##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 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: 000-51251
 
 
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    20-1538254(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)103 Powell Court, Suite 200
    
    37027Brentwood, Tennessee
    
    (Zip Code)(Address Of Principal Executive Offices)
 (615) 372-8500  (Registrants Telephone Number, Including Area Code)
 None
  Common Stock, par value $.01 per share
    
    Preferred Stock Purchase Rights(Title of Class)
    
    (Title of Class)
 þ o
 o þ
 þ o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of
OperationsItem 7A. Quantitative and Qualitative Disclosures about Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial
DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder MattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesSIGNATURESExhibit IndexEx-12.1  Ratio of Earnings to Fixed ChargesEx-21.1  List of SubsidiariesEx-23.1  Consent of Independent Registered Public Accounting FirmEx-31.1  Section 302 Certification of the CEOEx-31.2  Section 302 Certification of the CFOEx-32.1  Section 906 Certification of the CEOEx-32.2  Section 906 Certification of the CFO




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##### Table of Contents



PART I
 
 Item 1. Business.
 Overview of Our Company
    Business Combination with Province Healthcare Company
     1




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##### Table of Contents



Availability of Information
 www.lifepointhospitals.com
 Operating Philosophy
  
    
    increasing the scope and improving the quality of available healthcare
services;
    
    providing physicians a positive environment in which to practice medicine, with
access to necessary equipment, office space and resources needed to operate their
practices;
    
    providing an outstanding work environment for employees;
    
    recognizing and expanding the hospitals role as a community asset; and
    
    continuing to improve each hospitals financial performance.
 The Non-Urban Healthcare Market
  
    
    Less Competition than Urban Markets.Because non-urban communities have smaller
populations, they generally have fewer hospitals and other healthcare service providers.
Additionally, because non-urban hospitals are generally sole providers or one of a small
group of providers in their markets, there is limited competition. However, we are
experiencing an increase in competition from other specialized care providers, including
outpatient surgery, oncology, physical therapy and diagnostic centers, as well as competing
services rendered in physician offices.
    
    Community Focus.We believe that the local hospital generally is viewed as an integral
part of the community. In addition, we believe that non-urban communities are generally
characterized by a high level of patient and physician loyalty that fosters cooperative
relationships among the local hospitals, physicians, employees and patients.
    
    Acquisition Opportunities.Currently, not-for-profit and governmental entities own
most non-urban hospitals. These entities often have limited access to the capital needed to
keep pace with advances in medical technology. In addition, these entities sometimes lack
the management resources necessary to control hospital expenses, recruit and retain
physicians, expand healthcare services and comply with increasingly complex reimbursement
and managed care requirements. As a result, patients may migrate, be referred by local
physicians, or be encouraged by managed care plans to travel to hospitals in larger, urban
markets. We believe that, as a result of these pressures, many not-for-profit and
governmental owners of non-urban hospitals who wish to maximize the value of their
community assets and preserve the local availability of quality healthcare services are
interested in selling or leasing these hospitals to a company like ours, that is committed
to the local delivery of healthcare and that has greater access to capital and management
resources. Of the 35 hospitals that we have acquired since our spin-off from HCA in 1999
and that Province acquired prior to our business combination with Province in April 2005,
28 were acquired from either not-for-profit or governmental entities.
 2




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##### Table of Contents



Business Strategy
  
    
    Expand Breadth of Services and Attract Community Patients.We strive to increase revenues by
broadening the scope and improving the quality of healthcare services available at our
facilities and by recruiting physicians with a broader range of specialties. We believe that
our expansion of available treatments, our emphasis on quality and our community focus will
encourage residents in the non-urban communities we serve to seek care locally at our
facilities rather than at facilities outside the area. To broaden our services, we have
entered into outpatient joint ventures in a few of our communities. In addition, we have
undertaken projects in a majority of our hospitals that are targeted at expanding specialty
services. Capital expenditures related to these projects were as follows for the years
presented (dollars in millions):
 Number ofExpansion or Renovation Project
    
    Projects
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005Operating room expansions
    
    
    18
    
    
    $
    11.8
    
    
    $
    10.4
    
    
    $
    8.7
    
    
    $
    0.8
    
    
    $
    0.7New/replacement hospitals
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29.2MRI additions
    
    
    20
    
    
    
    4.1
    
    
    
    8.5
    
    
    
    4.9
    
    
    
    3.1
    
    
    
    4.1Medical office building additions
    
    
    20
    
    
    
    1.1
    
    
    
    4.8
    
    
    
    6.3
    
    
    
    4.1
    
    
    
    11.8Patient room additions
    
    
    3
    
    
    
    
    
    
    
    1.5
    
    
    
    7.2
    
    
    
    9.3
    
    
    
    15.6CT scanner additions
    
    
    15
    
    
    
    3.6
    
    
    
    0.7
    
    
    
    
    
    
    
    2.1
    
    
    
    5.2Emergency room expansions
    
    
    8
    
    
    
    0.7
    
    
    
    0.5
    
    
    
    3.8
    
    
    
    7.6
    
    
    
    10.3Rehabilitation additions
    
    
    7
    
    
    
    
    
    
    
    2.8
    
    
    
    1.8
    
    
    
    2.3
    
    
    
    Cardiac catheterization lab additions
    
    
    5
    
    
    
    
    
    
    
    3.1
    
    
    
    2.0
    
    
    
    
    
    
    
    Miscellaneous expansions
    
    
    14
    
    
    
    0.5
    
    
    
    5.7
    
    
    
    8.8
    
    
    
    21.1
    
    
    
    23.3113
    
    
    $
    21.8
    
    
    $
    38.0
    
    
    $
    43.5
    
    
    $
    50.4
    
    
    $
    100.2
 
 This table reflects approved expansion projects and is updated as incremental costs are incurred
on projects previously approved. 
    
    Strengthen Physician Recruiting and Retention.We believe that
recruiting physicians who are interested in practicing in local
communities is critical to increasing the quality of healthcare and
the breadth of available services at our facilities. Our physician
recruitment program is currently focused on recruiting additional
specialty care physicians and primary care physicians. Our local
management teams are focused on working more effectively with
individual physicians and physician practices. We believe that
expansion of the range of available treatments at our hospitals should
also assist in physician recruiting and contribute to the sense that
our hospitals are community assets.
    
    Improve Expense Management.We seek to control costs by, among other
things, attempting to improve employee productivity and decrease the
use of contract labor, controlling supply expenses through the use of
a group purchasing organization, controlling professional and general
liability insurance expenses through the utilization of risk
management and quality care programs, and reducing uncollectible
revenues. We have implemented cost control initiatives that include
efforts to adjust staffing levels according to patient volumes,
modifying supply purchases according to usage patterns and providing
support to hospital staff in more efficient billing and collection
processes. We believe that as our company grows, we should benefit
from our ability to spread certain fixed costs over a larger base of
operations.
    
    Retain and Develop Stable Management.We seek to retain the executive
teams at our hospitals to enhance medical staff relations and maintain
continuity of relationships within the community. We focus our
recruitment of managers on those who wish to live and practice in the
communities in which our hospitals are located and we allow our
hospital executives to participate in our stock incentive plans.
 3




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
    
    Improve Managed Care Revenues.We continue to strive to improve our
revenues from managed care plans by negotiating facility-specific
contracts with these payors on terms appropriate for non-urban
markets.
    
    Acquire Other Hospitals.We continue to pursue a selective
acquisition strategy and seek to identify and acquire hospitals in
non-urban markets that are the sole or significant market provider of
healthcare services in the community. By implementing our operating
strategies, we believe that we may attract many of the patients in
these markets that historically have sought care elsewhere. From time
to time, we may evaluate our facilities and sell assets that we
believe, for various reasons, may no longer fit within our long-term
strategy.We believe that our strategic goals align our interests with those of the local communities
served by our hospitals. We believe that the following qualities enable us to compete
successfully for acquisitions:
 
    
    our commitment to maintaining the local availability of quality healthcare services;
    
    our practice of providing market-specific, broader-based healthcare;
    
    our focus on physician recruiting and retention;
    
    our managements operating experience;
    
    our access to financing and our liquidity; and
    
    our ability to provide the necessary equipment and resources for physicians.
 
    
    Develop New Hospitals and Replace Existing Hospitals.We continue to focus on improving the operations of our new
hospitals as well as seeking additional opportunities. Consistent with our operating strategies, we continually evaluate
the communities we serve and our existing facilities to determine where replacement facilities would be beneficial.
 4




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##### Table of Contents



Acquisitions
  AcquiredAcquisition
    
    
    
    Purchase
    
    LicensedHospital Name
    
    Date
    
    Location
    
    Price (a)
    
    BedsDanville Regional Medical Center (b)
    
    July 1, 2005
    
    Danville, VA
    
    $
    210.0
    
    
    
    350Wythe County Community Hospital (b)
    
    June 1, 2005
    
    Wytheville, VA
    
    
    49.8
    
    
    
    104Province business combination:
    
    
    
    
    
    
    1,797.6
    
    
    
    2,529Ashland Regional Medical Center (b), (d)
    
    April 15, 2005
    
    Ashland, PA
    
    
    N/A
    
    
    
    123Bolivar Medical Center (b)
    
    April 15, 2005
    
    Cleveland, MS
    
    
    N/A
    
    
    
    165Coastal Carolina Medical Center
    
    April 15, 2005
    
    Hardeeville, SC
    
    
    N/A
    
    
    
    41Colorado Plains Medical Center (b)
    
    April 15, 2005
    
    Fort Morgan, CO
    
    
    N/A
    
    
    
    50Colorado River Medical Center (b)
    
    April 15, 2005
    
    Needles, CA
    
    
    N/A
    
    
    
    49Doctors Hospital of Opelousas
    
    April 15, 2005
    
    Opelousas, LA
    
    
    N/A
    
    
    
    171Ennis Regional Medical Center (b)
    
    April 15, 2005
    
    Ennis, TX
    
    
    N/A
    
    
    
    45Eunice Community Medical Center (b)
    
    April 15, 2005
    
    Eunice, LA
    
    
    N/A
    
    
    
    72Havasu Regional Medical Center (b)
    
    April 15, 2005
    
    Lake Havasu City, AZ
    
    
    N/A
    
    
    
    138Los Alamos Medical Center (b)
    
    April 15, 2005
    
    Los Alamos, NM
    
    
    N/A
    
    
    
    47Medical Center of Southern Indiana (b), (d)
    
    April 15, 2005
    
    Charlestown, IN
    
    
    N/A
    
    
    
    96Memorial Hospital of Martinsville (b)
    
    April 15, 2005
    
    Martinsville, VA
    
    
    N/A
    
    
    
    237Memorial Medical Center (b)
    
    April 15, 2005
    
    Las Cruces, NM
    
    
    N/A
    
    
    
    286Minden Medical Center
    
    April 15, 2005
    
    Minden, LA
    
    
    N/A
    
    
    
    159Northeastern Nevada Regional Hospital (b)
    
    April 15, 2005
    
    Elko, NV
    
    
    N/A
    
    
    
    75Palestine Regional Medical Center (b)
    
    April 15, 2005
    
    Palestine, TX
    
    
    N/A
    
    
    
    249Palo Verde Hospital (b), (e)
    
    April 15, 2005
    
    Blythe, CA
    
    
    N/A
    
    
    
    51Parkview Regional Hospital (b)
    
    April 15, 2005
    
    Mexia, TX
    
    
    N/A
    
    
    
    59Starke Memorial Hospital (b)
    
    April 15, 2005
    
    Knox, IN
    
    
    N/A
    
    
    
    53Teche Regional Medical Center (b)
    
    April 15, 2005
    
    Morgan City, LA
    
    
    N/A
    
    
    
    149Vaughan Regional Medical Center (b)
    
    April 15, 2005
    
    Selma, AL
    
    
    N/A
    
    
    
    214River Parishes Hospital
    
    July 1, 2004
    
    LaPlace, LA
    
    
    24.0
    
    
    
    106Spring View Hospital (b)
    
    October 1, 2003
    
    Lebanon, KY
    
    
    16.1
    
    
    
    113Logan
Regional Medical Center (b) and Guyan Valley Hospital (b)
    
    December 1, 2002
    
    Logan, WV
    
    
    87.5
    
    
    
    151Lakeland
Community Hospital (b) and Northwest Medical Center (b)
    
    December 1, 2002
    
    Haleyville, AL
    
    
    22.1
    
    
    
    170Russellville Hospital (b)
    
    October 3, 2002
    
    Russellville, AL
    
    
    19.8
    
    
    
    100Ville Platte Medical Center (b)
    
    December 1, 2001
    
    Ville Platte, LA
    
    
    11.1
    
    
    
    116Athens Regional Medical Center
    
    October 1, 2001
    
    Athens, TN
    
    
    17.0
    
    
    
    118Bluegrass Community Hospital (b), (c)
    
    January 2, 2001
    
    Versailles, KY
    
    
    3.2
    
    
    
    25Lander Valley Medical Center
    
    July 1, 2000
    
    Lander, WY
    
    
    29.8
    
    
    
    102Putnam Community Medical Center
    
    June 16, 2000
    
    Palatka, FL
    
    
    43.5
    
    
    
    141
 
 (a)
    
    Excluding working capital, except for the Province business combination.(b)
    
    Immediately prior to the acquisition of this hospital by Province or us, it was owned by
a not-for-profit or governmental entity.(c)
    
    Initially an operating lease; we exercised our option to purchase Bluegrass Community
Hospital for $3.2 million in January 2005.(d)
    
    Held-for-sale hospital.(e)
    
    Divested effective January 1, 2006. 5




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##### Table of Contents



Dispositions
  Sale
    
    LicensedHospital Name
    
    Disposition Date
    
    Location
    
    Price
    
    BedsPalo Verde Hospital
    
    January 1, 2006
    
    Blythe, CA
    
    
    
    
    
    
    51Bartow Memorial Hospital
    
    March 31, 2005
    
    Bartow, FL
    
    $
    33.0
    
    
    
    56Springhill Medical Center
    
    November 17, 2000
    
    Springhill, LA
    
    
    5.7
    
    
    
    63Barrow Medical Center
    
    September 1, 2000
    
    Barrow, GA
    
    
    2.2
    
    
    
    56Riverview Medical Center
    
    August 1, 2000
    
    Gonzales, LA
    
    
    20.7
    
    
    
    104Halstead Hospital
    
    April 1, 2000
    
    Halstead, KS
    
    
    
    
    
    
    177Trinity Hospital
    
    February 1, 2000
    
    Erin, TN
    
    
    2.4
    
    
    
    40
  Operations
     
    
    accounting, financial, tax, managed care and reimbursement management;
    
    clinical management;
    
    construction oversight and management;
    
    corporate ethics and compliance;
    
    education and training;
    
    employee benefit strategies;
    
    HIPAA compliance;
 6




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##### Table of Contents




    
    human resources management;
    
    information and clinical systems;
    
    internal auditing and consulting;
    
    legal management;
    
    managed care contracting;
    
    materials management;
    
    physician recruiting;
    
    physician services management;
    
    quality resource management;
    
    risk management; and
    
    revenue cycle management.
  Seasonality
  7




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##### Table of Contents



Properties
  Licensed Beds
    
    Acquisition/
    
    OperationalHospital Name
    
    Acute
    
    Psychiatric
    
    Rehabilitation
    
    SNF (a)
    
    Total
    
    Swing (b)
    
    Opening/Lease Date
    
    StatusAlabamaAndalusia Regional Hospital
    
    
    101
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    113
    
    
    
    
    
    
    HCA Spin-off
    
    OwnLakeland Community Hospital (c)
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    10
    
    
    12/1/2002
    
    OwnNorthwest Medical Center
    
    
    61
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    71
    
    
    
    
    
    
    12/1/2002
    
    OwnRussellville Hospital
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    10
    
    
    10/3/2002
    
    OwnVaughan Regional Medical Center
    
    
    175
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnArizonaHavasu Regional Medical Center (c)
    
    
    119
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    138
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnValley View Medical Center
    
    
    50
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    11/8/2005
    
    OwnCaliforniaColorado River Medical Center (f)
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    4/15/2005 (g)
    
    LeasePalo Verde Hospital (c), (e)
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51
    
    
    
    
    
    
    4/15/2005 (g)
    
    LeaseColoradoColorado Plains Medical Center (c), (h)
    
    
    40
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    4/15/2005 (g)
    
    LeaseFloridaPutnam Community Medical Center
    
    
    131
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    141
    
    
    
    
    
    
    6/16/2000
    
    OwnIndianaMedical Center of Southern Indiana (d)
    
    
    78
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnStarke Memorial Hospital
    
    
    45
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    53
    
    
    
    6
    
    
    4/15/2005 (g)
    
    LeaseKansasWestern Plains Regional Hospital (c)
    
    
    74
    
    
    
    
    
    
    
    16
    
    
    
    9
    
    
    
    99
    
    
    
    
    
    
    HCA Spin-off
    
    OwnKentuckyBluegrass Community Hospital (f)
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    15
    
    
    1/2/2001
    
    OwnBourbon Community Hospital
    
    
    33
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    58
    
    
    
    10
    
    
    HCA Spin-off
    
    OwnGeorgetown Community Hospital
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    10
    
    
    HCA Spin-off
    
    OwnJackson Purchase Medical Center
    
    
    107
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107
    
    
    
    10
    
    
    HCA Spin-off
    
    OwnLake Cumberland Regional Hospital (c)
    
    
    186
    
    
    
    34
    
    
    
    27
    
    
    
    12
    
    
    
    259
    
    
    
    
    
    
    HCA Spin-off
    
    OwnLogan Memorial Hospital
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    10
    
    
    HCA Spin-off
    
    OwnMeadowview Regional Medical Center
    
    
    101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101
    
    
    
    10
    
    
    HCA Spin-off
    
    OwnSpring View Hospital
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    6
    
    
    10/1/2003
    
    OwnLouisianaDoctors Hospital of Opelousas (h)
    
    
    117
    
    
    
    32
    
    
    
    22
    
    
    
    
    
    
    
    171
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnEunice Community Medical Center (h)
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    4/15/2005 (g)
    
    LeaseMinden Medical Center
    
    
    127
    
    
    
    20
    
    
    
    12
    
    
    
    
    
    
    
    159
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnRiver Parishes Hospital
    
    
    106
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106
    
    
    
    
    
    
    7/1/2004
    
    OwnTeche Regional Medical Center (c)
    
    
    140
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    149
    
    
    
    
    
    
    4/15/2005 (g)
    
    LeaseVille Platte Medical Center
    
    
    95
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    10
    
    
    12/1/2001
    
    OwnMississippiBolivar Medical Center (c)
    
    
    153
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    165
    
    
    
    
    
    
    4/15/2005 (g)
    
    LeaseNevadaNortheastern Nevada Regional Hospital (c)
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnNew MexicoLos Alamos Medical Center (c)
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47
    
    
    
    6
    
    
    4/15/2005 (g)
    
    OwnMemorial Medical Center
    
    
    274
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    286
    
    
    
    
    
    
    4/15/2005 (g)
    
    LeasePennsylvaniaAshland Regional Medical Center (d)
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    40
    
    
    
    123
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnSouth CarolinaCoastal Carolina Medical Center
    
    
    31
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnTennesseeAthens Regional Medical Center
    
    
    118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118
    
    
    
    10
    
    
    10/1/2001
    
    OwnCrockett Hospital
    
    
    97
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    107
    
    
    
    
    
    
    HCA Spin-off
    
    OwnEmerald-Hodgson Hospital
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    41
    
    
    
    
    
    
    HCA Spin-off
    
    OwnHillside Hospital
    
    
    81
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    5
    
    
    HCA Spin-off
    
    OwnLivingston Regional Hospital
    
    
    100
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    114
    
    
    
    14
    
    
    HCA Spin-off
    
    OwnSmith County Memorial Hospital
    
    
    53
    
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    10
    
    
    HCA Spin-off
    
    OwnSouthern Tennessee Medical Center
    
    
    107
    
    
    
    12
    
    
    
    12
    
    
    
    26
    
    
    
    157
    
    
    
    
    
    
    HCA Spin-off
    
    Own
 8




---



##### Table of Contents



Licensed Beds
    
    Acquisition/
    
    OperationalHospital Name
    
    Acute
    
    Psychiatric
    
    Rehabilitation
    
    SNF (a)
    
    Total
    
    Swing (b)
    
    Opening/Lease Date
    
    StatusTexasEnnis Regional Medical Center
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    
    
    
    4/15/2005 (g)
    
    LeasePalestine Regional Medical Center (c)
    
    
    163
    
    
    
    38
    
    
    
    39
    
    
    
    
    
    
    
    240
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnParkview Regional Hospital (c), (h)
    
    
    49
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    59
    
    
    
    
    
    
    4/15/2005 (g)
    
    LeaseUtahAshley Valley Medical Center (c)
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    39
    
    
    HCA Spin-off
    
    OwnCastleview Hospital (c)
    
    
    84
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84
    
    
    
    12
    
    
    HCA Spin-off
    
    OwnVirginiaDanville Regional Medical Center
    
    
    245
    
    
    
    35
    
    
    
    10
    
    
    
    60
    
    
    
    350
    
    
    
    
    
    
    7/1/2005
    
    OwnMemorial Hospital of Martinsville
    
    
    225
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    
    
    
    4/15/2005 (g)
    
    OwnWythe County Community Hospital (c)
    
    
    96
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    104
    
    
    
    9
    
    
    6/1/2005
    
    LeaseWest VirginiaGuyan Valley Hospital (f)
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    19
    
    
    12/1/2002
    
    OwnLogan Regional Medical Center (c)
    
    
    124
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    132
    
    
    
    
    
    
    12/1/2002
    
    OwnWyomingLander Valley Medical Center (c), (h)
    
    
    66
    
    
    
    15
    
    
    
    8
    
    
    
    
    
    
    
    89
    
    
    
    
    
    
    7/1/2000
    
    OwnRiverton Memorial Hospital (c), (h)
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    
    
    
    HCA Spin-off
    
    Own4,916
    
    
    
    296
    
    
    
    257
    
    
    
    197
    
    
    
    5,666
    
    
    
    231
 
 (a)
    
    Skilled nursing facility licensed beds.(b)
    
    The federal swing-bed program allows certain rural hospitals to provide a mix of acute,
skilled and intermediate care without obtaining a change in their licenses.(c)
    
    Designated by Medicare as a sole community hospital.(d)
    
    Held-for-sale hospital.(e)
    
    Divested effective January 1, 2006.(f)
    
    Critical-access hospital.(g)
    
    Hospital acquired as a result of the Province business combination.(h)
    
    Hospital is certified by the State and Medicare to use swing beds. However, the State
licensure does not assign a specific number of swing beds to a hospital.    ALABAMA
 Andalusia Regional Hospital
 Lakeland Community Hospital
 9




---



##### Table of Contents



Northwest Medical Center
 Russellville Hospital
 Vaughan Regional Medical Center
 ARIZONA
 Havasu Regional Medical Center
 Valley View Medical Center
 CALIFORNIA
 Colorado River Medical Center
 COLORADO
 Colorado Plains Medical Center
 10




---



##### Table of Contents



FLORIDA
 Putnam Community Medical Center
 INDIANA
 Medical Center of Southern Indiana
 Starke Memorial Hospital
 KANSAS
 Western Plains Regional Hospital
 KENTUCKY
 Bluegrass Community Hospital
 Bourbon Community Hospital
 Georgetown Community Hospital
 Jackson Purchase Medical Center
 11




---



##### Table of Contents



Lake Cumberland Regional Hospital
 Logan Memorial Hospital
 Meadowview Regional Medical Center
 Spring View Hospital
 LOUISIANA
 Doctors Hospital of Opelousas
 Eunice Community Medical Center
 Minden Medical Center
 River Parishes Hospital
 Teche Regional Medical Center
 12




---



##### Table of Contents



Ville Platte Medical Center
 MISSISSIPPI
 Bolivar Medical Center
 NEVADA
 Northeastern Nevada Regional Hospital
 NEW MEXICO
 Los Alamos Medical Center
 Memorial Medical Center
 PENNSYLVANIA
 Ashland Regional Medical Center
 SOUTH CAROLINA
 Coastal Carolina Medical Center
 13




---



##### Table of Contents



TENNESSEE
 Athens Regional Medical Center
 Crockett Hospital
 Hillside Hospital
 Livingston Regional Hospital
 Smith County Memorial Hospital
 Southern Tennessee Medical Center Emerald-Hodgson Hospital
 TEXAS
 Ennis Regional Medical Center
 Palestine Regional Medical Center
 Parkview Regional Hospital
 14




---



##### Table of Contents



UTAH
 Ashley Valley Medical Center
 Castleview Hospital
 VIRGINIA
 Danville Regional Medical Center
 Memorial Hospital of Martinsville
 Wythe County Community Hospital
 WEST VIRGINIA
 Logan Regional Medical Center Guyan Valley Hospital
 WYOMING
 Lander Valley Medical Center
 Riverton Memorial Hospital
 15




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##### Table of Contents



Demographic Information
  County/Parish Population
 Total County/Parish Population
    
    Annual Growth RatesHistorical
    
    Projected
    
    Historical
    
    ProjectedHospital
    
    County/Parish
    
    2003
    
    2004
    
    2005
    
    2010
    
    2003(a)
    
    2004
    
    2005
    
    2010(b)ALABAMAAndalusia Regional Hospital
    
    Covington
    
    
    37,293
    
    
    
    37,829
    
    
    
    37,007
    
    
    
    36,233
    
    
    
    -0.3
    %
    
    
    1.4
    %
    
    
    -2.2
    %
    
    
    -0.4
    %Lakeland Community Hospital
    
    Winston
    
    
    25,120
    
    
    
    25,278
    
    
    
    24,445
    
    
    
    23,733
    
    
    
    0.4
    %
    
    
    0.6
    %
    
    
    -3.3
    %
    
    
    -0.6
    %Northwest Medical Center
    
    Marion
    
    
    30,494
    
    
    
    30,961
    
    
    
    30,480
    
    
    
    29,824
    
    
    
    -0.8
    %
    
    
    1.5
    %
    
    
    -1.6
    %
    
    
    -0.4
    %Russellville Hospital
    
    Franklin
    
    
    31,255
    
    
    
    30,845
    
    
    
    30,988
    
    
    
    30,807
    
    
    
    0.0
    %
    
    
    -1.3
    %
    
    
    0.5
    %
    
    
    -0.1
    %Vaughan Regional Medical Center
    
    Dallas
    
    
    45,315
    
    
    
    45,459
    
    
    
    44,738
    
    
    
    43,292
    
    
    
    -0.8
    %
    
    
    0.3
    %
    
    
    -1.6
    %
    
    
    -0.7
    %ARIZONAHavasu Regional Medical Center
    
    Mohave
    
    
    172,190
    
    
    
    174,351
    
    
    
    182,126
    
    
    
    212,820
    
    
    
    3.6
    %
    
    
    1.3
    %
    
    
    4.5
    %
    
    
    3.2
    %Valley View Medical Center
    
    Mohave
    
    
    172,190
    
    
    
    174,351
    
    
    
    182,126
    
    
    
    212,820
    
    
    
    3.6
    %
    
    
    1.3
    %
    
    
    4.5
    %
    
    
    3.2
    %CALIFORNAColorado River Medical Center (c)
    
    San Bernardino
    
    
    5,444
    
    
    
    5,585
    
    
    
    5,811
    
    
    
    6,364
    
    
    
    -0.2
    %
    
    
    2.6
    %
    
    
    4.0
    %
    
    
    1.8
    %COLORADOColorado Plains Medical Center
    
    Morgan
    
    
    28,382
    
    
    
    28,627
    
    
    
    28,868
    
    
    
    30,479
    
    
    
    1.5
    %
    
    
    0.9
    %
    
    
    0.8
    %
    
    
    1.1
    %FLORIDAPutnam Community Medical Center
    
    Putnam
    
    
    71,088
    
    
    
    73,144
    
    
    
    72,193
    
    
    
    73,489
    
    
    
    0.3
    %
    
    
    2.9
    %
    
    
    -1.3
    %
    
    
    0.4
    %INDIANAMedical Center of Southern Indiana
    
    Clark
    
    
    99,815
    
    
    
    101,947
    
    
    
    103,421
    
    
    
    110,981
    
    
    
    1.1
    %
    
    
    2.1
    %
    
    
    1.4
    %
    
    
    1.4
    %Starke Memorial Hospital
    
    Starke
    
    
    22,744
    
    
    
    24,336
    
    
    
    23,736
    
    
    
    24,136
    
    
    
    -1.2
    %
    
    
    7.0
    %
    
    
    -2.5
    %
    
    
    0.3
    %KANSASWestern Plains Regional Hospital
    
    Ford
    
    
    33,246
    
    
    
    33,618
    
    
    
    33,940
    
    
    
    35,554
    
    
    
    0.8
    %
    
    
    1.1
    %
    
    
    1.0
    %
    
    
    0.9
    %KENTUCKYBluegrass Community Hospital
    
    Woodford
    
    
    23,915
    
    
    
    24,063
    
    
    
    24,221
    
    
    
    25,165
    
    
    
    1.0
    %
    
    
    0.6
    %
    
    
    0.7
    %
    
    
    0.8
    %Bourbon Community Hospital
    
    Bourbon
    
    
    19,653
    
    
    
    19,679
    
    
    
    19,606
    
    
    
    19,728
    
    
    
    0.5
    %
    
    
    0.1
    %
    
    
    -0.4
    %
    
    
    0.1
    %Georgetown Community Hospital
    
    Scott
    
    
    36,431
    
    
    
    36,266
    
    
    
    37,882
    
    
    
    43,285
    
    
    
    3.3
    %
    
    
    -0.5
    %
    
    
    4.5
    %
    
    
    2.7
    %Jackson Purchase Medical Center
    
    Graves
    
    
    37,442
    
    
    
    36,851
    
    
    
    36,836
    
    
    
    36,520
    
    
    
    0.4
    %
    
    
    -1.6
    %
    
    
    0.0
    %
    
    
    -0.2
    %Lake Cumberland Regional Hospital
    
    Pulaski
    
    
    57,428
    
    
    
    57,310
    
    
    
    57,913
    
    
    
    59,614
    
    
    
    0.7
    %
    
    
    -0.2
    %
    
    
    1.1
    %
    
    
    0.6
    %Logan Memorial Hospital
    
    Logan
    
    
    26,755
    
    
    
    26,620
    
    
    
    26,754
    
    
    
    26,951
    
    
    
    0.2
    %
    
    
    -0.5
    %
    
    
    0.5
    %
    
    
    0.1
    %Meadowview Regional Medical Center
    
    Mason
    
    
    16,669
    
    
    
    16,642
    
    
    
    16,833
    
    
    
    17,002
    
    
    
    -0.3
    %
    
    
    -0.2
    %
    
    
    1.1
    %
    
    
    0.2
    %Spring View Hospital
    
    Marion
    
    
    18,627
    
    
    
    18,179
    
    
    
    18,149
    
    
    
    17,947
    
    
    
    0.8
    %
    
    
    -2.4
    %
    
    
    -0.2
    %
    
    
    -0.2
    %LOUISIANADoctors Hospital of Opelousas
    
    St. Landry
    
    
    89,556
    
    
    
    89,428
    
    
    
    89,095
    
    
    
    89,844
    
    
    
    0.7
    %
    
    
    -0.1
    %
    
    
    -0.4
    %
    
    
    0.2
    %Eunice Community Medical Center
    
    St. Landry
    
    
    89,556
    
    
    
    89,428
    
    
    
    89,095
    
    
    
    89,844
    
    
    
    0.7
    %
    
    
    -0.1
    %
    
    
    -0.4
    %
    
    
    0.2
    %Minden Medical Center
    
    Webster
    
    
    41,418
    
    
    
    42,233
    
    
    
    41,770
    
    
    
    41,689
    
    
    
    -0.3
    %
    
    
    2.0
    %
    
    
    -1.1
    %
    
    
    0.0
    %River Parishes Hospital
    
    St. John the Baptist
    
    
    44,571
    
    
    
    45,421
    
    
    
    45,233
    
    
    
    46,997
    
    
    
    1.2
    %
    
    
    1.9
    %
    
    
    -0.4
    %
    
    
    0.8
    %Teche Regional Medical Center
    
    St. Mary
    
    
    52,309
    
    
    
    53,178
    
    
    
    52,463
    
    
    
    51,538
    
    
    
    -0.7
    %
    
    
    1.7
    %
    
    
    -1.3
    %
    
    
    -0.4
    %Ville Platte Medical Center
    
    Evangeline
    
    
    35,998
    
    
    
    36,573
    
    
    
    35,580
    
    
    
    35,202
    
    
    
    0.5
    %
    
    
    1.6
    %
    
    
    -2.7
    %
    
    
    -0.2
    %MISSISSIPPIBolivar Medical Center
    
    Bolivar
    
    
    40,164
    
    
    
    40,521
    
    
    
    38,975
    
    
    
    37,363
    
    
    
    -0.4
    %
    
    
    0.9
    %
    
    
    -3.8
    %
    
    
    -0.8
    %NEVADANortheastern Nevada Regional Hospital
    
    Elko
    
    
    47,193
    
    
    
    45,334
    
    
    
    46,018
    
    
    
    46,187
    
    
    
    1.4
    %
    
    
    -3.9
    %
    
    
    1.5
    %
    
    
    0.1
    %NEW MEXICOLos Alamos Medical Center
    
    Los Alamos
    
    
    18,106
    
    
    
    18,910
    
    
    
    19,402
    
    
    
    21,017
    
    
    
    -0.4
    %
    
    
    4.4
    %
    
    
    2.6
    %
    
    
    1.6
    %Memorial Medical Center
    
    Dona Ana
    
    
    182,356
    
    
    
    189,876
    
    
    
    193,519
    
    
    
    215,002
    
    
    
    1.4
    %
    
    
    4.1
    %
    
    
    1.9
    %
    
    
    2.1
    %PENNSYLVANIAAshland Regional Medical Center
    
    Schuylkill
    
    
    150,058
    
    
    
    153,628
    
    
    
    149,665
    
    
    
    147,091
    
    
    
