
    
    
    
    (13,711
    )
    
    
    20,289Depreciation and amortization
    
    
    
    
    
    
    10,919
    
    
    
    13,566
    
    
    
    
    
    
    
    24,485Management fees
    
    
    1,313
    
    
    
    (4,971
    )
    
    
    4,971
    
    
    
    
    
    
    
    1,313Equity in earnings of affiliates
    
    
    (32,450
    )
    
    
    
    
    
    
    
    
    
    
    32,450
    
    
    
    Total costs and expenses
    
    
    (10,848
    )
    
    
    185,467
    
    
    
    327,403
    
    
    
    15,246
    
    
    
    517,268Earnings (loss) before gain (loss) on
disposal of assets, minority
interests and income taxes
    
    
    10,848
    
    
    
    (361
    )
    
    
    33,920
    
    
    
    (18,739
    )
    
    
    25,668Gain (loss) on disposal of assets, net
    
    
    
    
    
    
    9
    
    
    
    (6
    )
    
    
    
    
    
    
    3Minority interests
    
    
    
    
    
    
    (1,112
    )
    
    
    
    
    
    
    
    
    
    
    (1,112
    )Earnings (loss) before income taxes
    
    
    10,848
    
    
    
    (1,464
    )
    
    
    33,914
    
    
    
    (18,739
    )
    
    
    24,559Income tax expense
    
    
    9,843
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,843Net earnings (loss)
    
    $
    1,005
    
    
    $
    (1,464
    )
    
    $
    33,914
    
    
    $
    (18,739
    )
    
    $
    14,716
  15




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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
    
    $
    
    
    
    $
    174,441
    
    
    $
    192,562
    
    
    $
    (3,092
    )
    
    $
    363,911Premium revenue
    
    
    
    
    
    
    
    
    
    
    108,791
    
    
    
    
    
    
    
    108,791Total net revenue
    
    
    
    
    
    
    174,441
    
    
    
    301,353
    
    
    
    (3,092
    )
    
    
    472,702Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    79,835
    
    
    
    60,119
    
    
    
    
    
    
    
    139,954Supplies
    
    
    
    
    
    
    31,182
    
    
    
    24,200
    
    
    
    
    
    
    
    55,382Medical claims
    
    
    
    
    
    
    
    
    
    
    93,631
    
    
    
    (3,092
    )
    
    
    90,539Other operating expenses
    
    
    
    
    
    
    32,115
    
    
    
    45,360
    
    
    
    
    
    
    
    77,475Provision for bad debts
    
    
    
    
    
    
    20,250
    
    
    
    13,867
    
    
    
    
    
    
    
    34,117Rentals and leases
    
    
    
    
    
    
    4,030
    
    
    
    5,210
    
    
    
    
    
    
    
    9,240Interest expense, net
    
    
    16,955
    
    
    
    
    
    
    
    7,275
    
    
    
    (7,275
    )
    
    
    16,955Depreciation and amortization
    
    
    
    
    
    
    9,710
    
    
    
    8,483
    
    
    
    
    
    
    
    18,193Management fees
    
    
    1,326
    
    
    
    (3,894
    )
    
    
    3,894
    
    
    
    
    
    
    
    1,326Equity in earnings of affiliates
    
    
    (39,237
    )
    
    
    
    
    
    
    
    
    
    
    39,237
    
    
    
    Total costs and expenses
    
    
    (20,956
    )
    
    
    173,228
    
    
    
    262,039
    
    
    
    28,870
    
    
    
    443,181Earnings (loss) before gain (loss) on
disposal of assets, minority
interests and income taxes
    
    
    20,956
    
    
    
    1,213
    
    
    
    39,314
    
    
    
    (31,962
    )
    
    
    29,521Gain (loss) on disposal of assets, net
    
    
    
    
    
    
    349
    
    
    
    (124
    )
    
    
    
    
    
    
    225Minority interests
    
    
    
    
    
    
    (1,515
    )
    
    
    
    
    
    
    
    
    
    
    (1,515
    )Earnings (loss) before income taxes
    
    
    20,956
    
    
    
    47
    
    
    
    39,190
    
    
    
    (31,962
    )
    
    
    28,231Income tax expense
    
    
    11,276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,276Net earnings (loss)
    
    $
    9,680
    
    
    $
    47
    
    
    $
    39,190
    
    
    $
    (31,962
    )
    
    $
    16,955
  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
    
    $
    
    
    
    $
    361,879
    
    
    $
    441,175
    
    
    $
    (6,823
    )
    
    $
    796,231Premium revenue
    
    
    
    
    
    
    
    
    
    
    258,799
    
    
    
    
    
    
    
    258,799Total net revenue
    
    
    
    
    
    
    361,879
    
    
    
    699,974
    
    
    
