##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from ______ to ______
 Commission File Number: 0-51251
 
  Delaware
    
    20-1538254(State or other jurisdiction
    
    (I.R.S. Employer Identification No.)of incorporation or organization)103 Powell Court, Suite 200Brentwood, Tennessee
    
    37027(Address of principal executive offices)
    
    (Zip Code)
 
 
  þ o
  þ o
  o þ




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##### Table of Contents



TABLE OF CONTENTS
 PART I-FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.Item 3. Quantitative and Qualitative Disclosures about Market Risk.PART II-OTHER INFORMATIONItem 6. Exhibits.EX-31.1  SECTION 302 CEO CERTIFICATIONEX-31.2  SECTION 302 CFO CERTIFICATIONEX-32.1  SECTION 906 CEO CERTIFICATIONEX-32.2  SECTION 906 CFO CERTIFICATON
 2




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##### Table of Contents



PART
IFINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 LIFEPOINT HOSPITALS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(In millions, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Revenues
    
    $
    253.7
    
    
    $
    552.4
    
    
    $
    739.4
    
    
    $
    1,295.9Salaries and benefits
    
    
    102.1
    
    
    
    217.9
    
    
    
    296.7
    
    
    
    508.5Supplies
    
    
    32.2
    
    
    
    76.7
    
    
    
    95.4
    
    
    
    173.4Other operating expenses
    
    
    44.1
    
    
    
    91.3
    
    
    
    123.9
    
    
    
    216.7Provision for doubtful accounts
    
    
    24.4
    
    
    
    63.9
    
    
    
    64.0
    
    
    
    128.2Depreciation and amortization
    
    
    12.1
    
    
    
    28.1
    
    
    
    34.5
    
    
    
    68.1Interest expense, net
    
    
    3.1
    
    
    
    20.4
    
    
    
    9.7
    
    
    
    38.3Debt retirement costs
    
    
    
    
    
    
    2.1
    
    
    
    1.5
    
    
    
    12.1Transaction costs
    
    
    
    
    
    
    (1.4
    )
    
    
    
    
    
    
    43.2ESOP expense
    
    
    2.3
    
    
    
    4.5
    
    
    
    7.1
    
    
    
    11.0220.3
    
    
    
    503.5
    
    
    
    632.8
    
    
    
    1,199.5Income from continuing operations before minority interests
and income taxes
    
    
    33.4
    
    
    
    48.9
    
    
    
    106.6
    
    
    
    96.4Minority interests in earnings of consolidated entities
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.7
    
    
    
    0.8Income from continuing operations before income taxes
    
    
    33.3
    
    
    
    48.6
    
    
    
    105.9
    
    
    
    95.6Provision for income taxes
    
    
    13.2
    
    
    
    18.0
    
    
    
    42.1
    
    
    
    41.8Income from continuing operations
    
    
    20.1
    
    
    
    30.6
    
    
    
    63.8
    
    
    
    53.8Discontinued operations, net of income taxes:Income (loss) from discontinued operations
    
    
    (0.4
    )
    
    
    (0.8
    )
    
    
    (1.5
    )
    
    
    0.1Impairment of assets of hospital held for sale
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (4.9
    )Loss on sale of hospital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.7
    )Loss from discontinued operations
    
    
    (0.4
    )
    
    
    (1.0
    )
    
    
    (1.5
    )
    
    
    (5.5
    )Net income
    
    $
    19.7
    
    
    $
    29.6
    
    
    $
    62.3
    
    
    $
    48.3Basic earnings (loss) per share:Continuing operations
    
    $
    0.54
    
    
    $
    0.55
    
    
    $
    1.73
    
    
    $
    1.11Discontinued operations
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    (0.12
    )Net income
    
    $
    0.53
    
    
    $
    0.54
    
    
    $
    1.69
    
    
    $
    0.99Diluted earnings (loss) per share:Continuing operations
    
    $
    0.51
    
    
    $
    0.54
    
    
    $
    1.61
    
    
    $
    1.09Discontinued operations
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.03
    )
    
    
    (0.11
    )Net income
    
    $
    0.50
    
    
    $
    0.53
    
    
    $
    1.58
    
    
    $
    0.98Weighted average shares and dilutive securities outstanding:Basic
    
    
    37.2
    
    
    
    55.3
    
    
    
    36.9
    
    
    
    48.4Diluted
    
    
    42.6
    
    
    
    56.2
    
    
    
    42.8
    
    
    
    49.3
  3




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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)
 December 31,
    
    
    September 30,2004
    
    
    2005(1)
    
    
    (unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18.6
    
    
    $
    39.2Accounts receivable, less allowances for doubtful accounts of $103.6 at December 31, 2004 and
$241.6 at September 30, 2005
    
    
    112.0
    
    
    
    252.1Inventories
    
    
    25.3
    
    
    
    54.4Assets held for sale
    
    
    33.0
    
    
    
    19.3Income taxes receivable
    
    
    7.5
    
    
    
    18.5Prepaid expenses
    
    
    7.1
    
    
    
    13.9Deferred income taxes and other current assets
    
    
    24.3
    
    
    
    20.6227.8
    
    
    
    418.0Property and equipment:Land
    
    
    20.5
    
    
    
    69.7Buildings and improvements
    
    
    385.4
    
    
    
    988.4Equipment
    
    
    342.0
    
    
    
    505.9Construction in progress (estimated cost to complete and equip after September 30, 2005 is $117.9)
    
    
    48.6
    
    
    
    125.9796.5
    
    
    
    1,689.9Accumulated depreciation
    
    
    (295.4
    )
    
    
    (351.9
    )501.1
    
    
    
    1,338.0Deferred loan costs, net
    
    
    4.9
    
    
    
    36.6Intangible assets, net
    
    
    3.3
    
    
    
    3.8Other
    
    
    5.8
    
    
    
    6.5Goodwill
    
    
    144.4
    
    
    
    1,370.7$
    887.3
    
    
    $
    3,173.6LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    29.5
    
    
    $
    74.6Accrued salaries
    
    
    31.2
    
    
    
    57.6Other current liabilities
    
    
    18.5
    
    
    
    55.2Current maturities of long-term debt
    
    
    
    
    
    
    0.579.2
    
    
    
    187.9Long-term debt
    
    
    221.0
    
    
    
    1,561.0Deferred income taxes
    
    
    47.9
    
    
    
    101.3Professional and general liability claims and other liabilities
    
    
    28.4
    
    
    
    60.0Minority interests in equity of consolidated entities
    
    
    1.3
    
    
    
    4.6Stockholders 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; 40,123,768 shares and 57,094,265
shares issued at December 31, 2004 and September 30, 2005, respectively
    
    
    0.4
    
    
    
    0.6Capital in excess of par value
    
    
    332.6
    
    
    
    1,050.2Unearned ESOP compensation
    
    
    (12.9
    )
    
    
    (10.0
    )Unearned compensation on nonvested stock
    
    
    (4.5
    )
    
    
    (32.2
    )Retained earnings
    
    
    222.8
    
    
    
    250.2Common stock in treasury, at cost, 1,198,800 shares at December 31, 2004
    
    
    (28.9
    )
    
    
    509.5
    
    
    
    1,258.8$
    887.3
    
    
    $
    3,173.6
 
 (1)
    
    Derived from audited financial statements.  4




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##### Table of Contents



LIFEPOINT HOSPITALS, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In millions)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Cash flows from operating activities:Net income
    
    $
    19.7
    
    
    $
    29.6
    
    
    $
    62.3
    
    
    $
    48.3Adjustments to reconcile net income to net cash provided by operating activities:Loss from discontinued operations
    
    
    0.4
    
    
    
    1.0
    
    
    
    1.5
    
    
    
    5.5Depreciation and amortization
    
    
    12.1
    
    
    
    28.1
    
    
    
    34.5
    
    
    
    68.1Debt retirement costs
    
    
    
    
    
    
    2.1
    
    
    
    1.5
    
    
    
    12.1Transaction costs
    
    
    
    
    
    
    (1.4
    )
    
    
    
    
    
    
    43.2ESOP expense
    
    
    2.3
    
    
    
    4.5
    
    
    
    7.1
    
    
    
    11.0Minority interests in earnings of consolidated entities
    
    
    0.1
    
    
    
    0.3
    
    
    
    0.7
    
    
    
    0.8Deferred income taxes (benefit)
    
    
    
    
    
    
    (14.7
    )
    
    
    (0.9
    )
    
    
    9.7Reserve for professional and general liability claims, net
    
    
    1.6
    
    
    
    (0.2
    )
    
    
    2.1
    
    
    
    1.8Tax benefit from employee stock plans
    
    
    0.1
    
    
    
    0.7
    
    
    
    4.4
    
    
    
    8.9Increase (decrease) in cash from operating assets and liabilities, net of
effects from acquisitions and divestitures:Accounts receivable
    
    
    (9.9
    )
    
    
    (12.2
    )
    
    
    (14.1
    )
    
    
    (20.5
    )Inventories and other current assets
    
    
    0.1
    
    
    
    5.4
    
    
    
    (3.1
    )
    
    
    8.7Accounts payable and accrued expenses
    
    
    9.6
    
    
    
    5.3
    
    
    
    15.9
    
    
    
    5.9Income taxes payable
    
    
    6.4
    
    
    
    16.0
    
    
    
    1.3
    
    
    
    (12.3
    )Other
    
    
    0.3
    
    
    
    4.3
    
    
    
    1.5
    
    
    
    8.1Net cash provided by operating activities  continuing operations
    
    
    42.8
    
    
    
    68.8
    
    
    
    114.7
    
    
    
    199.3Net cash provided by operating activities  discontinued operations
    
    
    0.9
    
    
    
    4.2
    
    
    
    0.9
    
    
    
    6.1Net cash provided by operating activities
    
    
    43.7
    
    
    
    73.0
    
    
    
    115.6
    
    
    
    205.4Cash flows from investing activities:Purchase of property and equipment
    
    
    (21.3
    )
    
    
    (48.4
    )
    
    
    (56.7
    )
    
    
    (108.8
    )Acquisitions, net of cash acquired
    
    
    (1.3
    )
    
    
    (3.6
    )
    
    
    (27.8
    )
    
    
    (963.3
    )Proceeds from sale of hospital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32.5Other
    
    
    (0.2
    )
    
    
    (0.2
    )
    
    
    (0.8
    )
    
    
    (0.8
    )Net cash used in investing activities
    
    
    (22.8
    )
    
    
    (52.2
    )
    
    
    (85.3
    )
    
    
    (1,040.4
    )Cash flows from financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    375.0
    
    
    
    30.0
    
    
    
    1,967.0Payments of borrowings
    
    
    (30.0
    )
    
    
    (402.7
    )
    
    
    (79.9
    )
    
    
    (1,111.9
    )Payment of debt issue costs
    
    
    
    
    
    
    (8.9
    )
    
    
    
    
    
    
    (40.7
    )Proceeds from exercise of stock options
    
    
    0.2
    
    
    
    1.7
    
    
    
    7.7
    
    
    
    43.3Other
    
    
    (0.2
    )
    
    
    0.3
    
    
    
    0.6
    
    
    
    (2.1
    )Net cash (used in) provided by financing activities
    
    
    (30.0
    )
    
    
    (34.6
    )
    
    
    (41.6
    )
    
    
    855.6Change in cash and cash equivalents
    
    
    (9.1
    )
    
    
    (13.8
    )
    
    
    (11.3
    )
    
    
    20.6Cash and cash equivalents at beginning of period
    
    
    18.4
    
    
    
    53.0
    
    
    
    20.6
    
    
    
    18.6Cash and cash equivalents at end of period
    
    $
    9.3
    
    
    $
    39.2
    
    
    $
    9.3
    
    
    $
    39.2Supplemental disclosure of cash flow information:Interest payments
    
    $
    0.4
    
    
    $
    19.8
    
    
    $
    7.1
    
    
    $
    43.3Capitalized interest
    
    $
    0.2
    
    
    $
    1.1
    
    
    $
    0.6
    
    
    $
    2.3Income taxes paid, net
    
    $
    6.6
    
    
    $
    15.7
    
    
    $
    36.6
    
    
    $
    35.7
  5




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LIFEPOINT HOSPITALS, INC.
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the Nine Months Ended September 30, 2005
(Amounts in millions)
 UnearnedCommon Stock
    