    -0.1
    %
    
    
    2.4
    %
    
    
    -2.6
    %
    
    
    -0.3
    %SOUTH CAROLINACoastal Carolina Medical Center
    
    Beaufort
    
    
    132,628
    
    
    
    139,233
    
    
    
    148,332
    
    
    
    180,310
    
    
    
    3.1
    %
    
    
    5.0
    %
    
    
    6.5
    %
    
    
    4.0
    %TENNESSEEAthens Regional Medical Center
    
    McMinn
    
    
    51,137
    
    
    
    50,524
    
    
    
    50,118
    
    
    
    50,850
    
    
    
    1.4
    %
    
    
    -1.2
    %
    
    
    -0.8
    %
    
    
    0.3
    %Crockett Hospital
    
    Lawrence
    
    
    40,242
    
    
    
    40,473
    
    
    
    40,649
    
    
    
    41,464
    
    
    
    0.3
    %
    
    
    0.6
    %
    
    
    0.4
    %
    
    
    0.4
    %Hillside Hospital
    
    Giles
    
    
    30,461
    
    
    
    30,149
    
    
    
    29,583
    
    
    
    29,211
    
    
    
    1.1
    %
    
    
    -1.0
    %
    
    
    -1.9
    %
    
    
    -0.3
    %Livingston Regional Hospital
    
    Overton
    
    
    20,627
    
    
    
    20,403
    
    
    
    20,195
    
    
    
    20,077
    
    
    
    0.8
    %
    
    
    -1.1
    %
    
    
    -1.0
    %
    
    
    -0.1
    %Smith County Memorial Hospital
    
    Smith
    
    
    18,752
    
    
    
    18,449
    
    
    
    18,265
    
    
    
    18,466
    
    
    
    1.9
    %
    
    
    -1.6
    %
    
    
    -1.0
    %
    
    
    0.2
    %Southern Tennessee Medical Center/
    
    Franklin
    
    
    40,903
    
    
    
    41,198
    
    
    
    41,414
    
    
    
    42,825
    
    
    
    1.4
    %
    
    
    0.7
    %
    
    
    0.5
    %
    
    
    0.7
    %Emerald-Hodgson Hospital
 16




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##### Table of Contents



County/Parish
Population
 Total County/Parish Population
    
    Annual Growth RatesHistorical
    
    Projected
    
    Historical
    
    ProjectedHospital
    
    County/Parish
    
    2003
    
    2004
    
    2005
    
    2010
    
    2003(a)
    
    2004
    
    2005
    
    2010(b)TEXASEnnis Regional Medical Center
    
    Ellis
    
    
    123,268
    
    
    
    128,468
    
    
    
    131,660
    
    
    
    154,092
    
    
    
    3.4
    %
    
    
    4.2
    %
    
    
    2.5
    %
    
    
    3.2
    %Palestine Regional Medical Center
    
    Anderson
    
    
    55,693
    
    
    
    57,506
    
    
    
    54,956
    
    
    
    55,316
    
    
    
    0.4
    %
    
    
    3.3
    %
    
    
    -4.4
    %
    
    
    0.1
    %Parkview Regional Hospital
    
    Limestone
    
    
    22,502
    
    
    
    22,991
    
    
    
    22,668
    
    
    
    23,095
    
    
    
    0.7
    %
    
    
    2.2
    %
    
    
    -1.4
    %
    
    
    0.4
    %UTAHAshley Valley Medical Center
    
    Uintah
    
    
    25,932
    
    
    
    26,633
    
    
    
    26,973
    
    
    
    28,877
    
    
    
    0.9
    %
    
    
    2.7
    %
    
    
    1.3
    %
    
    
    1.4
    %Castleview Hospital
    
    Carbon
    
    
    19,683
    
    
    
    19,949
    
    
    
    19,947
    
    
    
    19,823
    
    
    
    -1.2
    %
    
    
    1.4
    %
    
    
    0.0
    %
    
    
    -0.1
    %VIRGINIADanville Regional Medical Center
    
    Danville city
    
    
    46,274
    
    
    
    46,418
    
    
    
    46,029
    
    
    
    44,412
    
    
    
    -1.5
    %
    
    
    0.3
    %
    
    
    -0.8
    %
    
    
    -0.7
    %Memorial Hospital of Martinsville
    
    Martinsville city
    
    
    15,060
    
    
    
    14,801
    
    
    
    14,746
    
    
    
    14,161
    
    
    
    -0.8
    %
    
    
    -1.7
    %
    
    
    -0.4
    %
    
    
    -0.8
    %Wythe County Community Hospital
    
    Wythe
    
    
    28,197
    
    
    
    28,510
    
    
    
    27,896
    
    
    
    27,806
    
    
    
    0.7
    %
    
    
    1.1
    %
    
    
    -2.2
    %
    
    
    -0.1
    %WEST VIRGINIALogan Regional Medical Center/
    
    Logan
    
    
    35,970
    
    
    
    36,559
    
    
    
    37,759
    
    
    
    38,169
    
    
    
    -1.6
    %
    
    
    1.6
    %
    
    
    3.3
    %
    
    
    0.2
    %Guyan Valley HospitalWYOMINGLander Valley Medical Center
    
    Fremont
    
    
    36,049
    
    
    
    36,124
    
    
    
    36,118
    
    
    
    36,380
    
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.0
    %
    
    
    0.1
    %Riverton Memorial Hospital
    
    Fremont
    
    
    36,049
    
    
    
    36,124
    
    
    
    36,118
    
    
    
    36,380
    
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.0
    %
    
    
    0.1
    %Average for counties/parishes that LifePoint serves
    
    
    0.6
    %
    
    
    1.0
    %
    
    
    0.3
    %
    
    
    0.6
    %US Average
    
    
    1.2
    %
    
    
    1.4
    %
    
    
    1.0
    %
    
    
    1.2
    %
 
 (a)
    
    The 2003 historical growth rate represents the
compounded annual growth rate from 2000  2003.(b)
    
    The 2010 projected growth rate represents the compounded
annual growth rate from 2005  2010.(c)
    
    Population for Colorado River Medical Center is for the zip code of the hospital rather
than the county because the hospitals county includes part of the Los Angeles metropolitan
area.Copyright 2005 Health InfoTechnics, LLC 877/239-9549 October 19, 2005Demographic Source: ESRI Business Solutions 17




---



##### Table of Contents



Median Household Income
 Median Household Income
    
    Annual Growth RatesHistorical
    
    Projected
    
    Historical
    
    ProjectedHospital
    
    County/Parish
    
    2003
    
    2004
    
    2005
    
    2010
    
    2003(a)
    
    2004
    
    2005
    
    2010(b)ALABAMAAndalusia Regional Hospital
    
    Covington
    
    $
    27,482
    
    
    $
    28,122
    
    
    $
    28,673
    
    
    $
    31,373
    
    
    
    1.6
    %
    
    
    2.3
    %
    
    
    2.0
    %
    
    
    1.8
    %Lakeland Community Hospital
    
    Winston
    
    
    29,716
    
    
    
    30,517
    
    
    
    30,743
    
    
    
    33,483
    
    
    
    2.0
    %
    
    
    2.7
    %
    
    
    0.7
    %
    
    
    1.7
    %Northwest Medical Center
    
    Marion
    
    
    29,834
    
    
    
    30,635
    
    
    
    30,904
    
    
    
    34,024
    
    
    
    2.2
    %
    
    
    2.7
    %
    
    
    0.9
    %
    
    
    1.9
    %Russellville Hospital
    
    Franklin
    
    
    28,878
    
    
    
    29,811
    
    
    
    30,082
    
    
    
    33,485
    
    
    
    2.0
    %
    
    
    3.2
    %
    
    
    0.9
    %
    
    
    2.2
    %Vaughan Regional Medical Center
    
    Dallas
    
    
    25,014
    
    
    
    25,538
    
    
    
    25,848
    
    
    
    29,146
    
    
    
    2.7
    %
    
    
    2.1
    %
    
    
    1.2
    %
    
    
    2.4
    %ARIZONAHavasu Regional Medical Center
    
    Mohave
    
    
    35,395
    
    
    
    36,864
    
    
    
    38,350
    
    
    
    46,113
    
    
    
    3.9
    %
    
    
    4.2
    %
    
    
    4.0
    %
    
    
    3.8
    %Valley View Medical Center
    
    Mohave
    
    
    35,395
    
    
    
    36,864
    
    
    
    38,350
    
    
    
    46,113
    
    
    
    3.9
    %
    
    
    4.2
    %
    
    
    4.0
    %
    
    
    3.8
    %CALIFORNAColorado River Medical Center (c)
    
    San Bernardino
    
    
    28,980
    
    
    
    28,713
    
    
    
    29,422
    
    
    
    33,575
    
    
    
    4.1
    %
    
    
    -0.9
    %
    
    
    2.5
    %
    
    
    2.7
    %COLORADOColorado Plains Medical Center
    
    Morgan
    
    
    37,037
    
    
    
    38,501
    
    
    
    39,298
    
    
    
    44,128
    
    
    
    2.4
    %
    
    
    4.0
    %
    
    
    2.1
    %
    
    
    2.3
    %FLORIDAPutnam Community Medical Center
    
    Putnam
    
    
    30,498
    
    
    
    31,452
    
    
    
    32,509
    
    
    
    37,274
    
    
    
    2.7
    %
    
    
    3.1
    %
    
    
    3.4
    %
    
    
    2.8
    %INDIANAMedical Center of Southern Indiana
    
    Clark
    
    
    42,519
    
    
    
    43,557
    
    
    
    44,696
    
    
    
    49,378
    
    
    
    2.0
    %
    
    
    2.4
    %
    
    
    2.6
    %
    
    
    2.0
    %Starke Memorial Hospital
    
    Starke
    
    
    39,990
    
    
    
    40,645
    
    
    
    41,395
    
    
    
    45,364
    
    
    
    2.3
    %
    
    
    1.6
    %
    
    
    1.8
    %
    
    
    1.8
    %KANSASWestern Plains Regional Hospital
    
    Ford
    
    
    41,849
    
    
    
    43,562
    
    
    
    44,719
    
    
    
    52,501
    
    
    
    3.4
    %
    
    
    4.1
    %
    
    
    2.7
    %
    
    
    3.3
    %KENTUCKYBluegrass Community Hospital
    
    Woodford
    
    
    57,851
    
    
    
    59,490
    
    
    
    61,262
    
    
    
    75,059
    
    
    
    5.3
    %
    
    
    2.8
    %
    
    
    3.0
    %
    
    
    4.1
    %Bourbon Community Hospital
    
    Bourbon
    
    
    40,506
    
    
    
    41,315
    
    
    
    42,663
    
    
    
    52,109
    
    
    
    5.0
    %
    
    
    2.0
    %
    
    
    3.3
    %
    
    
    4.1
    %Georgetown Community Hospital
    
    Scott
    
    
    55,170
    
    
    
    56,671
    
    
    
    58,595
    
    
    
    70,858
    
    
    
    5.3
    %
    
    
    2.7
    %
    
    
    3.4
    %
    
    
    3.9
    %Jackson Purchase Medical Center
    
    Graves
    
    
    35,241
    
    
    
    36,059
    
    
    
    37,403
    
    
    
    45,221
    
    
    
    4.5
    %
    
    
    2.3
    %
    
    
    3.7
    %
    
    
    3.9
    %Lake Cumberland Regional Hospital
    
    Pulaski
    
    
    30,630
    
    
    
    31,267
    
    
    
    32,512
    
    
    
    38,376
    
    
    
    4.0
    %
    
    
    2.1
    %
    
    
    4.0
    %
    
    
    3.4
    %Logan Memorial Hospital
    
    Logan
    
    
    36,790
    
    
    
    37,697
    
    
    
    38,957
    
    
    
    45,956
    
    
    
    4.2
    %
    
    
    2.5
    %
    
    
    3.3
    %
    
    
    3.4
    %Meadowview Regional Medical Center
    
    Mason
    
    
    34,294
    
    
    
    34,889
    
    
    
    36,216
    
    
    
    43,745
    
    
    
    4.3
    %
    
    
    1.7
    %
    
    
    3.8
    %
    
    
    3.8
    %Spring View Hospital
    
    Marion
    
    
    33,946
    
    
    
    34,728
    
    
    
    36,197
    
    
    
    43,093
    
    
    
    3.8
    %
    
    
    2.3
    %
    
    
    4.2
    %
    
    
    3.5
    %LOUISIANADoctors Hospital of Opelousas
    
    St. Landry
    
    
    24,861
    
    
    
    25,484
    
    
    
    25,858
    
    
    
    29,332
    
    
    
    2.9
    %
    
    
    2.5
    %
    
    
    1.5
    %
    
    
    2.6
    %Eunice Community Medical Center
    
    St. Landry
    
    
    24,861
    
    
    
    25,484
    
    
    
    25,858
    
    
    
    29,332
    
    
    
    2.9
    %
    
    
    2.5
    %
    
    
    1.5
    %
    
    
    2.6
    %Minden Medical Center
    
    Webster
    
    
    30,400
    
    
    
    31,162
    
    
    
    31,674
    
    
    
    35,543
    
    
    
    2.4
    %
    
    
    2.5
    %
    
    
    1.6
    %
    
    
    2.3
    %River Parishes Hospital
    
    St. John the Baptist
    
    
    42,270
    
    
    
    43,538
    
    
    
    44,396
    
    
    
    50,288
    
    
    
    2.4
    %
    
    
    3.0
    %
    
    
    2.0
    %
    
    
    2.5
    %Teche Regional Medical Center
    
    St. Mary
    
    
    30,570
    
    
    
    31,324
    
    
    
    31,828
    
    
    
    35,924
    
    
    
    2.6
    %
    
    
    2.5
    %
    
    
    1.6
    %
    
    
    2.5
    %Ville Platte Medical Center
    
    Evangeline
    
    
    22,276
    
    
    
    22,815
    
    
    
    23,269
    
    
    
    26,651
    
    
    
    2.8
    %
    
    
    2.4
    %
    
    
    2.0
    %
    
    
    2.8
    %MISSISSIPPIBolivar Medical Center
    
    Bolivar
    
    
    25,423
    
    
    
    26,136
    
    
    
    26,560
    
    
    
    30,289
    
    
    
    2.7
    %
    
    
    2.8
    %
    
    
    1.6
    %
    
    
    2.7
    %NEVADANortheastern Nevada Regional Hospital
    
    Elko
    
    
    52,243
    
    
    
    54,185
    
    
    
    56,078
    
    
    
    63,751
    
    
    
    2.6
    %
    
    
    3.7
    %
    
    
    3.5
    %
    
    
    2.6
    %NEW MEXICOLos Alamos Medical Center
    
    Los Alamos
    
    
    86,665
    
    
    
    88,391
    
    
    
    90,983
    
    
    
    107,506
    
    
    
    3.6
    %
    
    
    2.0
    %
    
    
    2.9
    %
    
    
    3.4
    %Memorial Medical Center
    
    Dona Ana
    
    
    32,284
    
    
    
    33,507
    
    
    
    34,664
    
    
    
    40,346
    
    
    
    2.7
    %
    
    
    3.8
    %
    
    
    3.5
    %
    
    
    3.1
    %PENNSYLVANIAAshland Regional Medical Center
    
    Schuylkill
    
    $
    36,689
    
    
    $
    37,474
    
    
    $
    38,739
    
    
    $
    45,466
    
    
    
    3.9
    %
    
    
    2.1
    %
    
    
    3.4
    %
    
    
    3.3
    %SOUTH CAROLINACoastal Carolina Medical Center
    
    Beaufort
    
    
    52,141
    
    
    
    54,607
    
    
    
    55,712
    
    
    
    66,918
    
    
    
    3.4
    %
    
    
    4.7
    %
    
    
    2.0
    %
    
    
    3.7
    %TENNESSEEAthens Regional Medical Center
    
    McMinn
    
    
    34,329
    
    
    
    35,282
    
    
    
    36,319
    
    
    
    40,921
    
    
    
    2.6
    %
    
    
    2.8
    %
    
    
    2.9
    %
    
    
    2.4
    %Crockett Hospital
    
    Lawrence
    
    
    32,237
    
    
    
    33,169
    
    
    
    33,895
    
    
    
    37,742
    
    
    
    1.9
    %
    
    
    2.9
    %
    
    
    2.2
    %
    
    
    2.2
    %Hillside Hospital
    
    Giles
    
    
    37,598
    
    
    
    38,689
    
    
    
    39,996
    
    
    
    44,657
    
    
    
    2.6
    %
    
    
    2.9
    %
    
    
    3.4
    %
    
    
    2.2
    %Livingston Regional Hospital
    
    Overton
    
    
    28,667
    
    
    
    29,629
    
    
    
    30,264
    
    
    
    33,226
    
    
    
    1.8
    %
    
    
    3.4
    %
    
    
    2.1
    %
    
    
    1.9
    %Smith County Memorial Hospital
    
    Smith
    
    
    37,752
    
    
    
    38,854
    
    
    
    40,179
    
    
    
    44,565
    
    
    
    2.0
    %
    
    
    2.9
    %
    
    
    3.4
    %
    
    
    2.1
    %Southern Tennessee Medical Center/
    
    Franklin
    
    
    38,758
    
    
    
    40,056
    
    
    
    41,262
    
    
    
    46,442
    
    
    
    2.5
    %
    
    
    3.3
    %
    
    
    3.0
    %
    
    
    2.4
    %Emerald-Hodgson HospitalTEXASEnnis Regional Medical Center
    
    Ellis
    
    
    54,389
    
    
    
    56,447
    
    
    
    58,516
    
    
    
    65,970
    
    
    
    2.6
    %
    
    
    3.8
    %
    
    
    3.7
    %
    
    
    2.4
    %Palestine Regional Medical Center
    
    Anderson
    
    
    34,449
    
    
    
    35,692
    
    
    
    36,930
    
    
    
    42,337
    
    
    
    2.9
    %
    
    
    3.6
    %
    
    
    3.5
    %
    
    
    2.8
    %Parkview Regional Hospital
    
    Limestone
    
    
    32,200
    
    
    
    33,484
    
    
    
    34,906
    
    
    
    40,689
    
    
    
    3.2
    %
    
    
    4.0
    %
    
    
    4.2
    %
    
    
    3.1
    %UTAHAshley Valley Medical Center
    
    Uintah
    
    
    38,050
    
    
    
    38,756
    
    
    
    39,436
    
    
    
    45,263
    
    
    
    3.2
    %
    
    
    1.9
    %
    
    
    1.8
    %
    
    
    2.8
    %Castleview Hospital
    
    Carbon
    
    
    37,830
    
    
    
    38,446
    
    
    
    39,084
    
    
    
    45,260
    
    
    
    3.4
    %
    
    
    1.6
    %
    
    
    1.7
    %
    
    
    3.0
    %VIRGINIADanville Regional Medical Center
    
    Danville city
    
    
    30,113
    
    
    
    31,337
    
    
    
    32,215
    
    
    
    38,580
    
    
    
    3.7
    %
    
    
    4.1
    %
    
    
    2.8
    %
    
    
    3.7
    %Memorial Hospital of Martinsville
    
    Martinsville city
    
    
    30,667
    
    
    
    31,855
    
    
    
    32,662
    
    
    
    38,806
    
    
    
    3.6
    %
    
    
    3.9
    %
    
    
    2.5
    %
    
    
    3.5
    %Wythe County Community Hospital
    
    Wythe
    
    
    35,705
    
    
    
    37,182
    
    
    
    38,577
    
    
    
    45,154
    
    
    
    3.4
    %
    
    
    4.1
    %
    
    
    3.8
    %
    
    
    3.2
    %WEST VIRGINIALogan Regional Medical Center/
    
    Logan
    
    
    26,684
    
    
    
    27,273
    
    
    
    28,164
    
    
    
    32,799
    
    
    
    2.9
    %
    
    
    2.2
    %
    
    
    3.3
    %
    
    
    3.1
    %Guyan Valley HospitalWYOMINGLander Valley Medical Center
    
    Fremont
    
    
    35,783
    
    
    
    36,949
    
    
    
    37,862
    
    
    
    44,364
    
    
    
    3.2
    %
    
    
    3.3
    %
    
    
    2.5
    %
    
    
    3.2
    %Riverton Memorial Hospital
    
    Fremont
    
    
    35,783
    
    
    
    36,949
    
    
    
    37,862
    
    
    
    44,364
    
    
    
    3.2
    %
    
    
    3.3
    %
    
    
    2.5
    %
    
    
    3.2
    %Average
for counties/parishes that LifePoint serves
    
    $
    36,732
    
    
    $
    37,908
    
    
    $
    38,939
    
    
    $
    45,020US Average
    
    $
    48,073
    
    
    $
    49,660
    
    
    $
    51,261
    
    
    $
    60,558
 
 (a)
    
    The 2003 historical growth rate represents the
compounded annual growth rate from 2000  2003.(b)
    
    The 2010 projected growth rate represents the
compounded annual growth rate from 2005  2010.(c)
    
    Median Household Income for Colorado River Medical Center is for the zip code of the hospital
rather than the county because the hospitals county includes part of the Los Angeles metropolitan
area.Copyright 2005 Health InfoTechnics, LLC 877/239-9549 October 19, 2005Demographic Source:ESRI Business Solutions 18




---



##### Table of Contents



Unemployment Rate
 Historical Unemployment RatesHospital
    
    County/Parish
    
    2002
    
    2003
    
    2004
    
    2005 (a)ALABAMAAndalusia Regional Hospital
    
    Covington
    
    5.68%
    
    7.58%
    
    7.36%
    
    4.51%Lakeland Community Hospital
    
    Winston
    
    9.73%
    
    10.94%
    
    7.90%
    
    5.16%Northwest Medical Center
    
    Marion
    
    8.85%
    
    6.80%
    
    5.98%
    
    4.51%Russellville Hospital
    
    Franklin
    
    12.10%
    
    9.83%
    
    6.60%
    
    5.36%Vaughan Regional Medical Center
    
    Dallas
    
    13.10%
    
    12.96%
    
    11.62%
    
    8.72%ARIZONAHavasu Regional Medical Center
    
    Mohave
    
    5.40%
    
    4.93%
    
    3.98%
    
    4.00%Valley View Medical Center
    
    Mohave
    
    5.40%
    
    4.93%
    
    3.98%
    
    4.00%CALIFORNAColorado River Medical Center
    
    San Bernardino
    
    5.70%
    
    5.89%
    
    5.45%
    
    5.16%COLORADOColorado Plains Medical Center
    
    Morgan
    
    3.56%
    
    4.06%
    
    3.75%
    
    4.55%FLORIDAPutnam Community Medical Center
    
    Putnam
    
    7.20%
    
    5.83%
    
    5.59%
    
    4.66%INDIANAMedical Center of Southern Indiana
    
    Clark
    
    4.70%
    
    4.28%
    
    4.34%
    
    5.19%Starke Memorial Hospital
    
    Starke
    
    8.80%
    
    8.58%
    
    7.96%
    
    7.02%KANSASWestern Plains Regional Hospital
    
    Ford
    
    2.41%
    
    2.89%
    
    3.11%
    
    3.73%KENTUCKYBluegrass Community Hospital
    
    Woodford
    
    3.26%
    
    3.02%
    
    2.66%
    
    3.96%Bourbon Community Hospital
    
    Bourbon
    
    5.44%
    
    5.72%
    
    4.24%
    
    5.22%Georgetown Community Hospital
    
    Scott
    
    4.45%
    
    5.28%
    
    4.02%
    
    4.54%Jackson Purchase Medical Center
    
    Graves
    
    6.87%
    
    7.69%
    
    7.91%
    
    9.15%Lake Cumberland Regional Hospital
    
    Pulaski
    
    7.30%
    
    6.65%
    
    4.61%
    
    5.60%Logan Memorial Hospital
    
    Logan
    
    7.83%
    
    6.97%
    
    5.78%
    
    6.08%Meadowview Regional Medical Center
    
    Mason
    
    4.94%
    
    6.35%
    
    6.20%
    
    5.90%Spring View Hospital
    
    Marion
    
    3.85%
    
    4.53%
    
    3.57%
    
    5.58%LOUISIANADoctors Hospital of Opelousas
    
    St. Landry
    
    7.17%
    
    7.54%
    
    6.49%
    
    7.49%Eunice Community Medical Center
    
    St. Landry
    
    7.17%
    
    7.54%
    
    6.49%
    
    6.15%Minden Medical Center
    
    Webster
    
    9.22%
    
    9.66%
    
    7.97%
    
    6.50%River Parishes Hospital
    
    St. John the Baptist
    
    7.66%
    
    7.46%
    
    7.05%
    
    6.23%Teche Regional Medical Center
    
    St. Mary
    
    8.53%
    
    8.03%
    
    9.85%
    
    9.13%Ville Platte Medical Center
    
    Evangeline
    
    6.75%
    
    7.85%
    
    6.05%
    
    7.49%MISSISSIPPIBolivar Medical Center
    
    Bolivar
    
    11.68%
    
    8.78%
    
    8.85%
    
    9.30%NEVADANortheastern Nevada Regional Hospital
    
    Elko
    
    5.38%
    
    5.46%
    
    4.37%
    
    3.97%NEW MEXICOLos Alamos Medical Center
    
    Los Alamos
    
    1.03%
    
    1.56%
    
    1.59%
    
    2.97%Memorial Medical Center
    
    Dona Ana
    
    6.78%
    
    6.93%
    
    6.88%
    
    6.30%PENNSYLVANIAAshland Regional Medical Center
    
    Schuylkill
    
    7.36%
    
    7.54%
    
    7.69%
    
    6.01%SOUTH CAROLINACoastal Carolina Medical Center
    
    Beaufort
    
    2.81%
    
    2.95%
    
    3.35%
    
    4.80%TENNESSEEAthens Regional Medical Center
    
    McMinn
    
    8.28%
    
    8.28%
    
    7.26%
    
    6.30%Crockett Hospital
    
    Lawrence
    
    10.12%
    
    10.61%
    
    10.08%
    
    10.04%Hillside Hospital
    
    Giles
    
    7.94%
    
    9.63%
    
    7.34%
    
    7.54%Livingston Regional Hospital
    
    Overton
    
    6.54%
    
    6.33%
    
    5.64%
    
    5.91%Smith County Memorial Hospital
    
    Smith
    
    4.44%
    
    7.23%
    
    7.39%
    
    6.18%Southern Tennessee Medical Center/
    
    Franklin
    
    4.59%
    
    4.73%
    
    4.88%
    
    5.53%Emerald-Hodgson HospitalTEXASEnnis Regional Medical Center
    
    Ellis
    
    6.06%
    
    6.82%
    
    6.16%
    
    5.23%Palestine Regional Medical Center
    
    Anderson
    
    5.37%
    
    5.55%
    
    4.78%
    
    6.36%Parkview Regional Hospital
    
    Limestone
    
    4.37%
    
    4.53%
    
    4.07%
    
    4.94%UTAHAshley Valley Medical Center
    
    Uintah
    
    6.31%
    
    6.16%
    
    5.79%
    
    4.53%Castleview Hospital
    
    Carbon
    
    6.50%
    
    7.88%
    
    6.96%
    
    6.51%VIRGINIADanville Regional Medical Center
    
    Danville city
    
    9.69%
    
    11.32%
    
    11.42%
    
    9.99%Memorial Hospital of Martinsville
    
    Martinsville city
    
    16.47%
    
    14.01%
    
    16.42%
    
    10.38%Wythe County Community Hospital
    
    Wythe
    
    6.94%
    
    5.82%
    
    5.27%
    
    4.26%WEST VIRGINIALogan Regional Medical Center/
Guyan Valley Hospital
    
    Logan
    
    7.92%
    
    8.00%
    
    5.46%
    
    5.26%WYOMINGLander Valley Medical Center
    
    Fremont
    
    6.10%
    
    6.49%
    
    5.80%
    
    4.87%Riverton Memorial Hospital
    
    Fremont
    
    6.10%
    
     6.49%
    
     5.80%
    
     4.87%Average for counties/parishes that LifePoint serves
    
     6.80%
    
    6.90%
    
    6.22%
    
    5.92%US Average
    
    5.80%
    
    6.00%
    
    5.50%
    
    4.90%
 
 
 19




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##### Table of Contents



Services and Utilization
  
    
    the size of and growth in local population;
    
    local economic conditions;
    
    loyalty of the local population to support the local hospital;
    
    physician availability, expertise and local reputation;
    
    physician utilization trends;
    
    the availability of reimbursement programs such as Medicare and Medicaid;
    
    the ability to negotiate contracts with managed care organizations that are appropriate
for non-urban markets;
    
    necessary medical equipment to perform clinical procedures; and
    
    improved treatment protocols as a result of advances in medical technology and pharmacology.
   20




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##### Table of Contents



Sources of Revenue
  2001
    
    2002
    
    2003
    
    2004
    
    2005Medicare
    
    
    35.7
    %
    
    
    35.4
    %
    
    
    35.9
    %
    
    
    36.9
    %
    
    
    36.6
    %Medicaid
    
    
    10.9
    
    
    
    11.6
    
    
    
    10.9
    
    
    
    11.2
    
    
    
    9.4HMOs, PPOs and other private insurers
    
    
    42.3
    
    
    
    43.0
    
    
    
    40.5
    
    
    
    38.7
    
    
    
    40.8Self-pay
    
    
    7.7
    
    
    
    8.1
    
    
    
    8.6
    
    
    
    9.3
    
    
    
    11.3Other
    
    
    3.4
    
    
    
    1.9
    
    
    
    4.1
    
    
    
    3.9
    
    
    
    1.9100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Medicare
   Inpatient Acute Care Diagnosis Related Group Payments.
 21




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##### Table of Contents



Medicare
    
    MedicareDRG Payments
    
    Capital Payments2001
    
    $
    125.0
    
    
    $
    11.72002
    
    
    139.4
    
    
    
    13.32003
    
    
    180.4
    
    
    
    16.22004
    
    
    196.8
    
    
    
    17.82005
    
    
    362.0
    
    
    
    33.6
  FFY
    
    % Increase2001
    
    
    3.402002
    
    
    2.752003
    
    
    2.952004
    
    
    3.402005
    
    
    3.302006
    
    
    3.70
   22




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##### Table of Contents



Standard Rate for Hospitals with a Wage Index Greater than the National Average  (69.7% Labor Share and 30.3% Nonlabor Share)
 Labor-related
    
    Nonlabor-relatedFull update (3.7%)
    
    $
    3,297.84
    
    
    $
    1,433.63Reduced update (3.3%)
    
    $
    3,285.12
    
    
    $
    1,428.10
 Standard Rate for Hospitals with a Wage Index Less than or Equal to the National Average  (62.0% Labor Share and 38.0% Percent Nonlabor Share)
 Labor-related
    
    Nonlabor-relatedFull update (3.7%)
    
    $
    2,933.52
    
    
    $
    1,797.95Reduced update (3.3%)
    
    $
    2,922.20
    
    
    $
    1,791.02
 Capital StandardFederal Payment Rate$420.65
 Outlier Payments.
  Medicare Outlier Payments2001
    
    $
    1.62002
    
    
    0.72003
    
    
    0.42004
    
    
    0.62005
    
    
    2.5
 Disproportionate Share Payments.
   Medicare DSH Payments2001
    
    $
    6.82002
    
    
    9.02003
    
    
    10.02004
    
    
    21.22005
    
    
    48.0
 Wage Index.
 23




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##### Table of Contents



Post-Acute Care Transfer Policy.
 Inpatient Rehabilitation and the 75% Rule
  Minimum Qualifying
    
    
    Co-morbiditiesCost Reporting Period Beginning
    
    Patient Mix
    
    
    Apply (Y/N) (1)
    
    
    
    Patient Mix AffectedJuly 1, 2004-June 30, 2005
    
 50%
    
   
     Y
    
    
    Medicare and TotalJuly 1, 2005-June 30, 2006
    
 60%
    
 
     Y
    
    
    Medicare and Total*July 1, 2006-June 30, 2007
    
 60%
    

     Y
    
    
    Medicare and TotalJuly 1, 2007-June 30, 2008
    
 65%
    

     Y
    
    
    Medicare and TotalJuly 1, 2008 and thereafter
    
 75%
    

    
    N
    
    
    Medicare and Total
 
 (1)
    
    Patients with certain co-morbidities (additional health conditions) may count towards
the minimum patient mix established by the revised 75% Rule during the phase-in period.*
    
    DRA, if enacted, will extend the 60% compliance period for
one year, then the phase-in period will resume.  24




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##### Table of Contents




    
    increases the market basket payments by 3.6% utilizing a new methodology;
    
    incorporates downward adjustments for reimbursement (resulting in an overall decrease of
approximately 1.9%) in response to coding changes;
    
    increases the payment rate adjustment for IRFs in rural areas to 21.3% from the current 19.1%;
    
    reduces the outlier payment threshold for cases with unusually high costs;
    
    implements refinements to the case-mix groups, co-morbidity tiers and relative weights;
    
    implements new and revised payment adjustments that will be implemented on a
budget-neutral basis;
    
    adopts the new geographic labor market area definitions based on the definitions created
by the OMB known as Core-Based Statistical Areas to be implemented over a one-year
transition period; and
    
    incorporates several other modifications to Medicare reimbursement for IRFs.
  IRFReimbursement2001
    
    $
    7.62002
    
    
    12.52003
    
    
    18.42004
    
    
    20.92005
    
    
    29.5
 Inpatient Psychiatric. th
  25




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Medicare InpatientPsychiatric Payments2001
    
    
    $   6.12002
    
    
    6.42003
    
    
    7.02004
    
    
    7.82005
    
    
    15.3
 Skilled Nursing Facilities and Swing Beds.
  26




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##### Table of Contents



Medicare InpatientSNF Payments2001
    
    
    $
    7.42002
    
    
    
    6.32003
    
    
    
    4.82004
    
    
    
    4.02005
    
    
    
    6.3
   Medicare InpatientSwing-Bed Payments2001
    
    
    $
    2.42002
    
    
    
    4.22003
    
    
    
    4.02004
    
    
    
    5.72005
    
    
    
    6.2
 Critical Access Hospitals.
  Medicare Critical-AccessHospital Payments2001
    
    
    $
    1.92002
    
    
    
    2.22003
    
    
    
    4.02004
    
    
    
    5.42005
    
    
    
    5.3
 Graduate Medical Education:
 27




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##### Table of Contents



Indirect Medical Education.
 Outpatient Payments.
   Medicare
    
    Medicare Hold Harmless PaymentsOutpatient Payments
    
    (Included in Medicare Outpatient Payments)2001
    
    $
    34.9
    
    
    
    $   0.22002
    
    
    46.3
    
    
    
    0.52003
    
    
    57.6
    
    
    
    0.62004
    
    
    72.2
    
    
    
    0.22005
    
    
    143.2
    
    
    
    
 Home
Health Payments.
 28




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##### Table of Contents



Medicare Home Health Payments2001
    
    $
    0.32002
    
    
    0.22003
    
    
    1.92004
    
    
    1.22005
    
    
    8.2
 Sole Community Hospitals and Medicare Dependent Hospitals.
  Rural Health Clinics.
 Hospice
Payments.
 Medicare Bad Debt Reimbursement.
  