    (6,823
    )
    
    
    1,055,030Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    174,651
    
    
    
    157,358
    
    
    
    
    
    
    
    332,009Supplies
    
    
    
    
    
    
    60,922
    
    
    
    64,118
    
    
    
    
    
    
    
    125,040Medical claims
    
    
    
    
    
    
    
    
    
    
    219,142
    
    
    
    (6,823
    )
    
    
    212,319Other operating expenses
    
    
    
    
    
    
    61,804
    
    
    
    81,851
    
    
    
    
    
    
    
    143,655Provision for bad debts
    
    
    
    
    
    
    47,095
    
    
    
    38,094
    
    
    
    
    
    
    
    85,189Rentals and leases
    
    
    
    
    
    
    8,561
    
    
    
    11,599
    
    
    
    
    
    
    
    20,160Interest expense, net
    
    
    42,093
    
    
    
    
    
    
    
    27,651
    
    
    
    (27,651
    )
    
    
    42,093Depreciation and amortization
    
    
    
    
    
    
    21,467
    
    
    
    26,173
    
    
    
    
    
    
    
    47,640Management fees
    
    
    2,500
    
    
    
    (9,579
    )
    
    
    9,579
    
    
    
    
    
    
    
    2,500Equity in earnings of affiliates
    
    
    (59,562
    )
    
    
    
    
    
    
    
    
    
    
    59,562
    
    
    
    Total costs and expenses
    
    
    (14,969
    )
    
    
    364,921
    
    
    
    635,565
    
    
    
    25,088
    
    
    
    1,010,605Earnings (loss) before gain (loss) on disposal of
assets, minority interests and income taxes
    
    
    14,969
    
    
    
    (3,042
    )
    
    
    64,409
    
    
    
    (31,911
    )
    
    
    44,425Gain (loss) on disposal of assets, net
    
    
    
    
    
    
    74
    
    
    
    (9
    )
    
    
    
    
    
    
    65Minority interests
    
    
    
    
    
    
    (1,870
    )
    
    
    
    
    
    
    
    
    
    
    (1,870
    )Earnings (loss) before income taxes
    
    
    14,969
    
    
    
    (4,838
    )
    
    
    64,400
    
    
    
    (31,911
    )
    
    
    42,620Income tax expense
    
    
    17,189
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,189Net earnings (loss)
    
    $
    (2,220
    )
    
    $
    (4,838
    )
    
    $
    64,400
    
    
    $
    (31,911
    )
    
    $
    25,431
  17




---



##### 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
    
    $
    
    
    
    $
    317,618
    
    
    $
    361,109
    
    
    $
    (5,769
    )
    
    $
    672,958Premium revenue
    
    
    
    
    
    
    
    
    
    
    216,578
    
    
    
    
    
    
    
    216,578Total net revenue
    
    
    
    
    
    
    317,618
    
    
    
    577,687
    
    
    
    (5,769
    )
    
    
    889,536Costs and expenses:Salaries and benefits
    
    
    
    
    
    
    146,805
    
    
    
    118,544
    
    
    
    
    
    
    
    265,349Supplies
    
    
    
    
    
    
    55,621
    
    
    
    47,006
    
    
    
    
    
    
    
    102,627Medical claims
    
    
    
    
    
    
    
    
    
    
    186,003
    
    
    
    (5,769
    )
    
    
    180,234Other operating expenses
    
    
    
    
    
    
    62,368
    
    
    
    75,965
    
    
    
    
    
    
    
    138,333Provision for bad debts
    
    
    
    
    
    
    37,928
    
    
    
    27,937
    
    
    
    
    
    
    
    65,865Rentals and leases
    
    
    
    
    
    
    7,175
    
    
    
    10,515
    
    
    
    
    
    
    
    17,690Interest expense, net
    
    
    34,241
    
    
    
    
    
    
    
    14,151
    
    
    
    (14,151
    )
    
    
    34,241Depreciation and amortization
    
    
    
    
    
    
    18,193
    
    
    
    16,907
    
    
    
    
    
    
    
    35,100Management fees
    
    
    2,373
    
    
    
    (7,552
    )
    
    
    7,552
    
    
    
    
    
    
    
    2,373Business interruption insurance recoveries
    
    
    
    
    
    
    
    
    
    
    (1,918
    )
    
    
    
    
    
    
    (1,918
    )Equity in earnings of affiliates
    
    
    (67,938
    )
    
    
    
    
    
    
    
    
    
    
    67,938
    
    
    
    Total costs and expenses
    
    
    (31,324
    )
    
    
    320,538
    
    
    
    502,662
    
    
    
    48,018
    
    
    
    839,894Earnings (loss) before loss on disposal of
assets, minority interests and income taxes
    
