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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, 2007
 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
 
 (LIFEPOINT LOGO)
 (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)
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Exchange on Which RegisteredCommon Stock, par value $.01 per share
    
    NASDAQ Global Select MarketPreferred Stock Purchase Rights
    
    NASDAQ Global Select Market
 Securities registered pursuant to Section 12(g) of the Act: NONE
  þ o
  o þ
 þ o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    
    1Item 1A.
Risk Factors
    
    
    
    17Item 1B. Unresolved Staff Comments
    
    
    
    28Item 2. Properties
    
    
    
    28Item 3. Legal Proceedings
    
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    
    30PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    
    31Item 6. Selected Financial Data
    
    
    
    33Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    
    34Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    
    75Item 8. Financial Statements and Supplementary Data
    
    
    
    76Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    
    76Item 9A. Controls and Procedures
    
    
    
    76Item 9B. Other Information
    
    
    
    76PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    
    77Item 11. Executive Compensation
    
    
    
    77Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    
    77Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    
    78Item 14. Principal Accountant Fees and Services
    
    
    
    78PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    
    79SIGNATURESExhibit Index




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PART I
 Item 1. Business.
 Overview of Our Company
   Operations
    1




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2




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Availability of Information
 www.lifepointhospitals.com .
 Sources of Revenue
  2005
    
    2006
    
    2007Medicare
    
    
    36.6
    %
    
    
    34.8
    %
    
    
    32.9
    %Medicaid
    
    
    9.3
    
    
    
    10.1
    
    
    
    9.5HMOs, PPOs and other private insurers
    
    
    38.8
    
    
    
    38.6
    
    
    
    41.7Self-pay
    
    
    12.2
    
    
    
    12.7
    
    
    
    12.5Other
    
    
    3.1
    
    
    
    3.8
    
    
    
    3.4100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Medicare
   3




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Inpatient Acute Care Diagnosis Related Group Payments
   Medicare
    
    MedicareDRG
    
    CapitalPayments
    
    Payments2005
    
    $
    355.2
    
    
    $
    32.12006
    
    
    455.6
    
    
    
    40.32007
    
    
    469.0
    
    
    
    41.6
     4




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FFY 2008 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 (3.3%)
    
    $
    3,478.45
    
    
    $
    1,512.15Reduced update (1.3%)
    
    $
    3,411.10
    
    
    $
    1,482.87
 FFY 2008 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 (3.3%)
    
    $
    3,094.17
    
    
    $
    1,896.43Reduced update (1.3%)
    
    $
    3,034.26
    
    
    $
    1,859.71
 Capital Standard  Federal Payment Rate
 Outlier Payments
  Disproportionate Share Payments
  Wage Index and Geographic Reclassification
   5




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Inpatient Rehabilitation and the 75% Rule
      Inpatient Psychiatric
  Outpatient Payments
   6




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Medicare
    
    Medicare Hold Harmless PaymentsOutpatient Payments
    
    (Included in Medicare Outpatient Payments)2005
    
    $
    141.5
    
    
    $
    2006
    
    
    176.1
    
    
    
    2007
    
    
    189.6
    
    
    
    0.6
 Home Health 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.
  Recovery
Audit Contractors
    7




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Medicaid
      Annual Cost Reports
   HMOs, PPOs and Other Private Insurers
  8




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Self-Pay
    Self-Pay
    
    Charity/Indigent Care
    
    CombinedRevenues
    
    Write-Offs
    
    Total2005
    
    $
    220.8
    
    
    $
    23.8
    
    
    $
    244.62006
    
    
    303.7
    
    
    
    42.0
    
    
    
    345.72007
    
    
    329.2
    
    
    
    51.5
    
    
    
    380.7
 Competition for Patients
  
    
    the scope, breadth and quality of services a hospital offers to its patients and
physicians;
    
    the number, quality and specialties of the physicians who admit and refer patients to
the hospital;
    
    nurses and other health care professionals employed by the hospital or on the
hospitals staff;
    
    the hospitals reputation;
    
    its managed care contracting relationships;
    
    its location and the location and number of competitive facilities and other health
care alternatives;
    
    the physical condition of its buildings and improvements;
 
    
    the quality, age and state-of-the-art of its medical equipment;
    
    its parking or proximity to public transportation;
    
    the length of time it has been a part of the community;
    
    whether it has payor agreements with the entities that insure the individual in need of
care;
    
    the relative convenience of the manner in which care is provided (for example, whether
services are available on an outpatient basis and whether services can be obtained
quickly);
    
    the choices made by the physicians on the medical staffs of our hospitals; and
    
    the charges for its services.
 9




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Competition for Professionals
    10




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Employees
  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
    
    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.
  11




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
    
    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.
   12




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Corporate Practice of Medicine and Fee-Splitting.
 Emergency Medical Treatment and Active Labor Act.
   Federal False Claims Act.
  13




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Healthcare Reform.
  Conversion Legislation.
 Certificates of Need.
 HIPAA Transaction, Privacy and
Security Requirements.
   14




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Patient Safety and Quality Improvement Act of 2005.
 State Hospital Rate-Setting Activity.
 Medical Malpractice Tort Law Reform.
 Environmental Regulation.
 15




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Regulatory Compliance Program
   Risk Management and Insurance
     16




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Item 1A. Risk Factors.
 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 acquisitions, divestitures, business strategies and initiatives;
    
    interpretations of Medicare and Medicaid law and their effects on our business; and
    
    descriptions of assumptions underlying or relating to any of the foregoing.In this report, for example, we make forward-looking statements discussing our expectations
about:
    
    future financial performance and condition;
    
    future liquidity and capital resources;
    
    repurchases of our common stock;
    
    future cash flows;
    
    existing and future debt and equity structure;
    
    compliance with debt covenants;
    
    our strategic goals;
    
    our business strategy and operating philosophy;
    
    competition with other hospital companies and healthcare service providers;
    
    our compliance with federal, state and local regulations;
    
    our equity-based compensation metrics and arrangements;
    
    executive compensation metrics and arrangements;
    
    our hedging arrangements;
    
    supply and information technology costs;
    
    changes in interest rates;
    
    our plans as to the payment of dividends;
    
    future acquisitions, dispositions and joint ventures;
    
    tax-related liabilities;
    
    industry and general economic trends;
 17




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
    
    the effect of union organizing activity;
    
    the efforts of insurers and other payors, healthcare providers and others to contain
healthcare costs;
    
    reimbursement changes;
    
    the impact of recovery audit contractors;
    
    governmental budgetary challenges at the federal level and in the states where we
operate;
    
    patient volumes and related revenues;
    
    recruiting and retention of clinical personnel;
    
    future capital expenditures;
    
    expected changes in certain expenses;
    
    our contractual obligations;
    
    the completion of projects under construction;
    
    the impact of changes in our critical accounting estimates;
    
    claims and legal actions relating to professional liabilities and other matters;
    
    non-GAAP measures;
    
    the impact and applicability of new accounting standards; and
    
    physician recruiting and retention.
  Managements Discussion and
Analysis of Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures about Market Risk
 Risk Factors
 If
we do not effectively attract, recruit and retain qualified physicians, nurses, medical technicians
and other healthcare professionals, our ability to deliver healthcare services efficiently will be
adversely affected.
  18




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The loss of certain physicians can have a disproportionate impact on certain of our hospitals.
   We may continue to see the growth of uninsured and patient due accounts; deterioration in
the collectability of these accounts could adversely affect our results of operations and cash
flows.
   19




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Our revenues will 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 payors and healthcare cost containment initiatives may limit our revenues and
profitability.
       20




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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 increase the level of competition we face and may therefore adversely affect our
revenues, profitability and market share.
    We are subject to increasingly stringent governmental regulation, and may be subjected to
allegations that we have failed to comply with governmental regulations which could result in
sanctions and even greater scrutiny that reduce our revenues and profitability.
    21




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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.
  Revenue Concentration by StateAmount
    
    % of Total Revenues2005
    
    2006
    
    2007
    
    2005
    
    2006
    
    2007Kentucky
    
    $
    387.0
    
    
    $
    404.0
    
    
    $
    435.4
    
    
    
    21.4
    %
    
    
    16.9
    %
    
    
    16.6
    %Virginia
    
    
    189.5
    
    
    
    341.9
    
    
    
    369.7
    
    
    
    10.5
    
    
    
    14.3
    
    
    
    14.1Louisiana
    
    
    171.1
    
    
    
    211.3
    
    
    
    229.8
    
    
    
    9.5
    
    
    
    8.8
    
    
    
    8.7West Virginia
    
    
    78.3
    
    
    
    153.7
    
    
    
    229.7
    
    
    
    4.3
    
    
    
    6.4
    
    
    
    8.7New Mexico
    
    
    136.7
    
    
    
    210.9
    
    
    
    225.0
    
    
    
    7.6
    
    
    
    8.8
    
    
    
    8.6Tennessee
    
    
    191.7
    
    
    
    199.6
    
    
    
    209.8
    
    
    
    10.6
    
    
    
    8.3
    
    
    
    8.0Alabama
    
    
    162.5
    
    
    
    186.5
    
    
    
    191.0
    
    
    
    9.0
    
    
    
    7.8
    
    
    
    7.3Arizona
    
    
    65.6
    
    
    
    133.0
    
    
    
    167.1
    
    
    
    3.6
    
    
    
    5.5
    
    
    
    6.4Texas
    
    
    95.8
    
    
    
    136.3
    
    
    
    135.3
    
    
    
    5.3
    
    
    
    5.7
    
    
    
    5.1
  22




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We have substantial indebtedness and we may incur significant amounts of additional
indebtedness in the future which could affect our ability to finance operations and capital
expenditures, pursue desirable business opportunities or successfully operate our business in the
future.
   
    
    Under our credit facility, we are 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 the general economy
or our industry. Specific examples of industry changes that could have an adverse impact on
our cash flow include the implementation by the government of further limitations on
reimbursement under Medicare and Medicaid.
    
    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 incur 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 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.
 If our access to licensed information systems is interrupted or restricted, or if we are not
able to integrate changes to our existing information systems or information systems of acquired
hospitals, our operations will suffer.
 .
 23




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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.
     Our revenues and volume trends may be adversely affected by certain factors over which we have
no control relevant to the markets in which we have hospitals, including weather conditions.
  24




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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.
   25




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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.
  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.
     Certificate of need laws and regulations regarding licenses, ownership and operation may
impair our future expansion in some states.
  26




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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.
  Different interpretations of accounting principles could have a material adverse effect on our
results of operations or financial condition.
  Our stock price has been and may continue to be volatile; any significant decline may result
in litigation.
   
    
    actual or anticipated quarterly variations in operating results, particularly if they
differ from investors expectations;
    
    changes in financial estimates and recommendations by securities analysts;
    
    changes in government regulations including those relating to reimbursement and
operational policies and procedures;
    
    the operating and stock price performance of other companies that investors may deem
comparable;
    
    changes in overall economic factors in our markets;
    
    news reports relating to trends or events in our markets; and
    
    issues associated with integration of the hospitals that we acquire.
   27




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Item 1B. Unresolved Staff Comments.
  Item 2. Properties.
  Licensed
    
    OperationalHospital
    
    City
    
    Acquisition/Opening/Lease Date
    
    Beds
    
    StatusAlabamaAndalusia Regional Hospital
    
    Andalusia
    
    HCA Spin-Off(a)
    
    
    100
    
    
    OwnLakeland Community Hospital
    
    Haleyville
    
    December 1, 2002
    
    
    50
    
    
    OwnNorthwest Medical Center
    
    Winfield
    
    December 1, 2002
    
    
    71
    
    
    OwnRussellville Hospital
    
    Russellville
    
    October 3, 2002
    
    
    100
    
    
    OwnVaughan Regional Medical Center
    
    Selma
    
    April 15, 2005
    
    
    175
    
    
    OwnArizonaHavasu Regional Medical Center
    
    Lake Havasu City
    
    April 15, 2005
    
    
    138
    
    
    OwnValley View Medical Center
    
    Ft. Mohave
    
    November 8, 2005
    
    
    60
    
    
    OwnCaliforniaColorado
River Medical Center (b)
    
    Needles
    
    April 15, 2005
    
    
    25
    
    
    LeaseColoradoColorado Plains Medical Center
    
    Fort Morgan
    
    April 15, 2005
    
    
    50
    
    
    LeaseFloridaPutnam Community Medical Center
    
    Palatka
    
    June 16, 2000
    
    
    141
    
    
    OwnIndianaStarke Memorial Hospital
    
    Knox
    
    April 15, 2005
    
    
    53
    
    
    LeaseKansasWestern Plains Medical Complex
    
    Dodge City
    
    HCA Spin-Off(a)
    
    
    99
    
    
    OwnKentuckyBluegrass Community Hospital
    
    Versailles
    
    January 2, 2001
    
    
    25
    
    
    OwnBourbon Community Hospital
    
    Paris
    
    HCA Spin-Off(a)
    
    
    58
    
    
    OwnGeorgetown Community Hospital
    
    Georgetown
    
    HCA Spin-Off(a)
    
    
    75
    
    
    OwnJackson Purchase Medical Center
    
    Mayfield
    
    HCA Spin-Off(a)
    
    
    107
    
    
    OwnLake Cumberland Regional Hospital
    
    Somerset
    
    HCA Spin-Off(a)
    
    
    259
    
    
    OwnLogan Memorial Hospital
    
    Russellville
    
    HCA Spin-Off(a)
    
    
    92
    
    
    OwnMeadowview Regional Medical Center
    
    Maysville
    
    HCA Spin-Off(a)
    
    
    101
    
    
    OwnSpring View Hospital
    
    Lebanon
    
    October 1, 2003
    
    
    75
    
    
    OwnLouisianaAcadian Medical Center
    
    Eunice
    
    April 15, 2005
    
    
    52
    
    
    OwnDoctors Hospital of Opelousas
    
    Opelousas
    
    April 15, 2005
    
    
    171
    
    
    OwnMinden Medical Center
    
    Minden
    
    April 15, 2005
    
    
    159
    
    
    OwnRiver Parishes Hospital
    
    LaPlace
    
    July 1, 2004
    
    
    106
    
    
    OwnTeche Regional Medical Center
    
    Morgan City
    
    April 15, 2005
    
    
    149
    
    
    LeaseVille Platte Medical Center
    
    Ville Platte
    
    December 1, 2001
    
    
    95
    
    
    OwnMississippiBolivar Medical Center
    
    Cleveland
    
    April 15, 2005
    
    
    200
    
    
    LeaseNevadaNortheastern Nevada Regional
Hospital
    
    Elko
    
    April 15, 2005
    
    
    75
    
    
    Own
 28




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Licensed
    
    OperationalHospital
    
    City
    
    Acquisition/Opening/Lease Date
    
    Beds
    
    StatusNew MexicoLos Alamos Medical Center
    
    Los Alamos
    
    April 15, 2005
    
    
    47
    
    
    OwnMemorial Medical Center of Las
Cruces
    
    Las Cruces
    
    April 15, 2005
    
    
    286
    
    
    LeaseTennesseeAthens Regional Medical Center
    
    Athens
    
    October 1, 2001
    
    
    118
    
    
    OwnCrockett Hospital
    
    Lawrenceburg
    
    HCA Spin-Off(a)
    
    
    107
    
    
    OwnEmerald-Hodgson Hospital
    
    Sewanee
    
    HCA Spin-Off(a)
    
    
    41
    
    
    OwnHillside Hospital
    
    Pulaski
    
    HCA Spin-Off(a)
    
    
    95
    
    
    OwnLivingston Regional Hospital
    
    Livingston
    
    HCA Spin-Off(a)
    
    
    114
    
    
    OwnSouthern Tennessee Medical Center
    
    Winchester
    
    HCA Spin-Off(a)
    
    
    157
    
    
    OwnTexasEnnis Regional Medical Center
    
    Ennis
    
    April 15, 2005
    
    
    60
    
    
    LeasePalestine Regional Medical Center
    
    Palestine
    
    April 15, 2005
    
    
    150
    
    
    OwnParkview Regional Hospital
    
    Mexia
    
    April 15, 2005
    
    
    59
    
    
    LeaseUtahAshley Regional Medical Center
    
    Vernal
    
    HCA Spin-Off(a)
    
    
    39
    
    
    OwnCastleview Hospital
    
    Price
    
    HCA Spin-Off(a)
    
    
    84
    
    
    OwnVirginiaClinch Valley Medical Center
    
    Richlands
    
    July 1, 2006
    
    
    200
    
    
    OwnDanville Regional Medical Center
    
    Danville
    
    July 1, 2005
    
    
    350
    
    
    OwnMemorial Hospital of Martinsville
and Henry County
    
    Martinsville
    
    April 15, 2005
    
    
    220
    
    
    OwnWythe County Community Hospital
    
    Wytheville
    
    June 1, 2005
    
    
    100
    
    
    LeaseWest VirginiaLogan Regional Medical Center
    
    Logan
    
    December 1, 2002
    
    
    140
    
    
    OwnRaleigh General Hospital
    
    Beckley
    
    July 1, 2006
    
    
    300
    
    
    OwnWyomingLander Regional Hospital
    
    Lander
    
    July 1, 2000
    
    
    89
    
    
    OwnRiverton Memorial Hospital
    
    Riverton
    
    HCA Spin-Off(a)
    
    
    70
    
    
    Own5,687(a)
We were formerly a division of HCA and were spun-off as an
independent publicly-traded company on May 11, 1999.(b)
Held-for-disposal hospital.
  Item 3. Legal Proceedings.
 General.
 Americans with Disabilities Act Claim.
 29




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##### 



Item 4. Submission of Matters to a Vote of Security Holders.
  30




---



##### 



PART II
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
 Market Information for Common Stock
  High
    
    Low2006First Quarter
    
    $
    37.01
    
    
    $
    28.27Second Quarter
    
    
    36.40
    
    
    
    29.21Third Quarter
    
    
    37.20
    
    
    
    30.89Fourth Quarter
    
    
    36.94
    
    
    
    32.602007First Quarter
    
    $
    38.49
    
    
    $
    32.74Second Quarter
    
    
    40.80
    
    
    
    35.91Third Quarter
    
    
    40.49
    
    
    
    27.38Fourth Quarter
    
    
    32.50
    
    
    
    28.102008First
Quarter (through February 19, 2008)
    
    $
    30.75
    
    
    $
    23.76
  Stockholders
  Dividends
 Managements Discussion and Analysis of Financial Condition and Results of Operations,
 
 Recent Sales of Unregistered Securities
  Recent Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 Share Repurchase Program
  31




---



##### 



ApproximateTotal Number
    
    Dollar Valueof Shares
    
    of Shares thatPurchased as
    
    May Yet BeWeighted
    
    Part of a
    
    PurchasedTotal Number
    
    Average
    
    Publicly
    
    Under theof Shares
    
    Price Paid
    
    Announced
    
    ProgramPeriod
    
    Purchased
    
    per Share
    
    Program
    
    (In millions)December 2007
    
    
    1,356,487
    
    
    $
    30.35
    
    
    
    1,356,487
    
    
    $
    108.8
 Equity Compensation Plan Information
  Number of SecuritiesNumber of Securities
    
    
    
    
    
    
    Available for Futureto be Issued Upon
    
    
    Weighted-Average
    
    
    Issuance Under EquityExercise of Outstanding
    
    
    Exercise Price of
    
    
    Compensation PlansOptions, Warrants and
    
    
    Outstanding Options,
    
    
    (Excluding SecuritiesPlan Category
    
    Rights
    
    
    Warrants and Rights
    
    
    Reflected in Column (a))(a)
    
    
    (b)
    
    
    (c)Equity Compensation Plans Approved by Security Holders
    
    
    4,162,882
    (1)
    
    $
    30.65
    (2)
    
    
    2,946,347
    (3)Equity Compensation Plans not Approved by Security
Holders
    
    None
    
    
    None
    
    
    NoneTotal
    
    
    4,162,882
    
    
    $
    30.65
    
    
    
    2,946,347
 
 (1)
    
    Includes the following: 
    
    4,033,037 shares of common stock to be issued upon exercise of outstanding stock options
granted under the Incentive Plan;
    
    95,526 shares of common stock to be issued upon exercise of outstanding stock options
granted under the Outside Directors Plan;
    
    9,819 shares of common stock to be issued upon the vesting of deferred stock units
outstanding under the Outside Directors Plan; and
    
    24,500 shares of common stock to be issued upon the vesting of restricted stock units
outstanding under the Outside Directors Plan.
 