    
    The debt must be related to covered services and derived from deductible and coinsurance amounts;
    
    The provider must be able to establish that reasonable collection efforts were made;
    
    The debt was actually uncollectible when claimed as worthless; and
    
    Sound business judgment established that there was no likelihood of recovery at any time
in the future.
 29




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##### Table of Contents



Medicare Bad Debt Payments2001
    
    $
    2.72002
    
    
    4.32003
    
    
    5.52004
    
    
    7.12005
    
    
    13.6
 Medicaid
   30




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##### Table of Contents



Revenues (in millions)
    
    
    
    Cost ReportingState
    
    2001
    
    2002
    
    2003
    
    2004
    
    2005
    
    Reimbursement Methodologies
    
    RequirementsAlabama
    
    $
    1.0
    
    
    $
    1.7
    
    
    $
    5.8
    
    
    $
    6.6
    
    
    $
    15.8
    
    
    IP: Cost-related rates, not retrospective
    
    Informational onlyOP: Fee scheduleArizona
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.9
    
    
    IP: Per diem rates, not retrospective
    
    NoneOP: Fee scheduleCalifornia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    IP: Cost-based
    
    Inpatient cost settledOP: Fee scheduleColorado
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    IP: DRG-based
    
    Informational onlyOP: Fee scheduleFlorida
    
    
    5.0
    
    
    
    3.4
    
    
    
    3.0
    
    
    
    4.5
    
    
    
    5.2
    
    
    IP: Per diem
    
    Rate setting, cost settledOP: Per visit/per line itemIndiana
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    IP: DRG-based
    
    Informational onlyOP: Fee scheduleKansas
    
    
    1.9
    
    
    
    1.6
    
    
    
    2.1
    
    
    
    1.8
    
    
    
    3.3
    
    
    IP: DRG-based
    
    Informational onlyOP: Fee scheduleKentucky
    
    
    26.7
    
    
    
    36.0
    
    
    
    32.4
    
    
    
    40.5
    
    
    
    43.2
    
    
    IP: DRG-based
    
    Outpatient cost settledOP: Cost-based, flat rate, fee scheduleLouisiana
    
    
    0.4
    
    
    
    3.7
    
    
    
    3.6
    
    
    
    4.3
    
    
    
    16.9
    
    
    IP: Cost per discharge
    
    Outpatient cost settledOP: Primarily 83% of allowable cost and fee scheduleMississippi
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.0
    
    
    IP: Cost-based
    
    IP and OP cost settledOP: Cost-basedNevada
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3
    
    
    IP: Per diem rates, not retrospective
    
    NoneOP: Fee scheduleNew Mexico
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.8
    
    
    IP: DRG-based with cost-based capital
    
    IP capital and OP cost settledOP: Cost-based and fee scheduleSouth Carolina
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9
    
    
    IP: Cost-based
    
    IP capital and OP cost settledOP: Cost-basedTennessee
    
    
    18.0
    
    
    
    23.1
    
    
    
    24.6
    
    
    
    26.5
    
    
    
    25.5
    
    
    IP: DRG-based
    
    NoneOP: Fee scheduleTexas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.9
    
    
    IP: DRG-based
    
    OP cost settledOP: Cost-based and fee scheduleUtah
    
    
    7.6
    
    
    
    7.9
    
    
    
    8.4
    
    
    
    8.7
    
    
    
    8.1
    
    
    IP: Negotiated percentage of charges
    
    NoneOP: Primarily 93% of charges and fee scheduleVirginia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.3
    
    
    IP: DRG-based with cost-based capital
    
    IP capital and OP cost settledOP: Cost-basedWest Virginia
    
    
    
    
    
    
    0.6
    
    
    
    9.3
    
    
    
    9.4
    
    
    
    7.1
    
    
    IP: DRG-based
    
    Informational onlyOP: Fee scheduleWyoming
    
    
    4.2
    
    
    
    4.8
    
    
    
    5.2
    
    
    
    5.5
    
    
    
    6.8
    
    
    IP: Prospective, based on per discharge
    
    NoneOP: Fee schedule$
    64.8
    
    
    $
    82.8
    
    
    $
    94.4
    
    
    $
    107.8
    
    
    $
    173.3
 
 IP  InpatientOP  Outpatient  Medicaid Disproportionate Share PaymentsState
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005Alabama
    
    $
    0.3
    
    
    $
    0.3
    
    
    $
    0.6
    
    
    $
    1.7
    
    
    $
    3.7Kansas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9Kentucky
    
    
    4.4
    
    
    
    5.9
    
    
    
    3.4
    
    
    
    4.9
    
    
    
    4.9Louisiana
    
    
    
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    
    
    
    
    0.4Mississippi
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3New Mexico
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Tennessee
    
    
    1.3
    
    
    
    0.2
    
    
    
    0.9
    
    
    
    1.7
    
    
    
    1.3Texas
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9West Virginia
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    0.8
    
    
    
    0.8Wyoming
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    $
    6.0
    
    
    $
    6.5
    
    
    $
    5.8
    
    
    $
    9.1
    
    
    $
    15.4
 Annual Cost Reports
  31




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HMOs, PPOs and Other Private Insurers
   Self-Pay
    Self-Pay
    
    Charity/Indigent Care
    
    CombinedRevenues
    
    Write-offs
    
    Total2001
    
    $
    45.5
    
    
    $
    3.1
    
    
    $
    48.62002
    
    
    57.6
    
    
    
    3.5
    
    
    
    61.12003
    
    
    75.7
    
    
    
    5.2
    
    
    
    80.92004
    
    
    92.9
    
    
    
    7.8
    
    
    
    100.72005
    
    
    210.0
    
    
    
    24.0
    
    
    
    234.0
 Indigent Care Programs
  
    
    Expanded Care Program, which is funded by both the City of Las Cruces and Dona Ana
County; and
    
    Sole Community Program, which is funded by both Dona Ana County and the federal
government.
  32




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##### Table of Contents



Competition
 Existing Hospitals
     Hospital Acquisitions
  Employees and Medical Staff
  33




---



##### Table of Contents



Government Regulation
 Overview.
  Utilization Review
 Fraud and Abuse Laws.
 
    
    making claims to Medicare and/or Medicaid for services not provided or misrepresenting
actual services provided in order to obtain higher payments;
    
    paying money to induce the referral of patients or purchase of items or services where
such items or services are reimbursable under a federal or state health program; or
 34




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##### Table of Contents




    
    failing to provide appropriate emergency medical screening services to any individual
who comes to a hospitals campus or otherwise failing to properly treat and transfer
emergency patients.
    
    
    payment of any incentive by a hospital each time a physician refers a patient to the hospital;
    
    use of free or significantly discounted office space or equipment;
    
    provision of free or significantly discounted billing, nursing or other staff services;
    
    free training (other than compliance training) for a physicians office staff,
including management and laboratory technique training;
    
    guarantees which provide that if a physicians income fails to reach a predetermined
level, the hospital will pay any portion of the remainder;
    
    low-interest or interest-free loans, or loans which may be forgiven if a physician
refers patients to the hospital;
    
    payment of the costs for a physicians travel and expenses for conferences;
    
    payment of services which require few, if any, substantive duties by the physician or
which are in excess of the fair market value of the services rendered; or
    
    purchasing goods or services from physicians at prices in excess of their fair market
value.
  35




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##### Table of Contents



Corporate Practice of Medicine and Fee-Splitting.
 Emergency Medical Treatment and Active Labor Act.
  36




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##### Table of Contents



Federal False Claims Act.
  Healthcare Reform.
  Conversion Legislation.
 Certificates of Need.
 37




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HIPAA Transaction, Privacy and Security Requirements.
      38




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Patient Safety and Quality Improvement Act of 2005.
 California Seismic Standards
  
    
    certain hospitals in California must conduct seismic evaluation and submit
these evaluations to the Office of Statewide Health Planning and Development, Facilities
Development Division for its review and approval;
    
    hospitals in California must identify the most critical nonstructural systems
that represent the greatest risk of failure during an earthquake and submit timetables for
upgrading these systems to the Office of Statewide Health Planning and Development,
Facilities Development Division for its review and approval; and
    
    regulated hospitals in California must prepare a plan and compliance schedule
for each regulated building demonstrating the steps a hospital will take to bring the
hospital buildings into substantial compliance with the regulations and standards.
  State Hospital Rate-Setting Activity.
 Medical Malpractice Tort Law Reform.
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Environmental Regulation.
 Regulatory Compliance Program
    
    
    continuing the duties and activities of our audit and compliance committee, corporate
compliance officer, internal audit and compliance department, local hospital ethics and
compliance officers, corporate compliance committee and hospital compliance committees;
    
    maintaining our written code of conduct, which sets out our commitment to full
compliance with all statutes, regulations and guidelines applicable to federal healthcare
programs;
    
    maintaining our written policies and procedures addressing the operation of our compliance program;
    
    providing general training on the compliance program;
    
    providing specific training for the appropriate personnel on billing, coding and cost report issues;
    
    performing internal coding reviews of our facilities and having an independent third
party conduct periodic audits of those reviews;
    
    continuing our confidential disclosure program and compliance hotline to enable
employees or others to disclose issues or questions regarding possible inappropriate
policies or behavior;
    
    enhancing our screening program to ensure that we do not hire or engage employees or
contractors who have been sanctioned or excluded from participation in federal healthcare
programs;
 40




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
    
    reporting and making the appropriate refund for any material deficiency which resulted
in an overpayment to us by a federal healthcare program;
    
    reporting any healthcare related fraud involving any federally funded program; and
    
    submitting annual reports to the OIG which describe in detail the operations of our
corporate compliance program for the past year.
  Risk Management and Insurance
     
 Item 1A. Factors That May Affect Future Results
  
    
    projections of our revenues, net income, earnings per share, capital
expenditures, cash flows, debt repayments, interest rates, certain operating statistics and
data or other financial items;
    
    descriptions of plans or objectives of our management for future operations or
services, including pending acquisitions and divestitures;
    
    interpretations of Medicare and Medicaid law; and
    
    descriptions of assumptions underlying or relating to any of the foregoing.
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
    
    integration of our recent acquisitions;
    
    future financial performance;
    
    future liquidity and capital resources;
    
    future cash flows;
    
    future debt and equity structure;
    
    our strategic goals;
    
    competition with other hospitals;
    
    our compliance with federal, state and local regulations;
    
    our payment of dividends;
    
    future acquisitions;
    
    de novo facilities;
    
    industry trends;
    
    the efforts of insurers and other payors, healthcare providers and others to contain healthcare costs;
    
    reimbursement changes;
    
    patient volumes and related revenues;
    
    recruiting and retention of clinical personnel;
    
    future capital expenditures;
    
    our contractual obligations;
    
    the impact of changes in our critical accounting estimates;
    
    claims and legal actions relating to professional liabilities and other matters;
    
    the impact of new accounting standards; and
    
    physician recruiting and retention.
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Managements Discussion and
Analysis of Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures about Market Risk
 Risk Factors
 We have substantial indebtedness and we may incur significant amounts of additional
indebtedness in the future which could affect our ability to finance operations, pursue desirable
business opportunities or successfully run our business in the future.
   
    
    Under our credit facility, we will be required to satisfy and maintain specified
financial ratios and tests. Failure to comply with these obligations may cause an event
of default which, if not cured or waived, could require us to repay substantial
indebtedness immediately. Moreover, if debt repayment is accelerated, we will be
subject to higher interest rates on our debt obligations as a result of these
covenants, and our credit ratings may be adversely impacted.
    
    We may be vulnerable in the event of downturns and adverse changes in our
hospitals businesses, in our industry, or in the economy generally, such as the
implementation by the government of further limitations on reimbursement under Medicare
and Medicaid, because of our need for increased cash flow.
    
    We may have difficulty obtaining additional financing at favorable interest rates
to meet our requirements for working capital, capital expenditures, acquisitions,
general corporate or other purposes.
    
    We will be required to dedicate a substantial portion of our cash flow to the
payment of principal and interest on indebtedness, which will reduce the amount of
funds available for operations, capital expenditures and future acquisitions.
    
    Any borrowings we complete at variable interest rates expose us to increases in
interest rates generally.
    
    A breach of any of the restrictions or covenants in our debt agreements could cause
a cross-default under other debt agreements. We may be required to pay our indebtedness
immediately if we default on any of the numerous financial or other restrictive
covenants contained in the debt agreements. It is not certain whether we will have, or
will be able to obtain, sufficient funds to make these accelerated
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##### Table of Contents



payments. If any
senior debt is accelerated, our assets may not be sufficient to repay such indebtedness
and our other indebtedness.
 
    
    In the event of a default, we may be forced to pursue one or more alternative
strategies, such as restructuring or refinancing our indebtedness, selling assets,
reducing or delaying capital expenditures or seeking additional equity capital. There
can be no assurances that any of these strategies could be effected on satisfactory
terms, if at all, or that sufficient funds could be obtained to make these accelerated
payments.
 A substantial portion of our indebtedness consists of floating rate debt, which exposes us to
interest rate risk.
   We may be unable to integrate successfully the operations and businesses of LifePoint and
Province and realize the full cost savings and benefits anticipated from the Province business
combination.
  
    
    complexities associated with managing and coordinating the geographically
disparate combined businesses, which had 52 hospitals in 20 states as of January 1, 2006
(including two hospitals that are part of discontinued operations not yet divested);
    
    integrating personnel and processes from the two companies while maintaining
focus on providing consistent, high quality patient care;
    
    our inability to achieve the cost savings and efficiencies anticipated in the
Province business combination, including increased purchasing efficiencies and cost
reductions expected to result from the Province business combination;
    
    delays in replacing Provinces information systems with our information systems; and
    
    potential unknown liabilities and increased costs associated with the Province business combination.
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We have incurred significant expenses in connection with the Province business combination and
related financing transactions.
  If
our fair value declines, a material non-cash charge to earnings from
impairment of our goodwill could result.
  We may have difficulty acquiring hospitals on favorable terms and, because of regulatory
scrutiny, acquiring not-for-profit entities.
    We may encounter numerous business risks in acquiring additional hospitals and may have
difficulty operating and integrating those hospitals. As a result, we may be unable to achieve our
growth strategy.
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It is difficult to predict financial performance of our de novo hospitals, and these
facilities will take time to perform at the level of our other hospitals.
  We depend significantly on key personnel and the loss of one or more of our senior management
personnel or key local management personnel could limit our ability to execute our business
strategy.
  If we do not effectively recruit and retain physicians, nurses, medical technicians and other
healthcare professionals, our ability to deliver healthcare services efficiently will be adversely
affected.
    Our revenues may decline if federal or state programs reduce our Medicare or Medicaid payments
or if managed care companies reduce reimbursement amounts. In addition, the financial condition of
purchasers of healthcare services and healthcare cost containment initiatives may limit our
revenues and profitability.
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We may continue to see the growth of uninsured and patient due accounts and deterioration in
the collectibility of these accounts could adversely affect our results of operations and cash
flows.
   Our revenues are especially concentrated in a small number of states which will make us
particularly sensitive to regulatory and economic changes in those states.
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Revenue Concentration by StateAmount
    
    
    % of Total Revenues2004
    
    
    2005
    
    
    2004
    
    
    2005Kentucky
    
    $
    350.5
    
    
    $
    387.0
    
    
    
    35.2
    %
    
    
    20.9
    %Tennessee
    
    
    193.9
    
    
    
    205.3
    
    
    
    19.5
    
    
    
    11.1Virginia
    
    
    
    
    
    
    189.5
    
    
    
    
    
    
    
    10.2Louisiana
    
    
    45.3
    
    
    
    171.1
    
    
    
    4.5
    
    
    
    9.2Alabama
    
    
    109.3
    
    
    
    162.5
    
    
    
    11.0
    
    
    
    8.8New Mexico
    
    
    
    
    
    
    136.7
    
    
    
    
    
    
    
    7.4Texas
    
    
    
    
    
    
    95.8
    
    
    
    
    
    
    
    5.2West Virginia
    
    
    79.8
    
    
    
    78.3
    
    
    
    8.0
    
    
    
    4.2$
    778.8
    
    
    $
    1,426.2
    
    
    
    78.2
    %
    
    
    77.0
    %
   Other hospitals and outpatient facilities provide services similar to those which we offer.
In addition, physicians provide services in their offices that could be provided in our hospitals.
These factors may increase the level of competition we face and may therefore adversely affect our
revenues, profitability and market share.
   If we do not continually enhance our hospitals with the most recent technological advances in
diagnostic and surgical equipment, our ability to maintain and expand our markets will be adversely
affected.
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We continue to see rising costs in construction materials and labor. Such increased costs
could have an adverse affect on the cash flow return on investment relating to our capital
projects.
  We are subject to governmental regulation, and may be subjected to allegations that we have
failed to comply with governmental regulations which could result in sanctions that reduce our
revenues and profitability.
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We may be subjected to actions brought by the government under anti-fraud and abuse provisions
or by individuals on the governments behalf under the False Claims Acts qui tam or
whistleblower provisions.
  
    
    criminal penalties;
    
    civil monetary penalties; and/or
    
    exclusion from participation in Medicare, Medicaid or other federal healthcare
programs, any of which could impair our ability to operate one or more of our hospitals
profitably.
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We may be subject to liabilities because of malpractice and related legal claims brought
against our hospitals. If we become subject to these claims, we could be required to pay
significant damages, which may not be covered by insurance.
  We may be required to make significant capital expenditures in order to bring our facilities
into compliance with the Americans with Disabilities Act.
   Certificate of need laws and regulations regarding licenses, ownership and operation may
impair our future expansion in some states.
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In states without certificate of need laws, competing providers of healthcare services are
able to expand and construct facilities without the need for significant regulatory approval.
  We are subject to significant corporate regulation as a public company and failure to comply
with all applicable regulations could subject us to liability or negatively affect our stock price.
  We will be required to comply with California seismic standards, which may require significant
capital expenditures with respect to our California hospital.
  If our access to HCA-Information Technology and Services, Inc.s information systems is
restricted or we are not able to integrate changes to our existing information systems or
information systems of acquired hospitals, our operations could suffer.
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If we fail to comply with the terms of our corporate integrity agreement, we could be
required to pay significant monetary penalties.
   
    
    continuing the duties and activities of our audit and compliance committee,
corporate compliance officer, internal audit and compliance department, local hospital
ethics and compliance officers, corporate compliance committee and hospital compliance
committees;
    
    maintaining our written code of conduct, which sets out our commitment to
full compliance with all statutes, regulations and guidelines applicable to federal
healthcare programs;
    
    maintaining our written policies and procedures addressing the operation of
our compliance program;
    
    providing general training on the compliance program;
    
    providing specific training for the appropriate personnel on billing, coding and cost report issues;
    
    having an independent third party conduct periodic analyses of our internal
audits of our facilities diagnosis related group billing and coding;
    
    continuing our confidential disclosure program and compliance hotline to
enable employees or others to disclose issues or questions regarding possible
inappropriate policies or behavior;
    
    enhancing our screening program to ensure that we do not hire or engage
employees or contractors who have been sanctioned or excluded from participation in
federal healthcare programs;
    
    reporting any material deficiency which resulted in an overpayment to us by a
federal healthcare program;
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
    
    reporting any healthcare-related fraud involving any federally funded
program; and
    
    submitting annual reports to the OIG which describe in detail the operations
of our corporate compliance program for the past year.
  Our revenues and volume trends may be adversely affected by certain factors relevant to the
markets in which we have hospitals, including weather conditions.
  Different
interpretations of accounting principles could have a material
adverse effect on our results of operations or financial condition.
  We have never paid, and have no current plans to pay, any cash dividends on shares of our
common stock.
  Our stock price has been and may continue to be volatile.
  
    
    integration of the Province hospitals and other hospitals that we acquire;
    
    quarterly variations in operating results;
    
    changes in financial estimates and recommendations by securities analysts;
    
    changes in government regulations as they relate to reimbursement and
operational policies and procedures;
    
    the operating and stock price performance of other companies that investors may deem comparable;
 54




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##### Table of Contents




    
    changes in overall economic factors in our markets; and
    
    news reports relating to trends or events in our markets.
  
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
 Business, 
 
 Item 3. Legal Proceedings.
 General.
 Americans with Disabilities Act Claims.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  55




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##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
  High
    
    
    Low2004First Quarter
    
    $
    37.32
    
    
    $
    29.41Second Quarter
    
    
    39.16
    
    
    
    32.23Third Quarter
    
    
    38.60
    
    
    
    26.60Fourth Quarter
    
    
    37.74
    
    
    
    28.502005First Quarter
    
    $
    45.53
    
    
    $
    33.24Second Quarter
    
    
    51.10
    
    
    
    41.67Third Quarter
    
    
    51.51
    
    
    
    40.78Fourth Quarter
    
    
    44.47
    
    
    
    36.292006First Quarter (through February 3, 2006)
    
    $
    36.87
    
    
    $
    28.57
   Managements Discussion and Analysis of Financial Condition and Results of
Operations,  
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Item 6. Selected Financial Data.
 Business, Managements Discussion and Analysis of Financial Condition and
Results of Operations
 Years Ended December 31,2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005(In millions, except per common share amounts)Statement of Operations Data:Revenues
    
    $
    591.3
    
    
    $
    714.9
    
    
    $
    875.6
    
    
    $
    996.9
    
    
    $
    1,855.1Income from continuing operations
    
    
    33.6
    
    
    
    42.9
    
    
    
    70.2
    
    
    
    86.8
    
    
    
    79.8Income from continuing operations per common share:Basic
    
    $
    0.94
    
    
    $
    1.14
    
    
    $
    1.89
    
    
    $
    2.34
    
    
    $
    1.59Diluted
    
    $
    0.91
    
    
    $
    1.10
    
    
    $
    1.80
    
    
    $
    2.20
    
    
    $
    1.56Weighted average shares outstanding:Basic
    
    
    35.7
    
    
    
    37.5
    
    
    
    37.2
    
    
    
    37.0
    
    
    
    50.1Diluted
    
    
    37.1
    
    
    
    38.6
    
    
    
    43.3
    
    
    
    42.8
    
    
    
    53.2Cash dividends declared per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance Sheet Data (as of End of Year):Working capital, excluding assets and liabilities held for sale
    
    $
    82.4
    
    
    $
    67.5
    
    
    $
    102.1
    
    
    $
    115.9
    
    
    $
    181.9Property and equipment, net
    
    
    307.8
    
    
    
    409.6
    
    
    
    443.9
    
    
    
    501.1
    
    
    
    1,302.3Total assets (including assets held for sale)
    
    
    554.3
    
    
    
    733.5
    
    
    
    799.0
    
    
    
    890.4
    
    
    
    3,224.6Long-term debt, including amounts due within one year
    
    
    150.0
    
    
    
    250.0
    
    
    
    270.0
    
    
    
    221.0
    
    
    
    1,516.3Stockholders equity
    
    
    295.0
    
    
    
    357.6
    
    
    
    394.3
    
    
    
    509.5
    
    
    
    1,287.8
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Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
  Overview
   2003
    
    
    2004
    
    
    2005Revenues
    
    $
    875.6
    
    
    $
    996.9
    
    
    $
    1,855.1Income from continuing operations
    
    $
    70.2
    
    
    $
    86.8
    
    
    $
    79.8Diluted earnings per share from continuing operations
    
    $
    1.80
    
    
    $
    2.20
    
    
    $
    1.56
 Hospital Acquisitions
 Business
 Business Combination with Province Healthcare Company
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Discontinued
Operations
   2003
    
    
    2004
    
    
    2005Revenues
    
    $
    31.5
    
    
    $
    32.8
    
    
    $
    48.1Loss from discontinued operations
    
    $
    (1.7
    )
    
    $
    (1.1
    )
    
    $
    (0.4
    )Impairment of assets
    
    
    
    
    
    
    
    
    
    
    (5.8
    )Loss on sale of hospital
    
    
    
    
    
    
    
    
    
    
    (0.7
    )$
    (1.7
    )
    
    $
    (1.1
    )
    
    $
    (6.9
    )Diluted loss per share from discontinued
operations
    
    $
    (0.04
    )
    
    $
    (0.03
    )
    
    $
    (0.13
    )
 Key Challenges
 
    
    Integration of Recently Acquired Hospitals. We acquired
21 hospitals from Province and two other hospitals in separate
transactions during 2005. In addition, we have a pending
acquisition of five hospitals from HCA that we expect to close in
early 2006. The process of integrating operations could cause
an interruption of, or loss of momentum in, the activities of
our business. However, we are dedicated to devoting
significant management attention and resources to integrating
the business practices and operations of our recently acquired
hospitals.
    
    Medicare Changes.We are experiencing changes with
respect to governmental reimbursement that are affecting our
growth. Effective October 1, 2005, CMS expanded the post-acute
transfer policy from 30 DRGs to 182 DRGs, resulting in a $1.0
million and an estimated $3.3 million reduction in Medicare
inpatient PPS payments for the fourth quarter of 2005 and for
the year ended December 31, 2006, respectively. On
February 1, 2006, the House of Representatives approved the DRA.
This bill, previously passed by the Senate and expected to be signed
by the President, includes measures related to specialty hospitals,
quality reporting and pay-for-performance, the inpatient 75% Rule and
Medicaid cuts. Please refer
to Part I, Item 1. Business,Sources of Revenuefor a
detailed discussion of provisions that affect our Medicare
reimbursement, including the DRA.
    
    States Implementing Medicaid Cost Containment Measures.
A number of states have incurred budget deficits within recent
years. To address these budget deficits, certain states have
reduced spending and increased taxes. State cost containment
activity continues to focus on reducing provider payments and
limiting eligible enrollees under the state Medicaid programs.
The following is a summary of four states where we believe
there will be a negative impact on our revenues in 2006:
 Tennessee:
    
    We currently estimate that the reduction in the
TennCare Medicaid program will negatively impact us by
approximately between $6.0 million and $8.0 million during
2006.
 Alabama:
    
    The state of Alabama has implemented rate changes
and eliminated DSH payments. We currently estimate that these
changes will negatively impact us by approximately $6.4
million during 2006.
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Louisiana:
    
    The state of Louisiana has recently
implemented Medicaid reductions of approximately 12% to 17% from our
current reimbursement levels. We currently estimate that this will
negatively impact us by approximately $2.8 million
during 2006. DRA, if enacted, provides approximately $2.0 billion in
Hurricane Katrina-related Medicaid relief, which may mitigate or
eliminate the previously announced reductions.Kentucky:
    
    The Kentucky Medicaid program has implemented increased co-payments and discontinued
covering non-emergency department visits. We currently estimate that this will negatively
impact us by approximately $1.6 million during 2006.
 The changes in the various Medicaid programs and the reduction of enrollees in these programs
are resulting in higher self-pay revenues at our hospitals, which will cause increases in our
provision for doubtful accounts in the future.
    
    Increases in Provision for Doubtful Accounts. We experienced an increase in our
provision for doubtful accounts during recent years. These increases were the result of an
increased number of uninsured patients and an increase in co-payments and deductibles from
healthcare plan design changes. These changes increase collection costs and reduce overall
cash collections. Our provision for doubtful accounts was as follows for the periods presented
(in millions):
 Provision for Doubtful Accounts2003
    
    
    2004
    
    
    2005First Quarter
    
    $
    15.8
    
    
    $
    20.7
    
    
    $
    23.0Second Quarter
    
    
    15.1
    
    
    
    18.9
    
    
    
    41.3Third Quarter
    
    
    22.4
    
    
    
    24.4
    
    
    
    63.9Fourth Quarter
    
    
    20.8
    
    
    
    22.2
    
    
    
    62.1$
    74.1
    
    
    $
    86.2
    
    
    $
    190.3
 The provision for doubtful accounts relates primarily to self-pay revenues. The following table
reflects our quarterly self-pay revenues for the periods presented (in millions):
 Self-Pay Revenues2003
    
    
    2004
    
    
    2005First Quarter
    
    $
    17.6
    
    
    $
    21.0
    
    
    $
    24.2Second Quarter
    
    
    16.6
    
    
    
    21.4
    
    
    
    47.6Third Quarter
    
    
    21.4
    
    
    
    26.8
    
    
    
    71.5Fourth Quarter
    
    
    20.1
    
    
    
    23.7
    
    
    
    66.7$
    75.7
    
    
    $
    92.9
    
    
    $
    210.0
 Our revenues are reduced when we write-off patient accounts identified as charity and indigent
care. Our hospitals write off a portion of a patients account upon the determination that the
patient qualifies under a hospitals charity/indigent care policy. The following table reflects
our charity and indigent care write offs for the periods presented (in millions):
 Charity and Indigent Care Write-Offs2003
    
    
    2004
    
    
    2005First Quarter
    
    $
    1.0
    
    
    $
    1.9
    
    
    $
    1.8Second Quarter
    
    
    1.4
    
    
    
    2.4
    
    
    
    5.6Third Quarter
    
    
    1.0
    
    
    
    1.7
    
    
    
    7.6Fourth Quarter
    
    
    1.8
    
    
    
    1.8
    
    
    
    9.0$
    5.2
    
    
    $
    7.8
    
    
    $
    24.0
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The following table shows our revenue days outstanding reflected in our consolidated net
accounts receivable as of the dates indicated:
 Revenue Days Outstanding inAccounts Receivable2003
    
    2004
    
    2005March 31
    
    
    39.8
    
    
    
    39.1
    
    
    
    37.2June 30
    
    
    38.7
    
    
    
    38.8
    
    
    
    37.6September 30
    
    
    37.7
    
    
    
    40.6
    
    
    
    42.0December 31
    
    
    39.3
    
    
    
    38.8
    
    
    
    42.3
 The approximate percentages of billed hospital receivables (which is a component of total
accounts receivable) are summarized as follows:
 December 31, 2003
    
    
    December 31, 2004
    
    
    December 31, 2005Insured receivables
    
    
    41.1
    %
    
    
    40.9
    %
    
    
    40.6
    %Uninsured receivables (including
copayments and deductibles
    
    
    58.9
    
    
    
    59.1
    
    
    
    59.4100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 The approximate percentages of billed hospital receivables in summarized aging categories are as
follows:
 December 31, 2003
    
    
    December 31, 2004
    
    
    December 31, 20050 to 60 days
    
    
    47.5
    %
    
    
    52.5
    %
    
    
    51.4
    %61 to 150 days
    
    
    23.6
    
    
    
    20.8
    
    
    
    20.9Over 150 days
    
    
    28.9
    
    
    
    26.7
    
    
    
    27.7100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 We continue to implement a number of operating strategies as they relate to cash collections.
However, if the trend of increasing self-pay revenues continues, then this trend could have a
material adverse effect on our results of operations and financial position in the future.
    
    Substantial Indebtedness.We have substantial
indebtedness. Our consolidated debt was $1,516.3 million as of
December 31, 2005, and we incurred $60.3 million of interest
expense in 2005. We estimate we will incur a higher amount of
interest expense in 2006 because of higher interest rates and
additional debt incurred from the pending acquisition of five
HCA hospitals. Our substantial indebtedness increases our
cost of capital, decreases our net income and reduces the
amount of funds available for operations, capital expenditures
and future acquisitions. We are in compliance with our
financial debt covenants as of December 31, 2005 and believe
we will be in compliance with these throughout 2006. It is
not our intent to maintain large cash balances, and we will
focus on reducing our indebtedness during 2006.
    
    Physician Recruitment and Retention. Recruiting and
retaining both primary care physicians and specialists for our
non-urban communities is a key to increasing revenues and
patient volumes. Our management believes that continuing to
add specialists should help our hospitals increase volumes by
offering new services. We plan to spend $35.2 million to
recruit approximately 183 new admitting physicians during
2006.
    
    Increasing Purchase Prices for Acquisitions. As
previously discussed, we attempt to make acquisitions in a
highly competitive environment. Compared to historic trends,
we have seen an increase in prices being paid for hospital
acquisitions in recent years, including prices paid by us. In
some cases, the cost of an acquisition could result in a
dilutive effect on our results of operations depending on
various factors, including the acquired hospitals results of
operations, allocations of tangible and intangible assets,
effects of subsequent legislation changes and limitations on
rate increases.
    
    Start-up Costs at Our Two De Novo Hospitals.Each of our
two newly-constructed hospitals, Valley View Medical Center in
Fort Mohave, Arizona and Coastal Carolina Medical Center in
Hardeeville, South Carolina have incurred significant start-up
costs and will attempt to build market share over time.
In addition, as of February 6, 2006, we still have not
received Medicare certification at Valley View Medical Center.
We cannot bill Medicare and Medicaid for services provided
until we receive the Medicare certification. As a
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result, these de novo facilities have adversely affected our earnings and profitability in 2005
and are expected to continue in 2006.
    
    Shortage of Clinical Personnel and Increased Contract
Labor Usage.In recent years, many hospitals, including the
hospitals we own, have encountered difficulty in recruiting
and retaining nursing and other clinical personnel. When we
are unable to staff our nursing and clinical positions, we are
required to use contract labor to ensure adequate patient
care. Contract labor generally costs more per hour than
employed labor. We have adopted a number of human resources
strategies in an attempt to improve our ability to recruit and
retain nursing and other clinical personnel. However, we
expect that the staffing issues related to nurses and other
clinical personnel will continue in the future.
    