    
    31,324
    
    
    
    (2,920
    )
    
    
    75,025
    
    
    
    (53,787
    )
    
    
    49,642Loss on disposal of assets, net
    
    
    
    
    
    
    (796
    )
    
    
    (516
    )
    
    
    
    
    
    
    (1,312
    )Minority interests
    
    
    
    
    
    
    (2,855
    )
    
    
    
    
    
    
    
    
    
    
    (2,855
    )Earnings (loss) before income taxes
    
    
    31,324
    
    
    
    (6,571
    )
    
    
    74,509
    
    
    
    (53,787
    )
    
    
    45,475Income tax expense
    
    
    17,937
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,937Net earnings (loss)
    
    $
    13,387
    
    
    $
    (6,571
    )
    
    $
    74,509
    
    
    $
    (53,787
    )
    
    $
    27,538
  18




---



##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    (2,220
    )
    
    $
    (4,838
    )
    
    $
    64,400
    
    
    $
    (31,911
    )
    
    $
    25,431Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    21,467
    
    
    
    26,173
    
    
    
    
    
    
    
    47,640Amortization of loan costs
    
    
    1,446
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,446Minority interests
    
    
    
    
    
    
    1,870
    
    
    
    
    
    
    
    
    
    
    
    1,870Deferred income taxes
    
    
    14,422
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,422Loss (gain) on disposal of assets, net
    
    
    
    
    
    
    (74
    )
    
    
    9
    
    
    
    
    
    
    
    (65
    )Equity in earnings of affiliates
    
    
    (59,562
    )
    
    
    
    
    
    
    
    
    
    
    59,562
    
    
    
    Changes in operating assets and liabilities, net of the effect of acquisitions:Accounts receivable, net
    
    
    
    
    
    
    6,932
    
    
    
    (11,658
    )
    
    
    
    
    
    
    (4,726
    )Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    1,563
    
    
    
    (13,589
    )
    
    
    
    
    
    
    (12,026
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    (6,605
    )
    
    
    (31,696
    )
    
    
    (5,163
    )
    
    
    
    
    
    
    (43,464
    )Net cash provided by (used in) operating activities
    
    
    (52,519
    )
    
    
    (4,776
    )
    
    
    60,172
    
    
    
    27,651
    
    
    
    30,528Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (23,112
    )
    
    
    (34,744
    )
    
    
    
    
    
    
    (57,856
    )Cash paid for acquisition, net
    
    
    
    
    
    
    (16,822
    )
    
    
    
    
    
    
    
    
    
    
    (16,822
    )Proceeds from sale of assets
    
    
    
    
    
    
    87
    
    
    
    266
    
    
    
    
    
    
    
    353Change in other assets, net
    
    
    
    
    
    
    1,572
    
    
    
    498
    
    
    
    
    
    
    
    2,070Net cash used in investing activities
    
    
    
    
    
    
    (38,275
    )
    
    
    (33,980
    )
    
    
    
    
    
    
    (72,255
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (300,562
    )
    
    
    (606
    )
    
    
    (1,617
    )
    
    
    
    
    
    
    (302,785
    )Proceeds from debt borrowings
    
    
    337,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    337,200Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (2,779
    )
    
    
    
    
    
    
    (2,779
    )Proceeds from sale of partnership interests
    
    
    
    
    
    
    15,752
    
    
    
    
    
    
    
    
    
    
    
    15,752Change in intercompany balances with affiliates, net
    
    
    15,881
    
    
    
    35,980
    
    
    
    (24,210
    )
    
    
    (27,651
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    52,519
    
    
    
    51,126
    
    
    
    (28,606
    )
    
    
    (27,651
    )
    
    
    47,388Change in cash and cash equivalents
    
    
    
    
    
    
    8,075
    
    
    
    (2,414
    )
    
    
    
    
    
    
    5,661Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    (4,052
    )
    
    
    4,052
    
    
    
    
    
    
    
    Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    4,023
    
    
    $
    1,638
    
    
    $
    
    
    
    $
    5,661
  19




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (in thousands)
 Subsidiary
    
    
    Subsidiary
    
    
    
    
    
    
    CondensedParent Issuer
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activitiesNet earnings (loss)
    
    $
    13,387
    
    
    $
    (6,571
    )
    
    $
    74,509
    
    
    $
    (53,787
    )
    
    $
    27,538Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    18,193
    
    
    
    16,907
    
    
    
    
    
    
    
    35,100Amortization of loan costs
    
    
    1,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,517Minority interests
    
    
    
    
    
    
    2,855
    
    
    
    
    
    
    
    
    
    
    
    2,855Deferred income taxes
    
    
    16,274
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,274Loss on disposal of assets, net
    
    
    
    
    
    
    796
    
    
    
    516
    
    
    
    
    
    
    