    
    Capital in
    
    
    Unearned
    
    
    CompensationExcess of
    
    
    ESOP
    
    
    on Nonvested
    
    
    Retained
    
    
    TreasuryShares
    
    
    Amount
    
    
    Par Value
    
    
    Compensation
    
    
    Stock
    
    
    Earnings
    
    
    Stock
    
    
    TotalBalance at December 31, 2004
    
    
    38.9
    
    
    $
    0.4
    
    
    $
    332.6
    
    
    $
    (12.9
    )
    
    $
    (4.5
    )
    
    $
    222.8
    
    
    $
    (28.9
    )
    
    $
    509.5Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48.3
    
    
    
    
    
    
    
    48.3ESOP compensation earned
    
    
    
    
    
    
    
    
    
    
    8.1
    
    
    
    2.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11.0Exercise of stock options,
including tax benefits and
other
    
    
    1.5
    
    
    
    
    
    
    
    52.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52.2Stock activity in connection with
employee stock purchase plans
    
    
    0.1
    
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    
    
    
    
    (2.4
    )
    
    
    
    
    
    
    (1.7
    )Nonvested stock issued to key
employees and outside directors,
net of forfeitures
    
    
    0.8
    
    
    
    
    
    
    
    36.1
    
    
    
    
    
    
    
    (36.1
    )
    
    
    
    
    
    
    
    
    
    
    Common stock issued in connection
with the Province Merger
    
    
    15.0
    
    
    
    0.2
    
    
    
    595.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    595.9Change of
control vesting in
connection
with the Province Merger
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.0
    
    
    
    
    
    
    
    
    
    
    
    4.0Amortization of nonvested stock
grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4.4
    
    
    
    
    
    
    
    
    
    
    
    4.4Conversion of Convertible Notes
to
common stock
    
    
    0.8
    
    
    
    
    
    
    
    35.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35.2Retirement of treasury stock
    
    
    
    
    
    
    
    
    
    
    (10.4
    )
    
    
    
    
    
    
    
    
    
    
    (18.5
    )
    
    
    28.9
    
    
    
    Balance at September 30,
2005
    
    
    57.1
    
    
    $
    0.6
    
    
    $
    1,050.2
    
    
    $
    (10.0
    )
    
    $
    (32.2
    )
    
    $
    250.2
    
    
    $
    
    
    
    $
    1,258.8
 6




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LIFEPOINT HOSPITALS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2005
UNAUDITED
 NOTE 1  BASIS OF PRESENTATION
     NOTE 2  ACQUISITIONS
 Combination with Province Healthcare Company
  7




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Nine Months EndedSeptember 30,2004
    
    2005Revenues
    
    $
    1,431.8
    
    
    $
    1,575.8Income from continuing operations
    
    
    99.8
    
    
    
    80.2Net income
    
    
    95.5
    
    
    
    73.7Earnings per share:Basic:Income from continuing operations
    
    $
    1.92
    
    
    $
    1.48Net income
    
    $
    1.84
    
    
    $
    1.36Diluted:Income from continuing operations
    
    $
    1.83
    
    
    $
    1.44Net income
    
    $
    1.76
    
    
    $
    1.33
   Fair value of LifePoint Common Stock issued
    
    $
    596.0Cash
    
    
    586.3Fair value of assumed Province debt obligations
    
    
    511.6Severance and Province stock option costs
    
    
    73.8Direct transaction costs
    
    
    29.3$
    1,797.0
   9




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Net working capital
    
    $
    71.8Property and equipment
    
    
    702.1Goodwill
    
    
    1,092.7Other long-term assets
    
    
    5.4Total assets acquired
    
    
    1,872.0Debt
    
    
    511.6Other long-term liabilities
    
    
    25.6Deferred income taxes
    
    
    47.5Minority interests in equity of consolidated entities
    
    
    2.0Total liabilities assumed
    
    
    586.7Net assets acquired
    
    $
    1,285.3
  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 Acquisitions
     10




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Facility
    
    Number of BedsClinch Valley Medical Center, Richlands, VA
    
    
    200St. Josephs Hospital, Parkersburg, WV
    
    
    325Saint Francis Hospital, Charleston, WV
    
    
    155Raleigh General Hospital, Beckley, WV
    
    
    369Putnam General Hospital, Hurricane, WV
    
    
    68
 NOTE 3  LONG -TERM DEBT
  December 31,
    
    
    September 30,2004
    
    
    2005Senior BorrowingsCredit Agreement:Term B Loans
    
    $
    
    
    
    $
    1,326.9Revolving Credit Loans
    
    
    
    
    
    
    Senior Credit Borrowings
    
    
    
    
    
    
    1,326.9Subordinated BorrowingsProvince 7 1/2% Senior Subordinated Notes
    
    
    
    
    
    
    6.1Province 4 1/4% Convertible Subordinated Notes
    
    
    
    
    
    
    0.1LifePoint 4 1/2% Convertible Subordinated Notes
    
    
    221.0
    
    
    
    3 1/4% Convertible Senior Subordinated Debentures
    
    
    
    
    
    
    225.0221.0
    
    
    
    231.2Capital leases
    
    
    
    
    
    
    3.4Total debt
    
    
    221.0
    
    
    
    1,561.5Less: current portion
    
    
    
    
    
    
    0.5$
    221.0
    
    
    $
    1,561.0
  2005 (October 1 through December 31)
    
    $
    0.22006
    
    
    0.52007
    
    
    0.52008
    
    
    0.62009
    
    
    6.7Thereafter
    
    
    1,553.0$
    1,561.5
 New Senior Secured Credit Facilities
  11




---



##### Table of Contents



Level atRequirement
    
    September 30, 2005Minimum Interest Coverage Ratio
    

3 3.00:1.00
    
    6.16Maximum Total Leverage Coverage Ratio
    

£ 4.75:1.00
    
    3.47
    12




---



##### Table of Contents



Senior Subordinated Credit Agreement
  1 4
 Previous Credit Facilities
  Province 7 1/2% Senior Subordinated Notes
    Province 4 1/4% Convertible Subordinated Notes
  Province 4 1/2% Convertible Subordinated Notes
  13




---



##### Table of Contents



Historic
LifePoint 41/2% Convertible Subordinated Notes Due June 1, 2009
   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
 Deferred Loan Costs
 1 4
 14




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##### Table of Contents



1 4
 NOTE 4  EARNINGS PER SHARE
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005 (a)Numerator:Numerator for basic earnings per share  income from continuing
operations
    
    $
    20.1
    
    
    $
    30.6
    
    
    $
    63.8
    
    
    $
    53.8Interest on convertible notes, net of taxes
    
    
    1.7
    
    
    
    
    
    
    
    5.5
    
    
    
    Numerator for diluted earnings per share  income from continuing
operations
    
    
    21.8
    
    
    
    30.6
    
    
    
    69.3
    
    
    
    53.8Loss from discontinued operations
    
    
    (0.4
    )
    
    
    (1.0
    )
    
    
    (1.5
    )
    
    
    (5.5
    )$
    21.4
    
    
    $
    29.6
    
    
    $
    67.8
    
    
    $
    48.3Denominator:Denominator for basic earnings per share  weighted average shares outstanding
    
    
    37.2
    
    
    
    55.3
    
    
    
    36.9
    
    
    
    48.4Effect of dilutive securities:Employee stock benefit plans
    
    
    0.7
    
    
    
    0.9
    
    
    
    0.8
    
    
    
    0.9Convertible notes
    
    
    4.7
    
    
    
    
    
    
    
    5.1
    
    
    
    Denominator for diluted earnings per share  adjusted weighted average shares
    
    
    42.6
    
    
    
    56.2
    
    
    
    42.8
    
    
    
    49.3Basic earnings per share:Continuing operations
    
    $
    0.54
    
    
    $
    0.55
    
    
    $
    1.73
    
    
    $
    1.11Discontinued operations:Loss from discontinued operations
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    Impairment of assets of hospital held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.10
    )Loss on sale of hospital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.02
    )Loss on discontinued operations
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    (0.12
    )Net income
    
    $
    0.53
    
    
    $
    0.54
    
    
    $
    1.69
    
    
    $
    0.99Diluted earnings per share:Continuing operations
    
    $
    0.51
    
    
    $
    0.54
    
    
    $
    1.61
    
    
    $
    1.09Discontinued operations:Loss from discontinued operations
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.03
    )
    
    
    Impairment of assets of hospital held for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.10
    )Loss on sale of hospital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Loss on discontinued operations
    
    
    (0.01
    )
    
    
    (0.01
    )
    
    
    (0.03
    )
    
    
    (0.11
    )Net income
    
    $
    0.50
    
    
    $
    0.53
    
    
    $
    1.58
    
    
    $
    0.98
 
 (a)
    
    The impact of 2.9 million potential weighted average shares of the Companys common stock, if
converted, and interest expense related to convertible notes was not included in the
computation of diluted earnings per share because the effect would have been anti-dilutive. NOTE 5  DISCONTINUED OPERATIONS
   15




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##### Table of Contents



Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2005
    
    2004
    
    2005Revenues
    
    $
    7.6
    
    
    $
    8.2
    
    
    $
    24.9
    
    
    $
    34.9Income (loss) before income taxes
    
    $
    (0.5
    )
    
    $
    1.4
    
    
    $
    (2.2
    )
    
    $
    0.2
 NOTE 6  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
    16




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##### Table of Contents



NOTE 7  STOCK BENEFIT PLANS
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net income, as reported
    
    $
    19.7
    
    
    $
    29.6
    
    
    $
    62.3
    
    
    $
    48.3Add: Stock-based compensation expense included in
reported net income, net of related tax effects
    
    
    0.3
    
    
    
    1.4
    
    
    
    0.8
    
    
    
    6.8Less: Stock-based compensation expense determined
under fair value based method for all awards, net
of related tax effects
    
    
    (2.1
    )
    
    
    (2.1
    )
    
    
    (6.8
    )
    
    
    (15.6
    )Pro forma net income
    
    
    17.9
    
    
    
    28.9
    
    
    
    56.3
    
    
    
    39.5Interest on Convertible Notes, net of taxes
    
    
    1.7
    
    
    
    
    
    
    
    5.5
    
    
    
    Diluted pro forma net income
    
    $
    19.6
    
    
    $
    28.9
    
    
    $
    61.8
    
    
    $
    39.5Denominator
for basic earnings per share 
weighted average shares
    
    
    37.2
    
    
    
    55.3
    
    
    
    36.9
    
    
    
    48.4Effect of dilutive securities:Employee stock benefit plans
    
    
    0.7
    
    
    
    0.9
    
    
    
    0.8
    
    
    
    0.9Convertible Notes
    
    
    4.7
    
    
    
    
    
    
    
    5.1
    
    
    
    Denominator
for diluted earnings per share 
adjusted weighted average shares
    
    
    42.6
    
    
    
    56.2
    
    
    
    42.8
    
    
    
    49.3Earnings per share:Basic  as reported
    
    $
    0.53
    
    
    $
    0.54
    
    
    $
    1.69
    
    
    $
    0.99Basic  pro forma
    
    $
    0.48
    
    
    $
    0.52
    
    
    $
    1.52
    
    
    $
    0.82Diluted  as reported
    
    $
    0.50
    
    
    $
    0.53
    
    
    $
    1.58
    
    
    $
    0.98Diluted  pro forma
    
    $
    0.46
    
    
    $
    0.51
    
    
    $
    1.44
    
    
    $
    0.80
  17




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##### Table of Contents



Three Months
    
    Nine Months EndedEnded September 30,
    
    September 30,2004
    
    2005
    
    2004
    
    2005Risk free interest rate
    
    
    2.88
    %
    
    
    4.10
    %
    
    
    2.20
    %
    
    
    3.76
    %Expected life, in years
    
    
    3.0
    
    
    
    4.0
    
    
    
    3.0
    
    
    
    4.0Expected volatility
    
    
    53
    %
    
    
    56
    %
    
    
    53
    %
    
    
    56
    %
   DeferredStock Options
    
    Nonvested Stock
    
    Stock UnitsOutstanding
    
    Outstanding
    
    OutstandingWeighted
    
    
    
    
    
    WeightedShares
    
    
    
    Average
    
    
    
    AverageAvailable
    
    Number
    
    Exercise
    
    Number of
    
    Grant Date
    
    Number offor Grant
    
    of Shares
    
    Price
    
    Shares
    
    Price
    
    SharesDecember 31, 2003
    
    
    2,640,452
    
    
    
    4,393,442
    
    
    $
    23.91
    
    
    
    
    
    
    $
    
    
    
    
    9,478Increase in shares available
(approved by stockholders)
    
    
    2,200,000
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    Stock option grants
    
    
    (906,300
    )
    
    
    906,300
    
    
    