    Increases in Supply Costs.During the past few years, we
have experienced an increase in supply costs as a percentage
of revenues, especially in the areas of pharmaceutical,
orthopaedic, oncology and cardiac supplies. We participate in
a group purchasing organization in an attempt to achieve lower
supply costs from our vendors. Because of the fixed
reimbursement nature of most governmental and commercial payor
arrangements, we may not be able to recover supply cost
increases through increased revenues.
    
    Challenges in Professional and General Liability Costs.
In recent years, we have incurred favorable loss experience,
as reflected in our external actuarial reports. We implemented
enhanced risk management processes for monitoring professional
and general liability claims and managing in high-risk areas.
Professional and general liability costs remain a challenge to
us, and we expect this pressure to continue in the future.
    
    Increases in Information Technology Costs and Costs of
Integration.Our acquisition activity requires transitions
from, and the integration of, various information systems that
are used by hospitals we acquire. We rely heavily on HCA-IT
for information systems integration pursuant to our
contractual arrangement for information technology services.
During 2005, we increased the number of hospitals we operate
from 30 to 53. This resulted in significant increases in
information technology costs and we expect that such costs
will continue to increase significantly as we integrate our
recent acquisitions onto the HCA-IT systems. We plan to
convert between seven to nine hospitals to the patient accounting Meditech
system in 2006. The fees that HCA-IT charged us for
information system services are as follows for the years
presented (in millions):
 HCA-IT Fees2003
    
    $
    13.72004
    
    
    15.82005
    
    
    25.4
 Outlook
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Revenue Sources
 Business,  
    Subsequent Event
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Critical Accounting Estimates
  
    
    it requires assumptions to be made that were uncertain at the time the estimate was made; and
    
    changes in the estimate or different estimates that could have been made could have a material impact on our
consolidated results of operations or financial condition.
    Balance Sheet orIncome Statement Caption /Nature of Critical Estimate Item
    
    Assumptions / Approach Used
    
    Sensitivity AnalysisAllowance for doubtful accounts and provision
for doubtful accountsAccounts receivable primarily consist of
amounts due from third-party payors and
patients. Our ability to collect outstanding
receivables is critical to our results of
operations and cash flows. To provide for
accounts receivable that could become
uncollectible in the future, we establish an
allowance for doubtful accounts to reduce the
carrying value of such receivables to their
estimated net realizable value. The primary
uncertainty lies with uninsured patient
receivables and deductibles, co-payments or
other amounts due from individual patients.
Our allowance for doubtful accounts, included
in our balance sheets as of December 31 was
as follows (in millions):    2005  $252.9 ; and
   2004  $103.6.
Our provision for doubtful accounts, included
in our results of operations, was as follows
(in millions):    2005  $190.3
   2004  $86.2; and
   2003  $74.1.
    
    The largest component of bad debts in our
patient accounts receivable relates to
accounts for which patients are responsible,
which we refer to as patient responsibility
accounts. These accounts include both amounts
payable by uninsured patients and co-payments
and deductibles payable by insured patients.
In general, we attempt to collect
deductibles, co-payments and self-pay
accounts prior to the time of service for
non-emergency care. If we do not collect
these patient responsibility accounts prior
to the delivery of care, the accounts are
handled through our billing and collections
processes. 
We verify each patients insurance coverage
as early as possible before a scheduled
admission or procedure, including with
respect to eligibility, benefits and
authorization/pre-certification requirements,
in order to notify patients of the amounts
for which they will be responsible. We attempt to verify
insurance coverage within a reasonable amount
of time for all emergency room visits and
urgent admissions in compliance with the
Emergency Medical Treatment and Active Labor
Act. 
In general, we follow the following steps in
collecting accounts receivable:    if possible, cash collection of
deductibles, co-payments and self-pay
accounts prior to or at the time
service is provided;
   billing and follow-up with third party
payors;
   collection calls;
   utilization of collection agencies; and
   if collection efforts are unsuccessful,
write off of the accounts.
    
    If self-pay revenues during 2005 were changed
by 1%, our 2005 after-tax income from
continuing operations would change by
approximately $1.2 million or diluted
earnings per share of $0.02.
This is only one example of reasonably
possible sensitivity scenarios. The process
of determining the allowance requires us to
estimate uncollectible patient accounts that
are highly uncertain and requires a high
degree of judgment. It is impacted by changes
in regional economic conditions, business
office operations, payor mix and trends in
federal or state governmental healthcare coverage.
A significant increase in our provision for
doubtful accounts (as a percentage of
revenues) would lower our earnings. This
would adversely affect our results of
operations, financial condition, liquidity
and future access to capital.
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Balance Sheet orIncome Statement Caption /Nature of Critical Estimate Item
    
    Assumptions / Approach Used
    
    Sensitivity AnalysisAllowance for doubtful accounts and provision
for doubtful accounts (continued)
    
    Our policy is to write off accounts after all
collection efforts have failed, which is
typically no longer than one year after the
date of discharge of the patient. Patient
responsibility accounts represent the
majority of our write-offs. All of our
hospitals retain third-party collection
agencies for billing and collection of
delinquent accounts. At most of our
hospitals, more than one collection agency is used to promote
competition and improve performance results.
The selection of collection agencies and the
timing of referral of an account to a
collection agency vary among hospitals.
Generally, we do not write off accounts prior
to utilizing the services of a collection
agency. Once collection efforts have proven
unsuccessful, an account is written off from
our patient accounting system against the
allowance for doubtful accounts.We determine the adequacy of the allowance
for doubtful accounts utilizing a number of
analytical tools and benchmarks. No single
statistic or measurement alone determines the
adequacy of the allowance.As it relates to our recently-acquired
hospitals, we monitor trends in revenues and
cash collections on a monthly basis for 18 to
24 months subsequent to the acquisition on a
facility-by-facility basis.As it relates to our core hospitals, which we
refer to as same-hospital, we monitor the
revenue trends by payor classification on a
month-by-month basis along with the
composition of our accounts receivable
agings. This review is focused primarily on
trends in self-pay revenues, accounts
receivable, co-payment receivables and
historic payment patterns.In addition, we analyze other factors such as
revenue days in accounts receivable and we
review admissions and charges by physicians,
primarily focusing on recently recruited
physicians.The allowance for doubtful accounts relating
to the former Province facilities increased
by $21.0 million during 2005, which resulted
in a decrease in our diluted earnings per
share of $0.25 for 2005, to conform the
former Province facilities allowance for
doubtful accounts to our critical accounting
estimate. This adjustment constitutes a
change in the estimation process from the
former Province critical accounting estimate
and is reflected as transaction costs in our
consolidated statement of operations for
2005. The adjustment is the result of our
review of Provinces patient accounts
receivable and the application of the same
assumptions and processes we use.
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Balance Sheet orIncome Statement Caption /Nature of Critical Estimate Item
    
    Assumptions / Approach Used
    
    Sensitivity AnalysisRevenue recognition / Allowance for
contractual discountsWe recognize revenues in the period in which
services are provided. Accounts receivable
primarily consist of amounts due from
third-party payors and patients. Amounts we
receive for treatment of patients covered by
governmental programs, such as Medicare and
Medicaid, and other third-party payors such
as HMOs, PPOs and other private insurers, are
generally less than our established billing
rates. Accordingly, our gross revenues and
accounts receivable are reduced to net
realizable value through an allowance for
contractual discounts.
 
Approximately 86.8% of our revenues
during
2005 relate to discounted
charges. The
sources of these revenues
were as follows (as
a percentage of total
revenues):

    Revenues are recorded at estimated net
amounts due from patients, third-party payors
and others for healthcare services provided.
We utilize multiple patient accounting
systems. Therefore, estimates for contractual
allowances are calculated using computerized
and manual processes depending on the type of
payor involved and the patient accounting
system used by each of our hospitals. In
certain hospitals, the contractual allowances
are calculated by a computerized system based
on payment terms for each payor. In other
hospitals, the contractual allowances are
determined manually using historical
collections for each type of payor. For all
hospitals, certain manual estimates are used in
calculating contractual allowances based on
historical collections from payors that are
not significant or have not entered into a
contract with us. All contractual adjustments
regardless of type of payor or method of
calculation are reviewed and compared to
actual experience.   Medicare  36.6%;   Medicaid  9.4%; and   Managed care  40.8%.Governmental payors
    
    Governmental payorsThe majority of services performed on
Medicare and Medicaid patients are reimbursed
at predetermined reimbursement rates. The
differences between the established billing
rates (i.e., gross charges) and the
predetermined reimbursement rates are
recorded as contractual discounts and
deducted from gross charges. Under this
prospective reimbursement system, there is no
adjustment or settlement of the difference
between the actual cost to provide the
service and the predetermined reimbursement
rates.
Discounts for retrospectively cost-based
revenues, which were more prevalent in
periods before 2000, are estimated based on
historical and current factors and are
adjusted in future periods when settlements
of filed cost reports are received. Final
settlements under these programs are subject
to adjustment based on administrative review
and audit by third party intermediaries,
which can take several years to resolve
completely.
    
    Because the laws and regulations governing
the Medicare and Medicaid programs are
complex and subject to change, the estimates
of contractual discounts we record could
change by material amounts. Adjustments
related to final settlements increased our
revenues by the following amounts (in
millions):   2005  $9.3;
   2004  $7.5; and
   2003  $6.0.
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Balance Sheet orIncome Statement Caption /Nature of Critical Estimate Item
    
    Assumptions / Approach Used
    
    Sensitivity AnalysisRevenue recognition / Allowance for
contractual discounts (continued)
    
    Managed care
    
    Managed careFor most managed care plans, estimated
contractual allowances are adjusted to actual
contractual allowances as cash is received
and claims are reconciled. We evaluate the
following criteria in developing the
estimated contractual allowance percentages
each month: historical contractual allowance
trends based on actual claims paid by managed
care payors; review of contractual allowance
information reflecting current contract
terms; consideration and analysis of changes
in payor mix reimbursement levels; and other
issues that may impact contractual
allowances.
Accounts receivable primarily consist of
amounts due from third party payors and
patients. Amounts we receive for the
treatment of patients covered by HMOs, PPOs
and other private insurers are generally less
than our established billing rates. We
include contractual allowances as a reduction
to revenues in our financial statements based
on payor specific identification and payor
specific factors for rate increases and
denials.
    
    If our overall estimated contractual discount
percentage on all of our managed care
revenues during 2005 were changed by 1%, our
2005 after-tax income from continuing
operations would change by approximately $7.5
million.
This is only one example of reasonably
possible sensitivity scenarios. The process
of determining the allowance requires us to
estimate the amount expected to be received
and requires a high degree of judgment. It is
impacted by changes in managed care contracts
and other
related factors.
A significant increase in our estimate of
contractual discounts would lower our
earnings. This would adversely affect our
results of operations, financial condition,
liquidity and future access to capital.Applying our process to the accounts
receivable from Provinces third-party payors
resulted in a $5.4 million charge and
decreased our diluted earnings per share by
$0.07 during 2005 to conform the former
Province facilities allowance for
contractual discounts to our critical
accounting estimate. This adjustment
constitutes a change in the estimation
process from the former Province critical
accounting
estimate and is reflected as transaction
costs in our consolidated statement of
operations for 2005. The adjustment is the
result of our review of Provinces patient
accounts receivable and the application of
the same assumptions and processes we use.
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Balance Sheet orIncome Statement Caption /Nature of Critical Estimate Item
    
    Assumptions / Approach Used
    
    Sensitivity AnalysisGoodwill and accounting for business
combinationsGoodwill represents the excess of the
purchase price over the fair value of the net
assets of acquired companies. Our goodwill
included in our consolidated balance sheets as of December 31 for the following years was as follows (in
millions):    2005  $1,455.6; and
   2004  $144.4.
The increase in our goodwill during 2005 was
primarily the result of the Province business
combination and the acquisitions of DRMC and
WCCH. Please refer to Note 4 to our
consolidated financial statements included
elsewhere in this report for a detailed
rollforward of our goodwill.
    
    We follow the guidance in Statement of
Financial Accounting Standard (SFAS) No.
142, Goodwill and Other Intangible Assets,
and test goodwill for impairment using a fair
value approach. We are required to test for
impairment at least annually, absent some
triggering event that would accelerate an
impairment assessment. On an ongoing basis,
absent any impairment indicators, we perform
our goodwill impairment testing as of October
1 of each year. We determine fair value using
widely accepted valuation techniques,
including discounted cash flow and market
multiple analyses. These types of analyses
require us to make assumptions and estimates
regarding future cash flows, industry
economic factors and the profitability of
future business strategies.
The purchase price of acquisitions are
allocated to the assets acquired and
liabilities assumed based upon their
respective fair values and subject to change
during the twelve month period subsequent to
the acquisition date. We engage independent
third-party valuation firms to assist us in
determining the fair values of assets
acquired and liabilities assumed. Such
valuations require us to make significant
estimates and assumptions, including
projections of future events and operating
performance.
    
    We performed our annual testing for goodwill
impairment as of October 1, 2003, 2004 and
2005 using the methodology described here,
and determined that no goodwill impairment
existed. If actual future results are not
consistent with our assumptions and
estimates, we may be required to record
goodwill impairment charges in the future.
Our estimate of fair value of acquired assets
and assumed liabilities are based upon
assumptions believed to be reasonable based
upon current facts and circumstances. If 10%
of the non-depreciable assets acquired during
2005 were allocated to a depreciable asset
with an average life of 20 years,
depreciation expense would have increased by
approximately $4.4 million in 2005.Fair value estimates are derived from
independent appraisals, established market
values of comparable assets, or internal
calculations of estimated future net cash
flows. Our estimate of future cash flows is
based on assumptions and projections we
believe to be currently reasonable and
supportable. Our assumptions take into
account revenue and expense growth rates,
patient volumes, changes in payor mix, and
changes in legislation and other payor
payment patterns.
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Balance Sheet orIncome Statement Caption /Nature of Critical Estimate Item
    
    Assumptions / Approach Used
    
    Sensitivity AnalysisProfessional and general liability claimsWe are subject to potential medical
malpractice lawsuits and other claims as part
of providing healthcare services. To mitigate
a portion of this risk, we maintained
insurance for individual malpractice claims
exceeding a self-insured retention amount.
For 2001, the self-insured retention amount
was $1.0 million. For 2002, we increased our
self-insured retention level to $10.0 million
on individual  malpractice claims. For 2003, we lowered our
self-insured retention level to $5.0 million
on individual malpractice claims and for
2004, we increased our self-insured retention
level back to $10.0 million. For 2005, we
increased our self-insured retention levels
to $15.0 million in substantially all states.
We maintained self-insured retention at $10.0
million for facilities located in Florida or
Texas. Additionally, certain of our
facilities operate in states having state
specific medical malpractice programs. We
have obtained commercial insurance policies
as of May 1, 2005 for claims in excess of
$50,000 in the following states: Colorado;
Indiana; Kansas; and Pennsylvania. The state
program in Louisiana limits our medical
malpractice retention to $100,000.
Each year, we obtain quotes from various
malpractice insurers with respect to the cost
of obtaining medical malpractice insurance
coverage. We compare these quotes to our most
recent actuarially determined estimates of
losses at various self-insured retention
levels. Accordingly, changes in insurance
costs affect the self-insurance retention
level we choose each year. As insurance costs
have increased in recent years, we have
accepted a higher level of risk in
self-insured retention levels.
The reserve for professional and general
liability claims included in our consolidated balance
sheets as of December 31 was as follows (in
millions):   2005  $55.3; and
   2004  $27.2.
    
    Our reserves for professional and general
liability claims are based upon independent
actuarial calculations, which consider
historical claims data, demographic
considerations, severity factors and other
actuarial assumptions in the determination of
reserve estimates. Reserve estimates are
discounted to present value using a 5.0%
discount rate.
During the first quarter of 2005, we revised
our reserve estimation process by obtaining
independent actuarial calculations every
quarter, rather than twice each year, from two
actuarial firms. Our estimated reserve for professional and general
liability claims will be significantly
affected if current and future claims differ
from historical trends. While we monitor
reported claims closely and consider
potential outcomes as estimated by our
independent actuaries when determining our
professional and general liability reserves,
the complexity of the claims, the extended
period of time to settle the claims and the
wide range of potential outcomes complicates
the estimation process. In addition, certain
states have passed varying forms of tort
reform which attempt to limit the amount of
medical malpractice awards. If such laws are
passed in the states where our hospitals are
located, our loss estimates could
decrease.
We implemented enhanced risk management
processes for monitoring professional and
general liability claims and managing losses
in high-risk areas during 2002 and 2003 to
attempt to reduce loss levels and
appropriately manage risk. We refined our
estimation process for determining our
reserves for professional and general
liability claims during 2003 by expanding
from using one actuary to using multiple
actuaries.
We use the valuations of two actuaries and
average their results in determining our
recorded reserve levels. This averaging
process results in a refined estimation
approach that we believe produces a more
reliable estimate of ultimate losses.
We currently receive actuarial calculations
each quarter from
 two separate actuarial
firms. Province did not use the services of
either of these actuarial firms. Upon
conforming the hospitals that we acquired from Province to our
methodology by obtaining valuations from each
of our actuarial firms and averaging the
results, the reserves for professional and
general liability claims were increased by
$6.8 million. The impact of this change
decreased our diluted earnings per share by
$0.09 for the second quarter of 2005 and is
included in transaction costs in our consolidated statement of
operations.
    
    During 2004, we ceased receiving reserve
estimates from one of the three actuaries
that had historically been used to calculate
loss reserve estimates. This change in our
estimation process reduced our reserve levels
and related professional and general
liability insurance expense for 2004 by $4.0
million, on a pretax basis, or $0.06 per
diluted share. We continue to derive our
estimates for financial
reporting purposes by using a mathematical
average of the actuarial valuations from our
other two actuaries. The results of the
updated actuarial valuations from these two
actuaries reduced our reserve estimates for
years prior to 2005 by $11.0 million on a
pretax basis, or $0.13 per diluted share,
which reduced our professional and general
liability expense in 2005.
Additionally, actuarial calculations include
a large number of variables that may
significantly impact the estimate of ultimate
losses that are recorded during a reporting
period. Professional judgment is used by each
actuary in determining their loss estimates
by selecting factors that are considered
appropriate by the actuary for our specific
circumstances. Changes in assumptions used by
our independent actuaries with respect to
demographics and geography, industry trends,
development patterns and judgmental selection
of other factors may impact our recorded
reserve levels and our results of
operations.
We derive our estimates for financial
reporting purposes by using a mathematical
average of our actuarial results. Changes in
our initial estimates of professional and
general liability claims are non-cash charges
and accordingly, there would be no material
impact on our liquidity or capital resources.
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Balance Sheet orIncome Statement Caption /Nature of Critical Estimate Item
    
    Assumptions / Approach Used
    
    Sensitivity AnalysisProfessional
and general liability claims (continued)The reserve for professional and general
liability claims reflects the current
estimate of all outstanding losses, including
incurred but not reported losses, based upon
actuarial calculations as of the balance
sheet date. The loss estimates included in
the actuarial calculations may change in the
future based upon updated facts and
circumstances.
The total expense for professional and
general liability coverage, included in our
consolidated results of operations, was as follows (in
millions):   2005  $19.3;
   2004  $5.4; and
   2003  $8.3.

Our expense for professional and general
liability coverage each year includes the
actuarially determined estimate of losses for
the current year, including claims incurred
but not reported; the change in the estimate
of losses for prior years based upon actual
claims development experience as compared to
prior actuarial projections; the insurance
premiums for losses in excess of our
self-insured retention levels; the
administrative costs of the insurance program and interest
expense related to the discounted portion of
the liability. The 2005 expense also includes
$6.8 million of transaction costs recorded to
conform the hospitals that we acquired from Province to the our methodology
for determining medical malpractice reserves.
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Balance Sheet orIncome Statement Caption /Nature of Critical Estimate Item
    
    Assumptions / Approach Used
    
    Sensitivity AnalysisAccounting for income taxesDeferred tax assets generally represent items
that will result in a tax deduction in future
years for which we have already recorded the
tax benefit in our income statement. We
assess the likelihood that deferred tax
assets will be recovered from future taxable
income. To the extent we believe that
recovery is not probable, a valuation
allowance is established. To the extent we
establish a valuation allowance or increase
this allowance, we must include an expense as
part of the income tax provision in our
results of operations. Our deferred tax asset
balances in our consolidated balance sheets as of December
31 for the following years were as follows
(in millions):   2005  $97.0; and
   2004  $51.7.
Our valuation allowances for deferred tax
assets in our consolidated balance sheets as of December
31 for the following years were as follows
(in millions):   2005  $5.7; and
   2004  $3.4.
In addition, significant judgment is required
in determining and assessing the impact of
certain tax-related contingencies. We
establish accruals when, despite our belief
that our tax return positions are fully
supportable, it is probable that we have
incurred a loss related to tax contingencies
and the loss or range of loss can be
reasonably estimated.
We adjust the accruals related to tax
contingencies as part of our provision for
income taxes in our results of operations
based upon changing facts and circumstances,
such as progress of a tax audit, development
of industry related examination issues, as
well as legislative, regulatory or judicial
developments. A number of years may elapse
before a particular matter, for which we have
established an accrual, is audited and
resolved.
    
    The first step in determining the deferred
tax asset valuation allowance is identifying
reporting jurisdictions where we have a
history of tax and operating losses or are
projected to have losses in future periods as
a result of changes in operational
performance. We then determine if a valuation
allowance should be established against the
deferred tax assets for that reporting
jurisdiction.
The second step is to determine the amount of
the valuation allowance. We will generally
establish a valuation allowance equal to the
net deferred tax asset (deferred tax assets
less deferred tax liabilities) related to the
jurisdiction identified in step one of the
analysis. In certain cases, we may not reduce
the valuation allowance by the amount of the
deferred tax liabilities depending on the
nature and timing of future taxable income
attributable to deferred tax
liabilities.
In assessing tax contingencies, we identify
tax issues that we believe may be challenged
upon examination by the taxing authorities.
We also assess the likelihood of sustaining
tax benefits associated with tax planning
strategies and reduce tax benefits based on
managements judgment regarding such
likelihood. We compute the tax and related
interest on each contingency. We then
determine the amount of loss, or reduction in
tax benefits based upon the foregoing and
reflect such amount as a component of the
provision for income taxes in the reporting
period.
During each reporting period, we assess the
facts and circumstances related to recorded
tax contingencies. If tax contingencies are
no longer deemed probable based upon new
facts and circumstances, the contingency is
reflected as a reduction of the provision for
income taxes in the current period.
    
    Our deferred tax liabilities exceeded our
deferred tax assets by $74.1 million as of
December 31, 2005, excluding the impact of
valuation allowances. Historically, we have
produced federal taxable income. Therefore,
we believe that the likelihood of our not
realizing the federal tax benefit of our
deferred tax assets is remote.
However, we do have subsidiaries with a
history of tax losses in certain state
jurisdictions and, based upon those
historical tax losses, w
e assumed that the
subsidiaries would not be profitable in the
future for those states tax purposes. If our
assertion regarding the future profitability
of those subsidiaries were incorrect, then
our deferred tax assets would be understated
by the amount of the valuation allowance of
$5.7 million at December 31, 2005.
The IRS may propose adjustments for items we
have failed to identify as tax contingencies.
If the IRS were to propose and sustain
assessments equal to 10% of our taxable
income for 2005, we would incur $5.1 million
of additional tax payments for 2005 plus
applicable penalties and interest.
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Results of Operations
 Managements Discussion and Analysis of Financial
Condition and Results of Operations:
 Admissions.
 bps
 Continuing operations.
 Emergency room visits.
 Equivalent admissions
 ESOP.
 Medicare case mix index.
 N/A. .
 N/M.
 Outpatient surgeries
 Same-hospital
 72




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##### Table of Contents



Operating Results Summary
  Three Months Ended December 31,2004
    
    
    2005% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesRevenues
    
    $
    257.5
    
    
    
    100.0
    %
    
    $
    559.2
    
    
    
    100.0
    %Salaries and benefits
    
    
    102.7
    
    
    
    39.9
    
    
    
    222.0
    
    
    
    39.7Supplies
    
    
    33.7
    
    
    
    13.1
    
    
    
    78.2
    
    
    
    14.0Other operating expenses
    
    
    42.9
    
    
    
    16.6
    
    
    
    95.1
    
    
    
    17.0Provision for doubtful accounts
    
    
    22.2
    
    
    
    8.6
    
    
    
    62.1
    
    
    
    11.1Depreciation and amortization
    
    
    13.6
    
    
    
    5.4
    
    
    
    33.0
    
    
    
    5.9Interest expense, net
    
    
    2.9
    
    
    
    1.1
    
    
    
    22.0
    
    
    
    3.9Debt retirement costs
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    ESOP expense
    
    
    2.3
    
    
    
    0.9
    
    
    
    3.8
    
    
    
    0.7220.3
    
    
    
    85.6
    
    
    
    516.3
    
    
    
    92.3Income from continuing operations before
minority interests and income taxes
    
    
    37.2
    
    
    
    14.4
    
    
    
    42.9
    
    
    
    7.7Minority interests in earnings of
consolidated entities
    
    
    0.3
    
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.1Income from continuing operations before
income taxes
    
    
    36.9
    
    
    
    14.3
    
    
    
    42.6
    
    
    
    7.6Provision for income taxes
    
    
    13.9
    
    
    
    5.3
    
    
    
    16.6
    
    
    
    3.0Income from continuing operations
    
    $
    23.0
    
    
    
    9.0
    %
    
    $
    26.0
    
    
    
    4.6
    %
 Years Ended December 31,2003
    
    
    2004
    
    
    2005% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesRevenues
    
    $
    875.6
    
    
    
    100.0
    %
    
    $
    996.9
    
    
    
    100.0
    %
    
    $
    1,855.1
    
    
    
    100.0
    %Salaries and benefits
    
    
    352.3
    
    
    
    40.2
    
    
    
    399.4
    
    
    
    40.1
    
    
    
    730.5
    
    
    
    39.4Supplies
    
    
    114.2
    
    
    
    13.0
    
    
    
    129.1
    
    
    
    12.9
    
    
    
    251.6
    
    
    
    13.6Other operating expenses
    
    
    155.4
    
    
    
    17.8
    
    
    
    166.8
    
    
    
    16.7
    
    
    
    311.8
    
    
    
    16.7Provision for doubtful accounts
    
    
    74.1
    
    
    
    8.5
    
    
    
    86.2
    
    
    
    8.7
    
    
    
    190.3
    
    
    
    10.3Depreciation and amortization
    
    
    43.1
    
    
    
    4.8
    
    
    
    48.1
    
    
    
    4.9
    
    
    
    101.1
    
    
    
    5.5Interest expense, net
    
    
    12.8
    
    
    
    1.5
    
    
    
    12.6
    
    
    
    1.3
    
    
    
    60.3
    
    
    
    3.2Debt retirement costs
    
    
    
    
    
    
    
    
    
    
    1.5
    
    
    
    0.1
    
    
    
    12.2
    
    
    
    0.7Transaction costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43.2
    
    
    
    2.3ESOP expense
    
    
    6.9
    
    
    
    0.8
    
    
    
    9.4
    
    
    
    0.9
    
    
    
    14.8
    
    
    
    0.8758.8
    
    
    
    86.6
    
    
    
    853.1
    
    
    
    85.6
    
    
    
    1,715.8
    
    
    
    92.5Income from continuing operations before
minority interests and income taxes
    
    
    116.8
    
    
    
    13.4
    
    
    
    143.8
    
    
    
    14.4
    
    
    
    139.3
    
    
    
    7.5Minority interests in earnings of
consolidated entities
    
    
    0.7
    
    
    
    0.1
    
    
    
    1.0
    
    
    
    0.1
    
    
    
    1.1
    
    
    
    0.1Income from continuing operations before
income taxes
    
    
    116.1
    
    
    
    13.3
    
    
    
    142.8
    
    
    
    14.3
    
    
    
    138.2
    
    
    
    7.4Provision for income taxes
    
    
    45.9
    
    
    
    5.3
    
    
    
    56.0
    
    
    
    5.6
    
    
    
    58.4
    
    
    
    3.1Income from continuing operations
    
    $
    70.2
    
    
    
    8.0
    %
    
    $
    86.8
    
    
    
    8.7
    %
    
    $
    79.8
    
    
    
    4.3
    %
 73




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##### Table of Contents



Operating Statistics
 Three Months EndedDecember 31,
    
    Increase
    
    % Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Admissions:Same-hospital
    
    
    22,094
    
    
    
    21,930
    
    
    
    (164
    )
    
    
    (0.7
    )Continuing operations
    
    
    22,769
    
    
    
    45,447
    
    
    
    22,678
    
    
    
    99.6Equivalent admissions:Same-hospital
    
    
    44,054
    
    
    
    42,997
    
    
    
    (1,057
    )
    
    
    (2.4
    )Continuing operations
    
    
    45,744
    
    
    
    87,102
    
    
    
    41,358
    
    
    
    90.4Revenues per equivalent admission:Same-hospital
    
    $
    5,603
    
    
    $
    5,992
    
    
    $
    389
    
    
    
    6.9Continuing operations
    
    $
    5,630
    
    
    $
    6,420
    
    
    $
    790
    
    
    
    14.0Medicare case mix index:Same-hospital
    
    
    1.19
    
    
    
    1.21
    
    
    
    0.02
    
    
    
    1.7Continuing operations
    
    
    1.20
    
    
    
    1.24
    
    
    
    0.04
    
    
    
    3.3Average length of stay (days):Same-hospital
    
    
    4.0
    
    
    
    4.2
    
    
    
    0.2
    
    
    
    5.0Continuing operations
    
    
    4.0
    
    
    
    4.3
    
    
    
    0.3
    
    
    
    7.5Inpatient surgeries:Same-hospital
    
    
    6,212
    
    
    
    6,411
    
    
    
    199
    
    
    
    3.2Continuing operations
    
    
    6,500
    
    
    
    13,426
    
    
    
    6,926
    
    
    
    106.6Outpatient surgeries:Same-hospital
    
    
    18,179
    
    
    
    17,002
    
    
    
    (1,177
    )
    
    
    (6.5
    )Continuing operations
    
    
    19,133
    
    
    
    32,961
    
    
    
    13,828
    
    
    
    72.3Emergency room visits:Same-hospital
    
    
    99,331
    
    
    
    101,575
    
    
    
    2,244
    
    
    
    2.3Continuing operations
    
    
    103,852
    
    
    
    203,089
    
    
    
    99,237
    
    
    
    95.6Outpatient factor:Same-hospital
    
    
    2.00
    
    
    
    1.96
    
    
    
    (0.04
    )
    
    
    (2.0
    )Continuing operations
    
    
    2.01
    
    
    
    1.92
    
    
    
    (0.09
    )
    
    
    (4.5
    )Outpatient revenues as a percentage
of total revenues:Same-hospital
    
    
    50.9
    %
    
    
    49.3
    %
    
    (160
    )bps
    
    
    N/MContinuing operations
    
    
    52.8
    %
    
    
    49.0
    %
    
    (380
    )bps
    
    
    N/MNumber of hospitals at end of period:Same-hospital
    
    
    28
    
    
    
    28
    
    
    
    
    
    
    
    Continuing operations
    
    
    29
    
    
    
    50
    
    
    
    21
    
    
    
    72.4Licensed beds at end of period:Same-hospital
    
    
    2,582
    
    
    
    2,589
    
    
    
    7
    
    
    
    0.3Continuing operations
    
    
    2,688
    
    
    
    5,396
    
    
    
    2,708
    
    
    
    100.7Weighted-average licensed beds:Same-hospital
    
    
    2,582
    
    
    
    2,593
    
    
    
    11
    
    
    
    0.4Continuing operations
    
    
    2,720
    
    
    
    5,417
    
    
    
    2,697
    
    
    
    99.2
 74




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Years EndedDecember 31,
    
    Increase
    
    % Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Admissions:Same-hospital
    
    
    90,444
    
    
    
    91,424
    
    
    
    980
    
    
    
    1.1Continuing operations
    
    
    91,772
    
    
    
    155,279
    
    
    
    63,507
    
    
    
    69.2Equivalent admissions:Same-hospital
    
    
    180,617
    
    
    
    179,831
    
    
    
    (786
    )
    
    
    (0.4
    )Continuing operations
    
    
    183,819
    
    
    
    302,483
    
    
    
    118,664
    
    
    
    64.6Revenues per equivalent admission:Same-hospital
    
    $
    5,402
    
    
    $
    5,750
    
    
    $
    348
    
    
    
    6.4Continuing operations
    
    $
    5,423
    
    
    $
    6,133
    
    
    $
    710
    
    
    
    13.1Medicare case mix index:Same-hospital
    
    
    1.18
    
    
    
    1.20
    
    
    
    0.02
    
    
    
    1.7Continuing operations
    
    
    1.18
    
    
    
    1.22
    
    
    
    0.04
    
    
    
    3.4Average length of stay (days):Same-hospital
    
    
    4.0
    
    
    
    4.1
    
    
    
    0.1
    
    
    
    2.5Continuing operations
    
    
    4.0
    
    
    
    4.2
    
    
    
    0.2
    
    
    
    5.0Inpatient surgeries:Same-hospital
    
    
    25,692
    
    
    
    25,893
    
    
    
    201
    
    
    
    0.8Continuing operations
    
    
    26,235
    
    
    
    44,716
    
    
    
    18,481
    
    
    
    70.4Outpatient surgeries:Same-hospital
    
    
    73,754
    
    
    
    72,241
    
    
    
    (1,513
    )
    
    
    (2.1
    )Continuing operations
    
    
    75,508
    
    
    
    117,415
    
    
    
    41,907
    
    
    
    55.5Emergency room visits:Same-hospital
    
    
    406,719
    
    
    
    418,586
    
    
    
    11,867
    
    
    
    2.9Continuing operations
    
    
    416,060
    
    
    
    704,818
    
    
    
    288,758
    
    
    