    1,312Equity in earnings of affiliates
    
    
    (67,938
    )
    
    
    
    
    
    
    
    
    
    
    67,938
    
    
    
    Changes in operating assets and liabilities, net of the effect of acquisitions:Accounts receivable, net
    
    
    
    
    
    
    (11,083
    )
    
    
    (6,688
    )
    
    
    
    
    
    
    (17,771
    )Inventories, prepaid expenses and other current assets
    
    
    
    
    
    
    5,332
    
    
    
    (15,304
    )
    
    
    
    
    
    
    (9,972
    )Accounts payable, other accrued expenses and other
accrued liabilities
    
    
    (150
    )
    
    
    9,974
    
    
    
    12,852
    
    
    
    
    
    
    
    22,676Net cash provided by (used in) operating activities
    
    
    (36,910
    )
    
    
    19,496
    
    
    
    82,792
    
    
    
    14,151
    
    
    
    79,529Cash flows from investing activitiesPurchases of property and equipment, net
    
    
    
    
    
    
    (18,243
    )
    
    
    (78,927
    )
    
    
    
    
    
    
    (97,170
    )Cash paid for acquisition, net
    
    
    
    
    
    
    (79,753
    )
    
    
    
    
    
    
    
    
    
    
    (79,753
    )Proceeds from sale of assets
    
    
    
    
    
    
    986
    
    
    
    
    
    
    
    
    
    
    
    986Change in other assets, net
    
    
    
    
    
    
    1,633
    
    
    
    2,377
    
    
    
    
    
    
    
    4,010Net cash used in investing activities
    
    
    
    
    
    
    (95,377
    )
    
    
    (76,550
    )
    
    
    
    
    
    
    (171,927
    )Cash flows from financing activitiesPayment of debt and capital lease obligations
    
    
    (55,201
    )
    
    
    (1,019
    )
    
    
    (668
    )
    
    
    
    
    
    
    (56,888
    )Proceeds from debt borrowings
    
    
    56,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,000Distribution of minority interests
    
    
    
    
    
    
    
    
    
    
    (2,352
    )
    
    
    
    
    
    
    (2,352
    )Proceeds from sale of partnership interests
    
    
    
    
    
    
    
    
    
    
    223
    
    
    
    
    
    
    
    223Change in intercompany balances with affiliates, net
    
    
    36,111
    
    
    
    (21,866
    )
    
    
    (94
    )
    
    
    (14,151
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    36,910
    
    
    
    (22,885
    )
    
    
    (2,891
    )
    
    
    (14,151
    )
    
    
    (3,017
    )Change in cash and cash equivalents
    
    
    
    
    
    
    (98,766
    )
    
    
    3,351
    
    
    
    
    
    
    
    (95,415
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    94,518
    
    
    
    897
    
    
    
    
    
    
    
    95,415Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    (4,248
    )
    
    $
    4,248
    
    
    $
    
    
    
    $
    
  20




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##### Table of Contents



IASIS HEALTHCARE LLC
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 10. SUBSEQUENT EVENT
   21




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  FORWARD LOOKING STATEMENTS
 qui tam
  22




---



##### 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.
    qui tam qui tam
   23




---



##### Table of Contents



Revenue and Volume Trends
   Acute Care Revenue
   24




---



##### Table of Contents



Quarter
    
    
    Six MonthsEnded March 31,
    
    
    Ended March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Medicare
    
    
    34.2
    %
    
    
    32.0
    %
    
    
    33.2
    %
    
    
    31.0
    %Managed Medicare
    
    
    5.6
    %
    
    
    3.2
    %
    
    
    4.7
    %
    
    
    3.2
    %Medicaid
    
    
    7.3
    %
    
    
    7.4
    %
    
    
    7.2
    %
    
    
    7.0
    %Managed Medicaid
    
    
    10.4
    %
    
    
    11.0
    %
    
    
    10.3
    %
    
    
    11.4
    %Managed care
    
    
    36.8
    %
    
    
    40.6
    %
    
    
    38.9
    %
    
    
    41.6
    %Self-pay and other
    
    
    5.7
    %
    
    
    5.8
    %
    
    
    5.7
    %
    
    
    5.8
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  25




---



##### Table of Contents



Premium Revenue
   26




---



##### Table of Contents



Significant Industry Trends
  Value-Based Reimbursement
    27




---



##### Table of Contents



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;
 
    
    Hiring of a Chief Quality Officer;
 
    
    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;
 
    
    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.
  28




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##### Table of Contents



Growth in Bad Debts Resulting From Increased Self-Pay Volume and Revenue
   March 31,
    