 (2)
    
    Upon vesting, deferred stock units and restricted stock units are
settled for shares of common stock on a one-for-one basis.
Accordingly, the deferred stock units and restricted stock units have
been excluded for purposes of computing the weighted-average exercise
price.(3)
    
    Includes the following: 
    
    2,773,820 shares of common stock available for issuance under the Incentive Plan;
    
    56,007 shares of common stock available for issuance under the Management Stock Purchase
Plan; and
    
    116,520 shares of common stock available for issuance under the Outside Directors Plan.
 32




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##### 



Item 6. Selected Financial Data.
 Managements Discussion and Analysis of Financial Condition and
Results of Operations.
 Years Ended December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007(In millions, except per share amounts)Statement of Operations Data:Revenues
    
    $
    861.7
    
    
    $
    928.8
    
    
    $
    1,809.1
    
    
    $
    2,397.2
    
    
    $
    2,630.1Income from continuing operations
    
    
    69.4
    
    
    
    85.9
    
    
    
    82.2
    
    
    
    144.5
    
    
    
    125.9Income from continuing operations per share:Basic
    
    $
    1.86
    
    
    $
    2.32
    
    
    $
    1.64
    
    
    $
    2.60
    
    
    $
    2.24Diluted
    
    $
    1.78
    
    
    $
    2.18
    
    
    $
    1.61
    
    
    $
    2.57
    
    
    $
    2.20Weighted average shares outstanding:Basic
    
    
    37.2
    
    
    
    37.0
    
    
    
    50.1
    
    
    
    55.6
    
    
    
    56.2Diluted
    
    
    43.3
    
    
    
    42.8
    
    
    
    53.2
    
    
    
    56.3
    
    
    
    57.2Cash dividends declared per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance Sheet Data (as of end of year):Working capital, excluding assets and liabilities held for sale
    
    $
    101.9
    
    
    $
    115.8
    
    
    $
    180.0
    
    
    $
    193.4
    
    
    $
    339.9Property and equipment, net
    
    
    437.9
    
    
    
    495.5
    
    
    
    1,252.5
    
    
    
    1,339.4
    
    
    
    1,417.7Total assets (including assets held for sale)
    
    
    799.0
    
    
    
    890.4
    
    
    
    3,224.6
    
    
    
    3,638.4
    
    
    
    3,626.5Long-term debt, including amounts due within one year
    
    
    270.0
    
    
    
    221.0
    
    
    
    1,514.6
    
    
    
    1,668.9
    
    
    
    1,517.4Stockholders equity
    
    
    394.3
    
    
    
    509.5
    
    
    
    1,287.8
    
    
    
    1,450.0
    
    
    
    1,544.2
 33




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##### 



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
  2005
    
    2006
    
    2007Revenues
    
    $
    1,809.1
    
    
    $
    2,397.2
    
    
    $
    2,630.1Income from continuing operations
    
    $
    82.2
    
    
    $
    144.5
    
    
    $
    125.9Diluted earnings per share from continuing operations
    
    $
    1.61
    
    
    $
    2.57
    
    
    $
    2.20
 Key Challenges
  
    
    Inpatient Volumes.We have experienced a decline in our
inpatient volumes during the later half of 2007. This was the
result of physician attrition in several of our markets, lack of disease across our markets, the closure of certain unprofitable service lines at
a few of our hospitals and the long-term industry trend of inpatient services shifting to outpatient
services. We will focus on adding or further emphasizing service
lines that are needed in our communities.
    
    Increases in Provision for Doubtful Accounts.We have 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.
  Provision for Doubtful Accounts2005
    
    
    2006
    
    
    2007First Quarter
    
    $
    25.2
    
    
    $
    68.6
    
    
    $
    77.7Second Quarter
    
    
    45.3
    
    
    
    60.2
    
    
    
    84.6Third Quarter
    
    
    63.0
    
    
    
    73.9
    
    
    
    82.2Fourth Quarter
    
    
    63.8
    
    
    
    71.2
    
    
    
    79.6$
    197.3
    
    
    $
    273.9
    
    
    $
    324.1
   Charity and Indigent Care Write-Offs2005
    
    
    2006
    
    
    2007First Quarter
    
    $
    1.8
    
    
    $
    6.0
    
    
    $
    16.2Second Quarter
    
    
    6.3
    
    
    
    12.2
    
    
    
    14.1Third Quarter
    
    
    8.4
    
    
    
    11.6
    
    
    
    12.0Fourth Quarter
    
    
    9.5
    
    
    
    16.6
    
    
    
    11.4$
    26.0
    
    
    $
    46.4
    
    
    $
    53.7
 34




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##### 



Self-Pay Revenues2005
    
    
    2006
    
    
    2007First Quarter
    
    $
    26.9
    
    
    $
    73.8
    
    
    $
    80.3Second Quarter
    
    
    56.9
    
    
    
    73.3
    
    
    
    87.1Third Quarter
    
    
    74.1
    
    
    
    88.3
    
    
    
    86.6Fourth Quarter
    
    
    71.6
    
    
    
    75.1
    
    
    
    82.7$
    229.5
    
    
    $
    310.5
    
    
    $
    336.7
  Revenue Days Outstanding inAccounts Receivable2005
    
    2006
    
    2007March 31
    
    
    37.2
    
    
    
    39.6
    
    
    
    40.8June 30
    
    
    41.0
    
    
    
    40.7
    
    
    
    41.4September 30
    
    
    42.0
    
    
    
    45.1
    
    
    
    43.7December 31
    
    
    40.5
    
    
    
    43.1
    
    
    
    43.1
  December 31,
    
    December 31,2006
    
    2007Insured receivables
    
    
    37.1
    %
    
    
    33.2
    %Uninsured receivables (including co-payments and deductibles)
    
    
    62.9
    
    
    
    66.8100.0
    %
    
    
    100.0
    %
  December 31,
    
    December 31,2006
    
    20070 to 60 days
    
    
    49.3
    %
    
    
    45.1
    %61 to 150 days
    
    
    21.3
    
    
    
    19.9Over 150 days
    
    
    29.4
    
    
    
    35.0100.0
    %
    
    
    100.0
    %
 We continue to implement a number of operating strategies related to cash collections. However,
if the trend of increasing self-pay revenues continues, our future results of operations and
future financial position could be materially adversely affected.
 
    
    Physician Recruitment and Retention.Recruiting,
attracting and retaining both primary care physicians
and specialists for our non-urban communities is a key to increasing revenues, patient
volumes and the value that the communities place on our hospitals. The medical staffs at our
hospitals are typically small and our revenues are negatively affected by the loss of
physicians. We believe that continuing to add primary care physicians and specialists should
help our hospitals increase volumes by offering new services.
Physician attrition is also a challenge for us.
    
    Challenges in Professional and General Liability Costs.  Professional and general
liability costs remain a challenge to us and we expect this pressure to continue in the
future. Additionally, we experienced unfavorable claims development results in 2007, which
are reflected in our professional and general liability costs.
 35




---



##### 




    
    Shortage of Clinical Personnel and Increased Contract Labor Usage.In recent years, many
hospitals, including some of the hospitals we own, have encountered difficulty in recruiting
and retaining nurses and other clinical personnel. When we are unable to staff our nursing
and other 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 nurses and other clinical personnel. However, we expect that staffing
issues related to nurses and other clinical personnel will continue in the future.
Additionally, we have incurred an increase in professional fees primarily for anesthesiology,
radiology, and emergency room services. Our expense for professional fees paid to
hospital-based physicians has increased as the shortage of these physicians becomes more
acute.
    
    Indebtedness.Our consolidated debt was $1,517.4 million as of December 31, 2007, and we
incurred $95.7 million of net interest expense during 2007. Our indebtedness 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, 2007 and believe we will be in compliance with them throughout 2008.
    
    Medicare Changes  Implementation of Medicare
Severity Diagnosis-Related Groups.  Changes with
respect to governmental reimbursement affect our revenues and earnings. On August 1, 2007,
the Centers for Medicare and Medicaid Services (CMS) issued its hospital inpatient
prospective payment system final rule for FFY 2008. Among other items, the final rule
creates 745 new severity-adjusted diagnosis-related groups (Medicare Severity DRGs or
MS-DRGs) to replace Medicares current 538 DRGs. Under the final rule, the new MS-DRGs
will be phased in over a two year period. In addition, the final rule also provides for a
market basket increase of 3.3% in FFY 2008 for hospitals that report certain patient care
quality measures and an increase of 1.3% for hospitals that do not submit this information.
However, to offset the effect of the coding and discharge classification changes that CMS
believes will occur as hospitals implement the MS-DRG system, the final rule also reduces
Medicare payments to hospitals by 1.2% in federal fiscal year 2008 and 1.8% in both FFY 2009
and 2010.Subsequently, on September 29, 2007, President Bush signed Public Law No: 110-90, effectively
decreasing these reductions for FFY 2008 and 2009 to 0.6% and 0.9%. CMS plans to conduct a
look-back beginning in FFY 2010 and make appropriate changes to the reduction percentages
based on actual claims data. CMS anticipates that the final rule will result in an increase in
payments to hospitals that serve more severely ill patients and a decrease to hospitals that
serve patients who are less severely ill. Although difficult to predict, the implementation of
the MS-DRG system and the other provisions of the final rule may result in our Medicare acute
inpatient hospital reimbursement remaining flat in FFY 2008. Part I, Item 1. Business,
Sources of Revenue contains a detailed discussion of provisions that affect our Medicare
reimbursement, including the Medicare hospital inpatient, hospital outpatient, and inpatient
rehabilitation facility prospective payment systems.
    
    Medicare ChangesMedicare Hospital Outpatient Prospective Payment System. On November 1,
2007, CMS issued its final hospital outpatient prospective payment system rule for calendar
year 2008. Among other provisions, this includes a 3.3% market basket update and requires
hospitals to begin reporting seven hospital outpatient quality measures. Beginning in
calendar year 2009, the annual payment update factor will be reduced by 2.0 percentage points
for hospitals that do not report those measures.
    
    Medicare ChangesInpatient Rehabilitation Facility Prospective Payment System. On July
31, 2007, CMS published its Medicare inpatient rehabilitation facility prospective payment
system final rule for FFY 2008. The final rule increases the inpatient rehabilitation
facility (IRF) payment rate by 3.2% and the high-cost outlier threshold from $5,534 to
$7,362 for FFY 2008. The final rule also continues the phase-in of the requirement that at
least 75% of an IRFs patients have one of 13 designated medical conditions (the 75% Rule)
which has resulted in decreased volume in our rehabilitation units. However, the Medicare,
Medicaid, and SCHIP Extension Act of 2007, enacted December 29, 2007 (the Extension Act)
permanently freezes the compliance threshold at 60% effective for cost reporting periods
starting July 1, 2006, and allows co-morbid conditions to count toward this threshold.
    
    Medicaid Changes.States have adopted, or may be considering, legislation designed to
reduce coverage and program eligibility, enroll Medicaid recipients in managed care programs
and/or impose additional taxes on hospitals to help finance or expand the states Medicaid
systems. The legislation passed by the New Mexico legislature in
February 2008 is one example of this. Future legislation or other changes in the administration or interpretation of
government health programs could have a material adverse effect on our financial position
and results of operations. On May 25, 2007, CMS issued a final rule entitled Medicaid
Program; Cost Limit for Providers Operated by Units of Government and Provisions to Ensure
the Integrity of Federal-State Financial Partnership, which was expected to reduce federal
Medicaid funding by $4 billion over five years. Also on this date, President Bush signed
into law HR 2206, placing a moratorium on this rule for one year.
However, when the moratorium expires in 2008, this final rule could significantly impact state Medicaid
programs and our revenue from these programs.
 36




---



##### 




    
    Increases in Supply Costs. During the past few years, we have experienced an increase in
supply costs per-equivalent admission, especially in the areas of pharmaceutical, orthopedic,
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.
    
    Increases in Information Technology Costs and Costs of Integration.Our business depends
significantly on effective information systems to process clinical and financial information.
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. Under a contract with a term that will expire on December 31, 2009,
HCA-IT provides us with financial, clinical, patient accounting and network information
systems. We are currently negotiating with HCA-IT to extend the HCA-IT agreement beyond 2009.
 Hospital Acquisitions
 Properties
   Discontinued Operations
  Coastal Carolina Medical Center (Coastal)
  Cash proceeds from sale
    
    $
    35.4Less assets sold:Property and equipment
    
    
    (28.5
    )Goodwill
    
    
    (14.1
    )Intangible assets
    
    
    (0.5
    )Net working capital
    
    
    0.1(7.6
    )Income tax provision
    
    
    (0.2
    )$
    (7.8
    )
 37




---



##### 



Colorado River Medical Center (Colorado River)
   Property and equipment
    
    $
    (4.9
    )Net working capital
    
    
    (4.7
    )Goodwill
    
    
    (3.1
    )(12.7
    )Income tax benefit
    
    
    4.0$
    (8.7
    )
 Other Disposals
    2005
    
    
    2006
    
    
    2007Revenues
    
    $
    94.1
    
    
    $
    150.9
    
    
    $
    58.9Loss from discontinued operations
    
    $
    (2.8
    )
    
    $
    (3.2
    )
    
    $
    (6.8
    )Impairment charge
    
    
    (5.8
    )
    
    
    
    
    
    
    (16.5
    )Gain (loss) on sale of hospitals
    
    
    (0.7
    )
    
    
    4.2
    
    
    
    (0.6
    )Income (loss) from discontinued operations
    
    $
    (9.3
    )
    
    $
    1.0
    
    
    $
    (23.9
    )Diluted earnings (loss) per share from discontinued operations
    
    $
    (0.18
    )
    
    $
    0.02
    
    
    $
    (0.41
    )
 38




---



##### 



Summary
  Revenue Sources
 Business,  
    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.
   39




---



##### 



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 consolidated balance sheets as of
December 31 was as follows (in
millions):      2007  $376.3; and      2006  $326.2
Our provision for doubtful accounts from
continuing operations, included in our
consolidated results of operations, was as follows
(in millions):      2007  $314.2;      2006  $257.4; and      2005  $183.3
    
    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 or
self- pay 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 perform 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;
    
    If self-pay
revenues during
2007 were changed
by 1%, our 2007
after-tax income
from continuing
operations would
change by
approximately $2.0
million or diluted
earnings per share
of $0.03.
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.
Our estimates may
be 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     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.Our policy is to write-off accounts
after all collection efforts have
failed, which is generally one year
after the date of discharge of the
patient. Patient
 40




---



##### 



Balance Sheet orIncome Statement Caption/Nature of Critical Estimate Item
    
    Assumptions/Approach Used
    
    Sensitivity AnalysisAllowance
for doubtful accounts and provision for doubtful accounts (continued)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
constituted 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.
 41




---



##### 



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
84.1% of our revenues during 2007 relate
to discounted charges.

The sources of these revenues were as
follows (as a percentage of total
revenues):      Medicare  32.9%;      Medicaid  9.5%; and
    
    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.      Managed care  41.7%.
    
    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.
    
    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):      2007  $9.1      2006  $13.5; and      2005  $9.4Discounts 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.
 42




---



##### 



Balance Sheet orIncome Statement Caption/Nature of Critical Estimate Item
    
    Assumptions/Approach Used
    
    Sensitivity AnalysisRevenue
recognition/Allowance for contractual discounts (continued)Managed care
    
    Managed careAccounts 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.
For 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.
    
    If our overall
estimated
contractual
discount percentage
on all of our
managed care
revenues during
2007 were changed
by 1%, our 2007
after-tax income
from continuing
operations would
change by
approximately $5.0
million, or diluted
earnings per share
of $0.09. 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 based
on payor contract
provisions,
historical
collection data as
well as other
factors 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 constituted 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.Accounting for stock-based compensationWe issue stock options and other
stock-based awards to key employees and
directors under various
stockholder-approved stock-based
compensation plans. Prior to January 1,
2006, we accounted for our stock-based
employee compensation plans under the
measurement and recognition provisions
of APB No. 25, and related
Interpretations, as permitted by
SFAS No. 123. We did not record any
stock-based employee compensation
    
    We estimated the fair value of stock
options granted during the years ended
December 31, 2006 and 2007 using the
Hull-White II Valuation Model (HW-II)
lattice option valuation model and a
single option award approach. We
estimated the fair value of stock
options granted prior to January 1,
2006 using the Black-Scholes-Merton
(BSM) valuation model. We prefer the
HW-II over the BSM because the HW-II
considers characteristics of fair
    
    The fair value
calculations of our
stock option grants
are affected by
assumptions that
are believed to be
reasonable based
upon the facts and
circumstances at
the time of grant.
Changes in our
volatility
estimates can
materially affect
the fair values of
our stock option
grants. If our
estimated
weighted-average
volatility during
2007 were 10%
higher, our 2007
after-tax income
from continuing
operations would
decrease by approximately $0.2
million, or less
than $0.01 per
diluted share.
 43




---



##### 



Balance Sheet orIncome Statement Caption/Nature of Critical Estimate Item
    
    Assumptions/Approach Used
    
    Sensitivity AnalysisAccounting
for stock-based  compensation (continued)expense for stock options granted under
our stock-based incentive plans prior to
January 1, 2006, as all stock options
granted under those plans had exercise
prices equal to the fair market value of
our common stock on the day prior to the
date of the grant. We also did not
record any compensation expense in
connection with our Employee Stock
Purchase Plan prior to January 1, 2006,
as the purchase price of the stock was
not less than 85% of the lower of the
fair market values of our common stock
at the beginning of each offering period
or at the end of each purchase period.
Also, in accordance with APB 25, we
recorded compensation expense for our
nonvested stock awards. In accordance
with SFAS No. 123 and SFAS No. 148,
prior to January 1, 2006,we disclosed
our pro forma net income or loss and pro
forma expense for our stock-based
incentive programs.
Effective January 1, 2006, we adopted
the fair value recognition provisions of
SFAS No. 123(R), using the modified
prospective transition method. Under
that transition method, compensation
expense that we recognized for the years
ended December 31, 2006 and 2007,
included: (i) compensation expense for
all stock-based payments granted prior
to, but not yet vested as of, January 1,
2006, based on the grant date fair value
estimated in accordance with the
original provisions of SFAS No. 123; and
(ii) compensation expense for all
stock-based payments granted on or after
January 1, 2006, based on the grant date
fair value estimated in accordance with
the provisions of SFAS No. 123(R).
Because we elected to use the modified
prospective transition method, results
for prior periods have not been
restated. In March 2005, the SEC issued
SAB 107, which provides supplemental
implementation guidance for
SFAS No. 123(R). We have applied the
provisions of SAB 107 in our adoption of
SFAS No. 123(R).
We determine the fair value of nonvested
stock grants based on the closing price
of our common stock on the day prior to
the grant date. The nonvested stock
requires no payment from employees and
directors, and stock-based compensation
expense is recorded equally over the
vesting periods (three to five years).
    
    value
option pricing, such as an options
contractual term and the probability of
exercise before the end of the
contractual term, that are not
available under the BSM. In addition,
the complications surrounding the
expected term of an option are
material, as clarified by the SECs
focus on the matter in SAB 107. Given
our reasonably large pool of
unexercised options, we believe a
lattice model that specifically
addresses this fact and models a full
term of exercises is the most
appropriate and reliable means of
valuing our stock options. We are
amortizing the fair value on a
straight-line basis over the requisite
service periods of the awards, which
are the vesting periods of three years.
The stock options that were granted
during the years ended December 31,
2006 and 2007 vest 33.3% on each grant
anniversary date over three years of
continued employment.
The weighted-average fair value per
share of stock options granted by us
during 2007 was $10.24. The following
table shows the weighted average
assumptions we used to develop the fair
value estimates under our stock option
valuation model for 2007 and the
paragraphs below this table summarizes
each assumption:Expected volatility
    27.2
    %Risk free interest rate (range)
    3.34% - 5.21
    %Expected dividends
    Average
expected term (years)
    4.7Population Stratification
Under SFAS No. 123(R), a company should
aggregate individual awards into
relatively homogeneous groups with
respect to exercise and post-vesting
employment behaviors for the purpose of
refining the expected term assumption,
regardless of the valuation technique
used to estimate the fair value. In
addition, SAB 107 clarifies that a
company may generally make a reasonable
fair value estimate with as few as one
or two groupings. We have stratified
our employee population into two
groups: (i) Insiders, who are the
Section 16 filers under SEC rules; and
(ii) Non- insiders, who are the rest
of the employee population. We derived
this stratification based on the
analysis of our historical exercise
patterns, excluding certain
extraordinary events.
 44




---



##### 



Balance Sheet orIncome Statement Caption/Nature of Critical Estimate Item
    
    Assumptions/Approach Used
    
    Sensitivity AnalysisAccounting
for stock-based  compensation (continued)Our stock-based compensation from
continuing operations, included in our
consolidated results of operations, was as follows
(in
millions):

      2007  $18.8;      2006  $13.1; and       2005  $6.5
    
    Expected Volatility
Volatility is a measure of the tendency
of investment returns to vary around a
long-term average rate. Historical
volatility is still an appropriate
starting point for setting this
assumption under SFAS No. 123(R).
According to SFAS No. 123(R), companies
should also consider how future
experience may differ from the past.
This may require using other factors to
adjust historical volatility, such as
implied volatility, peer-group
volatility and the range and mean
reversion of volatility estimates over
various historical periods. SFAS No.
123(R) and SAB 107 acknowledge that
there is likely to be a range of
reasonable estimates for volatility. In
addition, SFAS No. 123(R) requires that
if a best estimate cannot be made,
management should use the mid-point in
the range of reasonable estimates for
volatility. Effective January 1, 2006
we estimate the volatility of our
common stock at the date of grant based
on both historical volatility and
implied volatility from traded options
on our common stock, consistent with
SFAS No. 123(R) and SAB 107.Risk-Free Interest RateLattice models require risk-free
interest rates for all potential times
of exercise obtained by using a
grant-date yield curve. A lattice model
would therefore require the yield curve
for the entire time period during which
employees might exercise their options.
We base the risk-free rate on the
implied yield in effect at the time of
option grant on U.S. Treasury
zero-coupon issues with equivalent
remaining terms.Expected DividendsWe have never paid any cash dividends
on our common stock and do not
anticipate paying any cash dividends in
the foreseeable future. Consequently,
we use an expected dividend yield of
zero.
 45




---



##### 



Balance Sheet orIncome Statement Caption/Nature of Critical Estimate Item
    
    Assumptions/Approach Used
    
    Sensitivity AnalysisAccounting
for stock-based  compensation (continued)Pre-Vesting ForfeituresPre-vesting forfeitures do not affect
the fair value calculation, but they
affect the expense calculation.
SFAS No. 123(R) requires us to estimate
pre-vesting forfeitures at the time of
grant and revise those estimates in
subsequent periods if actual
forfeitures differ from those
estimates. We have used historical data
to estimate pre-vesting stock option
and nonvested stock forfeitures and
record share-based compensation expense
only for those awards that are expected
to vest. For purposes of calculating
pro forma information under
SFAS No. 123 for periods prior to
January 1, 2006, we also used an
estimated forfeiture rate.During 2007, we changed from our static
forfeiture rate methodology to a
dynamic forfeiture rate methodology.
The dynamic forfeiture rate methodology
incorporates the lapse of time into the
resulting expense calculation and
results in a forfeiture rate that
diminishes as the granted awards
approach its vest date. Accordingly,
the dynamic forfeiture rate methodology
results in a more consistent stock
compensation expense calculation over
the vesting period of the award.Additionally, during 2007, we performed
an analysis of our initial pre-vesting
forfeiture rate percentage and
increased our initial pre-vesting
forfeiture rate ranging from 3.0% to
7.5%, up to an initial pre-vesting
forfeiture rate of 12.5%. The increase
in our initial pre-vesting forfeiture
rate reflects our recent forfeiture
trends and future expectations. As
previously discussed, as we utilize the
dynamic forfeiture rate methodology,
this rate is updated and is reduced
accordingly as time elapses until it
ultimately reaches 0% on the vesting
date, contingent upon the continued
employment of the grantee.Post-Vesting CancellationsPost-vesting cancellations include
vested options that are cancelled,
exercised or expire unexercised.Lattice models treat post-vesting
cancellations and voluntary early
exercise behavior as two separate
assumptions. We used historical data to
estimate post-vesting cancellations.
 46




---



##### 



Balance Sheet orIncome Statement Caption/Nature of Critical Estimate Item
    
    Assumptions/Approach Used
    
    Sensitivity AnalysisAccounting
for stock-based  compensation (continued)Expected TermSFAS No. 123(R) calls for an
extinguishment calculation,
dependent upon how long a granted stock
option remains outstanding before it is
fully extinguished. While
extinguishment may result from
exercise, it can also result from
cancellation (post-vesting) or
expiration at the contractual term.
Expected term is an output in lattice
models so we do not have to determine
this amount.Goodwill 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):      2007  $1,512.0; and      2006  $1,581.3
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 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.
    