    69.4Outpatient factor:Same-hospital
    
    
    2.00
    
    
    
    1.97
    
    
    
    (0.03
    )
    
    
    (1.5
    )Continuing operations
    
    
    2.00
    
    
    
    1.95
    
    
    
    (0.05
    )
    
    
    (2.5
    )Outpatient revenues as a percentage of total revenues:Same-hospital
    
    
    50.7
    %
    
    
    48.9
    %
    
    (180
    )bps
    
    
    N/MContinuing operations
    
    
    51.5
    %
    
    
    50.3
    %
    
    (120
    )bps
    
    
    N/MNumber of hospitals at end of period:Same-hospital
    
    
    28
    
    
    
    28
    
    
    
    
    
    
    
    Continuing operations
    
    
    29
    
    
    
    50
    
    
    
    21
    
    
    
    72.4Licensed beds at end of period:Same-hospital
    
    
    2,582
    
    
    
    2,589
    
    
    
    7
    
    
    
    0.3Continuing operations
    
    
    2,688
    
    
    
    5,396
    
    
    
    2,708
    
    
    
    100.7Weighted-average licensed beds:Same-hospital
    
    
    2,635
    
    
    
    2,670
    
    
    
    35
    
    
    
    1.3Continuing operations
    
    
    2,692
    
    
    
    4,539
    
    
    
    1,847
    
    
    
    68.6
 75




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##### Table of Contents



Years EndedDecember 31,
    
    Increase
    % Increase2003
    
    2004
    
    (Decrease)
    (Decrease)Admissions:Same-hospital
    
    
    88,108
    
    
    
    88,461
    
    
    
    353
    
    
    
    0.4Continuing operations
    
    
    88,695
    
    
    
    91,772
    
    
    
    3,077
    
    
    
    3.5Equivalent admissions:Same-hospital
    
    
    174,013
    
    
    
    175,064
    
    
    
    1,051
    
    
    
    0.6Continuing operations
    
    
    175,439
    
    
    
    183,819
    
    
    
    8,380
    
    
    
    4.8Revenues per equivalent admission:Same-hospital
    
    $
    4,995
    
    
    $
    5,436
    
    
    $
    441
    
    
    
    8.8Continuing operations
    
    $
    4,991
    
    
    $
    5,423
    
    
    $
    432
    
    
    
    8.7Medicare case mix index:Same-hospital
    
    
    1.17
    
    
    
    1.18
    
    
    
    0.01
    
    
    
    0.9Continuing operations
    
    
    1.17
    
    
    
    1.18
    
    
    
    0.01
    
    
    
    0.9Average length of stay (days):Same-hospital
    
    
    4.0
    
    
    
    4.1
    
    
    
    0.1
    
    
    
    2.5Continuing operations
    
    
    4.0
    
    
    
    4.0
    
    
    
    
    
    
    
    Inpatient surgeries:Same-hospital
    
    
    24,362
    
    
    
    25,030
    
    
    
    668
    
    
    
    2.7Continuing operations
    
    
    24,528
    
    
    
    26,235
    
    
    
    1,707
    
    
    
    7.0Outpatient surgeries:Same-hospital
    
    
    70,821
    
    
    
    71,077
    
    
    
    256
    
    
    
    0.4Continuing operations
    
    
    71,488
    
    
    
    75,508
    
    
    
    4,020
    
    
    
    5.6Emergency room visits:Same-hospital
    
    
    404,768
    
    
    
    392,422
    
    
    
    (12,346
    )
    
    
    (3.1
    )Continuing operations
    
    
    408,321
    
    
    
    416,060
    
    
    
    7,739
    
    
    
    1.9Outpatient factor:Same-hospital
    
    
    1.98
    
    
    
    1.98
    
    
    
    
    
    
    
    Continuing operations
    
    
    1.98
    
    
    
    2.00
    
    
    
    0.02
    
    
    
    1.0Outpatient revenues as a
percentage of total revenues:Same-hospital
    
    
    50.3
    %
    
    
    50.2
    %
    
    (10
    )bps
    
    
    N/MContinuing operations
    
    
    49.7
    %
    
    
    51.5
    %
    
    180
    bps
    
    
    N/MNumber of hospitals at end of period:Same-hospital
    
    
    27
    
    
    
    27
    
    
    
    
    
    
    
    Continuing operations
    
    
    28
    
    
    
    29
    
    
    
    1
    
    
    
    3.6Licensed beds at end of period:Same-hospital
    
    
    2,568
    
    
    
    2,507
    
    
    
    (61
    )
    
    
    (2.4
    )Continuing operations
    
    
    2,681
    
    
    
    2,688
    
    
    
    7
    
    
    
    0.3Weighted-average licensed beds:Same-hospital
    
    
    2,567
    
    
    
    2,638
    
    
    
    71
    
    
    
    2.8Continuing operations
    
    
    2,595
    
    
    
    2,692
    
    
    
    97
    
    
    
    3.7
 76




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##### Table of Contents



For the Three Months Ended December 31, 2004 and 2005
 Revenues
  Three Months EndedDecember 31,
    
    
    Increase
    
    
    % Increase2004
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)Same-hospital
    
    $
    247.1
    
    
    $
    257.6
    
    
    $
    10.5
    
    
    
    4.4
    %Former Province hospitals
    
    
    
    
    
    
    235.1
    
    
    
    235.1
    
    
    
    N/M2005 Acquisitions
    
    
    
    
    
    
    54.1
    
    
    
    54.1
    
    
    
    N/MOther acquisitions
    
    
    10.4
    
    
    
    12.4
    
    
    
    2.0
    
    
    
    19.2$
    257.5
    
    
    $
    559.2
    
    
    $
    301.7
    
    
    
    117.1
 Inpatient Revenues
  Outpatient Revenues
  Other
   Continuing Operations
    
    Same-hospital2004
    
    2005
    
    2004
    
    2005Medicare
    
    
    36.5
    %
    
    
    35.9
    %
    
    
    36.8
    %
    
    
    36.8
    %Medicaid
    
    
    11.4
    
    
    
    8.9
    
    
    
    11.5
    
    
    
    10.3HMOs, PPOs and other private insurers
    
    
    38.8
    
    
    
    42.2
    
    
    
    38.9
    
    
    
    39.1Self-Pay
    
    
    9.2
    
    
    
    11.9
    
    
    
    8.9
    
    
    
    10.4Other
    
    
    4.1
    
    
    
    1.1
    
    
    
    3.9
    
    
    
    3.4100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 77




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##### Table of Contents



Expenses
 Salaries and Benefits
 Three Months Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2004
    
    
    Revenues
    
    
    2005
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Salaries and benefits (dollars in millions):Salaries and wages
    
    $
    82.0
    
    
    
    31.9
    %
    
    $
    170.5
    
    
    
    30.5
    %
    
    $
    88.5
    
    
    
    108.0
    %Stock-based compensation
    
    
    0.5
    
    
    
    0.2
    
    
    
    2.2
    
    
    
    0.4
    
    
    
    1.7
    
    
    
    391.6Employee benefits
    
    
    17.5
    
    
    
    6.8
    
    
    
    39.0
    
    
    
    7.0
    
    
    
    21.5
    
    
    
    122.5Contract labor
    
    
    2.7
    
    
    
    1.0
    
    
    
    10.3
    
    
    
    1.8
    
    
    
    7.6
    
    
    
    280.5$
    102.7
    
    
    
    39.9
    %
    
    $
    222.0
    
    
    
    39.7
    %
    
    $
    119.3
    
    
    
    116.3ESOP expense (dollars in millions)
    
    $
    2.3
    
    
    
    0.9
    %
    
    $
    3.8
    
    
    
    0.7
    %
    
    $
    1.5
    
    
    
    64.5Continuing operations:Man-hours per equivalent admission
    
    
    85.6
    
    
    
    N/A
    
    
    
    93.6
    
    
    
    N/A
    
    
    
    8.0
    
    
    
    9.4Salaries and benefits per equivalent admission
    
    $
    2,130
    
    
    
    N/A
    
    
    $
    2,465
    
    
    
    N/A
    
    
    $
    335
    
    
    
    15.7Corporate office salaries and benefits (dollars in millions)
    
    $
    4.6
    
    
    
    1.8
    %
    
    $
    6.9
    
    
    
    1.2
    %
    
    $
    2.3
    
    
    
    49.3Same-hospital (dollars in millions):Salaries and wages
    
    $
    74.5
    
    
    
    30.2
    %
    
    $
    76.7
    
    
    
    29.8
    %
    
    $
    2.2
    
    
    
    2.9Employee benefits
    
    
    16.5
    
    
    
    6.7
    
    
    
    18.1
    
    
    
    7.0
    
    
    
    1.6
    
    
    
    9.8Contract labor
    
    
    2.5
    
    
    
    1.0
    
    
    
    2.6
    
    
    
    1.0
    
    
    
    0.1
    
    
    
    2.7$
    93.5
    
    
    
    37.9
    %
    
    $
    97.4
    
    
    
    37.8
    %
    
    $
    3.9
    
    
    
    4.1Same-hospital:Man-hours per equivalent admission
    
    
    84.9
    
    
    
    N/A
    
    
    
    87.1
    
    
    
    N/A
    
    
    
    2.2
    
    
    
    2.7Salaries and benefits per equivalent admission
    
    $
    2,108
    
    
    
    N/A
    
    
    $
    2,270
    
    
    
    N/A
    
    
    $
    162
    
    
    
    7.7
   78




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##### Table of Contents



Supplies
 Three Months Ended
    
    
    
    
    
    %December 31,
    
    Increase
    
    Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Continuing operations:Supplies (dollars in millions)
    
    $
    33.7
    
    
    $
    78.2
    
    
    $
    44.5
    
    
    
    131.6
    %Supplies as a percentage of revenues
    
    
    13.1
    %
    
    
    14.0
    %
    
    90
   bps
    
    
    N/MSupplies per equivalent admission
    
    $
    731
    
    
    $
    892
    
    
    $
    161
    
    
    
    22.1
    %Same-hospital:Supplies (dollars in millions)
    
    $
    32.2
    
    
    $
    34.4
    
    
    $
    2.2
    
    
    
    7.2
    %Supplies as a percentage of revenues
    
    
    13.0
    %
    
    
    13.4
    %
    
    40
  bps
    
    
    N/MSupplies per equivalent admission
    
    $
    724
    
    
    $
    802
    
    
    $
    78
    
    
    
    10.9
    %
  Other Operating Expenses
 Three Months EndedDecember 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2004
    
    
    Revenues
    
    
    2005
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Other operating expenses (dollars in millions):Professional fees
    
    $
    3.5
    
    
    
    1.4
    %
    
    $
    9.4
    
    
    
    1.7
    %
    
    $
    5.9
    
    
    
    170.6
    %Utilities
    
    
    4.3
    
    
    
    1.7
    
    
    
    11.6
    
    
    
    2.1
    
    
    
    7.3
    
    
    
    167.0Repairs and maintenance
    
    
    5.4
    
    
    
    2.1
    
    
    
    10.7
    
    
    
    1.9
    
    
    
    5.3
    
    
    
    96.7Rents and leases
    
    
    2.5
    
    
    
    1.0
    
    
    
    5.2
    
    
    
    0.9
    
    
    
    2.7
    
    
    
    109.2Insurance
    
    
    (0.4
    )
    
    
    (0.2
    )
    
    
    5.1
    
    
    
    0.9
    
    
    
    5.5
    
    
    
    N/MHCA-IT expense
    
    
    4.7
    
    
    
    1.8
    
    
    
    7.7
    
    
    
    1.4
    
    
    
    3.0
    
    
    
    64.1Physician recruiting
    
    
    4.6
    
    
    
    1.8
    
    
    
    7.1
    
    
    
    1.3
    
    
    
    2.5
    
    
    
    53.7Contract services
    
    
    8.2
    
    
    
    3.2
    
    
    
    20.2
    
    
    
    3.6
    
    
    
    12.0
    
    
    
    145.8Non-income taxes
    
    
    4.3
    
    
    
    1.7
    
    
    
    7.2
    
    
    
    1.3
    
    
    
    2.9
    
    
    
    67.5Other
    
    
    5.8
    
    
    
    2.1
    
    
    
    10.9
    
    
    
    1.9
    
    
    
    5.1
    
    
    
    94.4$
    42.9
    
    
    
    16.6
    %
    
    $
    95.1
    
    
    
    17.0
    %
    
    $
    52.2
    
    
    
    122.4Corporate office other operating expenses (dollars in millions)
    
    $
    3.6
    
    
    
    1.4
    %
    
    $
    6.4
    
    
    
    1.1
    %
    
    $
    2.8
    
    
    
    78.8Same-hospital other operating expenses (dollars in millions):Professional fees
    
    $
    3.3
    
    
    
    1.3
    %
    
    $
    4.2
    
    
    
    1.6
    %
    
    $
    0.9
    
    
    
    26.5Utilities
    
    
    4.0
    
    
    
    1.6
    
    
    
    4.7
    
    
    
    1.8
    
    
    
    0.7
    
    
    
    17.2Repairs and maintenance
    
    
    5.2
    
    
    
    2.1
    
    
    
    5.4
    
    
    
    2.1
    
    
    
    0.2
    
    
    
    3.4Rents and leases
    
    
    2.0
    
    
    
    0.8
    
    
    
    2.2
    
    
    
    0.8
    
    
    
    0.2
    
    
    
    7.5Insurance
    
    
    (0.9
    )
    
    
    (0.4
    )
    
    
    1.7
    
    
    
    0.7
    
    
    
    2.6
    
    
    
    N/MHCA-IT expense
    
    
    4.6
    
    
    
    1.9
    
    
    
    3.9
    
    
    
    1.5
    
    
    
    (0.7
    )
    
    
    (15.8
    )Physician recruiting
    
    
    4.1
    
    
    
    1.7
    
    
    
    4.6
    
    
    
    1.8
    
    
    
    0.5
    
    
    
    10.4Contract services
    
    
    6.8
    
    
    
    2.8
    
    
    
    8.5
    
    
    
    3.3
    
    
    
    1.7
    
    
    
    25.5Non-income taxes
    
    
    4.2
    
    
    
    1.7
    
    
    
    4.3
    
    
    
    1.7
    
    
    
    0.1
    
    
    
    3.0Other
    
    
    3.5
    
    
    
    1.5
    
    
    
    3.5
    
    
    
    1.4
    
    
    
    
    
    
    
    0.3$
    36.8
    
    
    
    15.0
    %
    
    $
    43.0
    
    
    
    16.7
    %
    
    $
    6.2
    
    
    
    16.7
  79




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##### Table of Contents



Provision for Doubtful Accounts
 Three Months EndedDecember 31,
    
    Increase
    
    % Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Continuing operations (dollars in millions):Provision for doubtful accounts
    
    $
    22.2
    
    
    $
    62.1
    
    
    $
    39.9
    
    
    
    178.9
    %Percentage of revenues
    
    
    8.6
    %
    
    
    11.1
    %
    
    
    250
    bps
    
    
    N/MCharity care write-offs
    
    $
    1.8
    
    
    $
    9.0
    
    
    $
    7.2
    
    
    
    398.8
    %Same-hospital (dollars in millions):Provision for doubtful accounts
    
    $
    20.7
    
    
    $
    22.8
    
    
    $
    2.1
    
    
    
    9.4
    %Percentage of revenues
    
    
    8.4
    %
    
    
    8.8
    %
    
    
    40
    bps
    
    
    N/MCharity care write-offs
    
    $
    1.8
    
    
    $
    2.3
    
    
    $
    0.5
    
    
    
    27.8
    %
 . Managements Discussion and
Analysis of Financial Condition and Results of Operations,  .
 Depreciation and Amortization
  Three Months EndedDecember 31,
    
    
    Increase
    
    
    % Increase2004
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)Same-hospital
    
    $
    12.9
    
    
    $
    13.9
    
    
    $
    1.0
    
    
    
    7.2
    %Former Province hospitals
    
    
    
    
    
    
    14.6
    
    
    
    14.6
    
    
    
    N/M2005 Acquisitions
    
    
    
    
    
    
    3.5
    
    
    
    3.5
    
    
    
    N/MOther acquisitions/corporate office
    
    
    0.7
    
    
    
    1.0
    
    
    
    0.3
    
    
    
    35.7$
    13.6
    
    
    $
    33.0
    
    
    $
    19.4
    
    
    
    141.3
 Interest Expense
 Three Months EndedDecember 31,
    
    
    Increase2004
    
    
    2005
    
    
    (Decrease)Interest expense (dollars in millions):Prior bank credit facility, including commitment fees
    
    $
    0.1
    
    
    $
    
    
    
    $
    (0.1
    )New senior credit facility, including commitment fees
    
    
    
    
    
    
    19.6
    
    
    
    19.64 1/2% convertible notes
    
    
    2.5
    
    
    
    
    
    
    
    (2.5
    )7 1/2% senior subordinated notes
    
    
    
    
    
    
    0.1
    
    
    
    0.13 1/4% convertible notes
    
    
    
    
    
    
    1.8
    
    
    
    1.8Other
    
    
    0.4
    
    
    
    0.5
    
    
    
    0.13.0
    
    
    
    22.0
    
    
    
    19.0Amortization of deferred loan costs
    
    
    0.4
    
    
    
    1.3
    
    
    
    0.9Less:Discontinued operations interest expense allocation
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )Interest income
    
    
    
    
    
    
    (0.5
    )
    
    
    (0.5
    )Capitalized interest
    
    
    (0.5
    )
    
    
    (0.7
    )
    
    
    (0.2
    )$
    2.9
    
    
    $
    22.0
    
    
    $
    19.1
 Managements Discussion and Analysis of Financial Condition and
Results of Operations
 80




---



##### Table of Contents



Provision for Income Taxes
 Three Months EndedDecember 31,
    
    Increase2004
    
    2005
    
    (Decrease)Provision for income taxes (in millions)
    
    $
    13.9
    
    
    $
    16.6
    
    
    $
    2.7Effective income tax rate
    
    
    37.5
    %
    
    
    38.9
    %
    
    
    140 bps
  For the Years Ended December 31, 2004 and 2005
 Revenue s
  Years EndedDecember 31,
    
    
    Increase
    
    
    % Increase2004
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)Same-hospital
    
    $
    975.8
    
    
    $
    1,034.0
    
    
    $
    58.2
    
    
    
    6.0
    %Former Province hospitals
    
    
    
    
    
    
    663.2
    
    
    
    663.2
    
    
    
    N/M2005 Acquisitions
    
    
    
    
    
    
    113.0
    
    
    
    113.0
    
    
    
    N/MOther acquisitions
    
    
    21.1
    
    
    
    44.9
    
    
    
    23.8
    
    
    
    112.8$
    996.9
    
    
    $
    1,855.1
    
    
    $
    858.2
    
    
    
    86.1
 Inpatient Revenues
 Business, 
 Outpatient Revenues
  Other
  81




---



##### Table of Contents



Continuing Operations
    
    Same-hospital2004
    
    2005
    
    2004
    
    2005Medicare
    
    
    36.9
    %
    
    
    36.6
    %
    
    
    36.9
    %
    
    
    37.1
    %Medicaid
    
    
    11.2
    
    
    
    9.4
    
    
    
    11.3
    
    
    
    10.7HMOs, PPOs and other private insurers
    
    
    38.7
    
    
    
    40.8
    
    
    
    38.6
    
    
    
    38.9Self-Pay
    
    
    9.3
    
    
    
    11.3
    
    
    
    9.1
    
    
    
    9.6Other
    
    
    3.9
    
    
    
    1.9
    
    
    
    4.1
    
    
    
    3.7100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Expenses
 Salaries and Benefits
 Years Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2004
    
    
    Revenues
    
    
    2005
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Salaries and benefits (dollars in millions):Salaries and wages
    
    $
    312.0
    
    
    
    31.3
    %
    
    $
    564.1
    
    
    
    30.4
    %
    
    $
    252.1
    
    
    
    80.8
    %Stock-based compensation
    
    
    1.8
    
    
    
    0.2
    
    
    
    6.6
    
    
    
    0.4
    
    
    
    4.8
    
    
    
    278.0Employee benefits
    
    
    73.4
    
    
    
    7.4
    
    
    
    133.2
    
    
    
    7.2
    
    
    
    59.8
    
    
    
    81.2Contract labor
    
    
    12.2
    
    
    
    1.2
    
    
    
    26.6
    
    
    
    1.4
    
    
    
    14.4
    
    
    
    118.6$
    399.4
    
    
    
    40.1
    %
    
    $
    730.5
    
    
    
    39.4
    %
    
    $
    331.1
    
    
    
    82.9ESOP expense (dollars in millions)
    
    $
    9.4
    
    
    
    0.9
    %
    
    $
    14.8
    
    
    
    0.8
    %
    
    $
    5.4
    
    
    
    57.4Continuing operations:Man-hours per equivalent admission
    
    
    83.8
    
    
    
    N/A
    
    
    
    89.3
    
    
    
    N/A
    
    
    
    5.5
    
    
    
    6.6Salaries and benefits per equivalent admission
    
    $
    2,059
    
    
    
    N/A
    
    
    $
    2,309
    
    
    
    N/A
    
    
    $
    250
    
    
    
    12.1Corporate office salaries and benefits (dollars in millions)
    
    $
    17.7
    
    
    
    1.8
    %
    
    $
    28.2
    
    
    
    1.5
    %
    
    $
    10.5
    
    
    
    59.2Same-hospital (dollars in millions):Salaries and wages
    
    $
    290.9
    
    
    
    29.8
    %
    
    $
    304.0
    
    
    
    29.4
    %
    
    $
    13.1
    
    
    
    4.5Employee benefits
    
    
    70.0
    
    
    
    7.2
    
    
    
    75.0
    
    
    
    7.2
    
    
    
    5.0
    
    
    
    7.2Contract labor
    
    
    11.6
    
    
    
    1.2
    
    
    
    10.1
    
    
    
    1.0
    
    
    
    (1.5
    )
    
    
    (12.8
    )$
    372.5
    
    
    
    38.2
    %
    
    $
    389.1
    
    
    
    37.6
    %
    
    $
    16.6
    
    
    
    4.5Same-hospital:Man-hours per equivalent admission
    
    
    83.4
    
    
    
    N/A
    
    
    
    83.3
    
    
    
    N/A
    
    
    
    (0.1
    )
    
    
    (0.2
    )Salaries and benefits per equivalent admission
    
    $
    2,040
    
    
    
    N/A
    
    
    $
    2,158
    
    
    
    N/A
    
    
    $
    118
    
    
    
    5.8
   82




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##### Table of Contents



Supplies
 Years EndedDecember 31,
    
    Increase
    
    % Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Continuing operations:Supplies (dollars in millions)
    
    $
    129.1
    
    
    $
    251.6
    
    
    $
    122.5
    
    
    
    94.9
    %Supplies as a percentage of revenues
    
    
    12.9
    %
    
    
    13.6
    %
    
    70bps
    
    
    N/MSupplies per equivalent admission
    
    $
    698
    
    
    $
    831
    
    
    $
    133
    
    
    
    19.0
    %Same-hospital:Supplies (dollars in millions)
    
    $
    125.9
    
    
    $
    135.5
    
    
    $
    9.6
    
    
    
    7.7
    %Supplies as a percentage of revenues
    
    
    12.9
    %
    
    
    13.1
    %
    
    20bps
    
    
    N/MSupplies per equivalent admission
    
    $
    694
    
    
    $
    756
    
    
    $
    62
    
    
    
    9.0
    %
  Other Operating Expenses
 Years Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2004
    
    
    Revenues
    
    
    2005
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Other operating expenses (dollars in millions):Professional fees
    
    $
    13.1
    
    
    
    1.3
    %
    
    $
    29.6
    
    
    
    1.6
    %
    
    $
    16.5
    
    
    
    126.4
    %Utilities
    
    
    16.7
    
    
    
    1.7
    
    
    
    35.1
    
    
    
    1.9
    
    
    
    18.4
    
    
    
    110.1Repairs and maintenance
    
    
    20.4
    
    
    
    2.0
    
    
    
    35.4
    
    
    
    1.9
    
    
    
    15.0
    
    
    
    73.9Rents and leases
    
    
    9.5
    
    
    
    1.0
    
    
    
    18.1
    
    
    
    1.0
    
    
    
    8.6
    
    
    
    90.3Insurance
    
    
    8.3
    
    
    
    0.8
    
    
    
    18.3
    
    
    
    1.0
    
    
    
    10.0
    
    
    
    121.3HCA-IT expense
    
    
    15.8
    
    
    
    1.6
    
    
    
    25.4
    
    
    
    1.4
    
    
    
    9.6
    
    
    
    61.4Physician recruiting
    
    
    14.8
    
    
    
    1.5
    
    
    
    26.8
    
    
    
    1.4
    
    
    
    12.0
    
    
    
    80.6Contract services
    
    
    32.5
    
    
    
    3.3
    
    
    
    64.5
    
    
    
    3.5
    
    
    
    32.0
    
    
    
    98.8Non-income taxes
    
    
    15.7
    
    
    
    1.6
    
    
    
    26.8
    
    
    
    1.4
    
    
    
    11.1
    
    
    
    71.2Other
    
    
    20.0
    
    
    
    1.9
    
    
    
    31.8
    
    
    
    1.6
    
    
    
    11.8
    
    
    
    58.0$
    166.8
    
    
    
    16.7
    %
    
    $
    311.8
    
    
    
    16.7
    %
    
    $
    145.0
    
    
    
    87.0Corporate office other operating expenses (dollars in millions)
    
    $
    11.4
    
    
    
    1.1
    %
    
    $
    21.1
    
    
    
    1.1
    %
    
    $
    9.7
    
    
    
    84.3Same-hospital other operating expenses (dollars in millions):Professional fees
    
    $
    12.5
    
    
    
    1.3
    %
    
    $
    15.2
    
    
    
    1.5
    %
    
    $
    2.7
    
    
    
    22.3Utilities
    
    
    16.1
    
    
    
    1.7
    
    
    
    18.1
    
    
    
    1.8
    
    
    
    2.0
    
    
    
    12.6Repairs and maintenance
    
    
    19.8
    
    
    
    2.0
    
    
    
    21.4
    
    
    
    2.1
    
    
    
    1.6
    
    
    
    7.7Rents and leases
    
    
    8.1
    
    
    
    0.8
    
    
    
    8.3
    
    
    
    0.8
    
    
    
    0.2
    
    
    
    2.3Insurance
    
    
    6.6
    
    
    
    0.7
    
    
    
    6.6
    
    
    
    0.6
    
    
    
    
    
    
    
    (0.3
    )HCA-IT expense
    
    
    15.5
    
    
    
    1.6
    
    
    
    15.7
    
    
    
    1.5
    
    
    
    0.2
    
    
    
    0.9Physician recruiting
    
    
    13.8
    
    
    
    1.4
    
    
    
    14.7
    
    
    
    1.4
    
    
    
    0.9
    
    
    
    6.6Contract services
    
    
    29.6
    
    
    
    3.0
    
    
    
    33.5
    
    
    
    3.2
    
    
    
    3.9
    
    
    
    13.2Non-income taxes
    
    
    15.2
    
    
    
    1.6
    
    
    
    17.6
    
    
    
    1.7
    
    
    
    2.4
    
    
    
    15.5Other
    
    
    13.4
    
    
    
    1.3
    
    
    
    12.5
    
    
    
    1.3
    
    
    
    (0.9
    )
    
    
    (6.7
    )$
    150.6
    
    
    
    15.4
    %
    
    $
    163.6
    
    
    
    15.9
    %
    
    $
    13.0
    
    
    
    8.6
  83




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##### Table of Contents



Provision for Doubtful Accounts
 Years EndedDecember 31,
    
    Increase
    
    % Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Continuing operations (dollars in millions):Provision for doubtful accounts
    
    $
    86.2
    
    
    $
    190.3
    
    
    $
    104.1
    
    
    
    120.6
    %Percentage of revenues
    
    
    8.7
    %
    
    
    10.3
    %
    
    160
    bps
    
    
    N/MCharity care write-offs
    
    $
    7.8
    
    
    $
    24.0
    
    
    $
    16.2
    
    
    
    209.0
    %Same-hospital (dollars in millions):Provision for doubtful accounts
    
    $
    83.3
    
    
    $
    87.4
    
    
    $
    4.1
    
    
    
    4.9
    %Percentage of revenues
    
    
    8.5
    %
    
    
    8.4
    %
    
    (10)
bps
    

    
    N/MCharity care write-offs
    
    $
    7.8
    
    
    $
    8.5
    
    
    $
    0.7
    
    
    
    10.0
    %
 , . Managements Discussion and Analysis of Financial Condition and Results of Operations
 Depreciation and Amortization
  Years EndedDecember 31,
    
    
    Increase
    
    
    % Increase2004
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)Same-hospital
    
    $
    46.5
    
    
    $
    53.0
    
    
    $
    6.5
    
    
    
    14.0
    %Former Province hospitals
    
    
    
    
    
    
    38.1
    
    
    
    38.1
    
    
    
    N/M2005 Acquisitions
    
    
    
    
    
    
    7.0
    
    
    
    7.0
    
    
    
    N/MOther acquisitions/corporate office
    
    
    1.6
    
    
    
    3.0
    
    
    
    1.4
    
    
    
    87.5$
    48.1
    
    
    $
    101.1
    
    
    $
    53.0
    
    
    
    110.0
 84




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##### Table of Contents



Interest Expense
 Years EndedDecember 31,
    
    
    Increase2004
    
    
    2005
    
    
    (Decrease)Interest expense (dollars in millions):Prior bank credit facility, including commitment fees
    
    $
    1.2
    
    
    $
    
    
    
    $
    (1.2
    )New senior credit facility, including commitment fees
    
    
    
    
    
    
    50.8
    
    
    
    50.8Senior subordinated credit agreement
    
    
    
    
    
    
    2.1
    
    
    
    2.14 1/2% convertible notes
    
    
    10.6
    
    
    
    4.5
    
    
    
    (6.1
    )4 1/4% convertible notes
    
    
    
    
    
    
    0.3
    
    
    
    0.37 1/2% senior subordinated notes
    
    
    
    
    
    
    0.3
    
    
    
    0.33 1/4% convertible notes
    
    
    
    
    
    
    2.8
    
    
    
    2.8Other
    
    
    0.7
    
    
    
    0.7
    
    
    
    12.5
    
    
    
    61.5
    
    
    
    49.0Amortization of deferred loan costs
    
    
    1.5
    
    
    
    4.1
    
    
    
    2.6Less:Discontinued operations interest expense allocation
    
    
    
    
    
    
    (0.4
    )
    
    
    (0.4
    )Interest income
    
    
    (0.3
    )
    
    
    (1.9
    )
    
    
    (1.6
    )Capitalized interest
    
    
    (1.1
    )
    
    
    (3.0
    )
    
    
    (1.9
    )$
    12.6
    
    
    $
    60.3
    
    
    $
    47.7
 .
Managements Discussion and Analysis of Financial Condition and Results of Operations,
 Debt Retirement Costs
  Years EndedDecember 31,2004
    
    
    2005Legal fees paid for retirement of assumed
Province debt, our convertible notes and
previous credit facility
    
    $
    
    
    
    $
    1.2Tender premiums paid on convertible notes
    
    
    0.9
    
    
    
    4.8Deferred loan costs expensed on tender of our
convertible notes and previous credit facility
    
    
    0.6
    
    
    
    5.7Creditor fees and other expenses
    
    
    
    
    
    
    0.5$
    1.5
    
    
    $
    12.2
 Transaction Costs
  Adjustment to Province acquired accounts receivable
    
    $
    26.4Adjustment to Province assumed liabilities, primarily related to professional
and general liability claims
    
    
    7.3Retention bonuses paid to former Province employees
    
    
    4.2Compensation expense (primarily restricted stock vesting from change in control)
    
    
    5.3$
    43.2
 85




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##### Table of Contents



Provision for Income Taxes
 Years EndedDecember 31,
    
    Increase2004
    
    2005
    
    (Decrease)Provision for income taxes (in millions):
    
    $
    56.0
    
    
    $
    58.4
    
    
    $
    2.4Effective income tax rate
    
    
    39.2
    %
    
    
    42.3
    %
    
    310
    bps
  For the Years Ended December 31, 2003 and 2004
 Revenues
  Years EndedDecember 31,
    
    
    Increase
    
    
    % Increase2003
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)Same-hospital
    
    $
    869.1
    
    
    $
    951.7
    
    
    $
    82.6
    
    
    
    9.5
    %Acquisitions
    
    
    6.5
    
    
    
    45.2
    
    
    
    38.7
    
    
    
    N/M$
    875.6
    
    
    $
    996.9
    
    
    $
    121.3
    
    
    
    13.9
 Inpatient Revenues
  Outpatient Revenues
  Other
  86




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##### Table of Contents



Continuing Operations
    
    Same-hospital2003
    
    2004
    
    2003
    
    2004Medicare
    
    
    35.9
    %
    
    
    36.9
    %
    
    
    36.6
    %
    
    
    37.3
    %Medicaid
    
    
    10.9
    
    
    
    11.2
    
    
    
    10.9
    
    
    
    11.3HMOs, PPOs and other private insurers
    
    
    40.5
    
    
    
    38.7
    
    
    
    39.8
    
    
    
    38.7Self-Pay
    
    
    8.6
    
    
    
    9.3
    
    
    
    8.6
    
    
    
    9.0Other
    
    
    4.1
    
    
    
    3.9
    
    
    
    4.1
    
    
    
    3.7100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Expenses
 Salaries and Benefits
 Years Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2003
    
    
    Revenues
    
    
    2004
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Salaries and benefits (dollars in millions):Salaries and wages
    
    $
    276.3
    
    
    
    31.6
    %
    
    $
    312.0
    
    
    
    31.3
    %
    
    $
    35.7
    
    
    
    12.9
    %Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1.8
    
    
    
    0.2
    
    
    
    1.8
    
    
    
    N/MEmployee benefits
    
    
    62.6
    
    
    
    7.1
    
    
    
    73.4
    
    
    
    7.4
    
    
    
    10.8
    
    
    
    17.5Contract labor
    
    
    13.4
    
    
    
    1.5
    
    
    