    
    September 30,2008
    
    
    2007Insured receivables
    
    
    67.0
    %
    
    
    66.7
    %Uninsured receivables
    
    
    33.0
    %
    
    
    33.3
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
   March 31,
    
    
    September 30,2008
    
    
    20070 to 90 days
    
    
    70.5
    %
    
    
    71.8
    %91 to 180 days
    
    
    17.6
    %
    
    
    15.5
    %Over 180 days
    
    
    11.9
    %
    
    
    12.7
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
   29




---



##### Table of Contents



Additional Charity Care and Charges to the Uninsured
  Sub-Acute Care Services
  Physician Integration
    Nursing Shortage
   30




---



##### Table of Contents



Decreased Federal and State Funding for Medicaid Programs
  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
  31




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##### Table of Contents



Selected Operating Data
  Quarter
    
    
    Six MonthsEnded March 31,
    
    
    Ended March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Acute Care:Number of acute care hospital facilities at end of period (1)
    
    
    16
    
    
    
    15
    
    
    
    16
    
    
    
    15Beds in service at end of period (2)
    
    
    2,770
    
    
    
    2,451
    
    
    
    2,770
    
    
    
    2,451Average length of stay (days) (3)
    
    
    4.76
    
    
    
    4.66
    
    
    
    4.66
    
    
    
    4.59Occupancy rates (average beds in service)
    
    
    52.9
    %
    
    
    55.9
    %
    
    
    50.4
    %
    
    
    52.9
    %Admissions (4)
    
    
    28,049
    
    
    
    25,609
    
    
    
    54,478
    
    
    
    47,913Adjusted admissions (5)
    
    
    44,183
    
    
    
    40,137
    
    
    
    86,793
    
    
    
    76,330Patient days (6)
    
    
    133,454
    
    
    
    119,222
    
    
    
    253,961
    
    
    
    219,990Adjusted patient days (5)
    
    
    203,114
    
    
    
    180,097
    
    
    
    390,028
    
    
    
    337,721Net patient revenue per adjusted admission
    
    $
    9,198
    
    
    $
    8,979
    
    
    $
    9,089
    
    
    $
    8,738Same-Facility (7):Number of acute care hospital facilities at end of period
    
    
    14
    
    
    
    14
    
    
    
    14
    
    
    
    14Beds in service at end of period (2)
    
    
    2,364
    
    
    
    2,214
    
    
    
    2,364
    
    
    
    2,214Average length of stay (days) (3)
    
    
    4.71
    
    
    
    4.63
    
    
    
    4.63
    
    
    
    4.58Occupancy rates (average beds in service)
    
    
    51.9
    %
    
    
    55.8
    %
    
    
    49.9
    %
    
    
    52.7
    %Admissions (4)
    
    
    23,695
    
    
    
    23,996
    
    
    
    46,264
    
    
    
    46,300Adjusted admissions (5)
    
    
    38,116
    
    
    
    37,913
    
    
    
    75,114
    
    
    
    74,106Patient days (6)
    
    
    111,614
    
    
    
    111,206
    
    
    
    214,145
    
    
    
    211,974Adjusted patient days (5)
    
    
    172,370
    
    
    
    169,044
    
    
    
    333,078
    
    
    
    326,668Net patient revenue per adjusted admission
    
    $
    9,239
    
    
    $
    9,065
    
    
    $
    9,175
    
    
    $
    8,775Health Choice:Medicaid covered lives
    
    
    126,398
    
    
    
    113,499
    
    
    
    126,398
    
    
    
    113,499Dual-eligible lives (8)
    
    
    3,437
    
    
    
    3,755
    
    
    
    3,437
    
    
    
    3,755Medical loss ratio (9)
    
    
    85.4
    %
    
    
    86.1
    %
    
    
    84.7
    %
    
    
    85.9
    %
 (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.  32




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##### Table of Contents



RESULTS OF OPERATIONS SUMMARY
  Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2008
    
    
    March 31, 2007
    
    
    March 31, 2008
    
    
    March 31, 2007Consolidated ($ in thousands):
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    410,764
    
    
    
    75.7
    %
    
    $
    363,911
    
    
    
    77.0
    %
    
    $
    796,231
    
    
    
    75.5
    %
    
    $
    672,958
    
    
    
    75.7
    %Premium revenue
    
    
    132,172
    
    
    
    24.3
    %
    
    
    108,791
    
    
    
    23.0
    %
    
    
    258,799
    
    
    
    24.5
    %
    
    
    216,578
    
    
    
    24.3
    %Total net revenue
    
    
    542,936
    
    
    
    100.0
    %
    
    
    472,702
    
    
    
    100.0
    %
    
    
    1,055,030
    
    
    
    100.0
    %
    
    
    889,536
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    168,383
    
    
    
    31.0
    %
    
    
    139,954
    
    
    
    29.6
    %
    
    
    332,009
    
    
    