    We performed our
annual testing for
goodwill impairment
as of October 1,
2005, 2006 and 2007
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
2006 were allocated
to a depreciable
asset with an
average life of 20
years, depreciation
expense would have
increased by
approximately $0.3
million in 2007.The purchase price of acquisitions are
allocated to the assets acquired and
liabilities assumed based upon their
respective fair values and are subject
to change during the twelve month
period subsequent to the acquisition
date.Fair value estimates are derived from
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.Professional and general liability claimsWe are subject to potential medical
malpractice lawsuits and other claims.
To mitigate a portion of this risk, we
maintained insurance for individual
malpractice claims exceeding a
self-insured retention amount. For 2005
through 2007,
    
    Our reserves for professional and
general liability claims are based upon
actuarial calculations completed
quarterly, which consider historical
claims data, demographic
considerations, severity factors, and
other actuarial assumptions in
    
    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 in
each actuarial
calculation in
determining their
 47




---



##### 



Balance Sheet orIncome Statement Caption/Nature of Critical Estimate Item
    
    Assumptions/Approach Used
    
    Sensitivity AnalysisProfessional
and general  liability claims (continued)our self-insured retention
levels ranged from $10.0 million to
$25.0 million, depending on the state we
operate in. Additionally, certain of
our facilities operate in states having
state specific medical malpractice
programs.
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):      2007  $69.4; and      2006  $62.4
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):
    
    determining reserve estimates, which
are discounted to present value using a
5.0% discount rate.
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 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 use the actuarial calculations and
average the results in determining our
recorded reserve levels on a quarterly
basis. This averaging process results
in a refined estimation approach that
we believe produces a more reliable
estimate of ultimate losses.
Upon conforming the hospitals that we
acquired from Province to our
methodology for estimating reserves for
professional and general liability
claims, the reserves for these claims
were increased by $6.8 million. The
impact of this change decreased our
diluted earnings per share by $0.08 for
the year ended December 31, 2005 and is
included in transaction costs in our
consolidated statement of operations.
    
    loss estimates by
selecting factors
that are considered
appropriate for our
specific
circumstances.
Changes in
assumptions used in
these actuarial
calculations 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.2007  $29.6;2006  $19.5; and2005  $18.2Our 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
 48




---



##### 



Balance Sheet orIncome Statement Caption/Nature of Critical Estimate Item
    
    Assumptions/Approach Used
    
    Sensitivity AnalysisProfessional
and general liability claims (continued)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 our
methodology for determining medical
malpractice reserves.Accounting 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):2007  $197.5; and2006  $133.5
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):2007  $39.4; and2006  $32.0
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
apply the provisions of FASB
Interpretation No. 48, Accounting for
Uncertainty in Income Taxes  an
Interpretation of FASB Statement No.
109 (FIN 48), which we adopted on
January 1, 2007. We apply the
recognition threshold and measurement
of a tax position taken or expected to
be taken in a tax return and follow the
guidance on various matters such as
derecognition, interest, penalties and
disclosure. We elected to continue our
historical practice of classifying
interest and penalties as a component
of income tax expense.
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
assets exceeded our
deferred tax
liabilities by
$39.8 million as of
December 31, 2007,
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, we
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 $39.4 million at
December 31, 2007.
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
2007, we would
incur $8.4 million
of additional tax
payments for 2007
plus applicable
penalties and
interest.
 49




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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.
 50




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##### 



Operating Results Summary
  Three Months Ended December 31,2006
    
    
    2007% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesRevenues
    
    $
    629.1
    
    
    
    100.0
    %
    
    $
    658.4
    
    
    
    100.0
    %Salaries and benefits
    
    
    244.2
    
    
    
    38.8
    
    
    
    260.5
    
    
    
    39.6Supplies
    
    
    89.4
    
    
    
    14.2
    
    
    
    91.1
    
    
    
    13.8Other operating expenses
    
    
    109.3
    
    
    
    17.4
    
    
    
    121.7
    
    
    
    18.5Provision for doubtful accounts
    
    
    66.9
    
    
    
    10.6
    
    
    
    81.1
    
    
    
    12.3Depreciation and amortization
    
    
    31.6
    
    
    
    5.1
    
    
    
    33.1
    
    
    
    5.1Interest expense, net
    
    
    27.1
    
    
    
    4.3
    
    
    
    22.0
    
    
    
    3.3568.5
    
    
    
    90.4
    
    
    
    609.5
    
    
    
    92.6Income from continuing operations before minority interests and income taxes
    
    
    60.6
    
    
    
    9.6
    
    
    
    48.9
    
    
    
    7.4Minority interests in earnings of consolidated entities
    
    
    0.2
    
    
    
    
    
    
    
    0.3
    
    
    
    Income from continuing operations before income taxes
    
    
    60.4
    
    
    
    9.6
    
    
    
    48.6
    
    
    
    7.4Provision for income taxes
    
    
    22.3
    
    
    
    3.5
    
    
    
    17.6
    
    
    
    2.7Income from continuing operations
    
    $
    38.1
    
    
    
    6.1
    %
    
    $
    31.0
    
    
    
    4.7
    %
 Years Ended December 31,2005
    
    
    2006
    
    
    2007% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesRevenues
    
    $
    1,809.1
    
    
    
    100.0
    %
    
    $
    2,397.2
    
    
    
    100.0
    %
    
    $
    2,630.1
    
    
    
    100.0
    %Salaries and benefits
    
    
    723.0
    
    
    
    40.0
    
    
    
    944.0
    
    
    
    39.4
    
    
    
    1,034.6
    
    
    
    39.3Supplies
    
    
    247.0
    
    
    
    13.7
    
    
    
    336.1
    
    
    
    14.0
    
    
    
    362.0
    
    
    
    13.8Other operating expenses
    
    
    300.4
    
    
    
    16.6
    
    
    
    410.0
    
    
    
    17.1
    
    
    
    478.8
    
    
    
    18.3Provision for doubtful accounts
    
    
    183.3
    
    
    
    10.1
    
    
    
    257.4
    
    
    
    10.7
    
    
    
    314.2
    
    
    
    11.9Depreciation and amortization
    
    
    97.5
    
    
    
    5.3
    
    
    
    107.8
    
    
    
    4.5
    
    
    
    132.4
    
    
    
    5.0Interest expense, net
    
    
    59.3
    
    
    
    3.3
    
    
    
    102.2
    
    
    
    4.3
    
    
    
    95.7
    
    
    
    3.6Debt retirement costs
    
    
    12.2
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Transaction costs
    
    
    43.2
    
    
    
    2.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,665.9
    
    
    
    92.1
    
    
    
    2,157.5
    
    
    
    90.0
    
    
    
    2,417.7
    
    
    
    91.9Income from continuing operations before minority
interests and income taxes
    
    
    143.2
    
    
    
    7.9
    
    
    
    239.7
    
    
    
    10.0
    
    
    
    212.4
    
    
    
    8.1Minority interests in earnings of consolidated entities
    
    
    1.1
    
    
    
    
    
    
    
    1.3
    
    
    
    0.1
    
    
    
    1.9
    
    
    
    0.1Income from continuing operations before income taxes
    
    
    142.1
    
    
    
    7.9
    
    
    
    238.4
    
    
    
    9.9
    
    
    
    210.5
    
    
    
    8.0Provision for income taxes
    
    
    59.9
    
    
    
    3.4
    
    
    
    93.9
    
    
    
    3.9
    
    
    
    84.6
    
    
    
    3.2Income from continuing operations
    
    $
    82.2
    
    
    
    4.5
    %
    
    $
    144.5
    
    
    
    6.0
    %
    
    $
    125.9
    
    
    
    4.8
    %
 51




---



##### 



For the Three Months Ended December 31, 2006 and 2007
 Revenues
   Three Months EndedDecember 31,
    
    Increase
    
    % Increase2006
    
    2007
    
    (Decrease)
    
    (Decrease)Admissions
    
    
    50,119
    
    
    
    47,990
    
    
    
    (2,129
    )
    
    
    (4.2
    )%Equivalent admissions
    
    
    97,103
    
    
    
    94,199
    
    
    
    (2,904
    )
    
    
    (3.0
    )Revenues per equivalent admission
    
    $
    6,470
    
    
    $
    6,985
    
    
    
    515
    
    
    
    8.0Medicare case mix index
    
    
    1.22
    
    
    
    1.29
    
    
    
    0.07
    
    
    
    5.7Average length of stay (days)
    
    
    4.2
    
    
    
    4.3
    
    
    
    0.1
    
    
    
    2.4Inpatient surgeries
    
    
    14,586
    
    
    
    14,368
    
    
    
    (218
    )
    
    
    (1.5
    )Outpatient surgeries
    
    
    36,232
    
    
    
    36,244
    
    
    
    12
    
    
    
    Emergency room visits
    
    
    216,843
    
    
    
    220,755
    
    
    
    3,912
    
    
    
    1.8Outpatient factor
    
    
    1.94
    
    
    
    1.96
    
    
    
    0.02
    
    
    
    1.0
  Three Months EndedDecember 31,2006
    
    2007Medicare
    
    
    34.9
    %
    
    
    32.4
    %Medicaid
    
    
    10.6
    
    
    
    9.5HMOs, PPOs and other private insurers
    
    
    39.2
    
    
    
    41.6Self-Pay
    
    
    11.7
    
    
    
    12.5Other
    
    
    3.6
    
    
    
    4.0100.0
    %
    
    
    100.0
    %
 Expenses
 Salaries and Benefits
  Three Months Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2006
    
    
    Revenues
    
    
    2007
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Salaries and wages
    
    $
    189.8
    
    
    
    30.2
    %
    
    $
    203.0
    
    
    
    30.8
    %
    
    $
    13.2
    
    
    
    7.0
    %Stock-based compensation
    
    
    3.7
    
    
    
    0.5
    
    
    
    6.3
    
    
    
    1.0
    
    
    
    2.6
    
    
    
    71.5Employee benefits
    
    
    35.8
    
    
    
    5.7
    
    
    
    38.2
    
    
    
    5.8
    
    
    
    2.4
    
    
    
    6.8Contract labor
    
    
    12.7
    
    
    
    2.0
    
    
    
    10.6
    
    
    
    1.6
    
    
    
    (2.1
    )
    
    
    (16.3
    )ESOP expense
    
    
    2.2
    
    
    
    0.4
    
    
    
    2.4
    
    
    
    0.4
    
    
    
    0.2
    
    
    
    10.3$
    244.2
    
    
    
    38.8
    %
    
    $
    260.5
    
    
    
    39.6
    %
    
    $
    16.3
    
    
    
    6.8Man-hours per equivalent admission
    
    
    89.1
    
    
    
    N/A
    
    
    
    92.2
    
    
    
    N/A
    
    
    
    3.1
    
    
    
    3.5Salaries and benefits per equivalent admission
    
    $
    2,423
    
    
    
    N/A
    
    
    $
    2,626
    
    
    
    N/A
    
    
    $
    203
    
    
    
    8.4
 52




---



##### 



Supplies
  Three Months EndedDecember 31,
    
    Increase
    

%
Increase2006
    
    2007
    
    (Decrease)
    
    (Decrease)Supplies
    
    $
    89.4
    
    
    $
    91.1
    
    
    $
    1.7
    
    
    
    1.9
    %Supplies as a percentage of revenues
    
    
    14.2
    %
    
    
    13.8
    %
    
    
    (40
    )bps
    
    
   N/MSupplies per equivalent admission
    
    $
    918
    
    
    $
    967
    
    
    $
    49
    
    
    
    5.3
    %
  Other Operating Expenses
  Three Months EndedDecember 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2006
    
    
    Revenues
    
    
    2007
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Professional fees
    
    $
    14.4
    
    
    
    2.3
    %
    
    $
    16.5
    
    
    
    2.5
    %
    
    $
    2.1
    
    
    
    14.7
    %Utilities
    
    
    11.7
    
    
    
    1.9
    
    
    
    12.0
    
    
    
    1.8
    
    
    
    0.3
    
    
    
    2.3Repairs and maintenance
    
    
    13.6
    
    
    
    2.2
    
    
    
    14.8
    
    
    
    2.2
    
    
    
    1.2
    
    
    
    8.2Rents and leases
    
    
    6.7
    
    
    
    1.1
    
    
    
    6.6
    
    
    
    1.0
    
    
    
    (0.1
    )
    
    
    (0.7
    )Insurance
    
    
    3.9
    
    
    
    0.6
    
    
    
    7.6
    
    
    
    1.2
    
    
    
    3.7
    
    
    
    94.8Physician recruiting
    
    
    4.2
    
    
    
    0.7
    
    
    
    5.0
    
    
    
    0.8
    
    
    
    0.8
    
    
    
    18.4Contract services
    
    
    34.1
    
    
    
    5.4
    
    
    
    35.5
    
    
    
    5.4
    
    
    
    1.4
    
    
    
    4.0Non-income taxes
    
    
    8.3
    
    
    
    1.3
    
    
    
    8.4
    
    
    
    1.3
    
    
    
    0.1
    
    
    
    1.7Other
    
    
    12.4
    
    
    
    1.9
    
    
    
    15.3
    
    
    
    2.3
    
    
    
    2.9
    
    
    
    23.3$
    109.3
    
    
    
    17.4
    %
    
    $
    121.7
    
    
    
    18.5
    %
    
    $
    12.4
    
    
    
    11.3
 53




---



##### 



Provision for Doubtful Accounts
  Three Months EndedDecember 31,
    
    Increase
    
    % Increase2006
    
    2007
    
    (Decrease)
    
    (Decrease)Provision for doubtful accounts
    
    $
    66.9
    
    
    $
    81.1
    
    
    $
    14.2
    
    
    
    21.2
    %Percentage of revenues
    
    
    10.6
    %
    
    
    12.3
    %
    
    
    170
    bps
    
    
    N/MCharity care write-offs
    
    $
    14.4
    
    
    $
    11.4
    
    
    $
    (3.0
    )
    
    
    (20.7
    )Percentage of revenues
    
    
    1.0
    %
    
    
    0.7
    %
    
    
    (30
    )bps
    
    
    N/M
  Depreciation and Amortization
  Interest Expense
  Three Months EndedDecember 31,
    
    
    Increase2006
    
    
    2007
    
    
    (Decrease)Interest expense:Senior
Secured  Credit Facilities, including commitment fees
    
    $
    26.9
    
    
    $
    13.5
    
    
    $
    (13.4
    )Province 71/2% Senior Subordinated Notes
    
    
    0.1
    
    
    
    0.1
    
    
    
    31/4% Debentures
    
    
    1.8
    
    
    
    1.8
    
    
    
    31/2% Notes
    
    
    
    
    
    
    5.0
    
    
    
    5.0Other
    
    
    0.5
    
    
    
    0.7
    
    
    
    0.229.3
    
    
    
    21.1
    
    
    
    (8.2
    )Amortization of deferred loan costs
    
    
    1.3
    
    
    
    1.9
    
    
    
    0.6Less:Discontinued operations interest expense allocation
    
    
    (2.6
    )
    
    
    
    
    
    
    2.6Interest income
    
    
    (0.4
    )
    
    
    (0.9
    )
    
    
    (0.5
    )Capitalized interest
    
    
    (0.5
    )
    
    
    (0.1
    )
    
    
    0.4$
    27.1
    
    
    $
    22.0
    
    
    $
    (5.1
    )
 54




---



##### 



1 2 1 2
 Provision for Income Taxes
  Three Months EndedDecember 31,
    
    Increase2006
    
    2007
    
    (Decrease)Provision for income taxes
    
    $
    22.3
    
    
    $
    17.6
    
    
    $
    (4.7
    )Effective income tax rate
    
    
    36.9
    %
    
    
    36.3
    %
    
    
    (60
    )bps
  55




---



##### 



For the Years Ended December 31, 2006 and 2007
 Revenues
   Years EndedDecember 31,
    
    
    
    % Increase2006
    
    2007
    
    Increase
    

(Decrease)Admissions
    
    
    189,622
    
    
    
    196,755
    
    
    
    7,133
    
    
    
    3.8
    %Equivalent admissions
    
    
    368,436
    
    
    
    386,820
    
    
    
    18,384
    
    
    
    5.0Revenues per equivalent admission
    
    $
    6,502
    
    
    $
    6,794
    
    
    $
    292
    
    
    
    4.5Medicare case mix index
    
    
    1.23
    
    
    
    1.25
    
    
    
    0.02
    
    
    
    1.6Average length of stay (days)
    
    
    4.2
    
    
    
    4.3
    
    
    
    0.1
    
    
    
    2.4Inpatient surgeries
    
    
    56,229
    
    
    
    58,130
    
    
    
    1,901
    
    
    
    3.4Outpatient surgeries
    
    
    140,881
    
    
    
    147,116
    
    
    
    6,235
    
    
    
    4.4Emergency room visits
    
    
    835,948
    
    
    
    891,990
    
    
    
    56,042
    
    
    
    6.7Outpatient factor
    
    
    1.94
    
    
    
    1.97
    
    
    
    0.03
    
    
    
    1.5
  2006
    
    2007Medicare
    
    
    34.8
    %
    
    
    32.9
    %Medicaid
    
    
    10.1
    
    
    
    9.5HMOs, PPOs and other private insurers
    
    
    38.6
    
    
    
    41.7Self-Pay
    
    
    12.7
    
    
    
    12.5Other
    
    
    3.8
    
    
    
    3.4100.0
    %
    
    
    100.0
    %
 Expenses
 Salaries and Benefits
  Years Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    % Increase2006
    
    
    Revenues
    
    
    2007
    
    
    Revenues
    
    
    Increase
    
    

(Decrease)Salaries and benefits:Salaries and wages
    
    $
    726.0
    
    
    
    30.3
    %
    
    $
    797.8
    
    
    
    30.3
    %
    
    $
    71.8
    
    
    
    9.9
    %Stock-based compensation
    
    
    13.1
    
    
    
    0.6
    
    
    
    18.8
    
    
    
    0.7
    
    
    
    5.7
    
    
    
    43.3Employee benefits
    
    
    144.9
    
    
    
    6.0
    
    
    
    154.7
    
    
    
    5.9
    
    
    
    9.8
    
    
    
    6.8Contract labor
    
    
    47.1
    
    
    
    2.0
    
    
    
    49.1
    
    
    
    1.9
    
    
    
    2.0
    
    
    
    4.3ESOP expense
    
    
    12.9
    
    
    
    0.5
    
    
    
    14.2
    
    
    
    0.5
    
    
    
    1.3
    
    
    
    10.2$
    944.0
    
    
    
    39.4
    %
    
    $
    1,034.6
    
    
    
    39.3
    %
    
    $
    90.6
    
    
    
    9.6Man-hours per equivalent admission
    
    
    89.9
    
    
    
    N/A
    
    
    
    89.9
    
    
    
    N/A
    
    
    
    
    
    
    
    Salaries and benefits per equivalent admission
    
    $
    2,438
    
    
    
    N/A
    
    
    $
    2,545
    
    
    
    N/A
    
    
    $
    107
    
    
    
    4.4
  56




---



##### 



Supplies
  Years EndedDecember 31,
    
    Increase
    
    % Increase2006
    
    2007
    
    (Decrease)
    
    (Decrease)Supplies
    
    $
    336.1
    
    
    $
    362.0
    
    
    $
    25.9
    
    
    
    7.7
    %Supplies as a percentage of revenues
    
    
    14.0
    %
    
    
    13.8
    %
    
    
    (20
    )bps
    
    
    N/MSupplies per equivalent admission
    
    $
    909
    
    
    $
    936
    
    
    $
    27
    
    
    
    3.0
    %
  Other Operating Expenses
  Years Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2006
    
    
    Revenues
    
    
    2007
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Other operating expenses:Professional fees
    
    $
    45.0
    
    
    
    1.9
    %
    
    $
    62.9
    
    
    
    2.5
    %
    
    $
    17.9
    
    
    
    39.8
    %Utilities
    
    
    46.1
    
    
    
    1.9
    
    
    
    48.4
    
    
    
    1.8
    
    
    
    2.3
    
    
    
    4.9Repairs and maintenance
    
    
    49.8
    
    
    
    2.1
    
    
    
    55.8
    
    
    
    2.1
    
    
    
    6.0
    
    
    
    12.0Rents and leases
    
    
    24.0
    
    
    
    1.0
    
    
    
    26.8
    
    
    
    1.0
    
    
    
    2.8
    
    
    
    11.6Insurance
    
    
    25.6
    
    
    
    1.1
    
    
    
    33.8
    
    
    
    1.3
    
    
    
    8.2
    
    
    