    33.49
    
    
    
    
    
    
    
    
    
    
    
    Stock option exercises
    
    
    
    
    
    
    (774,635
    )
    
    
    13.23
    
    
    
    
    
    
    
    
    
    
    
    Stock option cancellations
    
    
    165,526
    
    
    
    (165,526
    )
    
    
    33.64
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock unit grants
    
    
    (2,376
    )
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    2,376Deferred stock units vested
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    (1,544
    )Nonvested stock grants
    
    
    (196,000
    )
    
    
    
    
    
    
    N/A
    
    
    
    196,000
    
    
    
    33.67
    
    
    
    Nonvested stock cancellations
    
    
    10,000
    
    
    
    
    
    
    
    N/A
    
    
    
    (10,000
    )
    
    
    33.17
    
    
    
    December 31, 2004
    
    
    3,911,302
    
    
    
    4,359,581
    
    
    
    27.43
    
    
    
    186,000
    
    
    
    33.67
    
    
    
    10,310Increase in shares available
(approved by stockholders)
    
    
    2,000,000
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    Stock option grants
    
    
    (749,213
    )
    
    
    749,213
    
    
    
    42.70
    
    
    
    
    
    
    
    
    
    
    
    Stock option exercises
    
    
    
    
    
    
    (1,510,473
    )
    
    
    28.72
    
    
    
    
    
    
    
    
    
    
    
    Stock option cancellations
    
    
    32,730
    
    
    
    (32,730
    )
    
    
    37.49
    
    
    
    
    
    
    
    
    
    
    
    Deferred stock units vested
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    (1,230
    )Deferred stock units grants
    
    
    (2,076
    )
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    
    
    
    
    2,076Nonvested stock grants
    
    
    (876,226
    )
    
    
    
    
    
    
    N/A
    
    
    
    876,276
    
    
    
    42.85
    
    
    
    Change of control vesting
    
    
    
    
    
    
    
    
    
    
    N/A
    
    
    
    (186,000
    )
    
    
    33.67
    
    
    
    Nonvested stock cancellations
    
    
    13,950
    
    
    
    
    
    
    
    N/A
    
    
    
    (19,275
    )
    
    
    42.60
    
    
    
    September 30, 2005
    
    
    4,330,467
    
    
    
    3,565,591
    
    
    $
    30.00
    
    
    
    857,001
    
    
    $
    42.86
    
    
    
    11,156
   18




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##### Table of Contents



NOTE 8  CONTINGENCIES
 Americans with Disabilities Act Claims
   Corporate Integrity Agreement
  Legal Proceedings and General Liability Claims
  Physician Commitments
  19




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##### Table of Contents



Capital Expenditure Commitments
        Tax Matters
   20




---



##### Table of Contents



Acquisitions
  21




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Executive Overview
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Number of hospitals at end of period in
continuing operations
    
    
    29
    
    
    
    49
    
    
    
    29
    
    
    
    49Licensed beds at end of period in continuing
operations
    
    
    2,737
    
    
    
    5,401
    
    
    
    2,737
    
    
    
    5,401Weighted average licensed beds during the period in
continuing operations
    
    
    2,737
    
    
    
    5,401
    
    
    
    2,683
    
    
    
    4,243Revenues from continuing operations (in millions)
    
    $
    253.7
    
    
    $
    552.4
    
    
    $
    739.4
    
    
    $
    1,295.9Income from continuing operations (in millions)
    
    $
    20.1
    
    
    $
    30.6
    
    
    $
    63.8
    
    
    $
    53.8Diluted earnings per share from continuing operations
    
    $
    0.51
    
    
    $
    0.54
    
    
    $
    1.61
    
    
    $
    1.09
 Combination with Province Healthcare Company
   22




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##### Table of Contents



Discontinued Operations
  Hospital Acquisitions
 Business
 Revenue Sources
 Business,
   23




---



##### Table of Contents



Revenue/Volume Trends
  
    
    Physician Recruitment and Retention. Recruiting and retaining both
primary care physicians and specialists for our non-urban communities
is a key to increasing revenues and patient volumes. Management
believes that continuing to add specialists should help our hospitals
increase volumes by offering new services.
    
    Capital Expenditures. Management believes that increases in capital
expenditures in our hospitals should increase our local market share
and help persuade patients to obtain healthcare services within their
communities. The following table reflects our capital expenditures for
the periods presented (in millions):
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Capital Projects
    
    $
    14.3
    
    
    $
    28.4
    
    
    $
    36.9
    
    
    $
    65.4Routine
    
    
    5.2
    
    
    
    15.9
    
    
    
    15.0
    
    
    
    28.7Building Purchase
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.2Information Systems
    
    
    1.8
    
    
    
    4.1
    
    
    
    4.8
    
    
    
    11.5$
    21.3
    
    
    $
    48.4
    
    
    $
    56.7
    
    
    $
    108.8
  
    
    Medicare Rate Increases.MMA provides a prescription drug benefit for Medicare beneficiaries
and also contains numerous provisions that provide incremental funding to hospitals. The
initial increases in reimbursement under MMA were effective in 2004.
  Medicare DSH Payments2004
    
    
    2005First Quarter
    
    $
    3.1
    
    
    $
    7.5Second Quarter
    
    
    5.4
    
    
    
    11.9Third Quarter
    
    
    5.9
    
    
    
    15.5Fourth Quarter
    
    
    6.8
    
    
    
    N/A$
    21.2
    
    
    $
    34.9
 Business,
 24




---



##### Table of Contents




    
    Inpatient Rehabilitation and the 75% Rule. Historically,
freestanding rehabilitation hospitals and rehabilitation
units within acute care hospitals (collectively, IRFs)
received cost-based reimbursement from Medicare under an
exemption from the acute care prospective payment system
(PPS). In order to qualify for cost-based reimbursement
for IRFs, hospitals were required to have 75% of
their patients in one or more of ten medical conditions
(the 75% Rule).
The Balanced Budget Act of 1997 and its implementing
regulations replaced the traditional IRF cost-based
methodology, however, with a PPS system. This new
IRF-PPS became effective on January 1, 2002.
  Minimum Qualifying
    
    Co-morbiditiesCost Reporting Period
    
    Patient Mix
    
    Apply (Y/N)(1)
    
    Patient Mix AffectedJuly 1, 2004June 30, 2005
    
    
    50
    %
    
    
    Y
    
    
    Medicare and TotalJuly 1, 2005June 30, 2006
    
    
    60
    %
    
    
    Y
    
    
    Medicare and TotalJuly 1, 2006June 30, 2007
    
    
    65
    %
    
    
    Y
    
    
    Medicare and TotalJuly 1, 2007 and Thereafter
    
    
    75
    %
    
    
    N
    
    
    Total
 
 (1)
    
    Patients with certain co-morbidities (additional health conditions) may count
towards the minimum patient mix established by the 75% Rule during the phase-in period.    (1)
    
    increases the market basket payments by 3.6% utilizing a new methodology;(2)
    
    incorporates downward adjustments for reimbursement (resulting in an overall decrease of approximately 1.9%) in
response to coding changes;(3)
    
    increases the payment rate adjustment for IRFs in rural areas to 21.3% from the current 19.1%;(4)
    
    reduces the outlier payment threshold for cases with unusually high costs;(5)
    
    implements refinements to the case-mix groups, co-morbidity tiers, and relative weights;(6)
    
    implements new and revised payment adjustments that will be implemented on a budget neutral basis;
 25




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##### Table of Contents



(7)
    
    adopts the new geographic labor market area definitions based on the definitions created by the Office of
Management and Budget known as Core-Based Statistical Areas; and(8)
    
    incorporates several other modifications to Medicare reimbursement for IRFs.
   IRF Reimbursement2004
    
    
    2005First Quarter
    
    $
    5.0
    
    
    $
    4.3Second Quarter
    
    
    5.6
    
    
    
    8.7Third Quarter
    
    
    5.2
    
    
    
    7.8Fourth Quarter
    
    
    5.1
    
    
    
    N/ATotal
    
    $
    20.9
    
    
    $
    20.8
 
    
    Growth in Outpatient Services. We anticipate that the long-term growth trend in outpatient
services will continue. A number of procedures once performed only on an inpatient basis have
been, and will continue to be, converted to outpatient procedures. This conversion has
occurred through continuing advances in pharmaceutical and medical technologies, and as a
result of efforts made by payors to control costs. Generally, the payments we receive for
outpatient procedures are less than those for similar procedures performed in an inpatient
setting.
    
    Efforts to Reduce Payments. Revenues from HMOs, PPOs and other private
insurance programs are subject to contracts and other arrangements
that require us to discount the amounts we customarily charge for
healthcare services. These discounted arrangements often limit our
ability to increase charges in response to increasing costs during the
term of the contracts.
    
    States Implementing Medicaid Cost Containment Measures. A number of
states have incurred budget deficits in recent years. To close these
budget gaps, certain states have reduced spending and increased taxes.
State cost containment activity continues to focus on reducing
provider payments and limiting eligible enrollees under the state
Medicaid programs.
 Other Trends
 
    
    Increases in Provision for Doubtful Accounts. We experienced an increase in our provision
for doubtful accounts during the past few years. The increase was the result of a
combination of broad economic factors, including an increased number of uninsured patients,
and health care plan design changes that resulted in increased co-payments and deductibles.
Our provision for doubtful accounts for each quarter in 2004 and for the first, second and
third quarters in 2005 was as follows for the periods presented (in millions):
 Provision for Doubtful Accounts2004
    
    
    2005First Quarter
    
    $
    20.7
    
    
    $
    23.0Second Quarter
    
    
    18.9
    
    
    
    41.3Third Quarter
    
    
    24.4
    
    
    
    63.9Fourth Quarter
    
    
    22.2
    
    
    
    N/ATotal
    
    $
    86.2
    
    
    $
    128.2
 26




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##### Table of Contents



Charity and Indigent CareWrite-Offs2004
    
    
    2005First Quarter
    
    $
    1.9
    
    
    $
    1.8Second Quarter
    
    
    2.4
    
    
    
    5.6Third Quarter
    
    
    1.7
    
    
    
    7.6Fourth Quarter
    
    
    1.8
    
    
    
    N/ATotal
    
    $
    7.8
    
    
    $
    15.0
  Revenue Days inAccounts Receivable2004
    
    2005March 31
    
    
    39.1
    
    
    
    37.2June 30
    
    
    38.8
    
    
    
    37.6September 30
    
    
    40.6
    
    
    
    42.0December 31
    
    
    38.8
    
    
    
    N/A
  December 31, 2004
    
    March 31, 2005
    
    June 30, 2005
    
    September 30, 2005Insured receivables
    
    
    40.9
    %
    
    
    40.9
    %
    
    
    41.6
    %
    
    
    42.6
    %Uninsured receivables
(including co-payments and
deductibles)
    
    
    59.1
    
    
    
    59.1
    
    
    
    58.4
    
    
    
    57.4Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  December 31, 2004
    
    March 31, 2005
    
    June 30, 2005
    
    September 30, 20050 to 60 days
    
    
    52.5
    %
    
    
    54.4
    %
    
    
    52.4
    %
    
    
    52.5
    %61 to 150 days
    
    
    20.8
    
    
    
    18.5
    
    
    
    20.5
    
    
    
    20.7Over 150 days
    
    
    26.7
    
    
    
    27.1
    
    
    
    27.1
    
    
    
    26.8Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  
    
    Increased Purchase Prices for Acquisitions. As previously discussed, we attempt to make
acquisitions in a highly competitive environment. Compared to historic trends, we have seen an
increase in prices being paid for hospital acquisitions in the past few years. In some cases,
the cost of an acquisition could result in a dilutive effect on our results of operations for
up to two years depending on various factors, including the acquired hospitals results of
operations, allocations of tangible and intangible assets, effects of subsequent legislation
changes and limitations on rate increases. In addition, 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
 27




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##### Table of Contents



Information Technology and Services, Inc. (HCA-IT) for information systems integration as part
of our contractual arrangement for information technology services.
    
    Shortage of Clinical Personnel and Increased Contract Labor Usage.In
recent years, many hospitals, including the hospitals we own, have
encountered difficulty in recruiting and retaining nursing and other
clinical personnel. When we are unable to staff our nursing and
clinical positions, we are required to use contract labor to ensure
adequate patient care. Contract labor generally costs more per hour
than employed labor. We have adopted a number of human resources
strategies in an attempt to improve our ability to recruit and retain
nursing and other clinical personnel.
    