    31.5
    %
    
    
    265,349
    
    
    
    29.8
    %Supplies
    
    
    64,901
    
    
    
    12.0
    %
    
    
    55,382
    
    
    
    11.7
    %
    
    
    125,040
    
    
    
    11.9
    %
    
    
    102,627
    
    
    
    11.5
    %Medical claims
    
    
    109,439
    
    
    
    20.2
    %
    
    
    90,539
    
    
    
    19.2
    %
    
    
    212,319
    
    
    
    20.1
    %
    
    
    180,234
    
    
    
    20.3
    %Other operating expenses
    
    
    73,466
    
    
    
    13.6
    %
    
    
    77,475
    
    
    
    16.4
    %
    
    
    143,655
    
    
    
    13.6
    %
    
    
    138,333
    
    
    
    15.6
    %Provision for bad debts
    
    
    44,592
    
    
    
    8.2
    %
    
    
    34,117
    
    
    
    7.2
    %
    
    
    85,189
    
    
    
    8.1
    %
    
    
    65,865
    
    
    
    7.4
    %Rentals and leases
    
    
    10,400
    
    
    
    1.9
    %
    
    
    9,240
    
    
    
    2.0
    %
    
    
    20,160
    
    
    
    1.9
    %
    
    
    17,690
    
    
    
    2.0
    %Interest expense, net
    
    
    20,289
    
    
    
    3.7
    %
    
    
    16,955
    
    
    
    3.5
    %
    
    
    42,093
    
    
    
    4.0
    %
    
    
    34,241
    
    
    
    3.8
    %Depreciation and amortization
    
    
    24,485
    
    
    
    4.5
    %
    
    
    18,193
    
    
    
    3.8
    %
    
    
    47,640
    
    
    
    4.5
    %
    
    
    35,100
    
    
    
    3.9
    %Management fees
    
    
    1,313
    
    
    
    0.2
    %
    
    
    1,326
    
    
    
    0.3
    %
    
    
    2,500
    
    
    
    0.2
    %
    
    
    2,373
    
    
    
    0.3
    %Business interruption
insurance recoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,918
    )
    
    
    (0.2
    )%Total costs and expenses
    
    
    517,268
    
    
    
    95.3
    %
    
    
    443,181
    
    
    
    93.7
    %
    
    
    1,010,605
    
    
    
    95.8
    %
    
    
    839,894
    
    
    
    94.4
    %Earnings before gain (loss) on
disposal of assets, minority
interests and income taxes
    
    
    25,668
    
    
    
    4.7
    %
    
    
    29,521
    
    
    
    6.3
    %
    
    
    44,425
    
    
    
    4.2
    %
    
    
    49,642
    
    
    
    5.6
    %Gain (loss) on disposal of
assets, net
    
    
    3
    
    
    
    0.0
    %
    
    
    225
    
    
    
    0.0
    %
    
    
    65
    
    
    
    0.0
    %
    
    
    (1,312
    )
    
    
    (0.2
    )%Minority interests
    
    
    (1,112
    )
    
    
    (0.2
    )%
    
    
    (1,515
    )
    
    
    (0.3
    )%
    
    
    (1,870
    )
    
    
    (0.2
    )%
    
    
    (2,855
    )
    
    
    (0.3
    )%Earnings before income taxes
    
    
    24,559
    
    
    
    4.5
    %
    
    
    28,231
    
    
    
    6.0
    %
    
    
    42,620
    
    
    
    4.0
    %
    
    
    45,475
    
    
    
    5.1
    %Income tax expense
    
    
    9,843
    
    
    
    1.8
    %
    
    
    11,276
    
    
    
    2.4
    %
    
    
    17,189
    
    
    
    1.6
    %
    
    
    17,937
    
    
    
    2.0
    %Net earnings
    
    $
    14,716
    
    
    
    2.7
    %
    
    $
    16,955
    
    
    
    3.6
    %
    
    $
    25,431
    
    
    
    2.4
    %
    
    $
    27,538
    
    
    
    3.1
    %Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2008
    
    
    March 31, 2007
    
    
    March 31, 2008
    
    
    March 31, 2007Acute Care ($ in thousands):
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentageNet revenue:Acute care revenue
    
    $
    410,764
    
    
    
    99.2
    %
    
    $
    363,911
    
    
    
    99.2
    %
    
    $
    796,231
    
    
    
    99.2
    %
    
    $
    672,958
    
    
    
    99.2
    %Revenue between segments (1)
    
    
    3,493
    
    
    
    0.8
    %
    
    
    3,092
    
    
    
    0.8
    %
    
    
    6,823
    
    
    
    0.8
    %
    
    
    5,769
    
    
    
    0.8
    %Total net revenue
    
    
    414,257
    
    
    