    32.3Physician recruiting
    
    
    16.9
    
    
    
    0.7
    
    
    
    15.4
    
    
    
    0.6
    
    
    
    (1.5
    )
    
    
    (8.9
    )Contract services
    
    
    121.0
    
    
    
    5.0
    
    
    
    138.9
    
    
    
    5.3
    
    
    
    17.9
    
    
    
    14.8Non-income taxes
    
    
    33.0
    
    
    
    1.4
    
    
    
    36.8
    
    
    
    1.4
    
    
    
    3.8
    
    
    
    11.6Other
    
    
    48.6
    
    
    
    2.0
    
    
    
    60.0
    
    
    
    2.3
    
    
    
    11.4
    
    
    
    23.5$
    410.0
    
    
    
    17.1
    %
    
    $
    478.8
    
    
    
    18.3
    %
    
    $
    68.8
    
    
    
    16.8
   57




---



##### 



Provision for Doubtful Accounts
  Years EndedDecember 31,2006
    
    2007
    
    Increase
(Decrease)
    
    % Increase
(Decrease)Provision for doubtful accounts
    
    $
    257.4
    
    
    $
    314.2
    
    
    $
    56.8
    
    
    
    22.1
    %Percentage of revenues
    
    
    10.7
    %
    
    
    11.9
    %
    
    
    120
    bps
    
    
    N/MCharity care write-offs
    
    $
    42.0
    
    
    $
    51.5
    
    
    $
    9.5
    
    
    
    22.7
    %Percentage of revenues
    
    
    0.8
    %
    
    
    0.8
    %
    
    
    
    
    
    
    N/M
  Depreciation and Amortization
  Interest Expense
  Years EndedDecember 31,
    
    
    Increase2006
    
    
    2007
    
    
    (Decrease)Interest expense:Senior Secured Credit Facilities, including commitment fees
    
    $
    96.8
    
    
    $
    73.4
    
    
    $
    (23.4
    )Province 7 1/2% Senior Subordinated Notes
    
    
    0.5
    
    
    
    0.5
    
    
    
    31/4% Debentures
    
    
    7.3
    
    
    
    7.3
    
    
    
    31/2% Notes
    
    
    
    
    
    
    11.9
    
    
    
    11.9Other
    
    
    1.1
    
    
    
    2.9
    
    
    
    1.8105.7
    
    
    
    96.0
    
    
    
    (9.7
    )Amortization of deferred loan costs
    
    
    5.3
    
    
    
    6.8
    
    
    
    1.5Less:Discontinued operations interest expense allocation
    
    
    (5.7
    )
    
    
    (2.6
    )
    
    
    3.1Interest income
    
    
    (1.9
    )
    
    
    (2.8
    )
    
    
    (0.9
    )Capitalized interest
    
    
    (1.2
    )
    
    
    (1.7
    )
    
    
    (0.5
    )$
    102.2
    
    
    $
    95.7
    
    
    $
    (6.5
    )
 58




---



##### 



1 2 1 2
 Provision for Income Taxes
  Years EndedDecember 31,
    
    Increase2006
    
    2007
    

    (Decrease)Provision for income taxes
    
    $
    93.9
    
    
    $
    84.6
    
    
    $
    (9.3
    )Effective income tax rate
    
    
    39.4
    %
    
    
    40.2
    %
    
    
    80
    bps
  59




---



##### 



For the Years Ended December 31, 2005 and 2006
 Revenues
   Years EndedDecember 31,
    
    Increase
    
    % Increase2005
    
    2006
    
    (Decrease)
    
    (Decrease)Admissions
    
    
    151,887
    
    
    
    189,622
    
    
    
    37,735
    
    
    
    24.8
    %Equivalent admissions
    
    
    295,116
    
    
    
    368,436
    
    
    
    73,320
    
    
    
    24.8Revenues per equivalent admission
    
    $
    6,130
    
    
    $
    6,502
    
    
    $
    372
    
    
    
    6.1Medicare case mix index
    
    
    1.23
    
    
    
    1.23
    
    
    
    
    
    
    
    Average length of stay (days)
    
    
    4.2
    
    
    
    4.2
    
    
    
    
    
    
    
    Inpatient surgeries
    
    
    44,110
    
    
    
    56,229
    
    
    
    12,119
    
    
    
    27.5Outpatient surgeries
    
    
    115,514
    
    
    
    140,881
    
    
    
    25,367
    
    
    
    22.0Emergency room visits
    
    
    681,709
    
    
    
    835,948
    
    
    
    154,239
    
    
    
    22.6Outpatient factor
    
    
    1.94
    
    
    
    1.94
    
    
    
    
    
    
    
    
  2005
    
    2006Medicare
    
    
    36.6
    %
    
    
    34.8
    %Medicaid
    
    
    9.3
    
    
    
    10.1HMOs, PPOs and other private insurers
    
    
    38.8
    
    
    
    38.6Self-Pay
    
    
    12.2
    
    
    
    12.7Other
    
    
    3.1
    
    
    
    3.8100.0
    %
    
    
    100.0
    %
 Expenses
 Salaries and Benefits
  Years Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2005
    
    
    Revenues
    
    
    2006
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Salaries and benefits:Salaries and wages
    
    $
    553.7
    
    
    
    30.6
    %
    
    $
    726.0
    
    
    
    30.3
    %
    
    $
    172.3
    
    
    
    31.1
    %Stock-based compensation
    
    
    6.5
    
    
    
    0.4
    
    
    
    13.1
    
    
    
    0.6
    
    
    
    6.6
    
    
    
    103.2Employee benefits
    
    
    123.2
    
    
    
    6.8
    
    
    
    144.9
    
    
    
    6.0
    
    
    
    21.7
    
    
    
    17.6Contract labor
    
    
    25.2
    
    
    
    1.4
    
    
    
    47.1
    
    
    
    2.0
    
    
    
    21.9
    
    
    
    86.7ESOP expense
    
    
    14.4
    
    
    
    0.8
    
    
    
    12.9
    
    
    
    0.5
    
    
    
    (1.5
    )
    
    
    (10.3
    )$
    723.0
    
    
    
    40.0
    %
    
    $
    944.0
    
    
    
    39.4
    %
    
    $
    221.0
    
    
    
    30.6Man-hours per equivalent admission
    
    
    89.3
    
    
    
    N/A
    
    
    
    89.9
    
    
    
    N/A
    
    
    
    0.6
    
    
    
    0.7Salaries and benefits per equivalent admission
    
    $
    2,312
    
    
    
    N/A
    
    
    $
    2,438
    
    
    
    N/A
    
    
    $
    126
    
    
    
    5.4
  60




---



##### 



Supplies
  Years EndedDecember 31,
    
    Increase
    
    % Increase2005
    
    2006
    
    (Decrease)
    
    (Decrease)Supplies
    
    $
    247.0
    
    
    $
    336.1
    
    
    $
    89.1
    
    
    
    36.1
    %Supplies as a percentage of revenues
    
    
    13.7
    %
    
    
    14.0
    %
    
    
    30
    bps
    
    
    N/MSupplies per equivalent admission
    
    $
    834
    
    
    $
    909
    
    
    $
    75
    
    
    
    9.0
    %
  61




---



##### 



Other Operating Expenses
  Years Ended December 31,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2005
    
    
    Revenues
    
    
    2006
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Other operating expenses:Professional fees
    
    $
    27.6
    
    
    
    1.5
    %
    
    $
    45.0
    
    
    
    1.9
    %
    
    $
    17.4
    
    
    
    63.3
    %Utilities
    
    
    34.0
    
    
    
    1.9
    
    
    
    46.1
    
    
    
    1.9
    
    
    
    12.1
    
    
    
    35.9Repairs and maintenance
    
    
    34.7
    
    
    
    1.9
    
    
    
    49.8
    
    
    
    2.1
    
    
    
    15.1
    
    
    
    43.3Rents and leases
    
    
    17.6
    
    
    
    1.0
    
    
    
    24.0
    
    
    
    1.0
    
    
    
    6.4
    
    
    
    36.2Insurance
    
    
    17.8
    
    
    
    1.0
    
    
    
    25.6
    
    
    
    1.1
    
    
    
    7.8
    
    
    
    43.9Physician recruiting
    
    
    20.3
    
    
    
    1.1
    
    
    
    16.9
    
    
    
    0.7
    
    
    
    (3.4
    )
    
    
    (17.3
    )Contract services
    
    
    87.2
    
    
    
    4.8
    
    
    
    121.0
    
    
    
    5.0
    
    
    
    33.8
    
    
    
    38.8Non-income taxes
    
    
    26.1
    
    
    
    1.4
    
    
    
    33.0
    
    
    
    1.4
    
    
    
    6.9
    
    
    
    26.6Other
    
    
    35.1
    
    
    
    2.0
    
    
    
    48.6
    
    
    
    2.0
    
    
    
    13.5
    
    
    
    38.4$
    300.4
    
    
    
    16.6
    %
    
    $
    410.0
    
    
    
    17.1
    %
    
    $
    109.6
    
    
    
    36.5
   Provision for Doubtful Accounts
  Years EndedDecember 31,
    
    Increase
    
    % Increase2005
    
    2006
    
    (Decrease)
    
    (Decrease)Provision for doubtful accounts
    
    $
    183.3
    
    
    $
    257.4
    
    
    $
    74.1
    
    
    
    40.4
    %Percentage of revenues
    
    
    10.1
    %
    
    
    10.7
    %
    
    
    60
    bps
    
    
    N/MCharity care write-offs
    
    $
    23.8
    
    
    $
    42.0
    
    
    $
    18.2
    
    
    
    76.4
    %Percentage of revenues
    
    
    0.6
    %
    
    
    0.8
    %
    
    
    20
    bps
    
    
    N/M
   62




---



##### 



Depreciation and Amortization
   Years EndedDecember 31,
    
    
    Increase
    
    
    % Increase2005
    
    
    2006
    
    
    (Decrease)
    
    
    (Decrease)Hospital operations
    
    $
    96.5
    
    
    $
    116.1
    
    
    $
    19.6
    
    
    
    20.3
    %Purchase price allocation adjustment
    
    
    
    
    
    
    (13.5
    )
    
    
    (13.5
    )
    
    
    N/MCorporate office
    
    
    1.0
    
    
    
    5.2
    
    
    
    4.2
    
    
    
    400.6$
    97.5
    
    
    $
    107.8
    
    
    $
    10.3
    
    
    
    10.6
 Interest Expense
  Years Ended December 31,
    
    
    Increase2005
    
    
    2006
    
    
    (Decrease)Interest expense:Senior
Secured Credit Facilities, including commitment fees
    
    $
    51.1
    
    
    $
    96.8
    
    
    $
    45.7Senior subordinated credit agreement
    
    
    2.1
    
    
    
    
    
    
    
    (2.1
    )41/2% convertible notes
    
    
    4.5
    
    
    
    
    
    
    
    (4.5
    )Province 41/4% convertible notes
    
    
    0.3
    
    
    
    
    
    
    
    (0.3
    )Province 71/2% Senior Subordinated Notes
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.231/4% Debentures
    
    
    2.8
    
    
    
    7.3
    
    
    
    4.5Other
    
    
    0.4
    
    
    
    1.1
    
    
    
    0.761.5
    
    
    
    105.7
    
    
    
    44.2Amortization of deferred loan costs
    
    
    4.1
    
    
    
    5.3
    
    
    
    1.2Less:Discontinued operations interest expense allocation
    
    
    (1.4
    )
    
    
    (5.7
    )
    
    
    (4.3
    )Interest income
    
    
    (1.9
    )
    
    
    (1.9
    )
    
    
    Capitalized interest
    
    
    (3.0
    )
    
    
    (1.2
    )
    
    
    1.8$
    59.3
    
    
    $
    102.2
    
    
    $
    42.9
  Debt Retirement Costs
  Legal fees paid for retirement of assumed Province debt, our convertible notes and previous credit facility
    
    $
    1.2Tender premiums paid on convertible notes
    
    
    4.8Deferred loan costs expensed on tender of our convertible notes and previous credit facility
    
    
    5.7Creditor fees and other expenses
    
    
    0.5$
    12.2
 63




---



##### 



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
 Provision for Income Taxes
  Years EndedDecember 31,
    
    Increase2005
    
    2006
    
    (Decrease)Provision for income taxes
    
    $
    59.9
    
    
    $
    93.9
    
    
    $
    34.0Effective income tax rate
    
    
    42.2
    %
    
    
    39.4
    %
    
    
    (280
    )bps
  64




---



##### 



Liquidity and Capital Resources
 Liquidity
   2005
    
    
    2006
    
    
    2007Net cash flows provided by continuing operating activities
    
    $
    295.6
    
    
    $
    264.4
    
    
    $
    240.6Less: Purchase of property and equipment
    
    
    (165.5
    )
    
    
    (196.3
    )
    
    
    (164.1
    )Free operating cash flow
    
    
    130.1
    
    
    
    68.1
    
    
    
    76.5Acquisitions, net of cash acquired
    
    
    (963.6
    )
    
    
    (281.3
    )
    
    
    Proceeds from sale of hospitals
    
    
    32.5
    
    
    
    69.0
    
    
    
    107.4Proceeds from borrowings
    
    
    1,967.0
    
    
    
    260.0
    
    
    
    615.0Payments on borrowings
    
    
    (1,156.9
    )
    
    
    (110.0
    )
    
    
    (765.9
    )Proceeds from exercise of stock options
    
    
    43.6
    
    
    
    0.6
    
    
    
    12.7Proceeds for the completion of a new hospital
    
    
    
    
    
    
    
    
    
    
    14.7Payment of debt issue costs
    
    
    (40.7
    )
    
    
    (1.0
    )
    
    
    (14.2
    )Repurchase of common stock
    
    
    
    
    
    
    
    
    
    
    (29.0
    )Other
    
    
    (1.4
    )
    
    
    (1.9
    )
    
    
    1.2Cash flows from operations provided by (used in) discontinued operations
    
    
    5.8
    
    
    
    (18.5
    )
    
    
    22.5Cash flows from investing activities used in discontinued operations
    
    
    (4.6
    )
    
    
    (3.2
    )
    
    
    Net increase (decrease) in cash and cash equivalents
    
    $
    11.8
    
    
    $
    (18.2
    )
    
    $
    40.9
  Working Capital
  2005
    
    
    2006
    
    
    2007Total current assets, excluding assets held for sale
    
    $
    407.7
    
    
    $
    493.3
    
    
    $
    601.4Total current liabilities, excluding liabilities held for sale
    
    
    227.7
    
    
    
    299.9
    
    
    
    261.5Net working capital, excluding assets and liabilities held for sale
    
    $
    180.0
    
    
    $
    193.4
    
    
    $
    339.9Current ratio, excluding assets and liabilities held for sale
    
    
    1.8
    
    
    
    1.6
    
    
    
    2.3
 Capital Expenditures
   2005
    
    
    2006
    
    
    2007Capital projects
    
    $
    101.8
    
    
    $
    118.8
    
    
    $
    116.1Routine
    
    
    44.8
    
    
    
    61.3
    
    
    
    43.8Information systems
    
    
    18.9
    
    
    
    16.2
    
    
    
    4.2$
    165.5
    
    
    $
    196.3
    
    
    $
    164.1Depreciation expense (excluding 2006 price purchase allocation adjustments of $13.5 million)
    
    $
    96.2
    
    
    $
    92.6
    
    
    $
    130.2Ratio of capital expenditures to depreciation expense
    
    
    172
    %
    
    
    212
    %
    
    
    126
    %
 65




---



##### 



Debt
  Proceeds from
    
    
    Payments ofDecember 31, 2006
    
    
    Borrowings
    
    
    Borrowings
    
    
    December 31, 2007Senior
Secured Credit Facilities:Term B Loans
    
    $
    1,321.9
    
    
    $
    
    
    
    $
    (615.9
    )
    
    $
    706.0Revolving Loans
    
    
    110.0
    
    
    
    40.0
    
    
    
    (150.0
    )
    
    
    Province 71/2% Senior Subordinated Notes
    
    
    6.1
    
    
    
    
    
    
    
    
    
    
    
    6.1Province 41/4% Convertible Subordinated Notes
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    0.131/4% Debentures
    
    
    225.0
    
    
    
    
    
    
    
    
    
    
    
    225.031/2% Notes
    
    
    
    
    
    
    575.0
    
    
    
    
    
    
    
    575.0Other, including capital leases
    
    
    5.8
    
    
    
    
    
    
    
    (0.6
    )
    
    
    5.2$
    1,668.9
    
    
    $
    615.0
    
    
    $
    (766.5
    )
    
    $
    1,517.4
  December 31,
    
    
    December 31,
    
    
    Increase2006
    
    
    2007
    
    
    (Decrease)Current portion of long-term debt
    
    $
    0.5
    
    
    $
    0.5
    
    
    $
    Long-term debt
    
    
    1,668.4
    
    
    
    1,516.9
    
    
    
    (151.5
    )Total debt
    
    
    1,668.9
    
    
    
    1,517.4
    
    
    
    (151.5
    )Total stockholders equity
    
    
    1,450.0
    
    
    
    1,544.2
    
    
    
    94.2Total capitalization
    
    $
    3,118.9
    
    
    $
    3,061.6
    
    
    $
    (57.3
    )Total debt to total capitalization
    
    
    53.5
    %
    
    
    49.6
    %
    
    
    (39
    )bpsPercentage of:Fixed rate debt
    
    
    14.3
    %
    
    
    53.5
    %Variable rate debt*
    
    
    85.7
    
    
    
    46.5100.0
    %
    
    
    100.0
    %Percentage of:Senior debt
    
    
    86.2
    %
    
    
    46.9
    %Subordinated debt
    
    
    13.8
    
    
    
    53.1100.0
    %
    
    
    100.0
    %
 
 *
    
    Our interest rate swap mitigates our floating rate risk on our
outstanding variable rate borrowings which converts our variable rate
debt to an annual fixed rate of 5.585%. The above calculation does
not consider the effect of our interest rate swap. Our interest rate
swap decreases our variable rate debt as a percentage of our
outstanding debt from 85.7% to 31.8% as of December 31, 2006 and from
46.5% to nil as of December 31, 2007. Please refer to the Capital
Resources-Interest Rate Swap section below for a discussion of our
interest rate swap agreement. 66




---



##### 



Capital
Resources
 31/2% Convertible Senior Subordinated Notes due May 15, 2014
 1 2 1 2 1 2 1 2
 1 2 1 2 1 2
 1 2 1 2
 1 2
 1 2 1 2 1 2
 1 2 1 2
 Senior Secured Credit Facilities
 Terms
 1 2
  67




---



##### 



Borrowings and Payments
  1 2
 Letters of Credit and Availability
  Interest Rates
   Covenants
   Level atDecember 31,Requirement
    
    2007Minimum Interest Coverage Ratio
    
    
    3 3.50:1.00
    
    
    
    4.95Maximum Total Leverage Ratio
    
    
    £ 4.50:1.00
    
    
    
    3.27Capital Expenditure Ratio
    
    

£10.0
    %
    
    
    6.0
    %
 68




---



##### 



31/4% Convertible Senior Subordinated Debentures due August 15, 2025
 1 4 1 4 1 4 1 4
 1 4 1 4 1 4 1 4 1 4 1 4 1 4
 1 4 1 4
 1 4 1 4 1 4 1 4
 1 4 1 4
 Province 71/2% Senior Subordinated Notes
 1 2 1 2 1 2 1 2 1 2
 69




---



##### 



Province 41/4% Convertible Subordinated Notes
 1 4
 Interest Rate Swap
  Notional AmountDate Range
    

(In millions)November 30, 2006 to November 30, 2007
    
    $
    900.0November 30, 2007 to November 28, 2008
    
    
    750.0November 28, 2008 to November 30, 2009
    
    
    600.0November 30, 2009 to November 30, 2010
    
    
    450.0November 30, 2010 to May 30, 2011
    
    
    300.0
   Debt Ratings
  
    
    Moodys Investors Service, Inc. (Moodys);
    
    Standard & Poors Rating Services, (S&P); and
    
    Fitch Ratings.
  70




---



##### 



MoodysSenior
    
    Senior Implied
    
    
    
    
    
    S&P
    
    Fitch RatingsUnsecured
    
    Issuer
    
    
    
    
    
    Issuer
    
    
    
    
    
    IssuerDate
    
    Issuer Rating
    
    Rating
    
    Outlook
    
    Rating
    
    Outlook
    
    Rating
    
    OutlookApril 1999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    B+
    
    
    Stable
    
    
    
    
    
    
    October 1999
    
    
    
    
    
    
    B1
    
    
    Stable
    
    
    B+
    
    
    Stable
    
    
    
    
    
    
    February 2001
    
    
    
    
    
    
    B1
    
    
    Positive
    
    
    B+
    
    
    Stable
    
    
    
    
    
    
    May 2001
    
    
    
    
    
    Ba3
    
    Stable
    
    
    B+
    
    
    Stable
    
    
    
    
    
    
    June 2001
    
    
    B2
    
    
    Ba3
    
    Stable
    
    BB()
    
    Stable
    
    
    
    
    
    
    June 2002
    
    
    B2
    
    
    Ba3
    
    Stable
    
    BB()
    
    Stable
    
    
    
    
    
    
    December 2003
    
    
    B2
    
    
    Ba3
    
    Stable
    
    BB
    
    Stable
    
    
    
    
    
    
    August 2004
    
    
    B2
    
    
    Ba3
    
    Negative
    
    BB
    
    Negative
    
    
    
    
    
    
    March 2005
    
    
    B2
    
    
    Ba3
    
    Stable
    
    BB
    
    Stable
    
    
    
    
    
    
    July 2005
    
    
    B2
    
    
    Ba3
    
    Stable
    
    BB
    
    Negative
    
    
    
    
    
    
    May 2006
    
    
    B2
    
    
    Ba3
    
    Stable
    
    BB
    
    Negative
    
    BB()
    
    StableJanuary 2007
    
    
    B2
    
    
    Ba3
    
    Stable
    
    BB()
    