    12.2
    
    
    
    1.2
    
    
    
    (1.2
    )
    
    
    (8.9
    )$
    352.3
    
    
    
    40.2
    %
    
    $
    399.4
    
    
    
    40.1
    %
    
    $
    47.1
    
    
    
    13.4ESOP expense (dollars in millions)
    
    $
    6.9
    
    
    
    0.8
    %
    
    $
    9.4
    
    
    
    0.9
    %
    
    $
    2.5
    
    
    
    37.5Continuing operations:Man-hours per equivalent admission
    
    
    83.3
    
    
    
    N/A
    
    
    
    83.8
    
    
    
    N/A
    
    
    
    0.5
    
    
    
    0.6Salaries and benefits per equivalent admission
    
    $
    1,925
    
    
    
    N/A
    
    
    $
    2,059
    
    
    
    N/A
    
    
    $
    134
    
    
    
    7.0Corporate office salaries and benefits (dollars in millions)
    
    $
    14.3
    
    
    
    1.6
    %
    
    $
    17.7
    
    
    
    1.8
    %
    
    $
    3.4
    
    
    
    24.1Same-hospital (dollars in millions):Salaries and wages
    
    $
    273.9
    
    
    
    31.5
    %
    
    $
    296.8
    
    
    
    31.2
    %
    
    $
    22.9
    
    
    
    8.4Employee benefits
    
    
    62.0
    
    
    
    7.2
    
    
    
    70.2
    
    
    
    7.4
    
    
    
    8.2
    
    
    
    13.2Contract labor
    
    
    13.3
    
    
    
    1.5
    
    
    
    11.7
    
    
    
    1.2
    
    
    
    (1.6
    )
    
    
    (12.1
    )$
    349.2
    
    
    
    40.2
    %
    
    $
    378.7
    
    
    
    39.8
    %
    
    $
    29.5
    
    
    
    8.5Same-hospital:Man-hours per equivalent admission
    
    
    83.2
    
    
    
    N/A
    
    
    
    83.4
    
    
    
    N/A
    
    
    
    0.2
    
    
    
    0.2Salaries and benefits per equivalent admission
    
    $
    1,923
    
    
    
    N/A
    
    
    $
    2,045
    
    
    
    N/A
    
    
    $
    122
    
    
    
    6.3
  87




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##### Table of Contents



Supplies
 Years EndedDecember 31,
    
    Increase
    
    % Increase2003
    
    2004
    
    (Decrease)
    
    (Decrease)Continuing operations:Supplies (dollars in millions)
    
    $
    114.2
    
    
    $
    129.1
    
    
    $
    14.9
    
    
    
    13.1
    %Supplies as a percentage of revenues
    
    
    13.0
    %
    
    
    12.9
    %
    
    (10
    ) bps
    
    
    N/MSupplies per equivalent admission
    
    $
    650
    
    
    $
    698
    
    
    $
    48
    
    
    
    7.3
    %Same-hospital:Supplies (dollars in millions)
    
    $
    113.2
    
    
    $
    122.9
    
    
    $
    9.7
    
    
    
    8.5
    %Supplies as a percentage of revenues
    
    
    13.0
    %
    
    
    12.9
    %
    
    (10
    ) bps
    

    
    N/MSupplies per equivalent admission
    
    $
    650
    
    
    $
    697
    
    
    $
    47
    
    
    
    7.3
    %
  Other Operating Expenses
 Years Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2003
    
    
    Revenues
    
    
    2004
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Other operating expenses (dollars in millions):Professional fees
    
    $
    14.7
    
    
    
    1.7
    %
    
    $
    13.1
    
    
    
    1.3
    %
    
    $
    (1.6
    )
    
    
    (11.2
    )%Utilities
    
    
    14.6
    
    
    
    1.7
    
    
    
    16.7
    
    
    
    1.7
    
    
    
    2.1
    
    
    
    14.4Repairs and maintenance
    
    
    17.2
    
    
    
    2.0
    
    
    
    20.4
    
    
    
    2.0
    
    
    
    3.2
    
    
    
    18.6Rents and leases
    
    
    8.4
    
    
    
    1.0
    
    
    
    9.5
    
    
    
    1.0
    
    
    
    1.1
    
    
    
    13.6Insurance
    
    
    11.2
    
    
    
    1.3
    
    
    
    8.3
    
    
    
    0.8
    
    
    
    (2.9
    )
    
    
    (26.3
    )HCA-IT expense
    
    
    14.2
    
    
    
    1.6
    
    
    
    15.8
    
    
    
    1.6
    
    
    
    1.6
    
    
    
    11.1Physician recruiting
    
    
    13.0
    
    
    
    1.5
    
    
    
    14.8
    
    
    
    1.5
    
    
    
    1.8
    
    
    
    14.4Contract services
    
    
    30.8
    
    
    
    3.5
    
    
    
    32.5
    
    
    
    3.3
    
    
    
    1.7
    
    
    
    5.5Non-income taxes
    
    
    14.2
    
    
    
    1.6
    
    
    
    15.7
    
    
    
    1.6
    
    
    
    1.5
    
    
    
    10.3Other
    
    
    17.1
    
    
    
    1.9
    
    
    
    20.0
    
    
    
    1.9
    
    
    
    2.9
    
    
    
    17.6$
    155.4
    
    
    
    17.8
    %
    
    $
    166.8
    
    
    
    16.7
    %
    
    $
    11.4
    
    
    
    7.4Corporate office other operating expenses (dollars in millions)
    
    $
    9.9
    
    
    
    1.1
    %
    
    $
    11.4
    
    
    
    1.1
    %
    
    $
    1.5
    
    
    
    15.2Same-hospital other operating expenses (dollars in millions):Professional fees
    
    $
    14.7
    
    
    
    1.7
    %
    
    $
    12.9
    
    
    
    1.4
    %
    
    $
    (1.8
    )
    
    
    (12.3
    )Utilities
    
    
    14.5
    
    
    
    1.7
    
    
    
    15.8
    
    
    
    1.7
    
    
    
    1.3
    
    
    
    8.8Repairs and maintenance
    
    
    17.0
    
    
    
    2.0
    
    
    
    19.4
    
    
    
    2.0
    
    
    
    2.4
    
    
    
    13.9Rents and leases
    
    
    8.3
    
    
    
    1.0
    
    
    
    8.8
    
    
    
    0.9
    
    
    
    0.5
    
    
    
    5.6Insurance
    
    
    11.1
    
    
    
    1.3
    
    
    
    7.6
    
    
    
    0.8
    
    
    
    (3.5
    )
    
    
    (31.2
    )HCA-IT expense
    
    
    13.7
    
    
    
    1.6
    
    
    
    15.2
    
    
    
    1.6
    
    
    
    1.5
    
    
    
    11.4Physician recruiting
    
    
    12.0
    
    
    
    1.4
    
    
    
    13.8
    
    
    
    1.4
    
    
    
    1.8
    
    
    
    14.3Contract services
    
    
    30.8
    
    
    
    3.5
    
    
    
    30.4
    
    
    
    3.2
    
    
    
    (0.4
    )
    
    
    (1.3
    )Non-income taxes
    
    
    14.1
    
    
    
    1.6
    
    
    
    14.7
    
    
    
    1.5
    
    
    
    0.6
    
    
    
    4.3Other
    
    
    17.9
    
    
    
    1.9
    
    
    
    19.5
    
    
    
    2.1
    
    
    
    1.6
    
    
    
    9.3$
    154.1
    
    
    
    17.7
    %
    
    $
    158.1
    
    
    
    16.6
    %
    
    $
    4.0
    
    
    
    2.6
 Managements Discussion and Analysis of Financial Condition and Results of Operations, .
 88




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##### Table of Contents



Provision for Doubtful Accounts
 Years EndedDecember 31,
    
    Increase
    
    % Increase2003
    
    2004
    
    (Decrease)
    
    (Decrease)Continuing operations (dollars in millions):Provision for doubtful accounts
    
    $
    74.1
    
    
    $
    86.2
    
    
    $
    12.1
    
    
    
    16.3
    %Percentage of revenues
    
    
    8.5
    %
    
    
    8.7
    %
    
    20
    bps
    

    
    N/MCharity care write-offs
    
    $
    5.2
    
    
    $
    7.8
    
    
    $
    2.6
    
    
    
    51.2
    %Same-hospital (dollars in millions):Provision for doubtful accounts
    
    $
    73.5
    
    
    $
    81.1
    
    
    $
    7.6
    
    
    
    10.2
    %Percentage of revenues
    
    
    8.5
    %
    
    
    8.5
    %
    
    
    
    
    
    
    N/MCharity care write-offs
    
    $
    5.2
    
    
    $
    7.8
    
    
    $
    2.6
    
    
    
    51.2
    %
 . Managements
Discussion and Analysis of Financial Condition and Results of Operations
 Depreciation and Amortization
  Years EndedDecember 31,
    
    
    Increase
    
    
    % Increase2003
    
    
    2004
    
    
    (Decrease)
    
    
    (Decrease)Same-hospital
    
    $
    43.0
    
    
    $
    46.5
    
    
    $
    3.5
    
    
    
    8.3
    %Acquisitions
    
    
    0.1
    
    
    
    1.6
    
    
    
    1.5
    
    
    
    961.7$
    43.1
    
    
    $
    48.1
    
    
    $
    5.0
    
    
    
    11.6
 Interest Expense
 Years EndedDecember 31,
    
    
    Increase2003
    
    
    2004
    
    
    (Decrease)Interest expense (dollars in millions):Prior bank credit facility, including commitment fees
    
    $
    1.0
    
    
    $
    1.2
    
    
    $
    0.24 1/2% convertible notes
    
    
    11.3
    
    
    
    10.6
    
    
    
    (0.7
    )Other
    
    
    0.5
    
    
    
    0.7
    
    
    
    0.212.8
    
    
    
    12.5
    
    
    
    (0.3
    )Amortization of deferred loan costs
    
    
    1.6
    
    
    
    1.5
    
    
    
    (0.1
    )Less:Interest income
    
    
    (0.8
    )
    
    
    (0.3
    )
    
    
    0.5Capitalized interest
    
    
    (0.8
    )
    
    
    (1.1
    )
    
    
    (0.3
    )$
    12.8
    
    
    $
    12.6
    
    
    $
    (0.2
    )
  Provision for Income Taxes
 Years EndedDecember 31,
    
    
    Increase2003
    
    
    2004
    
    
    (Decrease)Provision
for income taxes (dollars in millions):
    
    $
    45.9
    
    
    $
    56.0
    
    
    $
    10.1Effective income tax rate
    
    
    39.6
    %
    
    
    39.2
    %
    
    
    (40
    ) bps
  89




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##### Table of Contents



Liquidity and Capital Resources
 Liquidity
   2003
    
    
    2004
    
    
    2005Net cash flows provided by continuing
operating activities
    
    $
    105.0
    
    
    $
    148.6
    
    
    $
    296.4Less: Purchase of property and equipment
    
    
    68.3
    
    
    
    82.0
    
    
    
    170.1Free operating cash flow
    
    
    36.7
    
    
    
    66.6
    
    
    
    126.3Acquisitions
    
    
    (16.5
    )
    
    
    (30.5
    )
    
    
    (963.6
    )Proceeds from sale of hospital
    
    
    
    
    
    
    
    
    
    
    32.5Proceeds from borrowings
    
    
    20.0
    
    
    
    30.0
    
    
    
    1,967.0Payments on borrowings
    
    
    
    
    
    
    (79.9
    )
    
    
    (1,156.9
    )Payment of debt issue costs
    
    
    
    
    
    
    
    
    
    
    (40.7
    )Repurchase of common stock
    
    
    (45.7
    )
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    3.7
    
    
    
    10.2
    
    
    
    43.6Other
    
    
    1.6
    
    
    
    0.8
    
    
    
    (1.4
    )Cash (used in) provided by discontinued operations
    
    
    (2.2
    )
    
    
    0.8
    
    
    
    5.0Net (decrease) increase in cash
and cash equivalents
    
    $
    (2.4
    )
    
    $
    (2.0
    )
    
    $
    11.8
  Working Capital
  2003
    
    
    2004
    
    
    2005Total current assets
    
    $
    205.3
    
    
    $
    230.9
    
    
    $
    421.6Total current liabilities
    
    
    68.8
    
    
    
    82.3
    
    
    
    230.1Net working capital
    
    $
    136.5
    
    
    $
    148.6
    
    
    $
    191.5Current ratio
    
    
    2.98
    
    
    
    2.81
    
    
    
    1.83
 90




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##### Table of Contents



Capital Expenditures
  2003
    
    
    2004
    
    
    2005Capital projects
    
    $
    42.1
    
    
    $
    52.5
    
    
    $
    101.7Routine
    
    
    22.7
    
    
    
    21.6
    
    
    
    43.2Purchase of buildings
    
    
    
    
    
    
    
    
    
    
    3.2Information systems
    
    
    3.5
    
    
    
    7.9
    
    
    
    22.0$
    68.3
    
    
    $
    82.0
    
    
    $
    170.1Depreciation expense
    
    $
    42.4
    
    
    $
    47.3
    
    
    $
    99.8Ratio of capital expenditures
to depreciation expense
    
    
    161.5
    %
    
    
    173.4
    %
    
    
    170.4
    %
  Debt
  Balance as of
    
    
    Proceeds from
    
    
    Payments of
    
    
    
    
    
    
    Balance as ofDecember 31, 2004
    
    
    Debt Borrowings
    
    
    Borrowings (g)
    
    
    Other
    
    
    December 31, 2005Senior Credit Facility:Term B Loans (a) (e)
    
    $
    
    
    
    $
    1,400.0
    
    
    $
    (118.1
    )
    
    $
    
    
    
    $
    1,281.9Revolving Credit Loans (b) (e)
    
    
    
    
    
    
    150.0
    
    
    
    (150.0
    )
    
    
    
    
    
    
    Senior Subordinated Credit Agreement (c) (d)
    
    
    
    
    
    
    192.0
    
    
    
    (192.0
    )
    
    
    
    
    
    
    Previous Province Credit Facility (a) (f)
    
    
    
    
    
    
    
    
    
    
    (27.0
    )
    
    
    27.0
    
    
    
    Provinces 7 1/2% Senior Subordinated Notes (a) (f)
    
    
    
    
    
    
    
    
    
    
    (193.9
    )
    
    
    200.0
    
    
    
    6.1Provinces 4 1/4% Convertible Subordinated Notes (a)
(f)
    
    
    
    
    
    
    
    
    
    
    (172.4
    )
    
    
    172.5
    
    
    
    0.1Provinces 4 1/2% Convertible Subordinated Notes (a)
(f)
    
    
    
    
    
    
    
    
    
    
    (76.0
    )
    
    
    76.0
    
    
    
    LifePoints 4 1/2% Convertible Subordinated Notes (c)
    
    
    221.0
    
    
    
    
    
    
    
    (185.1
    )
    
    
    (35.9
    )
    
    
    3 1/4% Convertible Senior Subordinated Debentures (d)
    
    
    
    
    
    
    225.0
    
    
    
    
    
    
    
    
    
    
    
    225.0Other, including capital leases (f)
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    3.4
    
    
    
    3.2$
    221.0
    
    
    $
    1,967.0
    
    
    $
    (1,114.7
    )
    
    $
    443.0
    
    
    $
    1,516.3
 
 (a)
    
    Represents the borrowings of $1,250.0 million of Term B loans under our senior credit
facility to finance the Province business combination and repay the Province assumed debt.(b)
    
    Represents the borrowings of $150.0 million in the form of revolving loans under our senior
credit facility, the proceeds of which were used in connection with the DRMC acquisition. The
revolving loans were borrowed as a temporary financing until additional Term B loans could be
borrowed.(c)
    
    Represents the borrowings under the Senior Subordinated Credit Agreement to purchase and
retire $185.1 million of the 4 1/2% Convertible Subordinated Notes, another $35.9 million of
the 4 1/2% Convertible Subordinated Notes were converted to 757,482 shares of common stock.(d)
    
    Represents the issuance of the 3 1/4% Convertible Senior Subordinated Debentures, the
proceeds of which were used to retire the Senior Subordinated Credit Agreement. The Senior
Subordinated Credit Agreement was entered into as a temporary financing until we could issue
the 3 1/4% Convertible Senior Subordinated Debentures. 91




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##### Table of Contents



(e)
    
    Represents the borrowings of $150.0 million in the form of additional Term B loans, the
proceeds of which were used to repay the $150.0 million of the revolving loans.(f)
    
    Represents the assumption of debt in connection with the Province business combination.(g)
    
    Payments on borrowings do not include $42.3 million of premiums paid to retire such debt.  December 31,
    
    
    December 31,
    
    
    Increase2004
    
    
    2005
    
    
    (Decrease)Current portion of long-term debt
    
    $
    
    
    
    $
    0.5
    
    
    $
    0.5Long-term debt
    
    
    221.0
    
    
    
    1,515.8
    
    
    
    1,294.8Total debt
    
    
    221.0
    
    
    
    1,516.3
    
    
    
    1,295.3Total stockholders equity
    
    
    509.5
    
    
    
    1,287.8
    
    
    
    778.3Total capitalization
    
    $
    730.5
    
    
    $
    2,804.1
    
    
    
    2,073.6Total debt to total capitalization
    
    
    30.3
    %
    
    
    54.1
    %
    
    
    2,380
    bpsPercentage of:Fixed rate debt
    
    
    100.0
    %
    
    
    15.5
    %Variable rate debt
    
    
    
    
    
    
    84.5100.0
    %
    
    
    100.0
    %Percentage of:Senior debt
    
    
    
    %
    
    
    84.8
    %Subordinated debt
    
    
    100.0
    
    
    
    15.2100.0
    %
    
    
    100.0
    %
  Capital Resources
 New Senior Secured Credit Facilities
   92




---



##### Table of Contents



Level atRequirement
    
    
    December 31, 2005Minimum Interest Coverage Ratio
    
    
    3 3.25:1.00
    
    
    
    5.61Maximum Total Leverage Coverage Ratio
    
    
    £ 4.75:1.00
    
    
    
    3.43
     93




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##### Table of Contents



Debt Ratings
  
    
    Moodys Investors Service, Inc. (Moodys); and
    
    Standard & Poors Rating Services, a division of McGraw-Hill Companies, Inc. (S&P).
   Moodys
    
    S&PSenior
    
    Senior ImpliedUnsecured
    
    Issuer
    
    
    
    IssuerDate
    
    Issuer Rating
    
    Rating
    
    Outlook
    
    Rating
    
    OutlookApril 1999
    
    
    
    
    
    
    
    B+
    
    StableOctober 1999
    
    
    
    B1
    
    Stable
    
    B+
    
    StableFebruary 2001
    
    
    
    B1
    
    Positive
    
    B+
    
    StableMay 2001
    
    
    
    Ba3
    
    Stable
    
    B+
    
    StableJune 2001
    
    B2
    
    Ba3
    
    Stable
    
    BB-
    
    StableJune 2002
    
    B2
    
    Ba3
    
    Stable
    
    BB-
    
    StableDecember 2003
    
    B2
    
    Ba3
    
    Stable
    
    BB
    
    StableAugust 2004
    
    B2
    
    Ba3
    
    Negative
    
    BB
    
    NegativeMarch 2005
    
    B2
    
    Ba3
    
    Stable
    
    BB
    
    StableJuly 2005
    
    B2
    
    Ba3
    
    Stable
    
    BB
    
    Negative
 
 Note: Dates represent change in rating or outlook. Senior Subordinated Credit Agreement
   94




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Previous Credit Facilities
  Province 7 1/2% Senior Subordinated Notes
    Province 4 1/4% Convertible Subordinated Notes
  Province 4 1/2% Convertible Subordinated Notes
  4 1/2% Convertible Subordinated Notes
   95




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##### Table of Contents



3 1/4% Convertible Senior Subordinated Debentures due August 15, 2025
      Liquidity and Capital Resources Outlook
   96




---



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Contractual Obligations, Commitments and Off-Balance Sheet Arrangements
 Contractual Obligations
   Payment Due by PeriodContractual Obligations
    
    Total
    
    
    2006
    
    
    2007-2008
    
    
    2009-2010
    
    
    After 2010Long-term debt obligations (a)
    
    $
    2,127.8
    
    
    $
    87.1
    
    
    $
    174.2
    
    
    $
    174.1
    
    
    $
    1,692.4Capital lease obligations
    
    
    4.2
    
    
    
    0.7
    
    
    
    1.3
    
    
    
    0.9
    
    
    
    1.3Operating lease obligations (b)
    
    
    66.7
    
    
    
    13.3
    
    
    
    18.8
    
    
    
    11.9
    
    
    
    22.7Other long-term liabilities (c)
    
    
    2.5
    
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.3
    
    
    
    1.5Purchase obligations (d)
    
    
    328.8
    
    
    
    127.0
    
    
    
    124.5
    
    
    
    38.6
    
    
    
    38.7$
    2,530.0
    
    
    $
    228.5
    
    
    $
    319.1
    
    
    $
    225.8
    
    
    $
    1,756.6
 
 (a)
    
    Included in long-term debt obligations are principal and interest owed on our outstanding
debt obligations. These obligations are explained further in Note 6 to our consolidated
financial statements included elsewhere in this report. We used the
6.185% effective interest rate at December 31, 2005 for our
$1,281.9 million outstanding Term B Loans to estimate interest
payments on this variable rate debt. Holders of our $225.0 million
outstanding 3 1/4% Debentures may require us to purchase for cash
some or all of the 3 1/4% Debentures on February 15, 2013, February
15, 2015, and February 15, 2020. For purposes of the above table, we
assumed that our 3 1/4% Debentures would be outstanding during its
entire term, which ends on August 15, 2025.(b)
    
    This reflects our future minimum operating lease payments. We enter into operating leases in
the normal course of business. Substantially all of our operating lease agreements have fixed payment
terms based on the passage of time. Some lease agreements provide us with the option to renew
the lease. Our future operating lease obligations would change if we exercised these renewal
options and if we entered into additional operating lease agreements. Please refer to Note
8 to our consolidated financial statements included elsewhere in this report for more
information regarding our operating leases.(c)
    
    We had a $60.3 million other long-term liability balance on our consolidated balance
sheet as of December 31, 2005. This balance reflected a $55.3 million reserve for professional
and general liability claims and $5.0 million related to other liabilities. We excluded the
$55.3 million reserve for professional and general liability claims
and $2.5 million of other
liabilities because of the uncertainty of the dollar amounts to be ultimately paid as well as
the timing of such amounts. Please refer to Part II, Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations, Critical Accounting Estimates 
Professional and general liability claims in this report for more information. 97




---



##### Table of Contents



(d)
    
    The following table summarizes our significant purchase obligations as of December 31, 2005
and the future periods in which such obligations are expected to be settled in cash (in
millions): Payment Due by PeriodPurchase Obligations
    
    Total
    
    
    2006
    
    
    2007-2008
    
    
    2009-2010
    
    
    After 2010HCA-IT services (e)
    
    $
    112.1
    
    
    $
    23.7
    
    
    $
    58.3
    
    
    $
    30.1
    
    
    $
    Capital expenditure obligations (f)
    
    
    66.9
    
    
    
    36.1
    
    
    
    26.6
    
    
    
    
    
    
    
    4.2Physician commitments (g)
    
    
    16.0
    
    
    
    16.0
    
    
    
    
    
    
    
    
    
    
    
    GEMS obligations (h)
    
    
    22.7
    
    
    
    10.1
    
    
    
    12.6
    
    
    
    
    
    
    
    Other purchase obligations (i)
    
    
    111.1
    
    
    
    41.1
    
    
    
    27.0
    
    
    
    8.5
    
    
    
    34.5$
    328.8
    
    
    $
    127.0
    
    
    $
    124.5
    
    
    $
    38.6
    
    
    $
    38.7
 
 (e)
    
    HCA-IT provides various information systems services, including, but not limited to,
financial, clinical, patient accounting and network information services to us under a
contract that expires on December 31, 2009. The amounts are based on estimated fees that will
be charged to our hospitals as of December 31, 2005 with an annual fee increase that is capped
by the consumer price index increase. We used a 4.0% annual rate increase as the estimated
consumer price index increase for the contract period. These fees will increase if we acquire
additional hospitals and use HCA-IT for information system conversion services at the acquired
hospitals.(f)
    
    We had projects under construction with an estimated additional cost to complete and equip of
approximately $118.7 million as of December 31, 2005. Because we can terminate substantially all
of the related construction contracts at any time without paying a termination fee, these
costs are excluded from the above table except for amounts contractually committed by us. In
addition, as discussed in Part I, Item 3. Legal Proceedingsof this report, we may be required
to make significant expenditures in order to bring our facilities into compliance with the
ADA. We are currently unable to estimate the costs that could be associated with modifying our
facilities because these costs are negotiated and determined on a facility-by-facility basis
and, therefore, have varied and will continue to vary significantly among facilities.(g)
    
    In consideration for a physician relocating to one of the communities, in which our hospitals
are located and agreeing to engage in private practice for the benefit of the respective
community, we may loan certain amounts to a physician, normally over a period of one year, to
assist in establishing his or her practice. We have committed to advance a maximum amount of
approximately $40.0 million as of December 31, 2005. The actual amount of such commitments to
be advanced often depends upon the financial results of a physicians private practice during
the loan period. The physician commitment amounts reflected in the above table were estimated
based on our historical amounts actually paid to physicians.(h)
    
    General Electric Medical Services (GEMS) provides diagnostic imaging equipment maintenance
and bio-medical services to us pursuant to a contract that expires on March 31, 2008. The
amounts in this table reflect our obligation based on the equipment we owned as of December
31, 2005.(i)
    
    Reflects our minimum commitments to purchase goods or services under non-cancelable contracts
as of December 31, 2005. Legal and Tax Matters
  Off-Balance Sheet Arrangements
  98




---



##### Table of Contents



Recently Issued Accounting Pronouncements
  
     99




---



##### Table of Contents



Segment Reporting
   
    
    the nature of the products and services;
    
    the nature of the production processes;
    
    the type or class of customer for their products and services;
    
    the methods used to distribute their products or provide their services; and
    
    if applicable, the nature of the regulatory environment, for example, banking,
insurance, or public utilities.
  
    
    the treatment of patients in a hospital setting is the only material source of revenues
for each of our operating divisions;
    
    the healthcare services provided by each of our operating divisions are generally the
same;
    
    the healthcare services provided by each of our operating divisions are generally
provided to similar types of patients, which are patients in a hospital setting;
    
    the healthcare services are primarily provided by the direction of affiliated or
employed physicians and by the nurses, lab technicians and others employed or contracted at
each of our hospitals; and
    
    the healthcare regulatory environment is generally similar for each of our operating
divisions.
  Inflation
  100




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
 Interest Rates
  Outstanding Debt
 1 4
  Cash Balances
  
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
    Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information.
  101




---



##### Table of Contents








PART III





Item 10. Directors and Executive Officers of the Registrant.


Executive Officers




Code of Ethics


www.lifepointhospitals.com


Directors




Compliance with Section 16(a) of the Exchange Act







Item 11. Executive Compensation.







Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.







Item 13. Certain Relationships and Related Transactions.




Item 14. Principal Accountant Fees and Services.


102




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##### Table of Contents



PART IV
 
 Item 15. Exhibit and Financial Statement Schedules.
  Consolidated Financial Statements:
  Financial Statements and Supplementary Data
 Consolidated Financial Statement Schedules:
  Exhibits:
 ExhibitNumber
    
    
    
    Description of Exhibits2.1
    
    
    
    Agreement and Plan of Merger, dated as of August 15, 2004, by and among LifePoint
Hospitals, Inc., Lakers Holding Corp., Lakers Acquisition Corp., Pacers Acquisition
Corp., and Province Healthcare Company (a)2.2
    
    
    
    Amendment No. 1 to Agreement and Plan of Merger, dated as of January 25, 2005, by
and among LifePoint Hospitals, Inc., Lakers Holding Corp., Lakers Acquisition Corp.,
Pacers Acquisition Corp. and Province Healthcare Company (b)2.3
    
    
    
    Amendment No. 2 to Agreement
and Plan of Merger, dated as of March 15, 2005, by and among
LifePoint Hospitals, Inc., Lakers Holding Corp., Lakers Acquisition Corp., Pacers
Acquisition Corp., and Province Healthcare Company (c)2.4
    
    
    
    Distribution Agreement dated May 11, 1999 by and among Columbia/HCA, Triad
Hospitals, Inc. and LifePoint Hospitals, Inc. (c)3.1
    
    
    
    Amended and Restated Certificate of Incorporation (d)3.2
    
    
    
    Amended and Restated Bylaws of LifePoint Hospitals, Inc. (d)4.1
    
    
    
    Form of Specimen Stock Certificate (e)4.2
    
    
    
    Rights Agreement, dated as of April 15, 2005, by and between LifePoint Hospitals,
Inc. and National City Bank, as Rights Agent (d)4.3
    
    
    
    Subordinated Indenture, dated as of May 27, 2003, between Province Healthcare
Company and U.S. Bank Trust National Association, as Trustee (f)4.4
    
    
    
    First Supplemental Indenture to Subordinated Indenture, dated as of May 27, 2003, by
and among Province Healthcare Company and U.S. Bank National Association, as
Trustee, relating to Province Healthcare Companys 7 1/2% Senior Subordinated Notes
due 2013 (f)4.5
    
    
    
    Second Supplemental Indenture to Subordinated Indenture, dated as of April 1, 2005,
by and among Province Healthcare Company and U.S. Bank National Association, as
Trustee (g)4.6
    
    
    
    Indenture, dated as of October 10, 2001, between Province Healthcare Company and
National City Bank, including the forms of Province Healthcare Companys 4 1/4%
Convertible Subordinated Notes due 2008 (h)4.7
    
    
    
    First Supplemental Indenture, dated as of April 15, 2005, by and among Province
Healthcare Company, LifePoint Hospitals, Inc. and U.S. Bank National Association (as
successor in interest to National City Bank), as trustee to the Indenture dated as
of October 10, 2001, relating to Province Healthcare Companys 4 1/4% Convertible
Subordinated Notes due 2008 (i)4.8
    
    
    
    Indenture, dated August 10, 2005, between LifePoint Hospitals, Inc. and Citibank,
N.A., as Trustee (j)4.9
    
    
    
    Form of 3.25% Convertible Senior Subordinated Debenture due 2025 (included as part
of Exhibit 4.8) (j)4.10
    
    
    
    Registration Rights Agreement, dated August 10, 2005, between LifePoint Hospitals,
Inc. and Citigroup Global Markets Inc. as Representatives of the Initial Purchasers
(j)10.1
    
    
    
    Tax Sharing and Indemnification Agreement, dated May 11, 1999, by and among
Columbia/HCA, LifePoint Hospitals, Inc. and Triad Hospitals, Inc. (k)10.2
    
    
    
    Benefits and Employment Matters Agreement, dated May 11, 1999 by and among
Columbia/HCA, LifePoint Hospitals, Inc. and Triad Hospitals, Inc. (k)10.3
    
    
    
    Insurance Allocation and Administration Agreement, dated May 11, 1999, by and among
Columbia/ HCA, LifePoint Hospitals, Inc. and Triad Hospitals, Inc. (k)10.4
    
    
    
    Computer and Data Processing Services Agreement dated May 11, 1999 by and between
Columbia Information Systems, Inc. and LifePoint Hospitals, Inc. (k)10.5
    
    
    
    Amendment to Computer and Data Processing Services Agreement, dated April 28, 2004,
by and between HCA-Information Technology and Services, Inc. and LifePoint
Hospitals, Inc. (l)10.6
    
    
    
    LifePoint Hospitals, Inc. Executive Stock Purchase Plan (k)10.7
    
    
    
    LifePoint Hospitals, Inc. Management Stock Purchase Plan, as amended and restated (m)10.8
    
    
    
    LifePoint Hospitals, Inc. Outside Directors Stock and Incentive Compensation Plan (k)10.9
    
    
    
    Amended and Restated 1998 Long-Term Incentive Plan (n)10.10
    
    
    
    Amendment to the LifePoint Hospitals, Inc. Outside Directors Stock and Incentive
Compensation Plan (o)10.11
    
    
    
    Credit Agreement, dated as of April 15, 2005, by and among LifePoint Hospitals,
Inc., as borrower, the lenders referred to therein, Citicorp North America, Inc. as
administrative agent, Bank of America, N.A., CIBC World Markets Corp., SunTrust
Bank, UBS Securities LLC, as co-syndication agents and Citigroup Global Markets,
Inc., as sole lead arranger and sole bookrunner (i)10.12
    
    
    
    Incremental Facility Amendment dated August 23, 2005, among LifePoint Hospitals,
Inc., as borrower, Citicorp North America, Inc., as administrative agent and the
lenders party thereto (p)10.13
    
    
    
    Amendment No. 2 to Credit Agreement, dated October 14, 2005, among LifePoint
Hospitals, Inc. as borrower, Citicorp North America, Inc., as administrative agent
and the lenders party thereto (q)10.14
    
    
    
    Corporate Integrity Agreement dated as of December 21, 2000 by and between the
Office of Inspector General of the Department of Health and Human Services and
LifePoint Hospitals, Inc. (r)10.15
    
    
    
    Amendment to the Corporate Integrity Agreement, dated April 29, 2002, between the
Office of Inspector General of the Department of Health and Human Services and
LifePoint Hospitals, Inc. (m)10.16
    
    
    
    Letter from the Office of Inspector General of the Department of Health and Human
Services, dated October 15, 2002 (m)10.17
    
    
    
    Letter from the Office of Inspector of the Department of Health and Human Services,
dated December 18, 2003 (s)10.18
    
    
    
    Letter from the Office of Inspector of the Department of Health and Human Services,
dated March 3, 2004 (s)10.19
    
    
    
    LifePoint Hospitals, Inc. Employee Stock Purchase Plan (t)10.20
    
    
    
    First Amendment to the LifePoint Hospitals, Inc. Employee Stock Purchase Plan (u)10.21
    
    
    
    LifePoint Hospitals, Inc. Change in Control Severance Plan (v)10.22
    
    
    
    LifePoint Hospitals, Inc. Executive Performance Incentive Plan (w)10.23
    
    
    
    Employment Agreement of Kenneth C. Donahey, as amended and restated (s)10.24
    
    
    
    Consulting Agreement, dated as of August 15, 2004, by and between LifePoint
Hospitals, Inc. and Martin S. Rash (b)10.25
    
    
    
    Comprehensive Service Agreement for Diagnostic Imaging and Biomedical Services,
executed on January 7, 2005, between LifePoint Hospital Holdings, Inc. and GE
Healthcare Technologies (s)10.26
    
    
    
    Form of LifePoint Hospitals, Inc. Nonqualified Stock Option Agreement (x)10.27
    
    
    
    Form of LifePoint Hospitals, Inc. Restricted Stock Award Agreement (x)21.1
    
    
    
    List of Subsidiaries23.1
    
    
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    
    
    Certification of the Chief
Executive Officer of LifePoint Hospitals, Inc. pursuant
to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    
    Certification of the Chief
Financial Officer of LifePoint Hospitals, Inc. pursuant
to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    
    Certification of the Chief
Executive Officer of LifePoint Hospitals, Inc. pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    
    Certification of the Chief
Financial Officer of LifePoint Hospitals, Inc. pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
 103




---



##### Table of Contents






|    |  |                                                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Incorporated by reference from exhibits to LifePoint Hospitals
Current Report on Form 8-K filed on August 16, 2004, File No.
000-29818.                                                               
|   
|(b) |  | Incorporated by reference from exhibits to the Registration Statement
on Form S-4 filed by Lakers Holding Corp. on February 18, 2005 under
the Securities Act of 1933, as amended, File No. 333-119929.
|   
|(c) |  | Incorporated by reference from exhibits to the Current Report on Form
8-K filed by LifePoint Hospitals, Inc. on March 16, 2005, File No.
000-29818.                                                    
|   
|(d) |  | Incorporated by reference from exhibits to the Registration Statement
on Form S-8 filed by LifePoint Hospitals, Inc. on April 15, 2005, File
No. 333-124093.                                           
|   
|(e) |  | Incorporated by reference from Appendix A to the Registration
Statement on Form S-4, as amended, filed by LifePoint Hospitals, Inc.
on February 18, 2005, File No. 333-119929.                         
|   
|(f) |  | Incorporated by reference from exhibits to Province Healthcare
Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2003, File No. 001-31320.                                        
|   
|(g) |  | Incorporated by reference from exhibits to the Current Report on Form
8-K dated April 5, 2005 of Province Healthcare Company File No.
001-31320.                                                       
|   
|(h) |  | Incorporated by reference from the exhibits filed with the Province
Healthcare Companys Registration Statement on Form S-3, dated January
24, 2001, registration No. 333-54192.                       
|   
|(i) |  | Incorporated by reference from exhibits to the Current Report on Form
8-K dated April 15, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.                                                       
|   
|(j) |  | Incorporated by reference from exhibits to the Current Report on Form
8-K dated August 10, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.                                                      
|   
|(k) |  | Incorporated by reference from exhibits to LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
File No. 000-29818.                                                
|   
|(l) |  | Incorporated by reference from exhibits to LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004,
File No. 000-29818.                                                 
|   
|(m) |  | Incorporated by reference from exhibits to LifePoint Hospitals Annual
Report on Form 10-K for the year ended December 31, 2002, File No.
000-29818.                                                   
|   
|(n) |  | Incorporated by reference from exhibits to the Current Report on Form
8-K dated July 7, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.                                                         
|   
|(o) |  | Incorporated by reference from Appendix B to LifePoint Hospitals
Proxy Statement dated April 28, 2004, File No. 000-29818.                                                                            
|   
|(p) |  | Incorporated by reference from exhibits to the Current Report on Form
8-K dated August 23, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.                                                      
|   
|(q) |  | Incorporated by reference from exhibits to the Current Report on Form
8-K dated October 18, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.                                                     
|   
|(r) |  | Incorporated by reference from exhibits to LifePoint Hospitals Annual
Report on Form 10-K for the year ended December 31, 2000, File No.
000-29818.                                                   
|   
|(s) |  | Incorporated by reference from exhibits to the Annual Report on Form
10-K for the year ended December 31, 2004 filed by LifePoint
Hospitals, Inc. on March 1, 2005, File No. 000-29818.                
|   
|(t) |  | Incorporated by reference from exhibits to LifePoint Hospitals Annual
Report on Form 10-K for the year ended December 31, 2001, File No.
000-29818.                                                   
|   
|(u) |  | Incorporated by reference from exhibits to LifePoint Hospitals
Registration Statement on Form S-8 under the Securities Act of 1933,
File No. 333-105775.                                              
|   
|(v) |  | Incorporated by reference from exhibits to LifePoint Hospitals
Current Report on Form 8-K dated May 16, 2002, File No. 000-29818.                                                                     
|   
|(w) |  | Incorporated by reference from Appendix C to LifePoint Hospitals
Proxy Statement dated April 28, 2004, File No. 000-29818.                                                                            
|   
|(x) |  | Incorporated by reference from exhibits to LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, File No. 000-51251.                                                 

105



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##### Table of Contents



Compensation Plans and Arrangements




1.
    