    100.0
    %
    
    
    367,003
    
    
    
    100.0
    %
    
    
    803,054
    
    
    
    100.0
    %
    
    
    678,727
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    164,050
    
    
    
    39.6
    %
    
    
    136,330
    
    
    
    37.1
    %
    
    
    323,633
    
    
    
    40.3
    %
    
    
    258,314
    
    
    
    38.1
    %Supplies
    
    
    64,857
    
    
    
    15.7
    %
    
    
    55,298
    
    
    
    15.1
    %
    
    
    124,919
    
    
    
    15.6
    %
    
    
    102,459
    
    
    
    15.1
    %Other operating expenses
    
    
    69,128
    
    
    
    16.7
    %
    
    
    73,592
    
    
    
    20.1
    %
    
    
    134,845
    
    
    
    16.8
    %
    
    
    130,736
    
    
    
    19.3
    %Provision for bad debts
    
    
    44,592
    
    
    
    10.8
    %
    
    
    34,117
    
    
    
    9.3
    %
    
    
    85,189
    
    
    
    10.6
    %
    
    
    65,865
    
    
    
    9.7
    %Rentals and leases
    
    
    10,111
    
    
    
    2.4
    %
    
    
    8,969
    
    
    
    2.4
    %
    
    
    19,586
    
    
    
    2.4
    %
    
    
    17,164
    
    
    
    2.5
    %Interest expense, net
    
    
    20,289
    
    
    
    4.9
    %
    
    
    16,955
    
    
    
    4.6
    %
    
    
    42,093
    
    
    
    5.3
    %
    
    
    34,241
    
    
    
    5.1
    %Depreciation and amortization
    
    
    23,586
    
    
    
    5.7
    %
    
    
    17,305
    
    
    
    4.7
    %
    
    
    45,846
    
    
    
    5.7
    %
    
    
    33,325
    
    
    
    4.9
    %Management fees
    
    
    1,313
    
    
    
    0.3
    %
    
    
    1,326
    
    
    
    0.4
    %
    
    
    2,500
    
    
    
    0.3
    %
    
    
    2,373
    
    
    
    0.3
    %Business interruption insurance recoveries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,918
    )
    
    
    (0.3
    )%Total costs and expenses
    
    
    397,926
    
    
    
    96.1
    %
    
    
    343,892
    
    
    
    93.7
    %
    
    
    778,611
    
    
    
    97.0
    %
    
    
    642,559
    
    
    
    94.7
    %Earnings before gain (loss) on
disposal of assets, minority
interests and income taxes
    
    
    16,331
    
    
    
    3.9
    %
    
    
    23,111
    
    
    
    6.3
    %
    
    
    24,443
    
    
    
    3.0
    %
    
    
    36,168
    
    
    
    5.3
    %Gain (loss) on disposal of
assets, net
    
    
    3
    
    
    
    0.0
    %
    
    
    225
    
    
    
    0.0
    %
    
    
    65
    
    
    
    0.0
    %
    
    
    (1,312
    )
    
    
    (0.2
    )%Minority interests
    
    
    (1,112
    )
    
    
    (0.2
    )%
    
    
    (1,515
    )
    
    
    (0.4
    )%
    
    
    (1,870
    )
    
    
    (0.2
    )%
    
    
    (2,855
    )
    
    
    (0.4
    )%Earnings before income taxes
    
    $
    15,222
    
    
    
    3.7
    %
    
    $
    21,821
    
    
    
    5.9
    %
    
    $
    22,638
    
    
    
    2.8
    %
    
    $
    32,001
    
    
    
    4.7
    %
 (1)

Revenue between segments is eliminated in our consolidated results.  33




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##### Table of Contents



Quarter Ended
    
    
    Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2008
    
    
    March 31, 2007
    
    
    March 31, 2008
    
    
    March 31, 2007Health Choice ($ in thousands):
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    Percentage
    
    
    Amount
    
    
    PercentagePremium revenue
    
    $
    132,172
    
    
    
    100.0
    %
    
    $
    108,791
    
    
    
    100.0
    %
    
    $
    258,799
    
    
    
    100.0
    %
    
    $
    216,578
    
    
    
    100.0
    %Costs and expenses:Salaries and benefits
    
    
    4,333
    
    
    
    3.3
    %
    
    
    3,624
    
    
    
    3.3
    %
    
    
    8,376
    
    
    
    3.2
    %
    
    
    7,035
    
    
    
    3.3
    %Supplies
    
    
    44
    
    
    
     0.0
    %
    
    
    84
    
    
    
    0.1
    %
    
    
    121
    
    
    
    0.0
    %
    
    
    168
    
    
    
    0.1
    %Medical claims (1)
    
    
    112,932
    
    
    
    85.4
    %
    
    
    93,631
    
    
    