    Stable
    
    BB()
    
    StableMay 2007
    
    
    B2
    
    
    Ba2
    
    Stable
    
    BB()
    
    Stable
    
    BB()
    
    Stable
 Liquidity and Capital Resources Outlook
      71




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##### 



Contractual Obligations, Commitments and Off-Balance Sheet Arrangements
 Contractual Obligations
   Payment Due by PeriodContractual Obligations
    
    Total
    
    
    2008
    
    
    2009-2010
    
    
    2011-2012
    
    
    After 2012Long-term debt obligations(a)
    
    $
    1,965.9
    
    
    $
    79.1
    
    
    $
    155.9
    
    
    $
    804.6
    
    
    $
    926.3Capital lease obligations
    
    
    6.7
    
    
    
    0.8
    
    
    
    1.4
    
    
    
    1.2
    
    
    
    3.3Operating lease obligations(b)
    
    
    55.4
    
    
    
    14.1
    
    
    
    18.2
    
    
    
    9.4
    
    
    
    13.7Other long-term liabilities(c)
    
    
    4.3
    
    
    
    1.2
    
    
    
    1.3
    
    
    
    0.4
    
    
    
    1.4Purchase obligations(d)
    
    
    276.5
    
    
    
    122.3
    
    
    
    101.9
    
    
    
    40.8
    
    
    
    11.5$
    2,308.8
    
    
    $
    217.5
    
    
    $
    278.7
    
    
    $
    856.4
    
    
    $
    956.2
 
 (a)
    
    Included in long-term debt obligations are principal and interest owed
on our outstanding debt obligations, giving consideration to our
interest rate swap. These obligations are explained further in Note 6
to our consolidated financial statements included elsewhere in this
report. We used the 6.715% effective interest rate at December 31,
2007 for our $706.0 million outstanding Term B Loans to estimate
interest payments on this variable rate debt instrument. Our interest
rate swap requires us to make quarterly interest payments at an annual
fixed rate of 5.585% while the counterparty is obligated to make
quarterly floating payments to us based on the three-month LIBOR on a
decreasing notional amount. Our calculation for long-term debt
obligations includes an estimate for the net result of these payments
between us and the counterparty using the difference between our
required annual fixed rate of 5.585% and the three-month LIBOR in
effect as of December 31, 2007 of 5.090% based on the effective
notional amounts for the indicated period. Holders of our $225.0
million outstanding 31/4% Debentures may require us to purchase for cash
some or all of the 31/4% Debentures on February 15, 2013, February 15,
2015, and February 15, 2020. For purposes of the above table, we
assumed that our 31/4% 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)
    
    Our professional and general liability claims and other liabilities
balance was $120.0 million and our long-term income tax liability
balance was $55.5 million on our consolidated balance sheet as of
December 31, 2007. The professional and general liability and other
liabilities balance reflected a $69.4 million reserve for professional
and general liability claims, an interest rate swap liability balance
of $31.0 million, a $14.3 million deferred income liability and $5.3
million related to other liabilities. The long-term income tax
liability is a result of our adoption of FIN 48 effective January 1,
2007.  We excluded the $69.4 million reserve for professional and
general liability claims, the $55.5 million long-term income tax
liability and the $1.0 million of other liabilities because of the
uncertainty of the dollar amounts to be ultimately paid as well as the
timing of such amounts. We excluded both the $14.3 million deferred
income liability and the $31.0 million interest rate swap liability as
they are non-cash liabilities. 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 on
our reserve for professional and general liability claims.(d)
    
    The following table summarizes our significant purchase obligations as
of December 31, 2007 and the future periods in which such obligations
are expected to be settled in cash (in millions): Payment Due by PeriodPurchase Obligations
    
    Total
    
    
    2008
    
    
    2009-2010
    
    
    2011-2012
    
    
    After 2012HCA-IT services(e)
    
    $
    60.7
    
    
    $
    29.6
    
    
    $
    31.1
    
    
    $
    
    
    
    $
    Capital expenditure obligations(f)
    
    
    31.8
    
    
    
    19.7
    
    
    
    7.9
    
    
    
    
    
    
    
    4.2Physician commitments(g)
    
    
    15.3
    
    
    
    15.3
    
    
    
    
    
    
    
    
    
    
    
    GEMS obligations(h)
    
    
    100.3
    
    
    
    22.3
    
    
    
    44.6
    
    
    
    33.4
    
    
    
    Other purchase obligations(i)
    
    
    68.4
    
    
    
    35.4
    
    
    
    18.3
    
    
    
    7.4
    
    
    
    7.3$
    276.5
    
    
    $
    122.3
    
    
    $
    101.9
    
    
    $
    40.8
    
    
    $
    11.5
 72




---



##### 



(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, 2007 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 $72.8 million as of December
31, 2007. 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 advance
certain amounts of money to a physician, normally over a period of one
year, to assist in establishing the physicians practice. Our
liability balance for contract-based physician minimum revenue
guarantees was $15.3 million at December 31, 2007 and depends upon the
cash collections of a physicians private practice during the
guarantee period.(h)
    
    General Electric Medical Services (GEMS) provides diagnostic imaging
equipment maintenance and bio-medical services to us pursuant to a
contract that expires on June 30, 2012.(i)
    
    Reflects our minimum commitments to purchase goods or services under
non-cancelable contracts as of December 31, 2007. Legal and Tax Matters
  Off-Balance Sheet Arrangements
  Recently Issued Accounting Pronouncements
   73




---



##### 



Segment Reporting
  74




---



##### 




    
    the treatment of patients in a hospital setting is the only material source of revenues
for each of our five 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 is 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 five
operating divisions.
  
    
    the way we manage our operations and extent to which our acquired facilities are
integrated into our existing operations as a single reporting unit;
    
    our goodwill is recoverable from the collective operations of our five operating
divisions and not individually from one single operating division;
    
    our operating divisions are frequently realigned based upon changing circumstances,
including acquisition and divestiture activity; and
    
    because of the collective size of our five operating divisions, each division benefits
from its participation in a group purchasing organization.
 Inflation
  Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
  Outstanding Debt
  1 4 1 2
  Cash Balances
  75




---



##### 



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.
  76




---



##### 



PART III
 Item 10. Directors, Executive Officers and Corporate Governance.
 Executive Officers
  Code of Ethics
 www.lifepointhospitals.com
 Directors
  Compliance with Section 16(a) of the Exchange Act
  Stockholder Nominees
  Audit and Compliance Committee
  Item 11. Executive Compensation.
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
   77




---



##### 



Item 13. Certain Relationships and Related Transactions, and Director Independence.
  Item 14. Principal Accountant Fees and Services.
  78




---



##### 



PART IV
 Item 15. Exhibits and Financial Statement Schedules.
  Consolidated Financial Statements:
  Financial
Statements and Supplementary Data
 Consolidated Financial Statement Schedules:
  Exhibits:
 ExhibitNumber
    
    
    
    Description of Exhibits3.1
    
    
    
    Amended and Restated Certificate of Incorporation
(incorporated by reference from exhibits to the
Registration Statement on Form S-8 filed by Historic
LifePoint Hospitals, Inc. on April 15, 2005,
File No. 333-124093).3.2
    
    
    
    Second Amended and Restated Bylaws of LifePoint Hospitals,
Inc. (incorporated by reference from exhibits to the
LifePoint Hospitals, Inc. Current Report on Form 8-K dated
October 16, 2006, File No. 000-51251).4.1
    
    
    
    Form of Specimen Stock Certificate (incorporated by
reference from exhibits to the Registration Statement on
Form S-4, as amended, filed by LifePoint Hospitals, Inc.
on October 25, 2004, File No. 333-119929).4.2
    
    
    
    Form of 3.25% Convertible Senior Subordinated Debenture
due 2025 (incorporated by reference from exhibits to
LifePoint Hospitals Current Report on Form 8-K dated
August 10, 2005, File No. 000-51251).4.3
    
    
    
    Registration Rights Agreement, dated August 10, 2005,
between LifePoint Hospitals, Inc. and Citigroup Global
Markets Inc. as Representatives of the Initial Purchasers
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated August 10,
2005, File No. 000-51251).4.4
    
    
    
    Rights Agreement, dated as of April 15, 2005, by and
between LifePoint Hospitals, Inc. and National City Bank,
as Rights Agent (incorporated by reference from exhibits
to the Registration Statement on Form S-8 filed by
Historic LifePoint Hospitals, Inc. on April 15, 2005, File
No. 333-124093).4.5
    
    
    
    Subordinated Indenture, dated as of May 27, 2003, between
Province Healthcare Company and U.S. Bank Trust National
Association, as Trustee (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).4.6
    
    
    
    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 71/2% Senior
Subordinated Notes due 2013 (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).4.7
    
    
    
    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 (incorporated by reference from exhibits to
Province Healthcare Companys Current Report on Form 8-K
dated April 1, 2005, File No. 001-31320).4.8
    
    
    
    Indenture, dated as of October 10, 2001, between Province
Healthcare Company and National City Bank, including the
forms of Province Healthcare Companys 41/4% Convertible
Subordinated Notes due 2008 (incorporated by reference
from exhibits to the Registration Statement on Form S-3,
filed by Province Healthcare Company on December 20, 2001,
File No. 333-75646).
 79




---



##### 



ExhibitNumber
    
    
    
    Description of Exhibits4.9
    
    
    
    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 41/4% Convertible
Subordinated Notes due 2008 (incorporated by reference
from exhibits to the Historic LifePoint Hospitals, Inc.
Current Report on Form 8-K dated April 15, 2005,
File No. 000-29818.4.10
    
    
    
    Indenture, dated August 10, 2005, between LifePoint
Hospitals, Inc. and Citibank, N.A., as Trustee
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated August 10,
2005, File No. 000-51251).4.11
    
    
    
    Indenture, dated May 29, 2007, by and between LifePoint
Hospitals, Inc. as Issuer and The Bank of New York Trust
Company, N.A., as Trustee (incorporated by reference from
exhibits to LifePoint Hospitals Current Report on Form
8-K dated May 31, 2007, File No. 000-51251).10.1
    
    
    
    Tax Sharing and Indemnification Agreement, dated May 11,
1999, by and among Columbia/HCA, LifePoint Hospitals, Inc.
and Triad Hospitals, Inc. (incorporated by reference from
exhibits to Historic LifePoint Hospitals Quarterly Report
on Form 10-Q for the quarter ended March 31, 1999,
File No. 000-29818).10.2
    
    
    
    Benefits and Employment Matters Agreement, dated May 11,
1999 by and among Columbia/HCA, LifePoint Hospitals, Inc.
and Triad Hospitals, Inc. (incorporated by reference from
exhibits to Historic LifePoint Hospitals Quarterly Report
on Form 10-Q for the quarter ended March 31, 1999,
File No. 000-29818).10.3
    
    
    
    Insurance Allocation and Administration Agreement, dated
May 11, 1999, by and among Columbia/HCA, LifePoint
Hospitals, Inc. and Triad Hospitals, Inc. (incorporated by
reference from exhibits to Historic LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, File No. 000-29818).10.4
    
    
    
    Computer and Data Processing Services Agreement dated
May 11, 1999 by and between Columbia Information Systems,
Inc. and LifePoint Hospitals, Inc. (incorporated by
reference from exhibits to Historic LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, File No. 000-29818).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. (incorporated by reference from
exhibits to Historic LifePoint Hospitals Quarterly Report
on Form 10-Q for the quarter ended June 30, 2004, File
No. 000-29818).10.6
    
    
    
    Comprehensive Service Agreement for Diagnostic Imaging and
Biomedical Services, executed on January 7, 2005, between
LifePoint Hospital Holdings, Inc. and GE Healthcare
Technologies (incorporated by reference from exhibits to
Historic LifePoint Hospitals Annual Report on Form 10-K
for the year ended December 31, 2004, File No. 000-29818).10.7
    
    
    
    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. (incorporated by reference from exhibits
to Historic LifePoint Hospitals Annual Report on
Form 10-K for the year ended December 31, 2000, File
No. 000-29818).10.8
    
    
    
    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. (incorporated by reference from exhibits
to Historic LifePoint Hospitals Annual Report on
Form 10-K for the year ended December 31, 2002, File
No. 000-29818).10.9
    
    
    
    Letter from the Office of Inspector General of the
Department of Health and Human Services, dated October 15,
2002 (incorporated by reference from exhibits to Historic
LifePoint Hospitals Annual Report on Form 10-K for the
year ended December 31, 2002, File No. 000-29818).10.10
    
    
    
    Letter from the Office of Inspector of the Department of
Health and Human Services, dated December 18, 2003
(incorporated by reference from exhibits to Historic
LifePoint Hospitals Annual Report on Form 10-K for the
year ended December 31, 2004, File No. 000-29818).
 80




---



##### 



ExhibitNumber
    
    
    
    Description of Exhibits10.11
    
    
    
    Letter from the Office of Inspector of the Department of
Health and Human Services, dated March 3, 2004
(incorporated by reference from exhibits to Historic
LifePoint Hospitals Annual Report on Form 10-K for the
year ended December 31, 2004, File No. 000-29818).10.12
    
    
    
    Amended and Restated 1998 Long Term Incentive Plan
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated July 7, 2005,
File No. 000-51251).10.13
    
    
    
    LifePoint Hospitals, Inc. Executive Performance Incentive
Plan (incorporated by reference from Appendix C to
Historic LifePoint Hospitals Proxy Statement dated
April 28, 2004, File No. 000-29818).10.14
    
    
    
    Form of LifePoint Hospitals, Inc. Nonqualified Stock
Option Agreement (incorporated by reference from exhibits
to LifePoint Hospitals Quarterly Report on Form 10-Q for
the quarter ended March 31, 2007, File No. 000-51251).10.15
    
    
    
    Form of LifePoint Hospitals, Inc. Restricted Stock Award
Agreement (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).10.16
    
    
    
    Form of LifePoint Hospitals, Inc. Deferred Restricted
Stock Award (incorporated by reference from exhibits to
LifePoint Hospitals Current Report on Form 8-K dated
May 12, 2006, file No. 000-51251).10.17
    
    
    
    LifePoint Hospitals, Inc. Employee Stock Purchase Plan
(incorporated by reference from exhibits to Historic
LifePoint Hospitals Annual Report on Form 10-K for the
year ended December 31, 2001, File No. 000-29818).10.18
    
    
    
    First Amendment to the LifePoint Hospitals, Inc. Employee
Stock Purchase Plan (incorporated by reference from
exhibits to the Registration Statement on Form S-8 filed
by Historic LifePoint Hospitals, Inc. on June 2, 2003,
File No. 333-105775).10.19
    
    
    
    Second Amendment To Employee Stock Purchase Plan
(incorporated by reference from exhibits to LifePoint
Hospitals Quarterly Report on Form 10-Q for the quarter
ended March 31, 2006, File No. 000-51251).10.20
    
    
    
    LifePoint Hospitals, Inc. Change in Control Severance
Plan, as amended and restated May 9, 2006 (incorporated by
reference from exhibits to LifePoint Hospitals Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007,
File No. 000-51251).10.21
    
    
    
    LifePoint Hospitals, Inc. Management Stock Purchase Plan,
as amended and restated (incorporated by reference from
exhibits to Historic LifePoint Hospitals Annual Report on
Form 10-K for the year ended December 31, 2002, File
No. 000-29818).10.22
    
    
    
    Form of Outside Directors Restricted Stock Agreement
(incorporated by reference from exhibits to LifePoint
Hospitals Quarterly Report on Form 10-Q for the quarter
ended March 31, 2006, File No. 000-51251).10.23
    
    
    
    LifePoint Hospitals, Inc. Outside Directors Stock and
Incentive Compensation Plan (incorporated by reference
from exhibits to Historic LifePoint Hospitals Quarterly
Report on Form 10-Q for the quarter ended March 31, 1999,
File No. 000-29818).10.24
    
    
    
    Amendment to the LifePoint Hospitals, Inc. Outside
Directors Stock and Incentive Compensation Plan
(incorporated by reference from Appendix B to Historic
LifePoint Hospitals Proxy Statement dated April 28, 2004,
File No. 000-29818).10.25
    
    
    
    Second Amendment to the LifePoint Hospitals, Inc. Outside
Directors Stock and Incentive Compensation Plan
(incorporated by reference from exhibits to LifePoint
Hospitals Quarterly Report on Form 10-Q for the quarter
ended March 31, 2006, File No. 000-51251).10.26
    
    
    
    Employment Agreement of Kenneth C. Donahey, as amended and
restated (incorporated by reference from exhibits to
Historic LifePoint Hospitals Annual Report on Form 10-K
for the year ended December 31, 2004, File No. 000-29818).10.27
    
    
    
    Separation Agreement dated June 25, 2006, by and between
LifePoint CSGP, LLC and Kenneth C. Donahey (incorporated
by reference from exhibits to LifePoint Hospitals Current
Report on Form 8-K dated June 26, 2006, File
No. 000-51251).10.28
    
    
    
    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 (incorporated by
reference from exhibits to Historic LifePoint Hospitals
Current Report on Form 8-K dated April 15, 2005, File
No. 000-29818).
 81




---



##### 



ExhibitNumber
    
    
    
    Description of Exhibits10.29
    
    
    
    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 (incorporated by reference from
exhibits to LifePoint Hospitals Current Report on
Form 8-K dated August 23, 2005, File No. 000-51251).10.30
    
    
    
    Amendment No. 2 to the Credit Agreement, dated October 14,
2005, among LifePoint Hospitals, Inc. as borrower,
Citicorp North America, Inc., as administrative agent and
the lenders party thereto (incorporated by reference from
exhibits to LifePoint Hospitals Current Report on
Form 8-K dated October 18, 2005, File No. 000-51251).10.31
    
    
    
    Incremental Facility Amendment No. 3 to the Credit
Agreement, dated June 30, 2006 among LifePoint Hospitals,
Inc. as borrower, Citicorp North America, Inc. as
administrative agent and the lenders party thereto.
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated June 30, 2006,
File No. 000-51251).10.32
    
    
    
    Incremental Facility Amendment No. 4 to the Credit
Agreement, dated September 8, 2006, among LifePoint
Hospitals, Inc. as borrower, Citicorp North America, Inc.
as administrative agent and the lenders party thereto
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated September 12,
2006, File No. 000-51251).10.33
    
    
    
    Amendment No. 5 to the Credit Agreement, dated as of May
11, 2007, among LifePoint Hospitals, Inc. as borrower,
Citicorp North America, Inc., as administrative agent and
the lenders party thereto (incorporated by reference from
exhibits to LifePoint Hospitals Current Report on
Form 8-K dated May 24, 2007, File No. 000-51251).10.34
    
    
    
    ISDA 2002 Master Agreement, dated as of June 1, 2006,
between Citibank, N.A. and LifePoint Hospitals, Inc.
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K/A dated September 8,
2006, File No. 000-51251).10.35
    
    
    
    Schedule to the ISDA 2002 Master Agreement (incorporated
by reference from exhibits to LifePoint Hospitals Current
Report on Form 8-K/A dated September 8, 2006, File
No. 000-51251).10.36
    
    
    
    Confirmation, dated as of June 2, 2006, between LifePoint
Hospitals, Inc. and Citibank, N.A. (incorporated by
reference from exhibits to LifePoint Hospitals Current
Report on Form 8-K/A dated September 8, 2006, File
No. 000-51251).10.37
    
    
    
    Stock Purchase Agreement, dated July 14, 2005, by HCA Inc.
and LifePoint Hospitals, Inc. (incorporated by reference
from exhibits to LifePoint Hospitals Quarterly Report on
Form 10-Q for the quarter ended June 30, 2006, File
No. 000-51251).10.38
    
    
    
    Amendment to the Stock Purchase Agreement, dated June 2,
2006 (incorporated by reference from exhibits to LifePoint
Hospitals Quarterly Report on Form 10-Q for the quarter
ended June 30, 2006, File No. 000-51251).10.39
    
    
    
    Repurchase Agreement, dated June 30, 2006, by and between
HCA Inc. and LifePoint Hospitals, Inc. (incorporated by
reference from exhibits to LifePoint Hospitals Quarterly
Report on Form 10-Q for the quarter ended June 30, 2006,
File No. 000-51251).10.40
    
    
    
    Executive Severance and Restrictive Covenant Agreement by
and between LifePoint CSGP, LLC and William F.
Carpenter III, dated December 11, 2006 (incorporated by
reference from exhibits to LifePoint Hospitals Current
Report on Form 8-K dated December 15, 2006, File
No. 000-51251).10.41
    
    
    
    Agreement to Cooperate and General Release, entered into
on May 4, 2007, by and between LifePoint Hospitals, CSGP,
LLC and Michael J. Culotta (incorporated by reference from
exhibits to LifePoint Hospitals Current Report on Form
8-K dated May 10, 2007, File No. 000-51251).12.1
    
    
    
    Ratio of Earnings to Fixed Charges21.1
    
    
    
    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
 82




---



##### 



Compensation Plans and Arrangements
  1.
    
    LifePoint Hospitals, Inc. Amended and Restated 1998 Long Term Incentive Plan, as
amended (filed as Exhibit 10.12)2.
    
    LifePoint Hospitals, Inc. Executive Performance Incentive Plan (filed as
Exhibit 10.13)3.
    
    Form of LifePoint Hospitals, Inc. Nonqualified Stock Option Agreement (filed as
Exhibit 10.14)4.
    
    Form of LifePoint Hospitals, Inc. Restricted Stock Award Agreement (filed as
Exhibit 10.15)5.
    
    Form of LifePoint Hospitals, Inc. Deferred Restricted Stock Award (filed as
Exhibit 10.16)6.
    
    LifePoint Hospitals, Inc. Employee Stock Purchase Plan, as amended (filed as
Exhibits 10.17, 10.18 and 10.19)7.
    
    LifePoint Hospitals, Inc. Change in Control Severance Plan
(filed as Exhibit 10.20)8.
    
    LifePoint Hospitals, Inc. Management Stock Purchase Plan, as amended and restated
(filed as Exhibit 10.21)9.
    