    Increases in Supply Costs.During the past few years, we have
experienced an increase in supply costs as a percentage of revenues,
especially in the areas of pharmaceutical, orthopaedic, cardiac and
oncology supplies. We participate in a group purchasing organization
in an attempt to achieve optimum supply costs from our vendors.
Because of fixed reimbursement nature of most governmental and
commercial payor arrangements, we may not be able to recover supply
cost increases through increased revenues.
    
    Challenges in professional and general liability costs.In recent
years, we have incurred favorable loss experience, as reflected in our
external actuarial reports. We implemented enhanced risk management
processes for monitoring professional and general liability claims and
managing risks in high-risk areas. Professional and general liability
costs remain a challenge for us, and we expect this pressure to
continue in the near term.
 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.
  
    
    Allowance for doubtful accounts and provision for doubtful accounts;
    
    Revenue recognition and allowance for contractual discounts;
    
    Professional and general liability claims; and
    
    Accounting for income taxes.
 Changes in Critical Accounting Estimates
  Allowance for Doubtful Accounts and Provision for Doubtful Accounts
  28




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##### Table of Contents



Allowance for Contractual Discounts
  Professional and General Liability Claims
  Business Combinations
   29




---



##### Table of Contents



Results of Operations
  Admissions.
 Equivalent admissions
 Emergency room visits.
 Outpatient surgeries
 Same
hospital
 Medicare case mix index.
 Continuing operations.
 N/M.
 bps
 30




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##### Table of Contents



Operating Results Summary
  Three Months Ended September 30,2004
    
    
    2005% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesRevenues
    
    $
    253.7
    
    
    
    100.0
    %
    
    $
    552.4
    
    
    
    100.0
    %Salaries and benefits
    
    
    102.1
    
    
    
    40.3
    
    
    
    217.9
    
    
    
    39.4Supplies
    
    
    32.2
    
    
    
    12.7
    
    
    
    76.7
    
    
    
    13.9Other operating expenses
    
    
    44.1
    
    
    
    17.4
    
    
    
    91.3
    
    
    
    16.5Provision for doubtful accounts
    
    
    24.4
    
    
    
    9.6
    
    
    
    63.9
    
    
    
    11.6Depreciation and amortization
    
    
    12.1
    
    
    
    4.8
    
    
    
    28.1
    
    
    
    5.2Interest expense, net
    
    
    3.1
    
    
    
    1.2
    
    
    
    20.4
    
    
    
    3.7Debt retirement costs
    
    
    
    
    
    
    
    
    
    
    2.1
    
    
    
    0.4Transaction costs
    
    
    
    
    
    
    
    
    
    
    (1.4
    )
    
    
    (0.3
    )ESOP expense
    
    
    2.3
    
    
    
    0.9
    
    
    
    4.5
    
    
    
    0.8220.3
    
    
    
    86.9
    
    
    
    503.5
    
    
    
    91.2Income from continuing operations before
minority interests and income taxes
    
    
    33.4
    
    
    
    13.1
    
    
    
    48.9
    
    
    
    8.8Minority interests in earnings of
consolidated entities
    
    
    0.1
    
    
    
    
    
    
    
    0.3
    
    
    
    Income from continuing operations before
income taxes
    
    
    33.3
    
    
    
    13.1
    
    
    
    48.6
    
    
    
    8.8Provision for income taxes
    
    
    13.2
    
    
    
    5.2
    
    
    
    18.0
    
    
    
    3.3Income from continuing operations
    
    $
    20.1
    
    
    
    7.9
    %
    
    $
    30.6
    
    
    
    5.5
    %
 Nine Months Ended September 30,2004
    
    
    2005% of
    
    
    
    
    
    
    % ofAmount
    
    
    Revenues
    
    
    Amount
    
    
    RevenuesRevenues
    
    $
    739.4
    
    
    
    100.0
    %
    
    $
    1,295.9
    
    
    
    100.0
    %Salaries and benefits
    
    
    296.7
    
    
    
    40.1
    
    
    
    508.5
    
    
    
    39.2Supplies
    
    
    95.4
    
    
    
    12.9
    
    
    
    173.4
    
    
    
    13.4Other operating expenses
    
    
    123.9
    
    
    
    16.7
    
    
    
    216.7
    
    
    
    16.7Provision for doubtful accounts
    
    
    64.0
    
    
    
    8.7
    
    
    
    128.2
    
    
    
    9.9Depreciation and amortization
    
    
    34.5
    
    
    
    4.7
    
    
    
    68.1
    
    
    
    5.4Interest expense, net
    
    
    9.7
    
    
    
    1.3
    
    
    
    38.3
    
    
    
    3.0Debt retirement costs
    
    
    1.5
    
    
    
    0.2
    
    
    
    12.1
    
    
    
    0.9Transaction costs
    
    
    
    
    
    
    
    
    
    
    43.2
    
    
    
    3.3ESOP expense
    
    
    7.1
    
    
    
    1.0
    
    
    
    11.0
    
    
    
    0.8632.8
    
    
    
    85.6
    
    
    
    1,199.5
    
    
    
    92.6Income from continuing operations before
minority interests and income taxes
    
    
    106.6
    
    
    
    14.4
    
    
    
    96.4
    
    
    
    7.4Minority interests in earnings of
consolidated entities
    
    
    0.7
    
    
    
    0.1
    
    
    
    0.8
    
    
    
    Income from continuing operations before
income taxes
    
    
    105.9
    
    
    
    14.3
    
    
    
    95.6
    
    
    
    7.4Provision for income taxes
    
    
    42.1
    
    
    
    5.7
    
    
    
    41.8
    
    
    
    3.2Income from continuing operations
    
    $
    63.8
    
    
    
    8.6
    %
    
    $
    53.8
    
    
    
    4.2
    %
 31




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##### Table of Contents



For the Quarters Ended September 30, 2004 and 2005
 Revenues
 Three Months Ended
    
    
    
    
    
    
    %September 30,
    
    
    Increase
    
    
    Increase2004
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)Revenues (dollars in millions):Same hospital
    
    $
    242.9
    
    
    $
    255.5
    
    
    $
    12.6
    
    
    
    5.0Former Province hospitals
    
    
    
    
    
    
    230.6
    
    
    
    230.6
    
    
    
    N/MDRMC
    
    
    
    
    
    
    45.4
    
    
    
    45.4
    
    
    
    N/MOther acquisitions
    
    
    10.8
    
    
    
    20.9
    
    
    
    10.1
    
    
    
    93.5$
    253.7
    
    
    $
    552.4
    
    
    $
    298.7
    
    
    
    117.7Admissions:Same hospital
    
    
    21,827
    
    
    
    21,621
    
    
    
    (206
    )
    
    
    (0.9
    )Continuing operations
    
    
    22,480
    
    
    
    44,743
    
    
    
    22,263
    
    
    
    99.0Equivalent admissions:Same hospital
    
    
    44,866
    
    
    
    43,769
    
    
    
    (1,097
    )
    
    
    (2.4
    )Continuing operations
    
    
    46,378
    
    
    
    88,457
    
    
    
    42,079
    
    
    
    90.7Revenues per equivalent admission:Same hospital
    
    $
    5,420
    
    
    $
    5,836
    
    
    $
    416
    
    
    
    7.7Continuing operations
    
    $
    5,470
    
    
    $
    6,245
    
    
    $
    775
    
    
    
    14.2Medicare case mix index:Same hospital
    
    
    1.19
    
    
    
    1.22
    
    
    
    0.03
    
    
    
    2.5Continuing operations
    
    
    1.19
    
    
    
    1.23
    
    
    
    0.04
    
    
    
    3.4Average length of stay (days):Same hospital
    
    
    4.0
    
    
    
    4.1
    
    
    
    0.1
    
    
    
    2.5Continuing operations
    
    
    4.0
    
    
    
    4.2
    
    
    
    0.2
    
    
    
    5.0Inpatient surgeries:Same hospital
    
    
    6,172
    
    
    
    6,612
    
    
    
    440
    
    
    
    7.1Continuing operations
    
    
    6,427
    
    
    
    13,138
    
    
    
    6,711
    
    
    
    104.4Outpatient surgeries:Same hospital
    
    
    18,567
    
    
    
    17,892
    
    
    
    (675
    )
    
    
    (3.6
    )Continuing operations
    
    
    19,367
    
    
    
    34,460
    
    
    
    15,093
    
    
    
    77.9Emergency room visits:Same hospital
    
    
    105,549
    
    
    
    106,957
    
    
    
    1,408
    
    
    
    1.3Continuing operations
    
    
    110,369
    
    
    
    210,999
    
    
    
    100,630
    
    
    
    91.2Outpatient factor:Same hospital
    
    
    2.05
    
    
    
    2.02
    
    
    
    (0.03
    )
    
    
    (1.3
    )Continuing operations
    
    
    2.06
    
    
    
    1.98
    
    
    
    (0.08
    )
    
    
    (4.1
    )Outpatient revenues as a percentage of total revenues:Same hospital
    
    
    51.3
    %
    
    
    51.3
    %
    
    0 bps
    
    
    N/M
 32




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##### Table of Contents



Inpatient Revenues
  Outpatient Revenues
  Other
   Same hospital2004
    
    2005Medicare
    
    
    36.5
    %
    
    
    36.1
    %Medicaid
    
    
    12.1
    
    
    
    10.3HMOs, PPOs and
other private
insurers
    
    
    37.2
    
    
    
    38.7Self Pay
    
    
    10.2
    
    
    
    11.0Other
    
    
    4.0
    
    
    
    3.9Total
    
    
    100.0
    %
    
    
    100.0
    %
 33




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##### Table of Contents



Expenses
 Salaries and Benefits
 Three Months Ended September 30,
    
    
    
    
    
    
    %% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    Increase2004
    
    
    Revenues
    
    
    2005
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Salaries and benefits (dollars in millions):Salaries and wages
    
    $
    79.8
    
    
    
    31.5
    %
    
    $
    168.7
    
    
    
    30.5
    %
    
    $
    88.9
    
    
    
    111.6
    %Stock-based compensation
    
    
    0.5
    
    
    
    0.2
    
    
    
    2.2
    
    
    
    0.4
    
    
    
    1.7
    
    
    
    297.2Employee benefits
    
    
    19.2
    
    
    
    7.6
    
    
    
    39.3
    
    
    
    7.1
    
    
    
    20.1
    
    
    
    104.1Contract labor
    
    
    2.6
    
    
    
    1.0
    
    
    
    7.7
    
    
    
    1.4
    
    
    
    5.1
    
    
    
    193.8$
    102.1
    
    
    
    40.3
    %
    
    $
    217.9
    
    
    
    39.4
    %
    
    $
    115.8
    
    
    
    113.2ESOP expense (dollars in millions)
    
    $
    2.3
    
    
    
    0.9
    %
    
    $
    4.5
    
    
    
    0.8
    %
    
    $
    2.2
    
    
    
    95.8Continuing operations:Man-hours per equivalent admission
    
    
    84.0
    
    
    
    N/A
    
    
    
    92.6
    
    
    
    N/A
    
    
    
    8.6
    
    
    
    10.2Salaries and benefits per equivalent admission
    
    $
    2,084
    
    
    
    N/A
    
    
    $
    2,386
    
    
    
    N/A
    
    
    $
    302
    
    
    
    14.5Corporate office salaries and benefits (dollars in millions)
    
    $
    4.8
    
    
    
    1.9
    %
    
    $
    6.1
    
    
    
    1.1
    %
    
    $
    1.3
    
    
    
    27.1Same hospital (dollars in millions):Salaries and wages
    
    $
    72.5
    
    
    
    29.8
    %
    
    $
    75.5
    
    
    
    29.6
    %
    
    $
    3.0
    
    
    
    4.2Employee benefits
    
    
    17.7
    
    
    
    7.3
    
    
    
    19.0
    
    
    
    7.4
    
    
    
    1.3
    
    
    
    7.3Contract labor
    
    
    2.4
    
    
    
    1.0
    
    
    
    2.6
    
    
    
    1.0
    
    
    
    0.2
    
    
    
    7.3$
    92.6
    
    
    
    38.1
    %
    
    $
    97.1
    
    
    
    38.0
    %
    
    $
    4.5
    
    
    
    4.9Same hospital:Man-hours per equivalent admission
    
    
    83.1
    
    
    
    N/A
    
    
    
    85.1
    
    
    
    N/A
    
    
    
    2.0
    
    
    
    2.3Salaries and benefits per equivalent admission
    
    $
    2,050
    
    
    
    N/A
    
    
    
    2,205
    
    
    
    N/A
    
    
    $
    155
    
    
    