    LifePoint Hospitals, Inc. Executive Stock Purchase Plan (filed as Exhibit 10.6)2.
    
    LifePoint Hospitals, Inc. Management Stock Purchase Plan, as amended and restated
(filed as Exhibit 10.7)3.
    
    LifePoint Hospitals, Inc. Amended and Restated 1998 Long-Term Incentive Plan, as
amended (filed as Exhibit 10.9)4.
    
    LifePoint Hospitals, Inc. Outside Directors Stock and Incentive Compensation Plan
(filed as Exhibits 10.8 and 10.10)5.
    
    LifePoint Hospitals, Inc. Employee Stock Purchase Plan, as amended (filed as Exhibits 10.19
and 10.20)6.
    
    LifePoint Hospitals, Inc. Change in Control Severance Plan (filed as Exhibit 10.21)7.
    
    LifePoint Hospitals, Inc. Executive Performance Incentive Plan (filed as Exhibit 10.22)8.
    
    Employment Agreement of Kenneth C. Donahey, as amended and restated (filed as Exhibit
10.23)9.
    
    Form of LifePoint Hospitals, Inc. Nonqualified Stock Option Agreement (filed as Exhibit
10.26)10.
    
    Form of LifePoint Hospitals, Inc. Restricted Stock Award Agreement (filed as Exhibit
10.27)


106



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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
 PageManagements Report on Internal Control Over Financial Reporting
    
    
    F-2Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting
    
    
    F-3Report of Independent Registered Public Accounting Firm
    
    
    F-4Consolidated Balance Sheets  December 31, 2004 and 2005
    
    
    F-5Consolidated Statements of Operations  for the years ended December 31, 2003, 2004 and 2005
    
    
    F-6Consolidated Statements of Cash Flows  for the years ended December 31, 2003, 2004 and 2005
    
    
    F-7Consolidated Statements of Stockholders Equity  for the years ended December 31, 2003,
2004 and 2005
    
    
    F-8Notes to Consolidated Financial Statements  December 31, 2005
    
    
    F-9
 F-1




---



##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
        /s/ Kenneth C. Donahey
    
    
    
    /s/ Michael J. CulottaChairman, Chief Executive Officer and President
    
    
    
    Chief Financial OfficerBrentwood, TennesseeFebruary 6, 2006
 F-2




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
       .
   
 F-3




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
       
 F-4




---



##### Table of Contents



LIFEPOINT HOSPITALS, INC.
 
 CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2005
(Dollars in millions, except per share amounts)
 2004
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18.6
    
    
    $
    30.4Accounts receivable, less allowances for doubtful accounts of $103.6 and
$252.9 at December 31, 2004 and 2005, respectively
    
    
    115.1
    
    
    
    256.8Inventories
    
    
    25.3
    
    
    
    57.2Assets held for sale
    
    
    33.0
    
    
    
    10.0Income taxes receivable
    
    
    7.5
    
    
    
    Prepaid expenses
    
    
    7.1
    
    
    
    12.0Deferred tax assets
    
    
    17.9
    
    
    
    44.2Other current assets
    
    
    6.4
    
    
    
    11.0230.9
    
    
    
    421.6Property and equipment:Land
    
    
    20.5
    
    
    
    64.7Buildings and improvements
    
    
    385.4
    
    
    
    992.4Equipment
    
    
    342.0
    
    
    
    547.1Construction in progress (estimated cost to complete and equip after December
31, 2005 is $118.7)
    
    
    48.6
    
    
    
    78.4796.5
    
    
    
    1,682.6Accumulated depreciation
    
    
    (295.4
    )
    
    
    (380.3
    )501.1
    
    
    
    1,302.3Deferred loan costs, net
    
    
    4.9
    
    
    
    35.4Intangible assets, net
    
    
    3.3
    
    
    
    4.2Other
    
    
    5.8
    
    
    
    5.5Goodwill
    
    
    144.4
    
    
    
    1,455.6$
    890.4
    
    
    $
    3,224.6LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    29.5
    
    
    $
    85.6Accrued salaries
    
    
    31.2
    
    
    
    58.8Other current liabilities
    
    
    21.6
    
    
    
    71.5Income taxes payable
    
    
    
    
    
    
    13.7Current maturities of long-term debt
    
    
    
    
    
    
    0.582.3
    
    
    
    230.1Long-term debt
    
    
    221.0
    
    
    
    1,515.8Deferred income taxes
    
    
    47.9
    
    
    
    124.0Professional and general liability claims and other liabilities
    
    
    28.4
    
    
    
    60.3Minority interests in equity of consolidated entities
    
    
    1.3
    
    
    
    6.6Stockholders equity:Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued
    
    
    
    
    
    
    Common stock, $.01 par value; 90,000,000 shares authorized; 40,123,768 shares
and 57,102,882 shares issued at December 31, 2004 and 2005, respectively
    
    
    0.4
    
    
    
    0.6Capital in excess of par value
    
    
    332.6
    
    
    
    1,053.1Unearned ESOP compensation
    
    
    (12.9
    )
    
    
    (9.7
    )Unearned compensation on nonvested stock
    
    
    (4.5
    )
    
    
    (31.0
    )Retained earnings
    
    
    222.8
    
    
    
    274.8Common stock in treasury, at cost, 1,198,800 shares at December 31, 2004
    
    
    (28.9
    )
    
    
    509.5
    
    
    
    1,287.8$
    890.4
    
    
    $
    3,224.6
  F-5




---



##### Table of Contents



LIFEPOINT HOSPITALS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2003, 2004 and 2005
(In millions, except per share amounts)
 2003
    
    
    2004
    
    
    2005Revenues
    
    $
    875.6
    
    
    $
    996.9
    
    
    $
    1,855.1Salaries and benefits
    
    
    352.3
    
    
    
    399.4
    
    
    
    730.5Supplies
    
    
    114.2
    
    
    
    129.1
    
    
    
    251.6Other operating expenses
    
    
    155.4
    
    
    
    166.8
    
    
    
    311.8Provision for doubtful accounts
    
    
    74.1
    
    
    
    86.2
    
    
    
    190.3Depreciation and amortization
    
    
    43.1
    
    
    
    48.1
    
    
    
    101.1Interest expense, net
    
    
    12.8
    
    
    
    12.6
    
    
    
    60.3Debt retirement costs
    
    
    
    
    
    
    1.5
    
    
    
    12.2Transaction costs
    
    
    
    
    
    
    
    
    
    
    43.2ESOP expense
    
    
    6.9
    
    
    
    9.4
    
    
    
    14.8758.8
    
    
    
    853.1
    
    
    
    1,715.8Income from continuing operations before minority
interests and income taxes
    
    
    116.8
    
    
    
    143.8
    
    
    
    139.3Minority interests in earnings of consolidated entities
    
    
    0.7
    
    
    
    1.0
    
    
    
    1.1Income from continuing operations before income taxes
    
    
    116.1
    
    
    
    142.8
    
    
    
    138.2Provision for income taxes
    
    
    45.9
    
    
    
    56.0
    
    
    
    58.4Income from continuing operations
    
    
    70.2
    
    
    
    86.8
    
    
    
    79.8Discontinued operations, net of income taxes:Loss from discontinued operations
    
    
    (1.7
    )
    
    
    (1.1
    )
    
    
    (0.4
    )Impairment of assets
    
    
    
    
    
    
    
    
    
    
    (5.8
    )Loss on sale of hospital
    
    
    
    
    
    
    
    
    
    
    (0.7
    )Loss from discontinued operations
    
    
    (1.7
    )
    
    
    (1.1
    )
    
    
    (6.9
    )Net income
    
    $
    68.5
    
    
    $
    85.7
    
    
    $
    72.9Basic earnings (loss) per share:Continuing operations
    
    $
    1.89
    
    
    $
    2.34
    
    
    $
    1.59Discontinued operations
    
    
    (0.05
    )
    
    
    (0.03
    )
    
    
    (0.14
    )Net income
    
    $
    1.84
    
    
    $
    2.31
    
    
    $
    1.45Diluted earnings (loss) per share:Continuing operations
    
    $
    1.80
    
    
    $
    2.20
    
    
    $
    1.56Discontinued operations
    
    
    (0.04
    )
    
    
    (0.03
    )
    
    
    (0.13
    )Net income
    
    $
    1.76
    
    
    $
    2.17
    
    
    $
    1.43Weighted average shares and dilutive securities
outstanding:Basic
    
    
    37.2
    
    
    
    37.0
    
    
    
    50.1Diluted
    
    
    43.3
    
    
    
    42.8
    
    
    
    53.2
  F-6




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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2003, 2004 and 2005
(Dollars in millions)
 2003
    
    
    2004
    
    
    2005Cash flows from operating activities:Net income
    
    $
    68.5
    
    
    $
    85.7
    
    
    $
    72.9Adjustments to reconcile net income to net cash
provided by operating activities:Loss from discontinued operations
    
    
    1.7
    
    
    
    1.1
    
    
    
    6.9Stock-based compensation
    
    
    
    
    
    
    1.8
    
    
    
    6.7Depreciation and amortization
    
    
    43.1
    
    
    
    48.1
    
    
    
    101.1Debt retirement costs
    
    
    
    
    
    
    1.5
    
    
    
    12.2Transaction costs
    
    
    
    
    
    
    
    
    
    
    43.2ESOP expense (non-cash portion)
    
    
    6.9
    
    
    
    9.4
    
    
    
    12.0Minority interests in earnings of consolidated entities
    
    
    0.7
    
    
    
    1.0
    
    
    
    1.1Deferred income taxes (benefit)
    
    
    8.9
    
    
    
    4.4
    
    
    
    (3.2
    )Reserve for professional and general liability claims, net
    
    
    2.4
    
    
    
    (0.2
    )
    
    
    1.8Tax benefit from employee stock plans
    
    
    2.3
    
    
    
    6.2
    
    
    
    8.9Increase (decrease) in cash from operating assets and liabilities,
net of effects from acquisitions and divestitures:Accounts receivable
    
    
    (15.5
    )
    
    
    (11.1
    )
    
    
    (25.4
    )Inventories and other current assets
    
    
    (4.8
    )
    
    
    (6.6
    )
    
    
    9.5Accounts payable and accrued expenses
    
    
    2.2
    
    
    
    8.9
    
    
    
    23.2Income taxes payable
    
    
    (7.5
    )
    
    
    (0.1
    )
    
    
    20.3Other
    
    
    (3.9
    )
    
    
    (1.5
    )
    
    
    5.2Net cash provided by operating activities-continuing operations
    
    
    105.0
    
    
    
    148.6
    
    
    
    296.4Net cash (used in) provided by discontinued operations
    
    
    (2.2
    )
    
    
    0.8
    
    
    
    5.0Net cash provided by operating activities
    
    
    102.8
    
    
    
    149.4
    
    
    
    301.4Cash flows from investing activities:Purchase of property and equipment
    
    
    (68.3
    )
    
    
    (82.0
    )
    
    
    (170.1
    )Acquisitions, net of cash acquired
    
    
    (16.5
    )
    
    
    (30.5
    )
    
    
    (963.6
    )Proceeds from sale of hospital
    
    
    
    
    
    
    
    
    
    
    32.5Other
    
    
    0.6
    
    
    
    (1.1
    )
    
    
    0.3Net cash used in investing activities
    
    
    (84.2
    )
    
    
    (113.6
    )
    
    
    (1,100.9
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    20.0
    
    
    
    30.0
    
    
    
    1,967.0Payments of borrowings
    
    
    
    
    
    
    (79.9
    )
    
    
    (1,156.9
    )Payment of debt issue costs
    
    
    
    
    
    
    
    
    
    
    (40.7
    )Repurchase of common stock
    
    
    (45.7
    )
    
    
    
    
    
    
    Proceeds from exercise of stock options
    
    
    3.7
    
    
    
    10.2
    
    
    
    43.6Other
    
    
    1.0
    
    
    
    1.9
    
    
    
    (1.7
    )Net cash (used in) provided by financing activities
    
    
    (21.0
    )
    
    
    (37.8
    )
    
    
    811.3Change in cash and cash equivalents
    
    
    (2.4
    )
    
    
    (2.0
    )
    
    
    11.8Cash and cash equivalents at beginning of year
    
    
    23.0
    
    
    
    20.6
    
    
    
    18.6Cash and cash equivalents at end of year
    
    $
    20.6
    
    
    $
    18.6
    
    
    $
    30.4Supplemental disclosure of cash flow information:Interest payments
    
    $
    12.4
    
    
    $
    12.1
    
    
    $
    55.7Capitalized interest
    
    $
    0.8
    
    
    $
    1.1
    
    
    $
    3.0Income taxes paid, net
    
    $
    41.4
    
    
    $
    44.6
    
    
    $
    32.0
  F-7




---



##### Table of Contents



LIFEPOINT HOSPITALS, INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the Years Ended December 31, 2003, 2004 and 2005
(Amounts in millions)
 UnearnedCapital in
    
    
    Unearned
    
    
    CompensationCommon Stock
    
    
    Excess of
    
    
    ESOP
    
    
    on Nonvested
    
    
    Retained
    
    
    TreasuryShares
    
    
    Amount
    
    
    Par Value
    
    
    Compensation
    
    
    Stock
    
    
    Earnings
    
    
    Stock
    
    
    TotalBalance at December 31, 2002
    
    
    39.6
    
    
    $
    0.4
    
    
    $
    297.2
    
    
    $
    (19.3
    )
    
    $
    
    
    
    $
    79.3
    
    
    $
    
    
    
    $
    357.6Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68.5
    
    
    
    
    
    
    
    68.5ESOP compensation earned
    
    
    
    
    
    
    
    
    
    
    3.7
    
    
    
    3.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.9Exercise of stock options,
including tax benefits and other
    
    
    0.3
    
    
    
    
    
    
    
    6.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.0Stock activity in connection with
employee stock purchase plans
    
    
    0.1
    
    
    
    
    
    
    
    1.3
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    1.0Repurchases and retirement of
common stock
    
    
    (0.9
    )
    
    
    
    
    
    
    (6.5
    )
    
    
    
    
    
    
    
    
    
    
    (10.3
    )
    
    
    
    
    
    
    (16.8
    )Purchases of treasury stock at cost
    
    
    (1.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28.9
    )
    
    
    (28.9
    )Balance at December 31, 2003
    
    
    37.9
    
    
    
    0.4
    
    
    
    301.7
    
    
    
    (16.1
    )
    
    
    
    
    
    
    137.2
    
    
    
    (28.9
    )
    
    
    394.3Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85.7
    
    
    
    
    
    
    
    85.7ESOP compensation earned
    
    
    
    
    
    
    
    
    
    
    6.2
    
    
    
    3.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.4Exercise of stock options,
including tax benefits and other
    
    
    0.8
    
    
    
    
    
    
    
    16.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16.4Stock activity in connection with
employee stock purchase plans
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    1.8Nonvested stock issued to key
employees and outside directors,
net of forfeitures
    
    
    0.2
    
    
    
    
    
    
    
    6.4
    
    
    
    
    
    
    
    (6.4
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of nonvested stock
grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.9
    
    
    
    
    
    
    
    
    
    
    
    1.9Balance at December 31, 2004
    
    
    38.9
    
    
    
    0.4
    
    
    
    332.6
    
    
    
    (12.9
    )
    
    
    (4.5
    )
    
    
    222.8
    
    
    
    (28.9
    )
    
    
    509.5Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72.9
    
    
    
    
    
    
    
    72.9ESOP compensation earned
    
    
    
    
    
    
    
    
    
    
    8.8
    
    
    
    3.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.0Exercise of stock options,
including tax benefits and other
    
    
    1.5
    
    
    
    
    
    
    
    52.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52.6Stock activity in connection with
employee stock purchase plans
    
    
    0.1
    
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    
    
    
    
    (2.4
    )
    
    
    
    
    
    
    (1.0
    )Nonvested stock issued to key
employees and outside directors,
net of forfeitures
    
    
    0.8
    
    
    
    
    
    
    
    37.2
    
    
    
    
    
    
    
    (37.2
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of nonvested stock
grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.7
    
    
    
    
    
    
    
    
    
    
    
    6.7Common stock issued in connection
with the Province Business
Combination
    
    
    15.0
    
    
    
    0.2
    
    
    
    595.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    595.9Change of control vesting in
connection with the Province
Business Combination
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.0
    
    
    
    
    
    
    
    
    
    
    
    4.0Conversion of Convertible Notes to
common stock
    
    
    0.8
    
    
    
    
    
    
    
    35.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35.2Retirement of treasury stock
    
    
    
    
    
    
    
    
    
    
    (10.4
    )
    
    
    
    
    
    
    
    
    
    
    (18.5
    )
    
    
    28.9
    
    
    
    Balance at December 31, 2005
    
    
    57.1
    
    
    $
    0.6
    
    
    $
    1,053.1
    
    
    $
    (9.7
    )
    
    $
    (31.0
    )
    
    $
    274.8
    
    
    $
    
    
    
    $
    1,287.8
  F-8




---



##### Table of Contents



LIFEPOINT HOSPITALS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2005
 Note 1. Organization and Summary of Significant Accounting Policies
 Organization
   Principles of Consolidation
  Fair Value of Financial Instruments
   2004
    
    
    2005Carrying
    
    
    
    
    
    
    Carryingamount of
    
    
    Fair value
    
    
    amount of
    
    
    Fair valueliability
    
    
    of liability
    
    
    liability
    
    
    of liability4 1/2% Subordinated Convertible Notes
    
    $
    221.0
    
    
    $
    222.7
    
    
    $
    
    
    
    $
    3 1/4% Convertible Senior Subordinated Debentures
    
    
    
    
    
    
    
    
    
    
    225.0
    
    
    
    207.0
 1 2 1 4
 Revenue Recognition and Allowance for Contractual Discounts
  F-9




---



##### Table of Contents



Concentration of Revenues
  F-10




---



##### Table of Contents



Hospitalsin state as of
    
    Percentage of Total RevenuesState
    
    December 31, 2005
    
    2003
    
    2004
    
    2005Kentucky
    
    8
    
    
    34.5
    %
    
    
    35.2
    %
    
    
    20.9
    %Tennessee
    
    7
    
    
    20.5
    
    
    
    19.5
    
    
    
    11.1Virginia
    
    3
    
    
    
    
    
    
    
    
    
    
    10.2Louisiana
    
    6
    
    
    2.7
    
    
    
    4.5
    
    
    
    9.2Alabama
    
    5
    
    
    11.4
    
    
    
    11.0
    
    
    
    8.8New Mexico
    
    2
    
    
    
    
    
    
    
    
    
    
    7.4Texas
    
    3
    
    
    
    
    
    
    
    
    
    
    5.2West Virginia
    
    2
    
    
    8.2
    
    
    
    8.0
    
    
    
    4.2
  Hospitalsin state as of
    
    Percentage of Total RevenuesState
    
    December 31, 2005
    
    2003
    
    2004
    
    2005Alabama
    
    5
    
    
    0.7
    %
    
    
    0.7
    %
    
    
    0.9
    %Arizona
    
    2
    
    
    
    
    
    
    
    
    
    
    0.3
    %California
    
    1
    
    
    
    
    
    
    
    
    
    
    0.1
    %Colorado
    
    1
    
    
    
    
    
    
    
    
    
    
    0.1
    %Florida
    
    1
    
    
    0.3
    %
    
    
    0.5
    %
    
    
    0.3
    %Indiana
    
    1
    
    
    
    
    
    
    
    
    
    
    0.1
    %Kansas
    
    1
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.2
    %Kentucky
    
    8
    
    
    3.7
    %
    
    
    4.1
    %
    
    
    2.3
    %Louisiana
    
    6
    
    
    0.4
    %
    
    
    0.4
    %
    
    
    0.9
    %Mississippi
    
    1
    
    
    
    
    
    
    
    
    
    
    0.4
    %Nevada
    
    1
    
    
    
    
    
    
    
    
    
    
    0.1
    %New Mexico
    
    2
    
    
    
    
    
    
    
    
    
    
    1.2
    %South Carolina
    
    1
    
    
    
    
    
    
    
    
    
    
    *Tennessee
    
    7
    
    
    2.8
    %
    
    
    2.7
    %
    
    
    1.4
    %Texas
    
    3
    
    
    
    
    
    
    
    
    
    
    0.5
    %Utah
    
    2
    
    
    1.0
    %
    
    
    0.9
    %
    
    
    0.4
    %Virginia
    
    3
    
    
    
    
    
    
    
    
    
    
    0.4
    %West Virginia
    
    2
    
    
    1.1
    %
    
    
    0.9
    %
    
    
    0.4
    %Wyoming
    
    2
    
    
    0.6
    %
    
    
    0.5
    %
    
    
    0.4
    %
 
 *
    
    - Less than 0.05% Cash and Cash Equivalents
  F-11




---



##### Table of Contents



Accounts Receivable and Allowance for Doubtful Accounts
    Balances
    
    Additions
    
    Accountsat
    
    Charged to
    
    Written Off,
    
    
    
    
    
    BalancesBeginning
    
    Costs and
    
    Net of
    
    
    
    
    
    at Endof Year
    
    Expenses (a)
    
    Recoveries
    
    Acquisitions
    
    of YearAllowance for doubtful accounts:Year ended December 31, 2003
    
    $
    109.1
    
    
    $
    81.5
    
    
    $
    (78.9
    )
    
    $
    
    
    
    $
    111.7Year ended December 31, 2004
    
    
    111.7
    
    
    
    94.7
    
    
    
    (102.8
    )
    
    
    
    
    
    
    103.6Year ended December 31, 2005
    
    
    103.6
    
    
    
    216.1
    
    
    
    (172.8
    )
    
    
    106.0
    
    
    
    252.9
 
 (a)
    
    Additions charged to costs and expenses include amounts related to the Companys
continuing operations and discontinued operations in the Companys accompanying
consolidated financial statements. Inventories
  Long-Lived Assets
 (a) Property and Equipment
   YearsBuildings and improvements
    
    10 - 40Equipment
    
    3 - 10Assets under capital leases:Buildings and improvements
    
    10 - 40Equipment
    
    3 - 5
 F-12




---



##### Table of Contents



2004
    
    
    2005Buildings and improvements
    
    $
    
    
    
    $
    154.7Equipment
    
    
    0.8
    
    
    
    1.90.8
    
    
    
    156.6Accumulated amortization
    
    
    (0.6
    )
    
    
    (6.3
    )$
    0.2
    
    
    $
    150.3
  (b) Deferred Loan Costs
  (c) Goodwill and Intangible Assets
   Discontinued Operations
  F-13




---



##### Table of Contents



Income Taxes
  Professional and General Liability Claims
      F-14




---



##### Table of Contents



Workers Compensation Reserves
    Self-Insured Medical Benefits
  F-15




---



##### Table of Contents



Minority Interests in Consolidated Entities
  General and Administrative Costs
  Physician Recruiting Costs
  Comprehensive Income
  Segment Reporting
   
    
    the nature of the products and services;
    
    the nature of the production processes;
    
    the type or class of customer for their products and services;
 F-16




---



##### Table of Contents




    
    the methods used to distribute their products or provide their services; and
    
    if applicable, the nature of the regulatory environment, for example, banking,
insurance, or public utilities.
  
    
    the treatment of patients in a hospital setting is the only material source of revenues
for each of the Companys operating divisions;
    
    the healthcare services provided by each of the Companys operating divisions are
generally the same;
    
    the healthcare services provided by each of the Companys operating divisions are
generally provided to similar types of patients, which are patients in a hospital setting;
    
    the healthcare services are primarily provided by the direction of affiliated or
employed physicians and by the nurses, lab technicians and others or contracted at each of
the Companys hospitals; and
    
    the healthcare regulatory environment is generally similar for each of the Companys
operating divisions.
  Stock-Based Compensation
   F-17




---



##### Table of Contents



2003
    
    
    2004
    
    
    2005(a)Net income, as reported
    
    $
    68.5
    
    
    $
    85.7
    
    
    $
    72.9Add: Stock-based compensation expense included in
reported net income, net of related tax effects
    
    
    
    
    
    
    1.1
    
    
    
    6.7Less: Stock-based compensation expense
determined under fair value based
method for all awards, net of
related tax effects
    
    
    (9.0
    )
    
    
    (9.0
    )
    
    
    (16.5
    )Pro forma net income
    
    
    59.5
    
    
    
    77.8
    
    
    
    63.1Interest on Convertible Notes, net of taxes
    
    
    7.8
    
    
    
    7.3
    
    
    
    Diluted pro forma net income
    
    $
    67.3
    
    
    $
    85.1
    
    
    $
    63.1Denominator for basic earnings per share  weighted
average shares
    
    
    37.2
    
    
    
    37.0
    
    
    
    50.1Effect of dilutive securities:Employee stock benefit plans
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.9Convertible Notes
    
    
    5.3
    
    
    
    5.0
    
    
    
    Denominator for diluted earnings per share 
adjusted weighted average shares
    
    
    43.3
    
    
    
    42.8
    
    
    
    51.0Earnings per share:Basic  as reported
    
    $
    1.84
    
    
    $
    2.31
    
    
    $
    1.45Basic  pro forma
    
    $
    1.60
    
    
    $
    2.10
    
    
    $
    1.26Diluted  as reported
    
    $
    1.76
    
    
    $
    2.17
    
    
    $
    1.43Diluted  pro forma
    
    $
    1.56
    
    
    $
    1.99
    
    
    $
    1.24
 
 (a)
    
    The impact of 2.2 million potential weighted average
shares of common stock, if converted, and interest
expense related to the Convertible Notes was not
included in the computation of diluted earnings per
share and pro forma diluted earnings per share
because the effect would have been anti-dilutive.  2003
    
    2004
    
    2005Risk free interest rate
    
    
    1.90
    %
    
    
    2.23
    %
    
    
    3.79
    %Expected life, in years
    
    
    3.0
    
    
    
    3.0
    
    
    
    4.0Expected volatility
    
    
    53.0
    %
    
    
    53.1
    %
    
    
    54.7
    %
    F-18




---



##### Table of Contents



Earnings Per Share
  Use of Estimates
  Reclassifications
  Recently Issued Accounting Pronouncements
   F-19




---



##### Table of Contents



Note 2. Acquisitions
 Business Combination with Province Healthcare Company
   F-20




---



##### Table of Contents



Fair value of LifePoint Common Stock issued
    
    $
    596.0Cash
    
    
    586.3Fair value of assumed Province debt obligations
    
    
    511.6Severance and Province stock option costs
    
    
    73.8Direct transaction costs
    
    
    29.9$
    1,797.6
   F-21




---



##### Table of Contents



Accounts receivable, net
    
    $
    122.1Inventories
    
    
    20.9Prepaid expenses
    
    
    4.6Other current assets
    
    
    15.5Property and equipment
    
    
    620.1Deferred loan costs
    
    
    10.7Other long-term assets
    
    
    0.6Goodwill
    
    
    1,176.4Total assets acquired, excluding cash
    
    
    1,970.9Accounts payable
    
    
    35.6Accrued salaries
    
    
    28.1Other current liabilities
    
    
    31.6Long-term debt
    
    
    511.6Deferred income taxes
    
    
    47.5Professional and general liability claims and other
liabilities
    
    
    25.6Minority interests in equity of consolidated entities
    
    
    2.0Total liabilities assumed
    
    
    682.0Net assets acquired
    
    $
    1,288.9
  Adjustment to Province acquired accounts receivable
    
    $
    26.4Adjustment to Province assumed liabilities, primarily related to professional
and general liability claims
    
    
    7.3Retention bonuses paid to former Province employees
    
    
    4.2Compensation expense, primarily restricted stock vesting from change in control
    
    
    5.3$
    43.2
   Other 2005 Acquisitions
  F-22




---



##### Table of Contents



Acquisition  2004
  Acquisition  2003
  Allocations of Purchase Price
  2003
    
    
    2004
    
    
    2005Fair value of assets acquired, excluding cash:Accounts receivable, net
    
    $
    
    
    
    $
    0.2
    
    
    $
    31.9Other current assets
    
    
    0.5
    
    
    
    1.3
    
    
    
    10.5Property and equipment
    
    
    10.0
    
    
    
    19.7
    
    
    
    117.7Intangible assets
    
    
    0.6
    
    
    
    
    
    
    
    0.2Other assets
    
    
    
    
    
    
    
    
    
    
    2.5Goodwill
    
    
    5.8
    
    
    
    5.8
    
    
    
    137.816.9
    
    
    
    27.0
    
    
    
    300.6Liabilities assumed
    
    
    
    
    
    
    (0.4
    )
    
    
    (19.1
    )Net assets acquired
    
    $
    16.9
    
    
    $
    26.6
    
    
    $
    281.5
 F-23




---



##### Table of Contents



Unaudited Pro Forma Results of Operations
  Years EndedDecember 31,2004
    
    
    2005Revenues
    
    $
    2,105.6
    
    
    $
    2,241.5Income from continuing operations
    
    
    139.8
    
    
    
    105.5Net income
    
    
    135.5
    
    
    