    86.1
    %
    
    
    219,142
    
    
    
    84.7
    %
    
    
    186,003
    
    
    
    85.9
    %Other operating expenses
    
    
    4,338
    
    
    
    3.3
    %
    
    
    3,883
    
    
    
    3.6
    %
    
    
    8,810
    
    
    
    3.4
    %
    
    
    7,597
    
    
    
    3.5
    %Rentals and leases
    
    
    289
    
    
    
    0.2
    %
    
    
    271
    
    
    
    0.2
    %
    
    
    574
    
    
    
    0.2
    %
    
    
    526
    
    
    
    0.2
    %Depreciation and amortization
    
    
    899
    
    
    
    0.7
    %
    
    
    888
    
    
    
    0.8
    %
    
    
    1,794
    
    
    
    0.7
    %
    
    
    1,775
    
    
    
    0.8
    %Total costs and expenses
    
    
    122,835
    
    
    
    92.9
    %
    
    
    102,381
    
    
    
    94.1
    %
    
    
    238,817
    
    
    
    92.2
    %
    
    
    203,104
    
    
    
    93.8
    %Earnings before income taxes
    
    $
    9,337
    
    
    
    7.1
    %
    
    $
    6,410
    
    
    
    5.9
    %
    
    $
    19,982
    
    
    
    7.8
    %
    
    $
    13,474
    
    
    
    6.2
    %
 (1)
    
    Medical claims paid to our hospitals of $3.5 million and $3.1 million for the quarters ended
March 31, 2008 and 2007, respectively, and $6.8 million and $5.8 million for the six months
ended March 31, 2008 and 2007, respectively, are eliminated in our consolidated results. Quarters Ended March 31, 2008 and 2007
 Net revenue
     34




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##### Table of Contents



Salaries and benefits
 Supplies
 Medical claims
 Other operating expenses qui tam qui tam
 Provision for bad debts
  35




---



##### Table of Contents



Interest
expense, net
 Depreciation and amortization
 Income tax expense
 Net earnings
 Six Months Ended March 31, 2008 and 2007
 Net revenue
     36




---



##### Table of Contents



Salaries and benefits
 Supplies
 Medical claims
 Other operating expenses qui tam qui
tam
  37




---



##### Table of Contents



Provision for bad debts
 Interest
expense, net
 Depreciation and amortization
 Income tax expense
 Net earnings
 LIQUIDITY AND CAPITAL RESOURCES
   38




---



##### Table of Contents



Available cash
    
    $
    5.7Available capacity under our senior secured revolving credit facility
    
    
    222.4Net available liquidity at March 31, 2008
    
    $
    228.1
   
    
    $50.0 million to $55.0 million for the two patient tower expansions in Utah;
    
    $48.0 million to $52.0 million for other growth and new business projects; and
    
    $62.0 million to $65.0 million in replacement or maintenance related projects at our
hospitals, including information systems projects.
      39




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##### Table of Contents



Overview of Cash Flow Activities for the Six Months Ended March 31, 2008 and 2007
  Six MonthsEnded March 31,2008
    
    
    2007Cash flow from operating activities
    
    $
    30.5
    
    
    $
    79.5Cash flow from investing activities
    
    
    (72.3
    )
    
    
    (171.9
    )Cash flow from financing activities
    
    
    47.4
    
    
    
    (3.0
    )
 Operating Activities
    40




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##### Table of Contents



Investing Activities
  
    
    $14.0 million related to the construction of the two patient towers in our Utah
market;
    
    $4.2 million for various expansion and renovation projects, including equipment,
at our San Antonio hospital;
    
    $9.5 million in hardware and software related to our advanced clinicals and other
information systems projects, including systems integration at
Glenwood and Alliance; and
    
    $9.2 million for
imaging and other diagnostic equipment, including 64-slice CT
scanners and cardiac catheterization labs.
  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
     41




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##### 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
    42




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##### Table of Contents



Seasonality
  RECENT ACCOUNTING PRONOUNCEMENTS
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Business Combinations 141(R).
 Noncontrolling Interests in Consolidated
Financial Statements
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
    43




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##### Table of Contents



Item 4T. Controls and Procedures
 Evaluations of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
   44




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##### Table of Contents



PART II.
OTHER INFORMATION
 
 Item 1.
Legal Proceedings
 qui tam qui tam
 
 Item 1A. Risk Factors
  We May Incur Material Fees,
Costs and Expenses In Connection With An Appeal of the Court Order Dismissing With Prejudice
the Qui Tam Action And Investigation of IAS.
 qui tam qui tam qui tam qui tam
 
 Item 6. Exhibits
 List of 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 9, 2008
    By:
    /s/ John M. DoyleJohn M. DoyleChief Accounting 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