    Form of Outside Directors Restricted Stock Agreement (filed
as Exhibit 10.22)10.
    
    LifePoint Hospitals, Inc. Outside Directors Stock and Incentive Compensation Plan
(filed as Exhibits 10.23, 10.24 and 10.25)11.
    
    Employment Agreement of Kenneth C. Donahey, as amended and restated (filed as
Exhibit 10.26)12.
    
    Separation Agreement of Kenneth C. Donahey (filed as
Exhibit 10.27)13.
    
    Executive Severance and Restrictive Covenant Agreement of William F. Carpenter III
(filed as Exhibit 10.40)14.
    
    Agreement to Cooperate and General Release of Michael J. Culotta (filed as Exhibit
10.41)
 83




---



##### 



INDEX TO FINANCIAL STATEMENTS
 PageManagements Report on Internal Control Over Financial Reporting
    
    F-2Report of Independent Registered Public Accounting Firm
    
    F-3Report of Independent Registered Public Accounting Firm
    
    F-4Consolidated Balance Sheets  December 31, 2006 and 2007
    
    F-5Consolidated
Statements of Operations  for the years ended December 31, 2005, 2006 and 2007
    
    F-6Consolidated Statements of Cash Flows  for the years ended December 31, 2005, 2006 and 2007
    
    F-7Consolidated Statements of Stockholders Equity  for the years ended December 31, 2005, 2006 and 2007
    
    F-8Notes to Consolidated Financial Statements  December 31, 2007
    
    F-9
 F-1




---



##### 



Managements Report on Internal Control Over Financial Reporting
       /s/ William F. Carpenter III
    
    /s/ David M. DillPresident and Chief Executive Officer
    
    Chief Financial Officer
 
 F-2




---



##### 



Report of Independent Registered Public Accounting Firm
         
 F-3




---



##### 



Report of Independent Registered Public Accounting Firm
     Accounting for Uncertainty in Income Taxes  An Interpretation of FASB
Statement No. 109
   
 F-4




---



##### 



LIFEPOINT HOSPITALS, INC.
 CONSOLIDATED BALANCE SHEETS
December 31, 2006 and 2007
(Dollars in millions, except per share amounts)
 2006
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12.2
    
    
    $
    53.1Accounts receivable, less allowances for doubtful accounts of $326.2 and $376.3 at December 31,
2006 and 2007, respectively
    
    
    321.6
    
    
    
    304.5Inventories
    
    
    65.9
    
    
    
    69.3Assets held for sale
    
    
    155.1
    
    
    
    Prepaid expenses
    
    
    12.6
    
    
    
    12.4Income taxes receivable
    
    
    11.2
    
    
    
    27.9Deferred tax assets
    
    
    49.2
    
    
    
    113.6Other current assets
    
    
    20.6
    
    
    
    20.6648.4
    
    
    
    601.4Property and equipment:Land
    
    
    76.8
    
    
    
    72.8Buildings and improvements
    
    
    1,061.5
    
    
    
    1,219.6Equipment
    
    
    597.7
    
    
    
    674.1Construction in progress (estimated cost to complete and equip after December 31, 2007 is $72.8)
    
    
    72.0
    
    
    
    34.11,808.0
    
    
    
    2,000.6Accumulated depreciation
    
    
    (468.6
    )
    
    
    (582.9
    )1,339.4
    
    
    
    1,417.7Deferred loan costs, net
    
    
    31.1
    
    
    
    38.6Intangible assets, net
    
    
    33.7
    
    
    
    52.4Other
    
    
    4.5
    
    
    
    4.4Goodwill
    
    
    1,581.3
    
    
    
    1,512.0$
    3,638.4
    
    
    $
    3,626.5LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    108.4
    
    
    $
    95.6Accrued salaries
    
    
    68.3
    
    
    
    66.7Other current liabilities
    
    
    127.1
    
    
    
    98.7Current maturities of long-term debt
    
    
    0.5
    
    
    
    0.5304.3
    
    
    
    261.5Long-term debt
    
    
    1,668.4
    
    
    
    1,516.9Deferred income taxes
    
    
    120.5
    
    
    
    113.2Professional and general liability claims and other liabilities
    
    
    82.3
    
    
    
    120.0Long-term income tax liability
    
    
    
    
    
    
    55.5Minority interests in equity of consolidated entities
    
    
    12.9
    
    
    
    15.2Stockholders equity:Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued
    
    
    
    
    
    
    Common stock, $0.01 par value; 90,000,000 shares authorized; 57,365,018 and 58,101,477 shares
issued at December 31, 2006 and 2007, respectively
    
    
    0.6
    
    
    
    0.6Capital in excess of par value
    
    
    1,044.4
    
    
    
    1,084.9Unearned ESOP compensation
    
    
    (6.4
    )
    
    
    (3.1
    )Accumulated other comprehensive loss
    
    
    (9.6
    )
    
    
    (19.8
    )Retained earnings
    
    
    421.0
    
    
    
    522.8Common stock in treasury, at cost, 1,356,487 shares at December 31, 2007
    
    
    
    
    
    
    (41.2
    )1,450.0
    
    
    
    1,544.2$
    3,638.4
    
    
    $
    3,626.5
  F-5




---



##### 



LIFEPOINT HOSPITALS, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2005, 2006 and 2007
(In millions, except per share amounts)
 2005
    
    
    2006
    
    
    2007Revenues
    
    $
    1,809.1
    
    
    $
    2,397.2
    
    
    $
    2,630.1Salaries and benefits
    
    
    723.0
    
    
    
    944.0
    
    
    
    1,034.6Supplies
    
    
    247.0
    
    
    
    336.1
    
    
    
    362.0Other operating expenses
    
    
    300.4
    
    
    
    410.0
    
    
    
    478.8Provision for doubtful accounts
    
    
    183.3
    
    
    
    257.4
    
    
    
    314.2Depreciation and amortization
    
    
    97.5
    
    
    
    107.8
    
    
    
    132.4Interest expense, net
    
    
    59.3
    
    
    
    102.2
    
    
    
    95.7Debt retirement costs
    
    
    12.2
    
    
    
    
    
    
    
    Transaction costs
    
    
    43.2
    
    
    
    
    
    
    
    1,665.9
    
    
    
    2,157.5
    
    
    
    2,417.7Income from continuing operations before minority interests and income taxes
    
    
    143.2
    
    
    
    239.7
    
    
    
    212.4Minority interests in earnings of consolidated entities
    
    
    1.1
    
    
    
    1.3
    
    
    
    1.9Income from continuing operations before income taxes
    
    
    142.1
    
    
    
    238.4
    
    
    
    210.5Provision for income taxes
    
    
    59.9
    
    
    
    93.9
    
    
    
    84.6Income from continuing operations
    
    
    82.2
    
    
    
    144.5
    
    
    
    125.9Discontinued operations, net of income taxes:Loss from discontinued operations
    
    
    (2.8
    )
    
    
    (3.2
    )
    
    
    (6.8
    )Impairment charge
    
    
    (5.8
    )
    
    
    
    
    
    
    (16.5
    )Gain (loss) on sale of hospitals
    
    
    (0.7
    )
    
    
    4.2
    
    
    
    (0.6
    )Income (loss) from discontinued operations
    
    
    (9.3
    )
    
    
    1.0
    
    
    
    (23.9
    )Cumulative effect of change in accounting principle, net of income taxes
    
    
    
    
    
    
    0.7
    
    
    
    Net income
    
    $
    72.9
    
    
    $
    146.2
    
    
    $
    102.0Basic earnings (loss) per share:Continuing operations
    
    $
    1.64
    
    
    $
    2.60
    
    
    $
    2.24Discontinued operations
    
    
    (0.19
    )
    
    
    0.02
    
    
    
    (0.42
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.01
    
    
    
    Net income
    
    $
    1.45
    
    
    $
    2.63
    
    
    $
    1.82Diluted earnings (loss) per share:Continuing operations
    
    $
    1.61
    
    
    $
    2.57
    
    
    $
    2.20Discontinued operations
    
    
    (0.18
    )
    
    
    0.02
    
    
    
    (0.41
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.01
    
    
    
    Net income
    
    $
    1.43
    
    
    $
    2.60
    
    
    $
    1.79Weighted average shares and dilutive securities outstanding:Basic
    
    
    50.1
    
    
    
    55.6
    
    
    
    56.2Diluted
    
    
    53.2
    
    
    
    56.3
    
    
    
    57.2
  F-6




---



##### 



LIFEPOINT
HOSPITALS, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2005, 2006 and 2007
(In millions)
 2005
    
    
    2006
    
    
    2007Cash flows from operating activities:Net income
    
    $
    72.9
    
    
    $
    146.2
    
    
    $
    102.0Adjustments to reconcile net income to net cash provided by operating activities:Loss (income) from discontinued operations
    
    
    9.3
    
    
    
    (1.0
    )
    
    
    23.9Cumulative effect of change in accounting principle, net of income taxes
    
    
    
    
    
    
    (0.7
    )
    
    
    Stock-based compensation
    
    
    6.5
    
    
    
    13.2
    
    
    
    18.8ESOP expense (non-cash portion)
    
    
    12.0
    
    
    
    9.1
    
    
    
    9.0Depreciation and amortization
    
    
    97.5
    
    
    
    107.8
    
    
    
    132.4Amortization of deferred loan costs
    
    
    4.0
    
    
    
    5.3
    
    
    
    6.7Debt retirement costs
    
    
    12.2
    
    
    
    
    
    
    
    Transaction costs
    
    
    43.2
    
    
    
    
    
    
    
    Minority interests in earnings of consolidated entities
    
    
    1.1
    
    
    
    1.3
    
    
    
    1.9Deferred income (benefit) taxes
    
    
    (3.2
    )
    
    
    45.2
    
    
    
    (14.9
    )Reserve for professional and general liability claims, net
    
    
    1.8
    
    
    
    6.2
    
    
    
    5.1Excess tax benefits from employee stock plans
    
    
    8.9
    
    
    
    
    
    
    
    Increase (decrease) in cash from operating assets and liabilities, net of
effects from acquisitions and divestitures:Accounts receivable
    
    
    (24.1
    )
    
    
    (46.8
    )
    
    
    (8.8
    )Inventories and other current assets
    
    
    11.1
    
    
    
    (11.4
    )
    
    
    (6.2
    )Accounts payable and accrued expenses
    
    
    20.6
    
    
    
    21.5
    
    
    
    (29.5
    )Income taxes payable /receivable
    
    
    20.5
    
    
    
    (31.4
    )
    
    
    (4.0
    )Other
    
    
    1.3
    
    
    
    (0.1
    )
    
    
    4.2Net cash provided by operating activities-continuing operations
    
    
    295.6
    
    
    
    264.4
    
    
    
    240.6Net cash provided by (used in) operating activities-discontinued operations
    
    
    5.8
    
    
    
    (18.5
    )
    
    
    22.5Net cash provided by operating activities
    
    
    301.4
    
    
    
    245.9
    
    
    
    263.1Cash flows from investing activities:Purchase of property and equipment
    
    
    (165.5
    )
    
    
    (196.3
    )
    
    
    (164.1
    )Acquisitions, net of cash acquired
    
    
    (963.6
    )
    
    
    (281.3
    )
    
    
    Other
    
    
    0.3
    
    
    
    (3.6
    )
    
    
    0.5Net cash used in investing activities-continuing operations
    
    
    (1,128.8
    )
    
    
    (481.2
    )
    
    
    (163.6
    )Net cash provided by investing activities-discontinued operations
    
    
    27.9
    
    
    
    65.8
    
    
    
    107.4Net cash used in investing activities
    
    
    (1,100.9
    )
    
    
    (415.4
    )
    
    
    (56.2
    )Cash flows from financing activities:Proceeds from borrowings
    
    
    1,967.0
    
    
    
    260.0
    
    
    
    615.0Payments of borrowings
    
    
    (1,156.9
    )
    
    
    (110.0
    )
    
    
    (765.9
    )Proceeds from exercise of stock options
    
    
    43.6
    
    
    
    0.6
    
    
    
    12.7Proceeds from employee stock purchase plans
    
    
    2.2
    
    
    
    3.0
    
    
    
    1.3Proceeds for the completion of a new hospital
    
    
    
    
    
    
    
    
    
    
    14.7Payment of debt issue costs
    
    
    (40.7
    )
    
    
    (1.0
    )
    
    
    (14.2
    )Purchases of treasury stock
    
    
    
    
    
    
    
    
    
    
    (29.0
    )Other
    
    
    (3.9
    )
    
    
    (1.3
    )
    
    
    (0.6
    )Net cash provided by (used in) financing activities
    
    
    811.3
    
    
    
    151.3
    
    
    
    (166.0
    )Change in cash and cash equivalents
    
    
    11.8
    
    
    
    (18.2
    )
    
    
    40.9Cash and cash equivalents at beginning of year
    
    
    18.6
    
    
    
    30.4
    
    
    
    12.2Cash and cash equivalents at end of year
    
    $
    30.4
    
    
    $
    12.2
    
    
    $
    53.1Supplemental disclosure of cash flow information:Interest payments
    
    $
    55.7
    
    
    $
    107.2
    
    
    $
    95.6Capitalized interest
    
    $
    3.0
    
    
    $
    1.2
    
    
    $
    1.7Income taxes paid, net
    
    $
    32.0
    
    
    $
    75.8
    
    
    $
    103.2
  F-7




---



##### 



LIFEPOINT HOSPITALS, INC.
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the Years Ended December 31, 2005, 2006 and 2007
(In millions)
 Unearned
    
    
    AccumulatedCapital in
    
    
    Unearned
    
    
    Compensation
    
    
    OtherCommon Stock
    
    
    Excess of
    
    
    ESOP
    
    
    on Nonvested
    
    
    Comprehensive
    
    
    Retained
    
    
    TreasuryShares
    
    
    Amount
    
    
    Par Value
    
    
    Compensation
    
    
    Stock
    
    
    Loss
    
    
    Earnings
    
    
    Stock
    
    
    TotalBalance at December 31, 2004
    
    
    38.9
    
    
    $
    0.4
    
    
    $
    332.6
    
    
    $
    (12.9
    )
    
    $
    (4.5
    )
    
    $
    
    
    
    $
    222.8
    
    
    $
    (28.9
    )
    
    $
    509.5Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72.9
    
    
    
    
    
    
    
    72.9Non-cash ESOP 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
    
    
    
    
    
    
    
    1,287.8Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146.2
    
    
    
    
    
    
    
    146.2Net change in fair value of interest rate swap, net of tax
benefit of $5.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9.6
    )
    
    
    
    
    
    
    
    
    
    
    (9.6
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136.6Reclassification of unearned compensation on nonvested stock
balance upon adoption of SFAS No. 123(R)
    
    
    
    
    
    
    
    
    
    
    (31.0
    )
    
    
    
    
    
    
    31.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash ESOP compensation earned
    
    
    
    
    
    
    
    
    
    
    6.4
    
    
    
    3.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.7Exercise of stock options, including tax benefits and other
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.6Stock activity in connection with employee stock purchase plans
    
    
    
    
    
    
    
    
    
    
    3.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.0Stock-based compensation  nonvested stock
    
    
    
    
    
    
    
    
    
    
    6.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.5Stock-based compensation  stock options
    
    
    
    
    
    
    
    
    
    
    5.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.8Nonvested stock issued to key employees, net of forfeitures
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2006
    
    
    57.4
    
    
    
    0.6
    
    
    
    1,044.4
    
    
    
    (6.4
    )
    
    
    
    
    
    
    (9.6
    )
    
    
    421.0
    
    
    
    
    
    
    
    1,450.0Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102.0
    
    
    
    
    
    
    
    102.0Net change in fair value of interest rate swap, net of tax
benefit of $5.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10.2
    )
    
    
    
    
    
    
    
    
    
    
    (10.2
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91.8Cumulative impact of change in accounting for uncertainties in
income taxes (FIN 48)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.2
    )Non-cash ESOP compensation earned
    
    
    
    
    
    
    
    
    
    
    6.2
    
    
    
    3.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.5Exercise of stock options, including tax benefits and other
    
    
    0.4
    
    
    
    
    
    
    
    13.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13.9Stock activity in connection with employee stock purchase plans
    
    
    
    
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.6Stock-based compensation  nonvested stock
    
    
    
    
    
    
    
    
    
    
    11.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11.7Stock-based compensation  stock options
    
    
    
    
    
    
    
    
    
    
    7.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.1Nonvested stock issued to key employees, net of forfeitures
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchases of treasury stock, at cost
    
    
    (1.4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41.2
    )
    
    
    (41.2
    )Balance at December 31, 2007
    
    
    56.7
    
    
    $
    0.6
    
    
    $
    1,084.9
    
    
    $
    (3.1
    )
    
    $
    
    
    
    $
    (19.8
    )
    
    $
    522.8
    
    
    $
    (41.2
    )
    
    $
    1,544.2
  F-8




---



##### 



LIFEPOINT
HOSPITALS, INC
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
 Note 1.  Organization and Summary of Significant Accounting Policies
 Organization
   Principles of Consolidation
  Use of Estimates
  Reclassifications
  Discontinued Operations
  F-9




---



##### 



General and Administrative Costs
  Fair Value of Financial Instruments
  LongTerm Debt. 1 2 1 2 1 4 1 4 1 4 1 4 1 2 1 4 1 2
 Interest Rate Swap.
 Revenue Recognition and Allowance for Contractual Discounts
    F-10




---



##### 



Concentration of Revenues
   Hospitals
    
    Percentage ofin State as of
    
    Total RevenuesState
    
    December 31, 2007
    
    2005
    
    2006
    
    2007Kentucky
    
    
    8
    
    
    
    21.4
    %
    
    
    16.9
    %
    
    
    16.6
    %Virginia
    
    
    4
    
    
    
    10.5
    
    
    
    14.3
    
    
    
    14.1Louisiana
    
    
    6
    
    
    
    9.5
    
    
    
    8.8
    
    
    
    8.7West Virginia
    
    
    2
    
    
    
    4.3
    
    
    
    6.4
    
    
    
    8.7New Mexico
    
    
    2
    
    
    
    7.6
    
    
    
    8.8
    
    
    
    8.6Tennessee
    
    
    6
    
    
    
    10.6
    
    
    
    8.3
    
    
    
    8.0Alabama
    
    
    5
    
    
    
    9.0
    
    
    
    7.8
    
    
    
    7.3Arizona
    
    
    2
    
    
    
    3.6
    
    
    
    5.5
    
    
    
    6.4Texas
    
    
    3
    
    
    
    5.3
    
    
    
    5.7
    
    
    
    5.1
 Cash and Cash Equivalents
  Accounts Receivable and Allowance for Doubtful Accounts
   F-11




---



##### 



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, 2005
    
    $
    103.6
    
    
    $
    216.1
    
    
    $
    (174.3
    )
    
    $
    106.0
    
    
    $
    251.4Year ended December 31, 2006
    
    
    251.4
    
    
    
    273.7
    
    
    
    (198.9
    )
    
    
    
    
    
    
    326.2Year ended December 31, 2007
    
    
    326.2
    
    
    
    324.0
    
    
    
    (273.9
    )
    
    
    
    
    
    
    376.3
 
 (a)
    
    Additions charged to costs and expenses include amounts related to the
Companys continuing 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
   2006
    
    
    2007Buildings and improvements
    
    $
    170.1
    
    
    $
    204.5Equipment
    
    
    18.6
    
    
    
    34.6188.7
    
    
    
    239.1Accumulated amortization
    
    
    (19.8
    )
    
    
    (34.8
    )$
    168.9
    
    
    $
    204.3
 F-12




---



##### 



(b) Deferred Loan Costs
  (c) Goodwill and Intangible Assets
   Income Taxes
   Point of Life Indemnity, Ltd.
  F-13




---



##### 



Professional and General Liability Claims
      Workers Compensation Reserves
   F-14




---



##### 



Self-Insured Medical Benefits
  Minority Interests in Consolidated Entities
  Segment Reporting
   
    
    the treatment of patients in a hospital setting is the only material source of revenues
for each of the Companys five 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 is 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 the Companys hospitals; and
    
    the healthcare regulatory environment is generally similar for each of the Companys
five operating divisions.
  
    
    the way the Company manages its operations and extent to which its acquired facilities
are integrated into its existing operations as a single reporting unit;
    
    the Companys goodwill is recoverable from the collective operations of its five
operating divisions and not individually from one single operating division;
    
    its operating divisions are frequently realigned based upon changing circumstances,
including acquisition and divestiture activity; and
    
    because of the collective size of its five operating divisions, each division benefits
from its participation in a group purchasing organization.
 F-15




---



##### 



Stock-Based Compensation
   Earnings (Loss) Per Share
  Recently Issued Accounting Pronouncements
   F-16




---



##### 



Note 2.  Acquisitions
 Acquisitions  2006
 Four
Former HCA Hospitals
   F-17




---



##### 



Inventories
    
    $
    13.0Prepaid expenses
    
    
    1.6Other current assets
    
    
    0.8Property and equipment
    
    
    198.0Intangible assets
    
    
    5.0Goodwill
    
    
    47.5Total assets acquired, excluding cash
    
    
    265.9Accounts payable
    
    
    0.2Accrued salaries
    
    
    5.6Other current liabilities
    
    
    2.4Total liabilities assumed
    
    
    8.2Net assets acquired
    
    $
    257.7
  Havasu Joint Venture
  Acquisitions  2005
 Business Combination with Province Healthcare Company
   F-18