    7.5
     34




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##### Table of Contents



Supplies
 Three Months Ended
    
    
    
    
    
    
    %September 30,
    
    
    Increase
    
    
    Increase2004
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)Continuing operations:Supplies (dollars in millions)
    
    $
    32.2
    
    
    $
    76.7
    
    
    $
    44.5
    
    
    
    138.6
    %Supplies as a percentage of revenues
    
    
    12.7
    %
    
    
    13.9
    %
    
    120 bps
    
    
    N/MSupplies per equivalent admission
    
    $
    693
    
    
    $
    865
    
    
    $
    172
    
    
    
    24.8
    %Same hospital:Supplies (dollars in millions)
    
    $
    30.7
    
    
    $
    32.9
    
    
    $
    2.2
    
    
    
    7.2
    %Supplies as a percentage of revenues
    
    
    12.6
    %
    
    
    12.9
    %
    
    30 bps
    
    
    N/MSupplies per equivalent admission
    
    $
    686
    
    
    $
    754
    
    
    $
    68
    
    
    
    9.8
    %
  Other Operating Expenses
 Three Months EndedSeptember 30,%% of Net
    
    
    
    
    
    
    % of Net
    
    
    Increase
    
    
    Increase2004
    
    
    Revenues
    
    
    2005
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Other operating expenses (dollars in millions):Professional fees
    
    $
    3.5
    
    
    
    1.4
    %
    
    $
    9.1
    
    
    
    1.7
    %
    
    $
    5.6
    
    
    
    162.9
    %Utilities
    
    
    4.3
    
    
    
    1.7
    
    
    
    11.0
    
    
    
    2.0
    
    
    
    6.7
    
    
    
    154.6Repairs and maintenance
    
    
    5.3
    
    
    
    2.1
    
    
    
    10.9
    
    
    
    2.0
    
    
    
    5.6
    
    
    
    104.3Rents and leases
    
    
    2.4
    
    
    
    1.0
    
    
    
    5.8
    
    
    
    1.0
    
    
    
    3.4
    
    
    
    136.4Insurance
    
    
    3.1
    
    
    
    1.2
    
    
    
    4.3
    
    
    
    0.8
    
    
    
    1.2
    
    
    
    35.6HCA-IT expense
    
    
    3.7
    
    
    
    1.5
    
    
    
    7.7
    
    
    
    1.4
    
    
    
    4.0
    
    
    
    106.7Physician recruiting
    
    
    4.6
    
    
    
    1.8
    
    
    
    6.9
    
    
    
    1.3
    
    
    
    2.3
    
    
    
    50.4Contract services
    
    
    8.6
    
    
    
    3.4
    
    
    
    18.9
    
    
    
    3.4
    
    
    
    10.3
    
    
    
    120.0Non-income taxes
    
    
    4.1
    
    
    
    1.6
    
    
    
    7.6
    
    
    
    1.4
    
    
    
    3.5
    
    
    
    82.6Other
    
    
    4.5
    
    
    
    1.7
    
    
    
    9.1
    
    
    
    1.5
    
    
    
    4.6
    
    
    
    102.2$
    44.1
    
    
    
    17.4
    %
    
    $
    91.3
    
    
    
    16.5
    %
    
    $
    47.2
    
    
    
    106.7Corporate office other operating expenses (dollars in millions):
    
    $
    2.6
    
    
    
    1.0
    %
    
    $
    5.6
    
    
    
    1.0
    %
    
    $
    3.0
    
    
    
    117.5Same hospital other operating expenses (dollars in millions):Professional fees
    
    $
    3.2
    
    
    
    1.3
    %
    
    $
    4.0
    
    
    
    1.6
    %
    
    $
    0.8
    
    
    
    22.8Utilities
    
    
    4.1
    
    
    
    1.7
    
    
    
    4.9
    
    
    
    1.9
    
    
    
    0.8
    
    
    
    19.9Repairs and maintenance
    
    
    5.0
    
    
    
    2.1
    
    
    
    5.6
    
    
    
    2.2
    
    
    
    0.6
    
    
    
    11.4Rents and leases
    
    
    1.9
    
    
    
    0.8
    
    
    
    2.0
    
    
    
    0.8
    
    
    
    0.1
    
    
    
    3.9Insurance
    
    
    2.7
    
    
    
    1.1
    
    
    
    1.1
    
    
    
    0.4
    
    
    
    (1.6
    )
    
    
    (60.4
    )HCA-IT expense
    
    
    3.6
    
    
    
    1.5
    
    
    
    3.9
    
    
    
    1.5
    
    
    
    0.3
    
    
    
    9.6Physician recruiting
    
    
    4.1
    
    
    
    1.7
    
    
    
    4.4
    
    
    
    1.7
    
    
    
    0.3
    
    
    
    8.0Contract services
    
    
    7.9
    
    
    
    3.2
    
    
    
    8.3
    
    
    
    3.2
    
    
    
    0.4
    
    
    
    6.0Non-income taxes
    
    
    3.9
    
    
    
    1.6
    
    
    
    4.2
    
    
    
    1.7
    
    
    
    0.3
    
    
    
    9.2Other
    
    
    2.9
    
    
    
    1.1
    
    
    
    1.7
    
    
    
    0.7
    
    
    
    (1.2
    )
    
    
    (44.8
    )$
    39.3
    
    
    
    16.1
    %
    
    $
    40.1
    
    
    
    15.7
    %
    
    $
    0.8
    
    
    
    2.1
 35




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##### Table of Contents



Provision for Doubtful Accounts
 Three Months Ended
    
    
    
    
    
    %September 30,
    
    Increase
    
    Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Continuing operations (dollars in millions):Provision for doubtful accounts
    
    $
    24.4
    
    
    $
    63.9
    
    
    $
    39.5
    
    
    
    162.3
    %Percentage of revenues
    
    
    9.6
    %
    
    
    11.6
    %
    
    200 bps
    
    
    N/MCharity care write-offs
    
    $
    1.7
    
    
    $
    7.6
    
    
    $
    5.9
    
    
    
    344.7
    %Same hospital (dollars in millions):Provision for doubtful accounts
    
    $
    23.0
    
    
    $
    23.9
    
    
    $
    0.9
    
    
    
    4.5
    %Percentage of revenues
    
    
    9.4
    %
    
    
    9.3
    %
    
    (10) bps
    
    
    N/MCharity care write-offs
    
    $
    1.7
    
    
    $
    2.3
    
    
    $
    0.6
    
    
    
    31.9
    %
  Depreciation and amortization
  Three Months EndedSeptember 30,
    
    Increase
    
    % Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Same hospital
    
    $
    11.4
    
    
    $
    11.9
    
    
    $
    0.5
    
    
    
    4.5
    %Former
Province hospitals
    
    
    
    
    
    
    11.8
    
    
    
    11.8
    
    
    
    N/MDRMC
    
    
    
    
    
    
    2.9
    
    
    
    2.9
    
    
    
    N/MOther
acquisitions/corporate office
    
    
    0.7
    
    
    
    1.5
    
    
    
    0.8
    
    
    
    114.1$
    12.1
    
    
    $
    28.1
    
    
    $
    16.0
    
    
    
    132.6
 36




---



##### Table of Contents



Interest Expense
 Three Months EndedSeptember 30,
    
    
    Increase2004
    
    
    2005
    
    
    (Decrease)Interest expense (dollars in millions):Bank Credit Agreement, including commitment fees
    
    $
    0.4
    
    
    $
    
    
    
    $
    (0.4
    )Senior credit facility, including commitment fees
    
    
    
    
    
    
    18.2
    
    
    
    18.2Senior subordinated credit agreement
    
    
    
    
    
    
    1.5
    
    
    
    1.54 1/2% convertible notes, due 2009
    
    
    2.5
    
    
    
    
    
    
    
    (2.5
    )7 1/2% senior subordinated notes
    
    
    
    
    
    
    0.1
    
    
    
    0.13 1/4% convertible notes, due 2025
    
    
    
    
    
    
    1.0
    
    
    
    1.0Other
    
    
    0.1
    
    
    
    0.1
    
    
    
    3.0
    
    
    
    20.9
    
    
    
    17.9Amortization of deferred loan costs
    
    
    0.4
    
    
    
    1.3
    
    
    
    0.9Less:Discontinued operations interest expense allocation
    
    
    
    
    
    
    (0.3
    )
    
    
    (0.3
    )Interest income
    
    
    (0.1
    )
    
    
    (0.4
    )
    
    
    (0.3
    )Capitalized interest
    
    
    (0.2
    )
    
    
    (1.1
    )
    
    
    (0.9
    )$
    3.1
    
    
    $
    20.4
    
    
    $
    17.3
 1 2
 Provision for Income Taxes
 Three Months EndedSeptember 30,
    
    Increase2004
    
    2005
    
    (Decrease)Provision
for income taxes (dollars in millions)
    
    $
    13.2
    
    
    $
    18.0
    
    
    $
    4.8Effective income tax rate
    
    
    39.7
    %
    
    
    37.1
    %
    
    (260) bps
 1 2
 37




---



##### Table of Contents



For the Nine Months Ended September 30, 2004 and 2005
 Revenues
 Nine Months EndedSeptember 30,
    
    
    Increase
    
    
    % Increase2004
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)Revenues (dollars in millions):Same hospital
    
    $
    728.7
    
    
    $
    776.4
    
    
    $
    47.7
    
    
    
    6.5
    %Former Province hospitals
    
    
    
    
    
    
    428.1
    
    
    
    428.1
    
    
    
    N/MDRMC
    
    
    
    
    
    
    45.4
    
    
    
    45.4
    
    
    
    N/MOther acquisitions
    
    
    10.7
    
    
    
    46.0
    
    
    
    35.3
    
    
    
    329.9$
    739.4
    
    
    $
    1,295.9
    
    
    $
    556.5
    
    
    
    75.3Admissions:Same hospital
    
    
    68,350
    
    
    
    69,494
    
    
    
    1,144
    
    
    
    1.7Continuing operations
    
    
    69,003
    
    
    
    109,832
    
    
    
    40,829
    
    
    
    59.2Equivalent admissions:Same hospital
    
    
    136,563
    
    
    
    136,834
    
    
    
    271
    
    
    
    0.2Continuing operations
    
    
    138,075
    
    
    
    215,381
    
    
    
    77,306
    
    
    
    56.0Revenues per equivalent admission:Same hospital
    
    $
    5,338
    
    
    $
    5,674
    
    
    $
    336
    
    
    
    6.3Continuing operations
    
    $
    5,355
    
    
    $
    6,017
    
    
    $
    662
    
    
    
    12.4Medicare case mix index:Same hospital
    
    
    1.17
    
    
    
    1.20
    
    
    
    0.03
    
    
    
    2.6Continuing operations
    
    
    1.17
    
    
    
    1.21
    
    
    
    0.04
    
    
    
    3.4Average length of stay (days):Same hospital
    
    
    4.1
    
    
    
    4.1
    
    
    
    
    
    
    
    Continuing operations
    
    
    4.1
    
    
    
    4.1
    
    
    
    
    
    
    
    Inpatient surgeries:Same hospital
    
    
    19,480
    
    
    
    19,482
    
    
    
    2
    
    
    
    Continuing operations
    
    
    19,735
    
    
    
    31,290
    
    
    
    11,555
    
    
    
    58.6Outpatient surgeries:Same hospital
    
    
    55,575
    
    
    
    55,239
    
    
    
    (336
    )
    
    
    (0.6
    )Continuing operations
    
    
    56,375
    
    
    
    84,454
    
    
    
    28,079
    
    
    
    49.8Emergency room visits:Same hospital
    
    
    307,388
    
    
    
    317,011
    
    
    
    9,623
    
    
    
    3.1Continuing operations
    
    
    312,208
    
    
    
    501,729
    
    
    
    189,521
    
    
    
    60.7Outpatient factor:Same hospital
    
    
    2.00
    
    
    
    1.97
    
    
    
    (0.03
    )
    
    
    (1.6
    )Continuing operations
    
    
    2.00
    
    
    
    1.96
    
    
    
    (0.04
    )
    
    
    (2.0
    )Outpatient revenues as a percentage of total revenues:Same hospital
    
    
    50.6
    %
    
    
    48.8
    %
    
    (180) bps
    
    
    N/M
 38




---



##### Table of Contents



Inpatient Revenues
   Outpatient Revenues
  Other
   Same hospital2004
    
    
    2005Medicare
    
    
    37.0
    %
    
    
    37.1
    %Medicaid
    
    
    11.1
    
    
    