    97.6Earnings per share:Basic:Income from continuing operations
    
    $
    2.68
    
    
    $
    1.94Net income
    
    $
    2.60
    
    
    $
    1.79Diluted:Income from continuing operations
    
    $
    2.55
    
    
    $
    1.89Net income
    
    $
    2.48
    
    
    $
    1.75
 Pending Acquisition
   Facility
    
    
    
    
    
    Number of BedsClinch Valley Medical Center, Richlands, VA
    
    
    
    
    
    
    200St. Josephs Hospital, Parkersburg, WV
    
    
    
    
    
    
    325Saint Francis Hospital, Charleston, WV
    
    
    
    
    
    
    155Raleigh General Hospital, Beckley, WV
    
    
    
    
    
    
    369Putnam General Hospital, Hurricane, WV
    
    
    
    
    
    
    68
 Note 3. Discontinued Operations
  F-24




---



##### Table of Contents



ImpairmentChargeCurrent assets
    
    $
    4.2Property and equipment
    
    
    1.7Goodwill
    
    
    3.08.9Income tax benefit
    
    
    (3.1
    )$
    5.8
     2003
    
    
    2004
    
    
    2005Revenues
    
    $
    31.5
    
    
    $
    32.8
    
    
    $
    48.1Loss before income taxes
    
    
    (2.5
    )
    
    
    (1.8
    )
    
    
    (0.7
    )
 F-25




---



##### Table of Contents



Note 4. Goodwill and Intangible Assets
  Balance at December 31, 2003
    
    $
    138.6Purchase price allocations for acquisitions in 2004
    
    
    5.8Balance at December 31, 2004
    
    
    144.4Purchase price allocation for Province Business Combination
    
    
    1,176.4Purchase price allocations for other acquisitions in 2005
    
    
    137.8Impairment recognized in discontinued operations
    
    
    (3.0
    )Balance at December 31, 2005
    
    $
    1,455.6
  GrossCarrying
    
    
    Accumulated
    
    
    NetAmount
    
    
    Amortization
    
    
    TotalCertificates of need:2005
    
    $
    1.4
    
    
    $
    
    
    
    $
    1.42004
    
    
    1.1
    
    
    
    
    
    
    
    1.1Non-competition agreements:2005
    
    $
    5.9
    
    
    $
    3.1
    
    
    $
    2.82004
    
    
    4.0
    
    
    
    1.8
    
    
    
    2.2Total intangible assets:2005
    
    $
    7.3
    
    
    $
    3.1
    
    
    $
    4.22004
    
    
    5.1
    
    
    
    1.8
    
    
    
    3.3
  2003
    
    
    2004
    
    
    2005Amortization expense
    
    $
    0.7
    
    
    $
    0.8
    
    
    $
    1.3
  Amount2006
    
    
    
    $
    1.52007
    
    
    
    
    0.92008
    
    
    
    
    0.12009
    
    
    
    
    0.12010
    
    
    
    
    0.1
 F-26




---



##### Table of Contents



Note 5. Income Taxes
  2003
    
    
    2004
    
    
    2005Current:Federal
    
    $
    34.2
    
    
    $
    48.6
    
    
    $
    53.2State
    
    
    2.8
    
    
    
    2.4
    
    
    
    7.037.0
    
    
    
    51.0
    
    
    
    60.2Deferred:Federal
    
    
    9.7
    
    
    
    3.7
    
    
    
    (1.3
    )State
    
    
    (1.3
    )
    
    
    2.0
    
    
    
    (2.8
    )8.4
    
    
    
    5.7
    
    
    
    (4.1
    )Increase (decrease) in valuation allowance
    
    
    0.5
    
    
    
    (0.7
    )
    
    
    2.3Total
    
    $
    45.9
    
    
    $
    56.0
    
    
    $
    58.4
   2003
    
    
    2004
    
    
    2005Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income taxes, net of federal income tax benefit
    
    
    2.4
    
    
    
    2.7
    
    
    
    3.0ESOP expense
    
    
    1.2
    
    
    
    1.5
    
    
    
    2.2Valuation allowance
    
    
    0.5
    
    
    
    (0.3
    )
    
    
    1.1Other items, net
    
    
    0.5
    
    
    
    0.3
    
    
    
    1.0Effective income tax rate
    
    
    39.6
    %
    
    
    39.2
    %
    
    
    42.3
    %
 F-27




---



##### Table of Contents



2004
    
    
    2005Deferred income tax liabilities:Depreciation and amortization
    
    $
    (62.4
    )
    
    $
    (151.0
    )Prepaid expenses
    
    
    (4.2
    )
    
    
    (6.2
    )Other
    
    
    (11.7
    )
    
    
    (13.9
    )Total deferred income tax liabilities
    
    
    (78.3
    )
    
    
    (171.1
    )Deferred income tax assets:Provision for doubtful accounts
    
    
    19.5
    
    
    
    38.2Employee compensation
    
    
    12.7
    
    
    
    16.9Professional liability claims
    
    
    10.9
    
    
    
    21.5Other
    
    
    8.6
    
    
    
    20.4Total deferred income tax assets
    
    
    51.7
    
    
    
    97.0Valuation allowance
    
    
    (3.4
    )
    
    
    (5.7
    )Net deferred income tax assets
    
    
    48.3
    
    
    
    91.3Net deferred income tax liabilities
    
    $
    (30.0
    )
    
    $
    (79.8
    )
  2004
    
    
    2005Current
    
    $
    17.9
    
    
    $
    44.2Long-term
    
    
    (47.9
    )
    
    
    (124.0
    )Total
    
    $
    (30.0
    )
    
    $
    (79.8
    )
      F-28




---



##### Table of Contents



Note 6. Long-Term Debt
  2004
    
    
    2005Senior Borrowings:Credit Agreement:Term B Loans
    
    $
    
    
    
    $
    1,281.9Revolving Credit Loans
    
    
    
    
    
    
    Senior Credit Borrowings
    
    
    
    
    
    
    1,281.9Subordinated Borrowings:Province 71/2% Senior Subordinated Notes
    
    
    
    
    
    
    6.1Province 41/4% Convertible Subordinated Notes, due 2008
    
    
    
    
    
    
    0.131/4% Convertible Senior Subordinated Debentures, due 2025
    
    
    
    
    
    
    225.0LifePoint 41/2% Subordinated Convertible Notes, due 2009
    
    
    221.0
    
    
    
    221.0
    
    
    
    231.2Capital leases
    
    
    
    
    
    
    3.2Total long-term debt
    
    
    221.0
    
    
    
    1,516.3Less: Current portion
    
    
    
    
    
    
    0.5$
    221.0
    
    
    $
    1,515.8
  2006
    
    $
    0.52007
    
    
    0.52008
    
    
    0.52009
    
    
    0.32010
    
    
    0.3Thereafter
    
    
    1,514.2$
    1,516.3
 New Senior Secured Credit Facilities
   F-29




---



##### Table of Contents



Level atRequirement
    
    
    December 31, 2005Minimum Interest Coverage Ratio
    
    
    3 3.25:1.00
    
    
    
    5.61Maximum Total Leverage Coverage Ratio
    
    
    £ 4.75:1.00
    
    
    
    3.43
    F-30




---



##### Table of Contents



Senior Subordinated Credit Agreement
   Previous Credit Facilities
  Province 7 1/2% Senior Subordinated Notes
    Province 4 1/4% Convertible Subordinated Notes
  F-31




---



##### Table of Contents



Province 4 1/2% Convertible Subordinated Notes
  Historic LifePoints 4 1/2% Convertible Subordinated Notes
   3 1/4% Convertible Senior Subordinated Debentures due August 15, 2025
    F-32




---



##### Table of Contents



Note 7. Stockholders Equity
 Preferred Stock
  Preferred Stock Purchase Rights
    Common Stock
  F-33




---



##### Table of Contents



Share Repurchase Program
   Total Numberof SharesPurchased asPart of aTotal Number
    
    Average
    
    Publiclyof Shares
    
    Price Paid
    
    AnnouncedPeriod
    
    Purchased
    
    per Share
    
    ProgramMay 2003
    
    
    863,600
    
    
    $
    19.43
    
    
    
    863,600June 2003
    
    
    10,200
    
    
    
    19.70
    
    
    
    10,200September 2003
    
    
    450,000
    
    
    
    24.31
    
    
    
    450,000October 2003
    
    
    738,600
    
    
    
    23.92
    
    
    
    738,600Total
    
    
    2,062,400
    
    
    $
    22.10
    
    
    
    2,062,400
 ESOP Compensation
    F-34




---



##### Table of Contents



Allocated shares
    
    
    1,861,783Shares committed to be released
    
    
    95,921Unreleased shares
    
    
    839,015Total ESOP shares
    
    
    2,796,719
 Management Stock Purchase Plan
  Shares Availablefor IssuanceDecember 31, 2002
    
    
    161,700Forfeitures
    
    
    15,051Issuances
    
    
    (32,217
    )December 31, 2003
    
    
    144,534Forfeitures
    
    
    7,704Issuances
    
    
    (25,932
    )December 31, 2004
    
    
    126,306Forfeitures
    
    
    857Issuances
    
    
    (22,037
    )December 31, 2005
    
    
    105,126
 Employee Stock Purchase Plan
  Shares Availablefor IssuanceDecember 31, 2002
    
    
    60,110Additional allocation
    
    
    200,000Issuances
    
    
    (70,787
    )December 31, 2003
    
    
    189,323Issuances
    
    
    (27,924
    )December 31, 2004
    
    
    161,399Issuances
    
    
    (53,422
    )December 31, 2005
    
    
    107,977
 F-35




---



##### Table of Contents



Stock Options
 1998 Long-Term Incentive Plan
    Outside Directors Stock and Incentive Plan
     F-36




---



##### Table of Contents



Summary
  DeferredStock Options
    
    Nonvested Stock
    
    Stock UnitsOutstanding
    
    Outstanding
    
    OutstandingWeighted
    
    
    
    
    
    WeightedShares
    
    
    
    
    
    Average
    
    
    
    
    
    AverageAvailable
    
    Number
    
    Exercise
    
    Number of
    
    Grant Date
    
    Number offor Grant
    
    of Shares
    
    Price
    
    Shares
    
    Price
    
    SharesDecember 31, 2002
    
    
    3,338,744
    
    
    
    4,016,419
    
    
    $
    23.81
    
    
    
    
    
    
    $
    
    
    
    
    7,876Stock option grants
    
    
    (1,066,850
    )
    
    
    1,066,850
    
    
    
    21.60
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock unit
grants
    
    
    (3,076
    )
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    3,076Deferred stock
units vested
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    (1,474
    )Stock option
exercises
    
    
    
    
    
    
    (333,006
    )
    
    
    11.20
    
    
    
    
    
    
    
    
    
    
    
    Stock option
cancellations
    
    
    356,821
    
    
    
    (356,821
    )
    
    
    27.75
    
    
    
    
    
    
    
    
    
    
    
    Adjustments
    
    
    14,813
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    December 31, 2003
    
    
    2,640,452
    
    
    
    4,393,442
    
    
    
    23.91
    
    
    
    
    
    
    
    
    
    
    
    9,478Increases in shares
available (approved
by stockholders)
    
    
    2,200,000
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    Stock option grants
    
    
    (906,300
    )
    
    
    906,300
    
    
    
    33.49
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock unit
grants
    
    
    (2,376
    )
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    2,376Deferred stock
units vested
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    (1,544
    )Nonvested stock
grants
    
    
    (196,000
    )
    
    
    
    
    
    
    N/A
    
    
    
    196,000
    
    
    
    33.67
    
    
    
    Stock option
exercises
    
    
    
    
    
    
    (774,635
    )
    
    
    13.23
    
    
    
    
    
    
    
    
    
    
    
    Stock option
cancellations
    
    
    165,526
    
    
    
    (165,526
    )
    
    
    33.64
    
    
    
    
    
    
    
    
    
    
    
    Nonvested stock
cancellations
    
    
    10,000
    
    
    
    
    
    
    
    N/A
    
    
    
    (10,000
    )
    
    
    33.17
    
    
    
    December 31, 2004
    
    
    3,911,302
    
    
    
    4,359,581
    
    
    
    27.43
    
    
    
    186,000
    
    
    
    33.70
    
    
    
    10,310Increases in shares
available (approved
by stockholders)
    
    
    2,000,000
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    Stock option grants
    
    
    (785,813
    )
    
    
    785,813
    
    
    
    42.65
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock unit
grants
    
    
    (2,076
    )
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    2,076Deferred stock
units vested
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    (1,230
    )Nonvested stock
grants
    
    
    (911,951
    )
    
    
    
    
    
    
    N/A
    
    
    
    911,951
    
    
    
    42.76
    
    
    
    Stock option
exercises
    
    
    
    
    
    
    (1,515,080
    )
    
    
    28.72
    
    
    
    
    
    
    
    
    
    
    
    Stock option
cancellations
    
    
    69,740
    
    
    
    (69,740
    )
    
    
    40.02
    
    
    
    
    
    
    
    
    
    
    
    Change of control
vesting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (186,000
    )
    
    
    33.67
    
    
    
    Nonvested stock
cancellations
    
    
    45,582
    
    
    
    
    
    
    
    
    
    
    
    (45,582
    )
    
    
    42.80
    
    
    
    December 31, 2005
    
    
    4,326,784
    
    
    
    3,560,574
    
    
    $
    33.67
    
    
    
    866,369
    
    
    $
    41.28
    
    
    
    11,156
  Stock Options Outstanding
    
    Exercisable Stock OptionsWeightedAverage
    
    WeightedRemaining
    
    Average
    
    
    
    
    
    WeightedNumber of
    
    Contractual
    
    Exercise
    
    Number of
    
    AverageRange of Exercise Prices
    
    Shares
    
    Life
    
    Price
    
    Shares
    
    Exercise Price$0.07 to $10.81
    
    
    731,023
    
    
    
    3.99
    
    
    $
    10.33
    
    
    
    731,023
    
    
    $
    10.33$15.64 to $17.44
    
    
    22,535
    
    
    
    2.48
    
    
    
    17.24
    
    
    
    22,535
    
    
    
    17.24$18.38 to $29.56
    
    
    553,446
    
    
    
    7.72
    
    
    
    22.06
    
    
    
    553,446
    
    
    
    22.06$31.05 to $33.17
    
    
    619,183
    
    
    
    8.03
    
    
    
    32.58
    
    
    
    619,183
    
    
    
    32.58$35.35 to $50.55
    
    
    1,634,387
    
    
    
    8.15
    
    
    
    40.66
    
    
    
    958,724
    
    
    
    38.93Total
    
    
    3,560,574
    
    
    
    7.17
    
    
    
    30.00
    
    
    
    2,884,911
    
    
    
    26.80
 F-37




---



##### Table of Contents



Note 8. Commitments and Contingencies
 Americans with Disabilities Act Claim
   Corporate Integrity Agreement
  Legal Proceedings and General Liability Claims
  Physician Commitments
  F-38




---



##### Table of Contents



Capital Expenditure Commitments
        Acquisitions
  F-39




---



##### Table of Contents



Leases
   Operating
    
    
    Capital LeaseYear ending December 31,

    
    Leases
    
    
    Obligations
    
    
    Total2006
    
    $
    13.3
    
    
    $
    0.7
    
    
    $
    14.02007
    
    
    10.4
    
    
    
    0.7
    
    
    
    11.12008
    
    
    8.4
    
    
    
    0.6
    
    
    
    9.02009
    
    
    6.9
    
    
    
    0.5
    
    
    
    7.42010
    
    
    5.0
    
    
    
    0.4
    
    
    
    5.42011 and thereafter
    
    
    22.7
    
    
    
    1.3
    
    
    
    24.0$
    66.7
    
    
    
    4.2
    
    
    $
    70.9Less: interest portion
    
    
    
    
    
    
    1.0Long-term obligations under capital leases
    
    
    
    
    
    $
    3.2
 Tax Matters
 Income Taxes
 Note 9. Earnings (Loss) Per Share
  2003
    
    
    2004
    
    
    2005Numerator:Numerator for basic earnings per share  income from
continuing operations
    
    $
    70.2
    
    
    $
    86.8
    
    
    $
    79.8Interest on convertible notes, net of taxes
    
    
    7.8
    
    
    
    7.3
    
    
    
    3.3Numerator for diluted earnings per share  income
from continuing operations
    
    
    78.0
    
    
    
    94.1
    
    
    
    83.1Loss from discontinued operations, net of income taxes
    
    
    (1.7
    )
    
    
    (1.1
    )
    
    
    (6.9
    )$
    76.3
    
    
    $
    93.0
    
    
    $
    76.2Denominator:Denominator for basic earnings (loss) per share 
weighted average shares outstanding
    
    
    37.2
    
    
    
    37.0
    
    
    
    50.1Effect of dilutive securities:Employee stock benefit plans
    
    
    0.8
    
    
    
    0.8
    
    
    
    0.9Convertible notes
    
    
    5.3
    
    
    
    5.0
    
    
    
    2.2Denominator for diluted earnings (loss) per share 
adjusted weighted average shares
    
    
    43.3
    
    
    
    42.8
    
    
    
    53.2
 F-40




---



##### Table of Contents



2003
    
    
    2004
    
    
    2005Basic earnings (loss) per share:Continuing operations
    
    $
    1.89
    
    
    $
    2.34
    
    
    $
    1.59Discontinued operations
    
    
    (0.05
    )
    
    
    (0.03
    )
    
    
    (0.14
    )Net income
    
    $
    1.84
    
    
    $
    2.31
    
    
    $
    1.45Diluted earnings (loss) per share:Continuing operations
    
    $
    1.80
    
    
    $
    2.20
    
    
    $
    1.56Discontinued operations
    
    
    (0.04
    )
    
    
    (0.03
    )
    
    
    (0.13
    )Net income
    
    $
    1.76
    
    
    $
    2.17
    
    
    $
    1.43
 Note 10. Related Party Transactions
  Note 11. Other Current Liabilities
  2004
    
    
    2005Accrued interest related to long-term debt
    
    $
    1.1
    
    
    $
    13.6Workers compensation liability
    
    
    3.4
    
    
    
    12.9Health benefits liability
    
    
    5.9
    
    
    
    9.4Other
    
    
    11.2
    
    
    
    35.6$
    21.6
    
    
    $
    71.5
 F-41




---



##### Table of Contents



Note 12. Unaudited Quarterly Financial Information
  2004First
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    247.5
    
    
    $
    238.2
    
    
    $
    253.7
    
    
    $
    257.5Income from continuing operations
    
    $
    24.2
    
    
    $
    19.5
    
    
    $
    20.1
    
    
    $
    23.0Income (loss) from discontinued operations
    
    
    (0.3
    )
    
    
    (0.8
    )
    
    
    (0.4
    )
    
    
    0.4Net income
    
    $
    23.9
    
    
    $
    18.7
    
    
    $
    19.7
    
    
    $
    23.4Basic earnings (loss) per share:Continuing operations
    
    $
    0.66
    
    
    $
    0.53
    
    
    $
    0.54
    
    
    $
    0.62Discontinued operations
    
    
    (0.01
    )
    
    
    (0.02
    )
    
    
    (0.01
    )
    
    
    0.01Net income
    
    $
    0.65
    
    
    $
    0.51
    
    
    $
    0.53
    
    
    $
    0.63Diluted earnings (loss) per share:Continuing operations
    
    $
    0.61
    
    
    $
    0.50
    
    
    $
    0.51
    
    
    $
    0.58Discontinued operations
    
    
    (0.01
    )
    
    
    (0.02
    )
    
    
    (0.01
    )
    
    
    0.01Net income
    
    $
    0.60
    
    
    $
    0.48
    
    
    $
    0.50
    
    
    $
    0.59
 2005First
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    275.9
    
    
    $
    467.6
    
    
    $
    552.4
    
    
    $
    559.2Income (loss) from continuing operations
    
    $
    26.0
    
    
    $
    (2.8
    )
    
    $
    30.6
    
    
    $
    26.0Discontinued operations:Income (loss) from discontinued
operations
    
    
    0.6
    
    
    
    0.3
    
    
    
    (0.8
    )
    
    
    (0.5
    )Impairment of assets
    
    
    
    
    
    
    (4.7
    )
    
    
    (0.2
    )
    
    
    (0.9
    )Gain (loss) on sale of hospital
    
    
    (0.8
    )
    
    
    0.1
    
    
    
    
    
    
    
    Loss from discontinued operations
    
    
    (0.2
    )
    
    
    (4.3
    )
    
    
    (1.0
    )
    
    
    (1.4
    )Net income
    
    $
    25.8
    
    
    $
    (7.1
    )
    
    $
    29.6
    
    
    $
    24.6Basic earnings (loss) per share:Continuing operations
    
    $
    0.69
    
    
    $
    (0.05
    )
    
    $
    0.55
    
    
    $
    0.47Discontinued operations
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    (0.01
    )
    
    
    (0.03
    )Net income (loss)
    
    $
    0.68
    
    
    $
    (0.13
    )
    
    $
    0.54
    
    
    $
    0.44Diluted earnings (loss) per share:Continuing operations
    
    $
    0.64
    
    
    $
    (0.05
    )
    
    $
    0.54
    
    
    $
    0.46Discontinued operations
    
    
    (0.01
    )
    
    
    (0.08
    )
    
    
    (0.01
    )
    
    
    (0.02
    )Net income (loss)
    
    $
    0.63
    
    
    $
    (0.13
    )
    
    $
    0.53
    
    
    $
    0.44
 Note 13. Subsequent Event
  F-42




---



##### Table of Contents



SIGNATURES
  LIFEPOINT HOSPITALS, INC.By:
    
    /s/ KENNETH C. DONAHEYKenneth C. DonaheyChairman, Chief Executive Officer and President
  Name
    
    Title
    
    Date/s/ KENNETH C. DONAHEY
    
    Chairman, Chief Executive
    
    February 6, 2006Kenneth C. Donahey
    
    Officer and President
(Principal Executive Officer)/s/ MICHAEL J. CULOTTA
    
    Chief Financial Officer
    
    February 6, 2006Michael J. Culotta
    
    (Principal Financial Officer)/s/ GARY D. WILLIS
    
    Chief Accounting Officer
    
    February 6, 2006Gary D. Willis
    
    (Principal Accounting Officer)/s/ RICKI TIGERT HELFER
    
    Director
    
    February 6, 2006Ricki Tigert Helfer/s/ JOHN E. MAUPIN, JR., D.D.S.
    
    Director
    
    February 6, 2006John E. Maupin, Jr., D.D.S./s/ DEWITT EZELL, JR.
    
    Director
    
    February 6, 2006DeWitt Ezell, Jr./s/ WILLIAM V. LAPHAM
    
    Director
    
    February 6, 2006William V. Lapham/s/ RICHARD H. EVANS
    
    Director
    
    February 6, 2006Richard H. Evans/s/ OWEN G. SHELL, JR.
    
    Director
    
    February 6, 2006Owen G. Shell, Jr./s/ MICHAEL P. HALEY
    
    Director
    
    February 6, 2006Michael P. Haley




---



##### Table of Contents



ExhibitNumber
    
    
    
    Description of Exhibits2.1
    
    
    
    Agreement and Plan of Merger, dated as of August 15, 2004, by and among LifePoint
Hospitals, Inc., Lakers Holding Corp., Lakers Acquisition Corp., Pacers Acquisition
Corp., and Province Healthcare Company (a)2.2
    
    
    
    Amendment No. 1 to Agreement and Plan of Merger, dated as of January 25, 2005, by
and among LifePoint Hospitals, Inc., Lakers Holding Corp., Lakers Acquisition Corp.,
Pacers Acquisition Corp. and Province Healthcare Company (b)2.3
    
    
    
    Amendment No. 2 to Agreement
and Plan of Merger, dated as of March 15, 2005, by and among
LifePoint Hospitals, Inc., Lakers Holding Corp., Lakers Acquisition Corp., Pacers
Acquisition Corp., and Province Healthcare Company (c)2.4
    
    
    
    Distribution Agreement dated May 11, 1999 by and among Columbia/HCA, Triad
Hospitals, Inc. and LifePoint Hospitals, Inc. (c)3.1
    
    
    
    Amended and Restated Certificate of Incorporation (d)3.2
    
    
    
    Amended and Restated Bylaws of LifePoint Hospitals, Inc. (d)4.1
    
    
    
    Form of Specimen Stock Certificate (e)4.2
    
    
    
    Rights Agreement, dated as of April 15, 2005, by and between LifePoint Hospitals,
Inc. and National City Bank, as Rights Agent (d)4.3
    
    
    
    Subordinated Indenture, dated as of May 27, 2003, between Province Healthcare
Company and U.S. Bank Trust National Association, as Trustee (f)4.4
    
    
    
    First Supplemental Indenture to Subordinated Indenture, dated as of May 27, 2003, by
and among Province Healthcare Company and U.S. Bank National Association, as
Trustee, relating to Province Healthcare Companys 7 1/2% Senior Subordinated Notes
due 2013 (f)4.5
    
    
    
    Second Supplemental Indenture to Subordinated Indenture, dated as of April 1, 2005,
by and among Province Healthcare Company and U.S. Bank National Association, as
Trustee (g)4.6
    
    
    
    Indenture, dated as of October 10, 2001, between Province Healthcare Company and
National City Bank, including the forms of Province Healthcare Companys 4 1/4%
Convertible Subordinated Notes due 2008 (h)4.7
    
    
    
    First Supplemental Indenture, dated as of April 15, 2005, by and among Province
Healthcare Company, LifePoint Hospitals, Inc. and U.S. Bank National Association (as
successor in interest to National City Bank), as trustee to the Indenture dated as
of October 10, 2001, relating to Province Healthcare Companys 4 1/4% Convertible
Subordinated Notes due 2008 (i)4.8
    
    
    
    Indenture, dated August 10, 2005, between LifePoint Hospitals, Inc. and Citibank,
N.A., as Trustee (j)4.9
    
    
    
    Form of 3.25% Convertible Senior Subordinated Debenture due 2025 (included as part
of Exhibit 4.8) (j)4.10
    
    
    
    Registration Rights Agreement, dated August 10, 2005, between LifePoint Hospitals,
Inc. and Citigroup Global Markets Inc. as Representatives of the Initial Purchasers
(j)10.1
    
    
    
    Tax Sharing and Indemnification Agreement, dated May 11, 1999, by and among
Columbia/HCA, LifePoint Hospitals, Inc. and Triad Hospitals, Inc. (k)10.2
    
    
    
    Benefits and Employment Matters Agreement, dated May 11, 1999 by and among
Columbia/HCA, LifePoint Hospitals, Inc. and Triad Hospitals, Inc. (k)10.3
    
    
    
    Insurance Allocation and Administration Agreement, dated May 11, 1999, by and among
Columbia/ HCA, LifePoint Hospitals, Inc. and Triad Hospitals, Inc. (k)10.4
    
    
    
    Computer and Data Processing Services Agreement dated May 11, 1999 by and between
Columbia Information Systems, Inc. and LifePoint Hospitals, Inc. (k)10.5
    
    
    
    Amendment to Computer and Data Processing Services Agreement, dated April 28, 2004,
by and between HCA-Information Technology and Services, Inc. and LifePoint
Hospitals, Inc. (l)10.6
    
    
    
    LifePoint Hospitals, Inc. Executive Stock Purchase Plan (k)10.7
    
    
    
    LifePoint Hospitals, Inc. Management Stock Purchase Plan, as amended and restated (m)10.8
    
    
    
    LifePoint Hospitals, Inc. Outside Directors Stock and Incentive Compensation Plan (k)10.9
    
    
    
    Amended and Restated 1998 Long-Term Incentive Plan (n)10.10
    
    
    
    Amendment to the LifePoint Hospitals, Inc. Outside Directors Stock and Incentive
Compensation Plan (o)




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##### Table of Contents



ExhibitNumber
    
    
    
    Description of Exhibits10.11
    
    
    
    Credit Agreement, dated as of April 15, 2005, by and among LifePoint Hospitals,
Inc., as borrower, the lenders referred to therein, Citicorp North America, Inc. as
administrative agent, Bank of America, N.A., CIBC World Markets Corp., SunTrust
Bank, UBS Securities LLC, as co-syndication agents and Citigroup Global Markets,
Inc., as sole lead arranger and sole bookrunner (i)10.12
    
    
    
    Incremental Facility Amendment dated August 23, 2005, among LifePoint Hospitals,
Inc., as borrower, Citicorp North America, Inc., as administrative agent and the
lenders party thereto (p)10.13
    
    
    
    Amendment No. 2 to Credit Agreement, dated October 14, 2005, among LifePoint
Hospitals, Inc. as borrower, Citicorp North America, Inc., as administrative agent
and the lenders party thereto (q)10.14
    
    
    
    Corporate Integrity Agreement dated as of December 21, 2000 by and between the
Office of Inspector General of the Department of Health and Human Services and
LifePoint Hospitals, Inc. (r)10.15
    
    
    
    Amendment to the Corporate Integrity Agreement, dated April 29, 2002, between the
Office of Inspector General of the Department of Health and Human Services and
LifePoint Hospitals, Inc. (m)10.16
    
    
    
    Letter from the Office of Inspector General of the Department of Health and Human
Services, dated October 15, 2002 (m)10.17
    
    
    
    Letter from the Office of Inspector of the Department of Health and Human Services,
dated December 18, 2003 (s)10.18
    
    
    
    Letter from the Office of Inspector of the Department of Health and Human Services,
dated March 3, 2004 (s)10.19
    
    
    
    LifePoint Hospitals, Inc. Employee Stock Purchase Plan (t)10.20
    
    
    
    First Amendment to the LifePoint Hospitals, Inc. Employee Stock Purchase Plan (u)10.21
    
    
    
    LifePoint Hospitals, Inc. Change in Control Severance Plan (v)10.22
    
    
    
    LifePoint Hospitals, Inc. Executive Performance Incentive Plan (w)10.23
    
    
    
    Employment Agreement of Kenneth C. Donahey, as amended and restated (s)10.24
    
    
    
    Consulting Agreement, dated as of August 15, 2004, by and between LifePoint
Hospitals, Inc. and Martin S. Rash (b)10.25
    
    
    
    Comprehensive Service Agreement for Diagnostic Imaging and Biomedical Services,
executed on January 7, 2005, between LifePoint Hospital Holdings, Inc. and GE
Healthcare Technologies (s)10.26
    
    
    
    Form of LifePoint Hospitals, Inc. Nonqualified Stock Option Agreement (x)10.27
    
    
    
    Form of LifePoint Hospitals, Inc. Restricted Stock Award Agreement (x)21.1
    
    
    
    List of Subsidiaries23.1
    
    
    
    Consent of Independent Registered Public Accounting Firm31.1
    
    
    
    Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. pursuant
to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    
    Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. pursuant
to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    
    Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    
    Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (a)
    
    Incorporated by reference from exhibits to LifePoint Hospitals
Current Report on Form 8-K filed on August 16, 2004, File No.
000-29818.(b)
    
    Incorporated by reference from exhibits to the Registration Statement
on Form S-4 filed by Lakers Holding Corp. on February 18, 2005 under
the Securities Act of 1933, as amended, File No. 333-119929.(c)
    
    Incorporated by reference from exhibits to the Current Report on Form
8-K filed by LifePoint Hospitals, Inc. on March 16, 2005, File No.
000-29818.(d)
    
    Incorporated by reference from exhibits to the Registration Statement
on Form S-8 filed by LifePoint Hospitals, Inc. on April 15, 2005, File
No. 333-124093.(e)
    
    Incorporated by reference from Appendix A to the Registration
Statement on Form S-4, as amended, filed by LifePoint Hospitals, Inc.
on February 18, 2005, File No. 333-119929.




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##### Table of Contents



(f)
    
    Incorporated by reference from exhibits to Province Healthcare
Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2003, File No. 001-31320.(g)
    
    Incorporated by reference from exhibits to the Current Report on Form
8-K dated April 5, 2005 of Province Healthcare Company File No.
001-31320.(h)
    
    Incorporated by reference from the exhibits filed with the Province
Healthcare Companys Registration Statement on Form S-3, dated January
24, 2001, registration No. 333-54192.(i)
    
    Incorporated by reference from exhibits to the Current Report on Form
8-K dated April 15, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.(j)
    
    Incorporated by reference from exhibits to the Current Report on Form
8-K dated August 10, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.(k)
    
    Incorporated by reference from exhibits to LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
File No. 000-29818.(l)
    
    Incorporated by reference from exhibits to LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004,
File No. 000-29818.(m)
    
    Incorporated by reference from exhibits to LifePoint Hospitals Annual
Report on Form 10-K for the year ended December 31, 2002, File No.
000-29818.(n)
    
    Incorporated by reference from exhibits to the Current Report on Form
8-K dated July 7, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.(o)
    
    Incorporated by reference from Appendix B to LifePoint Hospitals
Proxy Statement dated April 28, 2004, File No. 000-29818.(p)
    
    Incorporated by reference from exhibits to the Current Report on Form
8-K dated August 23, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.(q)
    
    Incorporated by reference from exhibits to the Current Report on Form
8-K dated October 18, 2005 of LifePoint Hospitals, Inc., File No.
000-51251.(r)
    
    Incorporated by reference from exhibits to LifePoint Hospitals Annual
Report on Form 10-K for the year ended December 31, 2000, File No.
000-29818.(s)
    
    Incorporated by reference from exhibits to the Annual Report on Form
10-K for the year ended December 31, 2004 filed by LifePoint
Hospitals, Inc. on March 1, 2005, File No. 000-29818.(t)
    
    Incorporated by reference from exhibits to LifePoint Hospitals Annual
Report on Form 10-K for the year ended December 31, 2001, File No.
000-29818.(u)
    
    Incorporated by reference from exhibits to LifePoint Hospitals
Registration Statement on Form S-8 under the Securities Act of 1933,
File No. 333-105775.(v)
    
    Incorporated by reference from exhibits to LifePoint Hospitals
Current Report on Form 8-K dated May 16, 2002, File No. 000-29818.(w)
    
    Incorporated by reference from Appendix C to LifePoint Hospitals
Proxy Statement dated April 28, 2004, File No. 000-29818.(x)
    
    Incorporated by reference from exhibits to LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended June 30, 2005,
File No. 000-51251.