---



##### 



Fair value of Company Common Stock issued
    
    $
    596.0Cash
    
    
    586.3Fair value of assumed Province debt obligations
    
    
    511.6Severance and Province stock option costs
    
    
    73.8Direct transaction costs
    
    
    30.5$
    1,798.2
   F-19




---



##### 



Cash
    
    $
    2.7Accounts receivable, net
    
    
    122.1Inventories
    
    
    21.0Prepaid expenses
    
    
    4.6Other current assets
    
    
    15.7Property and equipment
    
    
    575.6Other long-term assets
    
    
    15.8Goodwill
    
    
    1,177.1Total assets acquired
    
    
    1,934.6Accounts payable
    
    
    33.0Accrued salaries
    
    
    28.1Other current liabilities
    
    
    43.4Long-term debt
    
    
    511.6Professional and general liability claims and other liabilities
    
    
    29.9Minority interests in equity of consolidated entities
    
    
    2.0Total liabilities assumed
    
    
    648.0Net assets acquired
    
    $
    1,286.6
  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-20




---



##### 



Impact of Final Valuations of Fixed Assets
   Unaudited Pro Forma Results of Operations
    Revenues
    
    $
    2,195.5Income from continuing operations
    
    
    107.9Net income
    
    
    97.6Earnings per share:Basic:Income from continuing operations
    
    $
    1.99Net income
    
    $
    1.79Diluted:Income from continuing operations
    
    $
    1.94Net income
    
    $
    1.75
 Note 3.  Discontinued Operations
 Coastal Carolina Medical Center
  F-21




---



##### 



Cash proceeds from sale
    
    $
    35.4Less assets sold:Property and equipment
    
    
    (28.5
    )Goodwill
    
    
    (14.1
    )Intangible assets
    
    
    (0.5
    )Net working capital
    
    
    0.1(7.6
    )Income tax provision
    
    
    (0.2
    )$
    (7.8
    )
 Colorado River Medical Center
   Property and equipment
    
    $
    (4.9
    )Net working capital
    
    
    (4.7
    )Goodwill
    
    
    (3.1
    )(12.7
    )Income tax benefit
    
    
    4.0$
    (8.7
    )
 Two Former HCA Hospitals
  Smith County Memorial Hospital
  F-22




---



##### 



Three Former Province Hospitals
   Current assets
    
    $
    4.2Property and equipment
    
    
    1.7Goodwill
    
    
    3.08.9Income tax benefit
    
    
    (3.1
    )$
    5.8
 Bartow Memorial Hospital
  Impact of Discontinued Operations
    2005
    
    2006
    
    2007Revenues
    
    $
    94.1
    
    
    $
    150.9
    
    
    $
    58.9Loss before income taxes
    
    
    (4.5
    )
    
    
    (4.1
    )
    
    
    (9.9
    )
 F-23




---



##### 



Current
    
    
    Property and
    
    
    IntangibleAssets
    
    
    Equipment
    
    
    Assets, Net
    
    
    TotalBalance at December 31, 2006
    
    $
    14.1
    
    
    $
    140.6
    
    
    $
    0.4
    
    
    $
    155.1Sale of Saint Francis
    
    
    (3.7
    )
    
    
    (37.9
    )
    
    
    (0.2
    )
    
    
    (41.8
    )Impairment of Colorado River
    
    
    (4.3
    )
    
    
    (5.1
    )
    
    
    
    
    
    
    (9.4
    )Sale of St. Josephs
    
    
    (4.7
    )
    
    
    (68.5
    )
    
    
    (0.2
    )
    
    
    (73.4
    )Sale of Coastal
    
    
    (1.4
    )
    
    
    (29.1
    )
    
    
    
    
    
    
    (30.5
    )Balance at December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Note 4.  Goodwill and Intangible Assets
  Balance at December 31, 2005
    
    $
    1,449.9Goodwill acquired as part of acquisitions during 2006
    
    
    108.7Consideration adjustments and adjustments to purchase price allocations for 2005
acquisitions and Province Business Combination
    
    
    22.7Balance at December 31, 2006
    
    
    1,581.3Impairment related to Colorado River
    
    
    (3.1
    )Sale of Coastal (including impairment of $7.1 million)
    
    
    (14.1
    )Consideration adjustments and adjustments to purchase price allocations for
acquisitions
    
    
    (52.1
    )Balance at December 31, 2007
    
    $
    1,512.0
  GrossCarrying
    
    AccumulatedClass of Intangible Asset
    
    Amount
    
    Amortization
    
    Net TotalAmortized intangible assets:Contract-based physician minimum revenue guarantees2007
    
    $
    44.0
    
    
    $
    (8.8
    )
    
    $
    35.22006
    
    
    21.0
    
    
    
    (1.7
    )
    
    
    19.3Non-competition agreements2007
    
    $
    17.3
    
    
    $
    (7.0
    )
    
    $
    10.32006
    
    
    16.6
    
    
    
    (4.8
    )
    
    
    11.8Total amortized intangible assets2007
    
    $
    61.3
    
    
    $
    (15.8
    )
    
    $
    45.52006
    
    
    37.6
    
    
    
    (6.5
    )
    
    
    31.1Indefinite-lived intangible assets:Certificates of need2007
    
    $
    6.9
    
    
    $
    
    
    
    $
    6.92006
    
    
    2.6
    
    
    
    
    
    
    
    2.6Total intangible assets:2007
    
    $
    68.2
    
    
    $
    (15.8
    )
    
    $
    52.42006
    
    
    40.2
    
    
    
    (6.5
    )
    
    
    33.7
 F-24




---



##### 



Contract-Based Physician Minimum Revenue Guarantees
   Non-Competition Agreements
  Certificates of Need
  Amortization Expense
  2005
    
    
    $
    1.32006
    
    
    
    3.42007
    
    
    
    9.3
  2008
    
    $
    9.82009
    
    
    9.62010
    
    
    9.02011
    
    
    6.92012
    
    
    3.9Thereafter
    
    
    6.3$
    45.5
 F-25




---



##### 



Note 5. Accounting for Income Taxes
  Reclassification from current deferred tax assets
    
    $
    14.4Increase to current deferred tax assets
    
    
    36.9Increase in goodwill
    
    
    0.5Cumulative impact of change recorded in retained earnings
    
    
    0.2$
    52.0
  Balance at January 1, 2007

    
    $
    51.9Additions for tax positions of prior years
        
    
    3.3Reductions for settlements with taxing authorities
    


    
    (0.9
    )Reductions for lapse of statutes of limitations
    


    
    (2.1
    )Balance at December 31, 2007
    


    $
    52.2
  January 1,
    
    
    December 31,2007
    
    
    2007Unrecognized tax benefits
    
    $
    45.8
    
    
    $
    47.0Accrued interest and penalties
    
    
    6.2
    
    
    
    8.5$
    52.0
    
    
    $
    55.5
    F-26




---



##### 



2005
    
    
    2006
    
    
    2007Current:Federal
    
    $
    52.3
    
    
    $
    46.3
    
    
    $
    76.6State
    
    
    6.9
    
    
    
    4.9
    
    
    
    6.559.2
    
    
    
    51.2
    
    
    
    83.1Deferred:Federal
    
    
    0.9
    
    
    
    37.4
    
    
    
    (1.2
    )State
    
    
    (2.4
    )
    
    
    (0.7
    )
    
    
    (3.8
    )(1.5
    )
    
    
    36.7
    
    
    
    (5.0
    )Increase in valuation allowance
    
    
    2.2
    
    
    
    6.0
    
    
    
    6.5Total
    
    $
    59.9
    
    
    $
    93.9
    
    
    $
    84.6
   2005
    
    2006
    
    2007Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income taxes, net of federal income tax benefit
    
    
    2.7
    
    
    
    1.8
    
    
    
    1.3ESOP expense
    
    
    2.2
    
    
    
    1.0
    
    
    
    1.0Valuation allowance
    
    
    1.0
    
    
    
    1.6
    
    
    
    2.0Other items, net
    
    
    1.3
    
    
    
    
    
    
    
    0.9Effective income tax rate
    
    
    42.2
    %
    
    
    39.4
    %
    
    
    40.2
    %
 F-27




---



##### 



2006
    
    
    2007Deferred income tax liabilities:Depreciation and amortization
    
    $
    (152.7
    )
    
    $
    (155.2
    )Prepaid expenses
    
    
    (6.9
    )
    
    
    (2.4
    )Other
    
    
    (13.2
    )
    
    
    (0.1
    )Total deferred income tax liabilities
    
    
    (172.8
    )
    
    
    (157.7
    )Deferred income tax assets:Provision for doubtful accounts
    
    
    43.7
    
    
    
    84.5Employee compensation
    
    
    23.7
    
    
    
    33.7Professional liability claims
    
    
    24.4
    
    
    
    26.3Interest rate swap
    
    
    5.1
    
    
    
    10.9Other
    
    
    36.6
    
    
    
    42.1Total deferred income tax assets
    
    
    133.5
    
    
    
    197.5Valuation allowance
    
    
    (32.0
    )
    
    
    (39.4
    )Net deferred income tax assets
    
    
    101.5
    
    
    
    158.1Net deferred income tax assets (liabilities)
    
    $
    (71.3
    )
    
    $
    0.4
  2006
    
    
    2007Current
    
    $
    49.2
    
    
    $
    113.6Long-term
    
    
    (120.5
    )
    
    
    (113.2
    )Total
    
    $
    (71.3
    )
    
    $
    0.4
  Note 6.  Long-Term Debt
  2006
    
    
    2007Senior Borrowings:Credit Agreement:Term B Loans
    
    $
    1,321.9
    
    
    $
    706.0Revolving Loans
    
    
    110.0
    
    
    
    1,431.9
    
    
    
    706.0Subordinated Borrowings:Province 71/2% Senior Subordinated Notes
    
    
    6.1
    
    
    
    6.1Province 41/4% Convertible Subordinated Notes, due 2008
    
    
    0.1
    
    
    
    0.131/2% Notes, due 2014
    
    
    
    
    
    
    575.031/4% Debentures, due 2025
    
    
    225.0
    
    
    
    225.0231.2
    
    
    
    806.2Capital leases/other
    
    
    5.8
    
    
    
    5.2Total long-term debt
    
    
    1,668.9
    
    
    
    1,517.4Less: current portion
    
    
    0.5
    
    
    
    0.5$
    1,668.4
    
    
    $
    1,516.9
 F-28




---



##### 



2008
    
    $
    0.52009
    
    
    0.62010
    
    
    0.42011
    
    
    529.92012
    
    
    177.0Thereafter
    
    
    809.0$
    1,517.4
 Senior Secured Credit Facilities
 Terms
 1 2
  Borrowings and Payments
  1 2
 Letters of Credit and Availability
  Interest Rates
  F-29




---



##### 



Covenants
   Level atRequirement
    
    December 31, 2007Minimum Interest Coverage Ratio
    
    
    3 3.50:1.00
    
    
    
    4.95Maximum Total Leverage Ratio
    
    
    £ 4.50:1.00
    
    
    
    3.27Capital Expenditure Ratio
    
    

£10.0
    %
    
    
    6.0
    %
   31/2% Convertible Senior Subordinated Notes due May 15, 2014
 1 2 1 2 1 2
 1 2 1 2 1 2
 1 2
 F-30




---



##### 



1 2
 1 2
 1 2 1 2 1 2
 1 2 1 2
 31/4% Convertible Senior Subordinated Debentures due August 15, 2025
 1 4 1 4 1 4
 1 4 1 4 1 4 1 4 1 4 1 4 1 4
 1 4 1 4
 1 4 1 4 1 4 1 4
 1 4 1 4
  F-31




---



##### 



Province 71/2% Senior Subordinated Notes
 1 2 1 2 1 2
 1 2 1 2 1 2
 1 2 1 2 1 2 1 2
 Province 41/4% Convertible Subordinated Notes
 1 4 1 4
 Interest Rate Swap
  Notional AmountDate Range
    

(In millions)November 30, 2006 to November 30, 2007
    
    $
    900.0November 30, 2007 to November 28, 2008
    
    
    750.0November 28, 2008 to November 30, 2009
    
    
    600.0November 30, 2009 to November 30, 2010
    
    
    450.0November 30, 2010 to May 30, 2011
    
    
    300.0
   F-32




---



##### 



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




---



##### 



Comprehensive Income (Loss)
   ESOP Compensation
      Allocated shares
    
    
    2,517,044Shares committed to be released
    
    
    Unreleased shares
    
    
    279,675Total ESOP shares
    
    
    2,796,719
 Impact of the Adoption of SFAS No. 123(R)
  F-34




---



##### 



Description of Stock-Based Compensation Plans
 1998 Long-Term Incentive Plan
    Outside Directors Stock and Incentive Compensation Plan
  F-35




---



##### 



ESPP
   Shares Availablefor IssuanceDecember 31, 2004
    
    
    161,399Issuances
    
    
    (53,422
    )December 31, 2005
    
    
    107,977Issuances
    
    
    (71,847
    )December 31, 2006
    
    
    36,130Issuances
    
    
    (36,130
    )December 31, 2007
    
    
    
 F-36




---



##### 



MSPP
    Shares Availablefor IssuanceDecember 31, 2004
    
    
    126,306Forfeitures
    
    
    857Issuances
    
    
    (22,037
    )December 31, 2005
    
    
    105,126Forfeitures
    
    
    2,176Issuances
    
    
    (31,179
    )December 31, 2006
    
    
    76,123Forfeitures
    
    
    11,402Issuances
    
    
    (31,518
    )December 31, 2007
    
    
    56,007
 Stock Options
 Valuation
   2005
    
    2006
    
    2007Expected volatility
    
    
    54.7%
    
    
    
    32.8%
    
    
    
    27.2%Risk free interest rate (range)
    
    
    3.76 - 4.34
    %
    
    
    4.38 - 5.21
    %
    
    
    3.34 - 5.21
    %Expected dividends
    
    
    
    
    
    
    
    
    
    
    Average expected term (years)
    
    
    4.0
    
    
    
    5.4
    
    
    
    4.7Fair value per share of stock options granted
    
    
    $19.62
    
    
    
    $11.15
    
    
    
    $10.24
 F-37




---



##### 



Population Stratification
  Expected Volatility
  Risk-Free Interest Rate
  Expected Dividends
  Pre-Vesting Forfeitures
    F-38




---



##### 



Post-Vesting Cancellations
  Expected Term
  Stock Option Activity
  WeightedWeighted
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    AverageAverage
    
    
    Average
    
    
    
    
    
    
    Aggregate
    
    
    RemainingNumber
    
    
    Exercise
    
    
    Fair
    
    
    Total
    
    
    Intrinsic
    
    
    ContractualStock Options
    
    of Shares
    
    
    Price
    
    
    Value
    
    
    Fair Value
    
    
    Value(a)
    
    
    Term(In millions)
    
    
    (In millions)
    
    
    (In years)Outstanding at December 31, 2006
    
    
    4,121,524
    
    
    $
    30.19
    
    
    $
    11.77
    
    
    $
    48.5
    
    
    $
    24.5
    
    
    
    6.14Exercisable at December 31, 2006
    
    
    2,979,297
    
    
    $
    27.87
    
    
    $
    11.00
    
    
    $
    32.8
    
    
    $
    24.1
    
    
    
    5.07Granted
    
    
    1,056,811
    
    
    
    36.32
    
    
    
    10.24
    
    
    
    10.8
    
    
    
    N/A
    
    
    
    N/AForfeited (pre-vest cancellation)
    
    
    (570,307
    )
    
    
    36.48
    
    
    
    11.85
    
    
    
    (6.7
    )
    
    
    N/A
    
    
    
    N/AExercised
    
    
    (400,639
    )
    
    
    30.64
    
    
    
    11.64
    
    
    
    (4.7
    )
    
    
    3.1
    
    
    
    N/AExpired (post-vest cancellation)
    
    
    (78,826
    )
    
    
    40.16
    
    
    
    17.68
    
    
    
    (1.4
    )
    
    
    N/A
    
    
    
    N/AVested
    
    
    415,574
    
    
    
    37.10
    
    
    
    14.65
    
    
    
    6.0
    
    
    
    N/A
    
    
    
    N/AOutstanding at December 31, 2007
    
    
    4,128,563
    
    
    $
    30.65
    
    
    $
    11.25
    
    
    $
    46.5
    
    
    $
    17.7
    
    
    
    5.68Exercisable at December 31, 2007
    
    
    2,915,406
    
    
    $
    28.47
    
    
    $
    11.20
    
    
    $
    32.7
    
    
    $
    17.6
    
    
    
    4.43Unvested at December 31, 2007
    
    
    1,213,157
    
    
    $
    35.90
    
    
    $
    11.31
    
    
    $
    13.8
    
    
    $
    0.1
    
    
    
    8.67
 
 (a)
    
    The aggregate intrinsic value represents the difference between the
underlying stocks market price and the stock options exercise price.    F-39




---



##### 



Nonvested Stock
   WeightedNumber
    
    
    Average
    
    
    Total
    
    
    AggregateNonvested Shares
    
    of Shares
    
    
    Fair Value
    
    
    Fair Value
    
    
    Intrinsic Value(In millions)
    
    
    (In millions)Outstanding at December 31, 2006
    
    
    1,014,734
    
    
    $
    39.47
    
    
    $
    40.1
    
    
    $
    34.2Granted
    
    
    481,796
    
    
    
    36.44
    
    
    
    17.5
    
    
    
    N/AVested and exercised
    
    
    (10,500
    )
    
    
    40.60
    
    
    
    (0.4
    )
    
    
    0.2Forfeited (pre-vest cancellation)
    
    
    (202,918
    )
    
    
    38.99
    
    
    
    (8.0
    )
    
    
    N/AOutstanding at December 31, 2007
    
    
    1,283,112
    
    
    $
    38.33
    
    
    $
    49.2
    
    
    $
    35.7Unvested at December 31, 2007
    
    
    1,262,112
    
    
    $
    38.42
    
    
    $
    48.5
    
    
    $
    35.1
   F-40




---



##### 



Summary of Stock-Based Compensation
  Stock Options
    
    Nonvested StockOutstanding
    
    Outstanding
    
    DeferredWeighted
    
    
    
    
    
    Weighted
    
    Stock UnitsShares
    
    
    
    
    
    Average
    
    
    
    
    
    Average
    
    OutstandingAvailable
    
    Number of
    
    Exercise
    
    Number of
    
    Grant Date
    
    Number offor Grant
    
    Shares
    
    Price
    
    Shares
    
    Price
    
    SharesDecember 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
    
    
    (2,088
    )
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    2,088Deferred 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
    
    
    70,640
    
    
    
    (70,640
    )
    
    
    40.02
    
    
    
    
    
    
    
    
    
    
    
    Change of control vesting
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    (186,000
    )
    
    
    33.67
    
    
    
    Nonvested stock cancellations
    
    
    46,917
    
    
    
    
    
    
    
    N/A
    
    
    
    (46,917
    )
    
    
    42.80
    
    
    
    December 31, 2005
    
    
    4,329,007
    
    
    
    3,559,674
    
    
    
    29.98
    
    
    
    865,034
    
    
    
    42.76
    
    
    
    11,168Stock option grants
    
    
    (918,245
    )
    
    
    918,245
    
    
    
    33.24
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock unit grants
    
    
    (6,255
    )
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    6,255Deferred stock units vested
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    (799
    )Nonvested stock grants
    
    
    (418,344
    )
    
    
    
    
    
    
    N/A
    
    
    
    418,344
    
    
    
    33.23
    
    
    
    Stock option exercises
    
    
    
    
    
    
    (30,327
    )
    
    
    17.62
    
    
    
    
    
    
    
    
    
    
    
    Stock option cancellations
    
    
    326,068
    
    
    
    (326,068
    )
    
    
    37.68
    
    
    
    
    
    
    
    
    
    
    
    Nonvested stock cancellations
    
    
    268,644
    
    
    
    
    
    
    
    N/A
    
    
    
    (268,644
    )
    
    
    40.34
    
    
    
    December 31, 2006
    
    
    3,580,875
    
    
    
    4,121,524
    
    
    
    30.19
    
    
    
    1,014,734
    
    
    
    39.47
    
    
    
    16,624Stock option grants
    
    
    (1,056,811
    )
    
    
    1,056,811
    
    
    
    36.32
    
    
    
    
    
    
    
    Deferred stock unit grants
    
    
    (3,979
    )
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    3,979Deferred stock units vested
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    (10,784
    )Nonvested stock grants
    
    
    (481,796
    )
    
    
    
    
    
    
    N/A
    
    
    
    481,796
    
    
    
    36.44
    
    
    
    Stock option exercises
    
    
    
    
    
    
    (400,639
    )
    
    
    30.64
    
    
    
    
    
    
    
    
    
    
    
    Stock option cancellations
    
    
    649,133
    
    
    
    (649,133
    )
    
    
    36.93
    
    
    
    
    
    
    
    
    
    
    
    Nonvested stock exercises
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    (10,500
    )
    
    
    40.60
    
    
    
    Nonvested stock cancellations
    
    
    202,918
    
    
    
    
    
    
    
    N/A
    
    
    
    (202,918
    )
    
    
    38.99
    
    
    
    December 31, 2007
    
    
    2,890,340
    
    
    
    4,128,563
    
    
    $
    30.65
    
    
    
    1,283,112
    
    
    $
    38.33
    
    
    
    9,819
  2005(a)
    
    
    2006
    
    
    2007Nonvested stock
    
    $
    6.5
    
    
    $
    7.4
    
    
    $
    11.8Stock options
    
    
    
    
    
    
    5.7
    
    
    
    7.0Total stock-based compensation expense
    
    $
    6.5
    
    
    $
    13.1
    
    
    $
    18.8Tax benefits on stock-based compensation expense
    
    $
    2.4
    
    
    $
    5.2
    
    
    $
    7.8
 
 (a)
    
    This excludes the $4.0 million ($2.5 million, net of income taxes) of
compensation expense the Company recognized that was the result of the
accelerated vesting of nonvested stock due to the Province Business
Combination.  F-41




---



##### 



Note 8.  Commitments and Contingencies
 Americans with Disabilities Act Claim
   Legal Proceedings and General Liability Claims
  Physician Commitments
  F-42




---



##### 



Capital Expenditure Commitments
     Development Agreement with the City of Ennis
  Acquisitions
  Leases
   Operating
    
    
    Capital LeaseLeases
    
    
    Obligations
    
    
    Total2008
    
    $
    14.1
    
    
    $
    0.8
    
    
    $
    14.92009
    
    
    10.9
    
    
    