    10.8HMOs, PPOs and
other private insurers
    
    
    38.5
    
    
    
    38.8Self Pay
    
    
    9.2
    
    
    
    9.4Other
    
    
    4.2
    
    
    
    3.9Total
    
    
    100.0
    %
    
    
    100.0
    %
 39




---



##### Table of Contents



Expenses
 Salaries and Benefits
 Nine Months Ended September 30,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2004
    
    
    Revenues
    
    
    2005
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Salaries and benefits (dollars in millions):Salaries and wages
    
    $
    229.9
    
    
    
    31.0
    %
    
    $
    393.6
    
    
    
    30.3
    %
    
    $
    163.7
    
    
    
    71.2
    %Stock-based compensation
    
    
    1.3
    
    
    
    0.2
    
    
    
    4.4
    
    
    
    0.3
    
    
    
    3.1
    
    
    
    238.4Employee benefits
    
    
    56.0
    
    
    
    7.6
    
    
    
    94.2
    
    
    
    7.3
    
    
    
    38.2
    
    
    
    68.2Contract labor
    
    
    9.5
    
    
    
    1.3
    
    
    
    16.3
    
    
    
    1.3
    
    
    
    6.8
    
    
    
    72.3$
    296.7
    
    
    
    40.1
    %
    
    $
    508.5
    
    
    
    39.2
    %
    
    $
    211.8
    
    
    
    71.4ESOP expense (dollars in millions)
    
    $
    7.1
    
    
    
    1.0
    %
    
    $
    11.0
    
    
    
    0.8
    %
    
    $
    3.9
    
    
    
    55.1Continuing
operations:Man-hours per equivalent admission
    
    
    83.2
    
    
    
    N/A
    
    
    
    87.5
    
    
    
    N/A
    
    
    
    4.3
    
    
    
    5.2Salaries and benefits per equivalent admission
    
    
    2,036
    
    
    
    N/A
    
    
    
    2,245
    
    
    
    N/A
    
    
    
    209
    
    
    
    10.3Corporate office salaries and benefits (dollars in millions)
    
    $
    12.9
    
    
    
    1.7
    %
    
    $
    20.9
    
    
    
    1.6
    %
    
    $
    8.0
    
    
    
    62.7Same hospital (dollars in millions):Salaries and wages
    
    $
    216.5
    
    
    
    29.7
    %
    
    $
    227.2
    
    
    
    29.3
    %
    
    $
    10.7
    
    
    
    5.0Employee benefits
    
    
    53.4
    
    
    
    7.3
    
    
    
    56.9
    
    
    
    7.3
    
    
    
    3.5
    
    
    
    6.4Contract labor
    
    
    9.1
    
    
    
    1.3
    
    
    
    7.6
    
    
    
    1.0
    
    
    
    (1.5
    )
    
    
    (16.9
    )$
    279.0
    
    
    
    38.3
    %
    
    $
    291.7
    
    
    
    37.6
    %
    
    $
    12.7
    
    
    
    4.6Same hospital:Man-hours per equivalent admission
    
    
    83.0
    
    
    
    N/A
    
    
    
    82.1
    
    
    
    N/A
    
    
    
    (0.9
    )
    
    
    (1.1
    )Salaries and benefits per equivalent admission
    
    
    2,025
    
    
    
    N/A
    
    
    
    2,122
    
    
    
    N/A
    
    
    
    97
    
    
    
    4.8
  Supplies
 Nine Months EndedSeptember 30,Increase
    
    % Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Continuing
operations:Supplies (dollars in millions)
    
    $
    95.4
    
    
    $
    173.4
    
    
    $
    78.0
    
    
    
    81.9
    %Supplies as a percentage of revenues
    
    
    12.9
    %
    
    
    13.4
    %
    
    50 bps
    
    
    N/MSupplies per equivalent admission
    
    $
    687
    
    
    $
    806
    
    
    $
    119
    
    
    
    17.3Same hospital:Supplies (dollars in millions)
    
    $
    93.7
    
    
    $
    101.1
    
    
    $
    7.4
    
    
    
    7.9Supplies as a percentage of revenues
    
    
    12.9
    %
    
    
    13.0
    %
    
    10 bps
    
    
    N/MSupplies per equivalent admission
    
    $
    684
    
    
    $
    742
    
    
    $
    58
    
    
    
    8.5
    %
  40




---



##### Table of Contents



Other Operating Expenses
 Nine Months Ended September 30,% of
    
    
    
    
    
    
    % of
    
    
    Increase
    
    
    % Increase2004
    
    
    Revenues
    
    
    2005
    
    
    Revenues
    
    
    (Decrease)
    
    
    (Decrease)Other operating expenses (dollars in millions):Professional fees
    
    $
    9.6
    
    
    
    1.3
    %
    
    $
    20.1
    
    
    
    1.6
    %
    
    $
    10.5
    
    
    
    110.4
    %Utilities
    
    
    12.4
    
    
    
    1.7
    
    
    
    23.5
    
    
    
    1.8
    
    
    
    11.1
    
    
    
    90.2Repairs and maintenance
    
    
    14.9
    
    
    
    2.0
    
    
    
    24.7
    
    
    
    1.9
    
    
    
    9.8
    
    
    
    65.6Rents and leases
    
    
    7.0
    
    
    
    0.9
    
    
    
    12.9
    
    
    
    1.0
    
    
    
    5.9
    
    
    
    83.6Insurance
    
    
    8.7
    
    
    
    1.2
    
    
    
    13.2
    
    
    
    1.0
    
    
    
    4.5
    
    
    
    51.6HCA-IT expense
    
    
    11.4
    
    
    
    1.5
    
    
    
    18.0
    
    
    
    1.4
    
    
    
    6.6
    
    
    
    57.5Physician recruiting
    
    
    10.2
    
    
    
    1.4
    
    
    
    19.8
    
    
    
    1.5
    
    
    
    9.6
    
    
    
    93.8Contract services
    
    
    23.9
    
    
    
    3.2
    
    
    
    44.1
    
    
    
    3.4
    
    
    
    20.2
    
    
    
    84.6Non-income taxes
    
    
    11.4
    
    
    
    1.5
    
    
    
    19.6
    
    
    
    1.5
    
    
    
    8.2
    
    
    
    72.6Other
    
    
    14.4
    
    
    
    2.0
    
    
    
    20.8
    
    
    
    1.6
    
    
    
    6.4
    
    
    
    43.8$
    123.9
    
    
    
    16.7
    %
    
    $
    216.7
    
    
    
    16.7
    %
    
    $
    92.8
    
    
    
    74.8Corporate office other
operating expenses (dollars in millions):
    
    $
    7.9
    
    
    
    1.1
    %
    
    $
    14.5
    
    
    
    1.1
    %
    
    $
    6.6
    
    
    
    85.1Same hospital other operating expenses (dollars in millions):Professional fees
    
    $
    9.2
    
    
    
    1.3
    %
    
    $
    11.1
    
    
    
    1.4
    %
    
    $
    1.9
    
    
    
    20.8Utilities
    
    
    12.1
    
    
    
    1.7
    
    
    
    13.4
    
    
    
    1.7
    
    
    
    1.3
    
    
    
    11.0Repairs and maintenance
    
    
    14.7
    
    
    
    2.0
    
    
    
    16.0
    
    
    
    2.1
    
    
    
    1.3
    
    
    
    9.2Rents and leases
    
    
    6.1
    
    
    
    0.8
    
    
    
    6.1
    
    
    
    0.8
    
    
    
    
    
    
    
    0.6Insurance
    
    
    7.5
    
    
    
    1.0
    
    
    
    4.9
    
    
    
    0.6
    
    
    
    (2.6
    )
    
    
    (34.8
    )HCA-IT expense
    
    
    11.0
    
    
    
    1.5
    
    
    
    11.8
    
    
    
    1.5
    
    
    
    0.8
    
    
    
    8.0Physician recruiting
    
    
    9.7
    
    
    
    1.3
    
    
    
    10.3
    
    
    
    1.3
    
    
    
    0.6
    
    
    
    6.4Contract services
    
    
    22.8
    
    
    
    3.1
    
    
    
    24.9
    
    
    
    3.2
    
    
    
    2.1
    
    
    
    9.5Non-income taxes
    
    
    11.0
    
    
    
    1.5
    
    
    
    13.2
    
    
    
    1.7
    
    
    
    2.2
    
    
    
    20.3Other
    
    
    9.7
    
    
    
    1.3
    
    
    
    8.9
    
    
    
    1.2
    
    
    
    (0.8
    )
    
    
    (9.3
    )$
    113.8
    
    
    
    15.5
    %
    
    $
    120.6
    
    
    
    15.5
    %
    
    $
    6.8
    
    
    
    6.0
  41




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##### Table of Contents



Provision for doubtful accounts
 Nine Months EndedSeptember 30,
    
    
    Increase
    
    
    % Increase2004
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)Continuing operations (dollars in millions):Provision for doubtful accounts
    
    $
    64.0
    
    
    $
    128.2
    
    
    $
    64.2
    
    
    
    100.3
    %Percentage of revenues
    
    
    8.7
    %
    
    
    9.9
    %
    
    120 bps
    
    
    N/MCharity care write-offs
    
    $
    6.0
    
    
    $
    15.1
    
    
    $
    9.1
    
    
    
    152.2
    %Same hospital (dollars in millions):Provision for doubtful accounts
    
    $
    62.6
    
    
    $
    64.6
    
    
    $
    2.0
    
    
    
    3.4
    %Percentage of revenues
    
    
    8.6
    %
    
    
    8.3
    %
    
    (30) bps
    
    
    N/MCharity care write-offs
    
    $
    6.0
    
    
    $
    6.3
    
    
    $
    0.3
    
    
    
    4.7
    %
  Depreciation and amortization
  Nine Months EndedSeptember 30,
    
    Increase
    
    % Increase2004
    
    2005
    
    (Decrease)
    
    (Decrease)Same hospital
    
    $
    33.6
    
    
    $
    37.2
    
    
    $
    3.6
    
    
    
    10.8
    %Former
Province hospitals
    
    
    
    
    
    
    24.5
    
    
    
    24.5
    
    
    
    N/MDRMC
    
    
    
    
    
    
    2.9
    
    
    
    2.9
    
    
    
    N/MOther
acquisitions/corporate office
    
    
    0.9
    
    
    
    3.5
    
    
    
    2.6
    
    
    
    309.5$
    34.5
    
    
    $
    68.1
    
    
    $
    33.6
    
    
    
    97.6
 Interest Expense
 Nine Months EndedSeptember 30,
    
    
    Increase2004
    
    
    2005
    
    
    (Decrease)Interest expense (in millions):Bank Credit Agreement, including commitment fees
    
    $
    1.1
    
    
    $
    
    
    
    $
    (1.1
    )Senior credit facility, including convert fees
    
    
    
    
    
    
    31.2
    
    
    
    31.2Senior subordinated credit agreement
    
    
    
    
    
    
    2.1
    
    
    
    2.14 1/2% convertible notes, due 2009
    
    
    8.1
    
    
    
    4.5
    
    
    
    (3.6
    )4 1/4% convertible notes, due 2008
    
    
    
    
    
    
    0.3
    
    
    
    0.37 1/2% senior subordinated notes
    
    
    
    
    
    
    0.2
    
    
    
    0.23 1/4%
convertible senior subordinated debentures, due 2025
    
    
    
    
    
    
    1.0
    
    
    
    1.0Other
    
    
    0.3
    
    
    
    0.2
    
    
    
    (0.1
    )9.5
    
    
    
    39.5
    
    
    
    30.0Amortization of deferred loan costs
    
    
    1.1
    
    
    
    2.8
    
    
    
    1.7Less:Discontinued operations interest expense allocation
    
    
    
    
    
    
    (0.3
    )
    
    
    (0.3
    )Interest income
    
    
    (0.3
    )
    
    
    (1.4
    )
    
    
    (1.1
    )Capitalized interest
    
    
    (0.6
    )
    
    
    (2.3
    )
    
    
    (1.7
    )$
    9.7
    
    
    $
    38.3
    
    
    $
    28.6
 1 2
 42




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##### Table of Contents



Debt retirement costs
  Nine Months EndedSeptember 30,2004
    
    
    2005Legal fees for retirement of assumed Province
debt, our convertible notes and previous
credit facility
    
    $
    
    
    
    $
    1.1Tender premiums paid on convertible notes
    
    
    0.9
    
    
    
    4.8Deferred loan costs expensed on tender of our
convertible notes and previous credit facility
    
    
    0.6
    
    
    
    5.7Creditor fees and other expenses
    
    
    
    
    
    
    0.5$
    1.5
    
    
    $
    12.1
 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
 Nine Months EndedSeptember 30,
    
    Increase2004
    
    2005
    
    (Decrease)Provision
for income taxes (dollars in millions)
    
    $
    42.1
    
    
    $
    41.8
    
    
    $
    (0.3
    )Effective income tax rate
    
    
    39.8
    %
    
    
    43.8
    %
    
    400 bps
  43




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##### Table of Contents



Liquidity and Capital Resources
 Liquidity
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Net cash provided by continuing
operating activities
    
    $
    42.8
    
    
    $
    68.8
    
    
    $
    114.7
    
    
    $
    199.3Purchase of property and equipment
    
    
    (21.3
    )
    
    
    (48.4
    )
    
    
    (56.7
    )
    
    
    (108.8
    )Free operating cash flow
    
    
    21.5
    
    
    
    20.4
    
    
    
    58.0
    
    
    
    90.5Acquisitions
    
    
    (1.3
    )
    
    
    (3.6
    )
    
    
    (27.8
    )
    
    
    (963.3
    )Proceeds from sale of hospital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32.5Proceeds from borrowings
    
    
    
    
    
    
    375.0
    
    
    
    30.0
    
    
    
    1,967.0Payments on borrowings
    
    
    (30.0
    )
    
    
    (402.7
    )
    
    
    (79.9
    )
    
    
    (1,111.9
    )Payment of debt issue costs
    
    
    
    
    
    
    (8.9
    )
    
    
    
    
    
    
    (40.7
    )Proceeds from exercise of stock options
    
    
    0.2
    
    
    
    1.7
    
    
    
    7.7
    
    
    
    43.3Other
    
    
    (0.4
    )
    
    
    0.1
    
    
    
    (0.2
    )
    
    
    (2.9
    )Cash provided by discontinued operations
    
    
    0.9
    
    
    
    4.2
    
    
    
    0.9
    
    
    
    6.1Net (decrease) increase in cash
and cash equivalents
    
    $
    (9.1
    )
    
    $
    (13.8
    )
    
    $
    (11.3
    )
    
    $
    20.6
  Working Capital
  December 31,
    
    
    September 30,
    
    
    Increase2004
    
    
    2005
    
    
    (Decrease)Total current assets
    
    $
    227.8
    
    
    $
    418.0
    
    
    $
    190.2Total current liabilities
    
    
    79.2
    
    
    
    187.9
    
    
    
    108.7Net working capital
    
    $
    148.6
    
    
    $
    230.1
    
    
    $
    81.5Current ratio
    
    
    2.88
    
    
    
    2.22
  44




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##### Table of Contents



Capital Expenditures
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Capital projects
    
    $
    14.3
    
    
    $
    28.4
    
    
    $
    36.9
    
    
    $
    65.4Routine
    
    
    5.2
    
    
    
    15.9
    
    
    
    15.0
    
    
    
    28.7Purchase of buildings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.2Information systems
    
    
    1.8
    
    
    
    4.1
    
    
    
    4.8
    
    
    
    11.5$
    21.3
    
    
    $
    48.4
    
    
    $
    56.7
    
    
    $
    108.8Depreciation expense
    
    $
    11.9
    
    
    $
    27.9
    
    
    $
    33.9
    
    
    $
    67.4Percentage of capital expenditures
to depreciation expense
    
    
    179.0
    %
    
    
    173.5
    %
    
    
    167.3
    %
    
    
    161.4
    %
  Debt
  Balance as of
    
    
    Proceeds from
    
    
    Payments of
    
    
    
    
    
    
    Balance as ofDecember 31, 2004
    
    
    Debt Borrowings
    
    
    Borrowings (g)
    
    
    Other
    
    
    September 30, 2005Senior Credit Facility:Term B Loans (a) (e)
    
    $
    
    
    
    $
    1,400.0
    
    
    $
    (73.1
    )
    
    $
    
    
    
    $
    1,326.9Revolving Credit Loans (b) (e)
    
    
    
    
    
    
    150.0
    
    
    
    (150.0
    )
    
    
    
    
    
    
    Senior Subordinated Credit Agreement (c) (d)
    
    
    
    
    
    
    192.0
    
    
    
    (192.0
    )
    
    
    
    
    
    
    Previous Province Credit Facility (a) (f)
    
    
    
    
    
    
    
    
    
    
    (27.0
    )
    
    
    27.0
    
    
    
    Provinces 7 1/2% Senior Subordinated Notes (a) (f)
    
    
    
    
    
    
    
    
    
    
    (193.9
    )
    
    
    200.0
    
    
    
    6.1Provinces 4 1/4% Convertible Subordinated Notes (a) (f)
    
    
    
    
    
    
    
    
    
    
    (172.4
    )
    
    
    172.5
    
    
    
    0.1Provinces 4 1/2% Convertible Subordinated Notes (a) (f)
    
    
    
    
    
    
    
    
    
    
    (76.0
    )
    
    
    76.0
    
    
    
    LifePoints 4 1/2% Convertible Subordinated Notes (c)
    
    
    221.0
    
    
    
    
    
    
    
    (185.1
    )
    
    
    (35.9
    )
    
    
    3 1/4% Convertible Senior Subordinated Debentures (d)
    
    
    
    
    
    
    225.0
    
    
    
    
    
    
    
    
    
    
    
    225.0Other, including capital leases (f)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.4
    
    
    
    3.4$
    221.0
    
    
    $
    1,967.0
    
    
    $
    (1,069.5
    )
    
    $
    443.0
    
    
    $
    1,561.5
 
 (a)
    
    Represents the borrowings of $1,250.0 million of Term B Loans to finance the merger with
Province and repay the Province assumed debt.(b)
    
    Represents the borrowings of $150.0 million in the form of the Revolving Loans, proceeds of
which were used in connection with the Danville acquisition. The Revolving Loans were
borrowed as a temporary financing until the Incremental Term B Loans could be borrowed.(c)
    
    Represents the borrowings under the Senior Subordinated Credit Agreement to purchase and
retire $185.1 million of the 4 1/2% Convertible Subordinated Notes, another $35.9 million of
the 4 1/2% Convertible Subordinated Notes were converted to 757,482 shares of common stock. 45




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##### Table of Contents



(d)
    
    Represents the issuance of the 3 1/4% Convertible Senior Subordinated Debentures, proceeds of
which were used to retire the Senior Subordinated Credit Agreement. The Senior Subordinated
Credit Agreement was entered into as a temporary financing until we could issue the 3 1/4%
Convertible Senior Subordinated Debentures.(e)
    
    Represents the borrowings of $150.0 million in the form of the Incremental Term B Loans,
proceeds of which were used to repay the $150.0 million of the Revolving Credit Loans.(f)
    
    Represents the assumption of debt in connection with the business combination with
Province.(g)
    
    Payments on borrowings do not include $42.3 million of premiums paid to retire such debt. December 31,
    
    
    September 30,
    
    
    Increase2004
    
    
    2005
    
    
    (Decrease)Current portion of long-term debt
    
    $
    
    
    
    $
    0.5
    
    
    $
    0.5Long-term debt
    
    
    221.0
    
    
    
    1,561.0
    
    
    
    1,340.0Total debt
    
    
    221.0
    
    
    
    1,561.5
    
    
    
    1,340.5Total stockholders equity
    
    
    509.5
    
    
    
    1,258.8
    
    
    
    749.3Total capitalization
    
    $
    730.5
    
    
    $
    2,820.3
    
    
    $
    2,089.8Total debt to total capitalization
    
    
    30.3
    %
    
    
    55.4
    %
    
    
    N/MPercentage of:Fixed rate debt
    
    
    100.0
    %
    
    
    15.0
    %Variable rate debt
    
    
    
    
    
    
    85.0100.0
    %
    
    
    100.0
    %Percentage of:Senior debt
    
    
    
    
    
    
    85.2
    %Subordinated debt
    
    
    100.0
    
    
    
    14.8100.0
    %
    
    
    100.0
    %
 1 2
 Capital Resources
 New Senior Secured Credit Facilities
    46




---



##### Table of Contents



Level atRequirement
    
    September 30, 2005Minimum Interest Coverage Ratio
    
    
    3 3.00:1.00
    
    
    
    6.16Maximum Total Leverage Coverage Ratio
    
    
    £ 4.75:1.00
    
    
    
    3.47
      Debt Ratings
  
    
    Moodys Investors Service, Inc. (Moodys); and
    
    Standard & Poors Rating Services, a division of McGraw-Hill Companies, Inc. (S&P).
 47




---



##### Table of Contents



Moodys
    
    S&PSenior
    
    Senior ImpliedUnsecured
    
    Issuer
    
    

    
    IssuerDate
    
    Issuer Rating
    
    Rating
    
    Outlook
    
    Rating
    
    OutlookApril 1999
    
    
    
    
    
    
    
    B+
    
    StableOctober 1999
    
    
    
    B1
    
    Stable
    
    B+
    
    StableFebruary 2001
    
    
    
    B1
    
    Positive
    
    B+
    
    StableMay 2001
    
    
    
    Ba3
    
    Stable
    
    B+
    
    StableJune 2001
    
    B2
    
    Ba3
    
    Stable
    
    BB-
    
    StableJune 2002
    
    B2
    
    Ba3
    
    Stable
    
    BB-
    
    StableDecember 2003
    
    B2
    
    Ba3
    
    Stable
    
    BB
    
    StableAugust 2004
    
    B2
    
    Ba3
    
    Negative
    
    BB
    
    NegativeMarch 2005
    
    B2
    
    Ba3
    
    Stable
    
    BB
    
    StableJuly 2005
    
    B2
    
    Ba3
    
    Stable
    
    BB
    
    Negative
 
 Note: Dates represent a change in our rating or outlook Senior Subordinated Credit Agreement
 1 2
 1 4
 Previous Credit Facilities
  Province 71/2% Senior Subordinated Notes
 1 2 1 2
 1 2 1 2 1 2
 48




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##### Table of Contents



1 2 1 2 1 2 1 2
 Province 41/4% Convertible Subordinated Notes
 1 4 1 4
 Province 41/2% Convertible Subordinated Notes
 1 2
 Historic LifePoints 41/2% Convertible Subordinated Notes
 1 2 1 2
 1 2 1 2
 3 1/4% 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
 49




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##### Table of Contents



1 4 1 4
 1 4 1 4 1 4 1 4
 1 4 1 4
 Liquidity and Capital Resources Outlook
     Contractual Obligations
  50




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##### Table of Contents



Payments Due by Period(3 months)Contractual Obligations
    
    Total
    
    2005
    
    2006-2007
    
    2008-2009
    
    After 2009Long-term debt obligations (a)
    
    $
    2,182.8
    
    
    $
    18.3
    
    
    $
    159.8
    
    
    $
    166.1
    
    
    $
    1,838.6Capital lease obligations
    
    
    4.2
    
    
    
    0.2
    
    
    
    1.4
    
    
    
    1.1
    
    
    
    1.5Operating lease obligations (b)
    
    
    61.1
    
    
    
    3.8
    
    
    
    20.7
    
    
    
    13.4
    
    
    
    23.2Other long-term liabilities (c)
    
    
    0.4
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    
    
    
    
    Purchase obligations (d)
    
    
    263.4
    
    
    
    39.6
    
    
    
    150.6
    
    
    
    69.9
    
    
    
    3.3Total
    
    $
    2,511.9
    
    
    $
    62.1
    
    
    $
    332.7
    
    
    $
    250.5
    
    
    $
    1,866.6
 
 (a)
    
    Included in long-term debt obligations are principal and interest owed on our
outstanding debt obligations. These obligations are explained further in Note 3 to our
condensed consolidated financial statements in this report.(b)
    
    We enter into operating leases in the normal course of business. Substantially all of
our 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. The above table reflects our future minimum
operating lease payments.(c)
    
    We had a $60.0 million other long-term liability balance on our condensed consolidated
balance sheet as of September 30, 2005. This balance reflected a $55.9 million reserve for
professional and general liability claims and $4.1 million related to other liabilities.
We excluded the $55.9 million reserve for professional and general liability claims and
$4.1 million of other liabilities from this table due to the uncertainty of the dollar
amounts to be ultimately paid as well as the timing of such amounts. Please refer to the
Critical Accounting Estimates  Professional and General Liability Reserves in our 2004
Annual Report on Form 10-K for more information.(d)
    
    The following table summarizes our significant purchase obligations as of September 30,
2005 and the future periods in which such obligations are expected to be settled in cash
(in millions): Payments Due by PeriodPurchase Obligations
    