    0.8
    
    
    
    11.72010
    
    
    7.3
    
    
    
    0.6
    
    
    
    7.92011
    
    
    5.3
    
    
    
    0.6
    
    
    
    5.92012
    
    
    4.1
    
    
    
    0.6
    
    
    
    4.7Thereafter
    
    
    13.7
    
    
    
    3.3
    
    
    
    17.0$
    55.4
    
    
    
    6.7
    
    
    $
    62.1Less: interest portion
    
    
    
    
    
    
    1.5Long-term obligations under capital leases
    
    
    
    
    
    $
    5.2
 F-43




---



##### 



Tax Matters
  Note 9.  Earnings (Loss) Per Share
  2005
    
    
    2006
    
    
    2007Numerator:Numerator for basic earnings (loss) per share  income from continuing operations
    
    $
    82.2
    
    
    $
    144.5
    
    
    $
    125.9Interest on convertible notes, net of income taxes
    
    
    3.3
    
    
    
    
    
    
    
    Numerator for diluted earnings per share  income from continuing operations
    
    
    85.5
    
    
    
    144.5
    
    
    
    125.9Income (loss) from discontinued operations, net of income taxes
    
    
    (9.3
    )
    
    
    1.0
    
    
    
    (23.9
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.7
    
    
    
    $
    76.2
    
    
    $
    146.2
    
    
    $
    102.0Denominator:Denominator for basic earnings (loss) per share  weighted average shares outstanding
    
    
    50.1
    
    
    
    55.6
    
    
    
    56.2Effect of dilutive securities:Employee stock benefit plans
    
    
    0.9
    
    
    
    0.7
    
    
    
    1.0Convertible notes
    
    
    2.2
    
    
    
    
    
    
    
    Denominator for diluted earnings (loss) per share  weighted average shares
    
    
    53.2
    
    
    
    56.3
    
    
    
    57.2Basic earnings (loss) per share:Continuing operations
    
    $
    1.64
    
    
    $
    2.60
    
    
    $
    2.24Discontinued operations
    
    
    (0.19
    )
    
    
    0.02
    
    
    
    (0.42
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.01
    
    
    
    Net income
    
    $
    1.45
    
    
    $
    2.63
    
    
    $
    1.82Diluted earnings (loss) per share:Continuing operations
    
    $
    1.61
    
    
    $
    2.57
    
    
    $
    2.20Discontinued operations
    
    
    (0.18
    )
    
    
    0.02
    
    
    
    (0.41
    )Cumulative effect of change in accounting principle
    
    
    
    
    
    
    0.01
    
    
    
    Net income
    
    $
    1.43
    
    
    $
    2.60
    
    
    $
    1.79
 1 2 1 4 1 4 1 2
 Note 10.  Impact of Changes in the Companys Senior Executives
  F-44




---



##### 



Note 11.  Other Current Liabilities
  2006
    
    
    2007Cash received in advance in connection with the sale of Saint Francis
    
    $
    40.4
    
    
    $
    Accrued interest
    
    
    11.3
    
    
    
    10.6Workers compensation liability
    
    
    10.7
    
    
    
    13.0Medical benefits liability
    
    
    13.7
    
    
    
    14.3Physician minimum revenue guarantee liability
    
    
    11.0
    
    
    
    15.3Share repurchase payable
    
    
    
    
    
    
    12.2Other
    
    
    40.0
    
    
    
    33.3$
    127.1
    
    
    $
    98.7
 F-45




---



##### 



Note 12.  Unaudited Quarterly Financial Information
  2006First
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    580.6
    
    
    $
    560.2
    
    
    $
    627.3
    
    
    $
    629.1Income from continuing operations
    
    $
    35.2
    
    
    $
    37.2
    
    
    $
    34.0
    
    
    $
    38.1Discontinued operations:Income (loss) from discontinued operations
    
    
    (1.6
    )
    
    
    (2.1
    )
    
    
    0.3
    
    
    
    0.2Gain (loss) on sale of hospitals
    
    
    3.8
    
    
    
    (0.3
    )
    
    
    0.6
    
    
    
    0.1Income (loss) from discontinued operations
    
    
    2.2
    
    
    
    (2.4
    )
    
    
    0.9
    
    
    
    0.3Cumulative effect of change in accounting principle
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    38.1
    
    
    $
    34.8
    
    
    $
    34.9
    
    
    $
    38.4Basic earnings (loss) per share:Continuing operations
    
    $
    0.64
    
    
    $
    0.67
    
    
    $
    0.61
    
    
    $
    0.68Discontinued operations
    
    
    0.04
    
    
    
    (0.04
    )
    
    
    0.02
    
    
    
    0.01Cumulative effect of change in accounting principle
    
    
    0.01
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.69
    
    
    $
    0.63
    
    
    $
    0.63
    
    
    $
    0.69Diluted earnings (loss) per share:Continuing operations
    
    $
    0.63
    
    
    $
    0.66
    
    
    $
    0.60
    
    
    $
    0.67Discontinued operations
    
    
    0.04
    
    
    
    (0.04
    )
    
    
    0.02
    
    
    
    0.01Cumulative effect of change in accounting principle
    
    
    0.01
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    0.68
    
    
    $
    0.62
    
    
    $
    0.62
    
    
    $
    0.68
 2007First
    
    
    Second
    
    
    Third
    
    
    FourthRevenues
    
    $
    661.2
    
    
    $
    654.3
    
    
    $
    656.2
    
    
    $
    658.4Income from continuing operations
    
    $
    38.7
    
    
    $
    24.6
    
    
    $
    31.6
    
    
    $
    31.0Discontinued operations:Loss from discontinued operations
    
    
    (0.9
    )
    
    
    (2.6
    )
    
    
    (3.3
    )
    
    
    Loss on sale of hospitals
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.4
    )
    
    
    Impairment
adjustment (charge)
    
    
    (7.9
    )
    
    
    (8.5
    )
    
    
    0.3
    
    
    
    (0.4
    )Loss from discontinued operations
    
    
    (8.9
    )
    
    
    (11.2
    )
    
    
    (3.4
    )
    
    
    (0.4
    )Net income
    
    $
    29.8
    
    
    $
    13.4
    
    
    $
    28.2
    
    
    $
    30.6Basic earnings (loss) per share:Continuing operations
    
    $
    0.69
    
    
    $
    0.44
    
    
    $
    0.56
    
    
    $
    0.55Discontinued operations
    
    
    (0.16
    )
    
    
    (0.20
    )
    
    
    (0.06
    )
    
    
    (0.01
    )Net income
    
    $
    0.53
    
    
    $
    0.24
    
    
    $
    0.50
    
    
    $
    0.54Diluted earnings (loss) per share:Continuing operations
    
    $
    0.69
    
    
    $
    0.43
    
    
    $
    0.55
    
    
    $
    0.54Discontinued operations
    
    
    (0.16
    )
    
    
    (0.20
    )
    
    
    (0.06
    )
    
    
    (0.01
    )Net income
    
    $
    0.53
    
    
    $
    0.23
    
    
    $
    0.49
    
    
    $
    0.53
 F-46




---



##### 



SIGNATURES
  LIFEPOINT HOSPITALS, INC.By:
    /s/ WILLIAM F. CARPENTER IIIWilliam F. Carpenter IIIPresident and Chief Executive Officer  Name
    
    Title
    
    Date/s/  OWEN G. SHELL, JR.

Owen G. Shell, Jr.
    
    Chairman of the Board of Directors
    
    February 18, 2008/s/  WILLIAM F. CARPENTER III

William F. Carpenter III
    
    President,
Chief Executive Officer, and Director
(Principal Executive Officer)
    
    February 18, 2008/s/  DAVID M. DILL

David M. Dill
    
    Chief Financial Officer
(Principal Financial Officer)
    
    February 18, 2008/s/  GARY D. WILLIS

Gary D. Willis
    
    Chief Accounting Officer
(Principal Accounting Officer)
    
    February 18, 2008/s/  RICHARD H. EVANS

Richard H. Evans
    
    Director
    
    February 18, 2008/s/  DEWITT EZELL, JR

DeWitt Ezell, Jr
    
    Director
    
    February 18, 2008/s/  MICHAEL P. HALEY

Michael P. Haley
    
    Director
    
    February 18, 2008/s/ MARGUERITE W. KONDRACKE

Marguerite W. Kondracke
    
    Director
    
    February 18, 2008/s/  WILLIAM V. LAPHAM

William V. Lapham
    
    Director
    
    February 18, 2008/s/  JOHN E. MAUPIN, JR., D.D.S

John E. Maupin, Jr., D.D.S
    
    Director
    
    February 18, 2008




---



##### 



ExhibitNumber
    
    
    
    Description of Exhibits3.1
    
    
    
    Amended and Restated Certificate of Incorporation
(incorporated by reference from exhibits to the
Registration Statement on Form S-8 filed by Historic
LifePoint Hospitals, Inc. on April 15, 2005, File
No. 333-124093).3.2
    
    
    
    Second Amended and Restated Bylaws of LifePoint
Hospitals, Inc. (incorporated by reference from
exhibits to the LifePoint Hospitals, Inc. Current
Report on Form 8-K dated October 16, 2006, File
No. 000-51251).4.1
    
    
    
    Form of Specimen Stock Certificate (incorporated by
reference from exhibits to the Registration Statement
on Form S-4, as amended, filed by LifePoint Hospitals,
Inc. on October 25, 2004, File No. 333-119929).4.2
    
    
    
    Form of 3.25% Convertible Senior Subordinated Debenture
due 2025 (incorporated by reference from exhibits to
LifePoint Hospitals Current Report on Form 8-K dated
August 10, 2005, File No. 000-51251).4.3
    
    
    
    Registration Rights Agreement, dated August 10, 2005,
between LifePoint Hospitals, Inc. and Citigroup Global
Markets Inc. as Representatives of the Initial
Purchasers (incorporated by reference from exhibits to
LifePoint Hospitals Current Report on Form 8-K dated
August 10, 2005, File No. 000-51251).4.4
    
    
    
    Rights Agreement, dated as of April 15, 2005, by and
between LifePoint Hospitals, Inc. and National City
Bank, as Rights Agent (incorporated by reference from
exhibits to the Registration Statement on Form S-8
filed by Historic LifePoint Hospitals, Inc. on
April 15, 2005, File No. 333-124093).4.5
    
    
    
    Subordinated Indenture, dated as of May 27, 2003,
between Province Healthcare Company and U.S. Bank
Trust National Association, as Trustee (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).4.6
    
    
    
    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 71/2% Senior Subordinated Notes due 2013 (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).4.7
    
    
    
    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 (incorporated by reference from
exhibits to Province Healthcare Companys Current
Report on Form 8-K dated April 1, 2005, File
No. 001-31320).4.8
    
    
    
    Indenture, dated as of October 10, 2001, between
Province Healthcare Company and National City Bank,
including the forms of Province Healthcare Companys 41/4% Convertible Subordinated Notes due 2008
(incorporated by reference from exhibits to the
Registration Statement on Form S-3, filed by Province
Healthcare Company on December 20, 2001, File
No. 333-75646).4.9
    
    
    
    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 41/4% Convertible Subordinated Notes due 2008
(incorporated by reference from exhibits to the
Historic LifePoint Hospitals, Inc. Current Report on
Form 8-K dated April 15, 2005, File No. 000-29818.4.10
    
    
    
    Indenture, dated August 10, 2005, between LifePoint
Hospitals, Inc. and Citibank, N.A., as Trustee
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated August 10,
2005, File No. 000-51251).4.11
    
    
    
    Indenture, dated May 29, 2007, by and between LifePoint
Hospitals, Inc. as Issuer and The Bank of New York
Trust Company, N.A., as Trustee (incorporated by
reference from exhibits to LifePoint Hospitals Current
Report on Form 8-K dated May 31, 2007, File
No. 000-51251).10.1
    
    
    
    Tax Sharing and Indemnification Agreement, dated
May 11, 1999, by and among Columbia/HCA, LifePoint
Hospitals, Inc. and Triad Hospitals, Inc. (incorporated
by reference from exhibits to Historic LifePoint
Hospitals Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, File No. 000-29818).10.2
    
    
    
    Benefits and Employment Matters Agreement, dated
May 11, 1999 by and among Columbia/HCA, LifePoint
Hospitals, Inc. and Triad Hospitals, Inc. (incorporated
by reference from exhibits to Historic LifePoint
Hospitals Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, File No. 000-29818).10.3
    
    
    
    Insurance Allocation and Administration Agreement,
dated May 11, 1999, by and among Columbia/HCA,
LifePoint Hospitals, Inc. and Triad Hospitals, Inc.
(incorporated by reference from exhibits to Historic
LifePoint Hospitals Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999, File No. 000-29818).10.4
    
    
    
    Computer and Data Processing Services Agreement dated
May 11, 1999 by and between Columbia Information
Systems, Inc. and LifePoint Hospitals, Inc.
(incorporated by reference from exhibits to Historic
LifePoint Hospitals Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999, File No. 000-29818).




---



##### 



ExhibitNumber
    
    
    
    Description of Exhibits10.5
    
    
    
    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. (incorporated by reference
from exhibits to Historic LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2004, File No. 000-29818).10.6
    
    
    
    Comprehensive Service Agreement for Diagnostic Imaging
and Biomedical Services, executed on January 7, 2005,
between LifePoint Hospital Holdings, Inc. and GE
Healthcare Technologies (incorporated by reference from
exhibits to Historic LifePoint Hospitals Annual report
on Form 10-K for the year ended December 31, 2004, File
No. 000-29818).10.7
    
    
    
    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. (incorporated by reference
from exhibits to Historic LifePoint Hospitals Annual
Report on Form 10-K for the year ended December 31,
2000, File No. 000-29818).10.8
    
    
    
    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. (incorporated by reference
from exhibits to Historic LifePoint Hospitals Annual
Report on Form 10-K for the year ended December 31,
2002, File No. 000-29818).10.9
    
    
    
    Letter from the Office of Inspector General of the
Department of Health and Human Services, dated
October 15, 2002 (incorporated by reference from
exhibits to Historic LifePoint Hospitals Annual Report
on Form 10-K for the year ended December 31, 2002, File
No. 000-29818).10.10
    
    
    
    Letter from the Office of Inspector of the Department
of Health and Human Services, dated December 18, 2003
(incorporated by reference from exhibits to Historic
LifePoint Hospitals Annual Report on Form 10-K for the
year ended December 31, 2004, File No. 000-29818).10.11
    
    
    
    Letter from the Office of Inspector of the Department
of Health and Human Services, dated March 3, 2004
(incorporated by reference from exhibits to Historic
LifePoint Hospitals Annual Report on Form 10-K for the
year ended December 31, 2004, File No. 000-29818).10.12
    
    
    
    Amended and Restated 1998 Long Term Incentive Plan
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated July 7,
2005, File No. 000-51251).10.13
    
    
    
    LifePoint Hospitals, Inc. Executive Performance
Incentive Plan (incorporated by reference from
Appendix C to Historic LifePoint Hospitals Proxy
Statement dated April 28, 2004, File No. 000-29818).10.14
    
    
    
    Form of LifePoint Hospitals, Inc. Nonqualified Stock
Option Agreement (incorporated by reference from
exhibits to LifePoint Hospitals Quarterly Report on
Form 10-Q for the quarter ended March 31, 2007, File
No. 000-51251).10.15
    
    
    
    Form of LifePoint Hospitals, Inc. Restricted Stock
Award Agreement (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).10.16
    
    
    
    Form of LifePoint Hospitals, Inc. Deferred Restricted
Stock Award (incorporated by reference from exhibits to
LifePoint Hospitals Current Report on Form 8-K dated
May 12, 2006, file No. 000-51251).10.17
    
    
    
    LifePoint Hospitals, Inc. Employee Stock Purchase Plan
(incorporated by reference from exhibits to Historic
LifePoint Hospitals Annual Report on Form 10-K for the
year ended December 31, 2001, File No. 000-29818).10.18
    
    
    
    First Amendment to the LifePoint Hospitals, Inc.
Employee Stock Purchase Plan (incorporated by reference
from exhibits to the Registration Statement on Form S-8
filed by Historic LifePoint Hospitals, Inc. on June 2,
2003, File No. 333-105775).10.19
    
    
    
    Second Amendment To Employee Stock Purchase Plan
(incorporated by reference from exhibits to LifePoint
Hospitals Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006, File No. 000-51251).10.20
    
    
    
    LifePoint Hospitals, Inc. Change in Control Severance
Plan, as amended and restated May 9, 2006 (incorporated
by reference from exhibits to LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2007, File No. 000-51251).10.21
    
    
    
    LifePoint Hospitals, Inc. Management Stock Purchase
Plan, as amended and restated (incorporated by
reference from exhibits to Historic LifePoint
Hospitals Annual Report on Form 10-K for the year
ended December 31, 2002, File No. 000-29818).




---



##### 



ExhibitNumber
    
    
    
    Description of Exhibits10.22
    
    
    
    Form of Outside Directors Restricted Stock Agreement
(incorporated by reference from exhibits to LifePoint
Hospitals Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006, File No. 000-51251).10.23
    
    
    
    LifePoint Hospitals, Inc. Outside Directors Stock and
Incentive Compensation Plan (incorporated by reference
from exhibits to Historic LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, File No. 000-29818).10.24
    
    
    
    Amendment to the LifePoint Hospitals, Inc. Outside
Directors Stock and Incentive Compensation Plan
(incorporated by reference from Appendix B to Historic
LifePoint Hospitals Proxy Statement dated April 28,
2004, File No. 000-29818).10.25
    
    
    
    Second Amendment to the LifePoint Hospitals, Inc.
Outside Directors Stock and Incentive Compensation Plan
(incorporated by reference from exhibits to LifePoint
Hospitals Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006, File No. 000-51251).10.26
    
    
    
    Employment Agreement of Kenneth C. Donahey, as amended
and restated (incorporated by reference from exhibits
to Historic LifePoint Hospitals Annual Report on
Form 10-K for the year ended December 31, 2004, File
No. 000-29818).10.27
    
    
    
    Separation Agreement dated June 25, 2006, by and
between LifePoint CSGP, LLC and Kenneth C. Donahey
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated June 26,
2006, File No. 000-51251).10.28
    
    
    
    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 (incorporated by reference from the exhibits
filed to Historic LifePoint Hospitals Current Report
on Form 8-K, dated April 15, 2005, File No. 000-29818).10.29
    
    
    
    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 (incorporated by reference from
exhibits to LifePoint Hospitals Current Report on
Form 8-K dated August 23, 2005, File No. 000-51251).10.30
    
    
    
    Amendment No. 2 to the Credit Agreement, dated
October 14, 2005, among LifePoint Hospitals, Inc. as
borrower, Citicorp North America, Inc., as
administrative agent and the lenders party thereto
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated October 18,
2005, File No. 000-51251).10.31
    
    
    
    Incremental Facility Amendment No. 3 to the Credit
Agreement, dated June 30, 2006 among LifePoint
Hospitals, Inc. as borrower, Citicorp North America,
Inc. as administrative agent and the lenders party
thereto. (incorporated by reference from exhibits to
LifePoint Hospitals Current Report on Form 8-K dated
June 30, 2006, File No. 000-51251).10.32
    
    
    
    Incremental Facility Amendment No. 4 to the Credit
Agreement, dated September 8, 2006, among LifePoint
Hospitals, Inc. as borrower, Citicorp North America,
Inc. as administrative agent and the lenders party
thereto (incorporated by reference from exhibits to
LifePoint Hospitals Current Report on Form 8-K dated
September 12, 2006, File No. 000-51251).10.33
    
    
    
    Amendment No. 5 to the Credit Agreement, dated as of
May 11, 2007, among LifePoint Hospitals, Inc. as
borrower, Citicorp North America, Inc., as
administrative agent and the lenders party thereto
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated May 24,
2007, File No. 000-51251).10.34
    
    
    
    ISDA 2002 Master Agreement, dated as of June 1, 2006,
between Citibank, N.A. and LifePoint Hospitals, Inc.
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K/A dated
September 8, 2006, File No. 000-51251).10.35
    
    
    
    Schedule to the ISDA 2002 Master Agreement
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K/A dated
September 8, 2006, File No. 000-51251).10.36
    
    
    
    Confirmation, dated as of June 2, 2006, between
LifePoint Hospitals, Inc. and Citibank, N.A.
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K/A dated
September 8, 2006, File No. 000-51251).10.37
    
    
    
    Stock Purchase Agreement, dated July 14, 2005, by HCA
Inc. and LifePoint Hospitals, Inc. (incorporated by
reference from exhibits to LifePoint Hospitals
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006, File No. 000-51251).10.38
    
    
    
    Amendment to the Stock Purchase Agreement, dated
June 2, 2006 (incorporated by reference from exhibits
to LifePoint Hospitals Quarterly Report on Form 10-Q
for the quarter ended June 30, 2006, File
No. 000-51251).




---



##### 



ExhibitNumber
    
    
    
    Description of Exhibits10.39
    
    
    
    Repurchase Agreement, dated June 30, 2006, by and
between HCA Inc. and LifePoint Hospitals, Inc.
(incorporated by reference from exhibits to LifePoint
Hospitals Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006, File No. 000-51251).10.40
    
    
    
    Executive Severance and Restrictive Covenant Agreement
by and between LifePoint CSGP, LLC and William F.
Carpenter III, dated December 11, 2006 (incorporated by
reference from exhibits to LifePoint Hospitals Current
Report on Form 8-K dated December 15, 2006, File
No. 000-51251).10.41
    
    
    
    Agreement to Cooperate and General Release, entered
into on May 4, 2007, by and between LifePoint
Hospitals, CSGP, LLC and Michael J. Culotta
(incorporated by reference from exhibits to LifePoint
Hospitals Current Report on Form 8-K dated May 10,
2007, File No. 000-51251).12.1
    
    
    
    Ratio of Earnings to Fixed Charges.21.1
    
    
    
    List of Subsidiaries.23.1
    
    
    
    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