    Total
    
    (3 months) 2005
    
    2006-2007
    
    2008-2009
    
    After 2009HCA-IT services (e)
    
    $
    115.7
    
    
    $
    3.6
    
    
    $
    51.9
    
    
    $
    60.2
    
    
    $
    Capital expenditure obligations (f)
    
    
    66.3
    
    
    
    21.5
    
    
    
    38.8
    
    
    
    3.1
    
    
    
    2.9Physician commitments (g)
    
    
    17.0
    
    
    
    4.2
    
    
    
    12.8
    
    
    
    
    
    
    
    GEMS obligations (h)
    
    
    24.9
    
    
    
    1.9
    
    
    
    20.4
    
    
    
    2.6
    
    
    
    Other purchase obligations (i)
    
    
    39.5
    
    
    
    8.4
    
    
    
    26.7
    
    
    
    4.0
    
    
    
    0.4Total
    
    $
    263.4
    
    
    $
    39.6
    
    
    $
    150.6
    
    
    $
    69.9
    
    
    $
    3.3
 
 (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 was recently extended through December 31, 2009. Please refer to the
Arrangements Relating to the Distribution section in Part I, Businessin our 2004 Annual
Report on Form 10-K for more information. The amounts in the above table are based on
estimated fees that will be charged to our hospitals as of September 30, 2005 with an
annual fee increase that is capped by the consumer price index increase. We used a 4.0%
annual rate increase as the estimated consumer price index increase for the contract
period. These fees will increase if we acquire additional hospitals and use HCA-IT for
information system conversion services at the acquired hospitals.(f)
    
    We had projects under construction with an estimated additional cost to complete and
equip of approximately $117.9 million as of September 30, 2005. Since 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 our 2004 Annual Report on From 10-K, we may be required to make significant
expenditures in order to bring our facilities into compliance with the ADA. We are
currently unable to 51




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##### Table of Contents



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 our communities and agreeing to
engage in private practice for the benefit of the respective community, we may loan certain
amounts to a physician, normally over a period of one year, to assist in establishing his
or her practice. We have committed to advance a maximum amount of
approximately $42.5 million as of September 30, 2005. The actual amount of such commitments to be advanced
often depends upon the financial results of a physicians private practice during the loan
period. The physician commitment amounts reflected in the above table were estimated based
on our historical amounts actually paid to physicians.(h)
    
    General Electric Medical Services (GEMS) provides diagnostic imaging equipment
maintenance and bio-medical services to us pursuant to a contract that expires on March 31,
2008. The amounts in the above table reflect our obligation based on the equipment we
owned as of September 30, 2005.(i)
    
    Reflects our minimum commitments to purchase goods or services under non-cancelable contracts as of
September 30, 2005. Off-Balance Sheet Arrangements
  Impact of Recently Issued Accounting Pronouncements
  Contingencies
  
    
    Claims made under the Americans with Disabilities Act;
    
    Our Corporate Integrity Agreement;
    
    Legal proceedings and general liability claims;
    
    Physician commitments;
    
    Capital expenditure commitments;
    
    Tax matters; and
    
    Acquisitions.
 Forward-Looking Statements
  
    
    projections of our revenues, net income, earnings per share, capital expenditures or other financial items;
    
    descriptions of plans or objectives of management for future operations or services, including pending acquisitions;
    
    forecasts of our future economic performance; and
 52




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##### Table of Contents




    
    descriptions of assumptions underlying or relating to any of the foregoing.
  
    
    integration of our recent acquisitions;
    
    future financial performance;
    
    future liquidity and capital resources;
    
    industry trends;
    
    patient volumes and related revenues;
    
    recruiting and retention of physicians and clinical personnel;
    
    future capital expenditures;
    
    our contractual obligations;
    
    the impact of new accounting standards; and
    
    future acquisitions.
  
    
    problems that may arise in integrating the Province hospitals and our other acquired hospitals;
    
    reduction in payments to healthcare providers by government and commercial third-party payors, as well as
cost-containment efforts of insurers and other payors;
    
    the possibility of adverse changes in, and requirements of, applicable laws, regulations, policies and
procedures, including those required by our corporate integrity agreement;
    
    our ability to manage healthcare risks and the lack of state and federal tort reform;
    
    the availability, cost and terms of insurance coverage;
    
    the highly competitive nature of the healthcare business, including the competition to recruit and retain
physicians and other healthcare professionals;
    
    the ability to attract and retain qualified management and personnel;
    
    the geographic concentration of our operations;
    
    our ability to acquire hospitals on favorable terms and to complete budgeted capital improvements successfully;
    
    our ability to operate and integrate newly acquired facilities successfully;
    
    the availability and terms of capital to fund our business strategy;
    
    changes in our liquidity or the amount or terms of our indebtedness and in our debt credit ratings;
    
    the potential adverse impact of government investigations and litigation involving the business practices of
healthcare providers, including whistleblowers investigations;
 53




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##### Table of Contents




    
    changes in generally accepted accounting principles or practices;
    
    volatility in the market value of our common stock;
    
    changes in general economic conditions in the markets we serve and changes in the manner in which employers
provide healthcare coverage to their employees;
    
    our reliance on information technology systems maintained by HCA-IT;
    
    the costs of complying with the Americans with Disabilities Act and the related litigation; and
    
    those risks and uncertainties described from time to time in our filings with the SEC.
 54




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##### Table of Contents



Update to Risk Factors
  We have substantial indebtedness and we may incur significant amounts of additional indebtedness in
the future which could affect our ability to finance operations, pursue desirable business
opportunities or successfully run our business in the future.
   
    
    Under our senior credit agreement, we will be required to satisfy and maintain specified financial ratios and
tests. Failure to comply with these obligations may cause an event of default which, if not cured or waived,
could require us to repay substantial indebtedness immediately. Moreover, if debt repayment is accelerated, we
will be subject to higher interest rates on our debt obligations as a result of these covenants, and our credit
ratings may be adversely impacted.
    
    We may be vulnerable in the event of downturns and adverse changes in our hospitals businesses, in our
industry, or in the economy generally, such as the implementation by the government of further limitations on
reimbursement under Medicare and Medicaid, because of our need for increased cash flow.
    
    We may have difficulty obtaining additional financing at favorable interest rates to meet our requirements for
working capital, capital expenditures, acquisitions, general corporate or other purposes.
    
    We will be required to dedicate a substantial portion of our cash flow to the payment of principal and
interest on indebtedness, which will reduce the amount of funds available for operations, capital expenditures
and future acquisitions.
    
    Any borrowings we complete at variable interest rates expose us to increases in interest rates generally.
    
    A breach of any of the restrictions or covenants in our debt agreements could cause a cross-default under
other debt agreements. We may be required to pay our indebtedness immediately if we default on any of the
numerous financial or other restrictive covenants contained in the debt agreements. It is not certain whether
or not 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 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.
 55




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##### Table of Contents



A
substantial portion of the Companys indebtedness consists of
floating rate debt which exposes the
Company to interest rate risk.
   We have incurred significant expenses in connection with the Province business combination and
related financing transactions.
  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.
   
    
    our Kentucky hospitals generated approximately 18.6% of
revenues for the year ended December 31, 2003 and
approximately 18.7% of revenues for the year ended
December 31, 2004;
    
    our Tennessee hospitals generated approximately 11.1% of
revenues for the year ended December 31, 2003 and
approximately 10.3% of revenues for the year ended
December 31, 2004;
    
    our Alabama hospitals generated approximately 10.3% of
revenues for the year ended December 31, 2003 and
approximately 9.6% of revenues for the year ended December
31, 2004; and
    
    our Louisiana hospitals generated approximately 9.6% of
revenues for the year ended December 31, 2003 and
approximately 9.5% of revenues for the year ended December
31, 2004.
   56




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##### Table of Contents



We may be required to make significant capital expenditures in order to bring our facilities into
compliance with the Americans with Disabilities Act.
   Certificate of need laws and regulations regarding licenses, ownership and operation may impair our
future expansion in some states.
  Different interpretations of accounting principles could have a material adverse effect on the
Companys results of operations or financial condition.
  We may continue to see the growth of uninsured and patient due accounts and deterioration in the
collectibility of these accounts could adversely affect our results of operations and cash flows.
   57




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##### Table of Contents



Our revenues and volume trends may be adversely affected by certain factors relevant to the markets
in which we have hospitals, including weather conditions.
  If we fail to 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 continue to see rising costs as it relates to construction materials and labor. Such increased
costs could have an adverse affect on the cash flow return on investment relating to our projects.
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
 1 4
  58




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##### Table of Contents



Item 4. Controls and Procedures.
   59




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##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 6. Exhibits.
 Exhibit Number
    
    Description2.1
    
    Agreement and Plan of Merger, dated as of August 15, 2004, by and among LifePoint Hospitals, Inc., Lakers
Holding Corp., Lakers Acquisition Corp., Pacers Acquisition Corp. and Province Healthcare Company (a)2.2
    
    Amendment No. 1 to Agreement and Plan of Merger, dated as of January 25, 2005, by and among LifePoint
Hospitals, Inc., Lakers Holding Corp., Lakers Acquisition Corp., Pacers Acquisition Corp. and Province
Healthcare Company (a)2.3
    
    Amendment No. 2 to Agreement and Plan of Merger, dated as of March 15, 2005, by and among LifePoint Hospitals,
Inc., Lakers Holding Corp., Lakers Acquisition Corp., Pacers Acquisition Corp. and Province Healthcare Company
(b)3.1
    
    Amended and Restated Certificate of Incorporation of LifePoint Hospitals, Inc. (c)3.2
    
    Amended and Restated By-Laws of LifePoint Hospitals, Inc. (c)4.1
    
    Indenture, dated August 10, 2005, between LifePoint Hospitals, Inc. as Issuer and Citibank, N.A., as Trustee (e)4.2
    
    Form of 3.25% Convertible Senior Subordinated Debenture due 2025 (included as part of Exhibit 4.1) (e)4.3
    
    Registration Rights Agreement, dated August 10, 2005, between LifePoint Hospitals, Inc. and Citigroup Global
Markets Inc. as Representatives of the Initial Purchasers (e)10.1
    
    Credit Agreement, dated as of April 15, 2005, among Lakers Holding Corp. (to be renamed 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 (d)10.2
    
    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 (f)10.3
    
    Amendment No. 2 to Credit Agreement, dated October 14, 2005, among LifePoint Hospitals, Inc., as borrower,
Citicorp North America, Inc., as administrative agent and the lenders party thereto (g)10.4
    
    Form of Senior Subordinated Credit
Agreement, dated as of June 15, 2005, among LifePoint Hospitals,
Inc., as borrower, the lenders referred to therein and Citigroup
Global Markets Inc. as sole lead arranger, sole bookrunner and sole
syndication agent(h)31.1
    
    Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 
 (a)
    
    Incorporated by reference to Appendix A to the Registration Statement on Form S-4, as
amended, filed by LifePoint Hospitals, Inc. (formerly Lakers Holding Corp.) on February 18,
2005, File Number 333-119929.(b)
    
    Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Historic
LifePoint Hospitals, Inc. on March 16, 2005, File Number 0-29818.(c)
    
    Incorporated by reference to exhibits to the Registration Statement on Form S-8 filed by
LifePoint Hospitals, Inc. (formerly Lakers Holding Corp.) dated April 15, 2005, File Number
333-124151.(d)
    
    Incorporated by reference to the exhibits to the Current Report on Form 8-K filed by
LifePoint Hospitals, Inc. (formerly Lakers Holding Corp.), dated April 15, 2005, File Number
0-51251.(e)
    
    Incorporated by reference to exhibits to the Current Report on Form 8-K dated August 10, 2005
of LifePoint Hospitals, Inc., File Number 0-51251(f)
    
    Incorporated by reference to the exhibits to the Current Report on Form 8-K dated August 23,
2005 of LifePoint Hospitals, Inc., File Number 0-51251(g)
    
    Incorporated by reference to the exhibits to the Current Report on Form 8-K dated October 18,
2005 of LifePoint Hospitals, Inc., File Number 0-51251(h)
    
    Incorporated by reference to the exhibits to the Current
Report on Form 8-K filed by LifePoint Hospitals, Inc., dated
June 15, 2005, File Number 0-51251 60




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##### Table of Contents



SIGNATURES
  Date: October 27, 2005
    
    LifePoint Hospitals, Inc.By:
    
    /s/ Michael J. CulottaMichael J. CulottaChief Financial Officer(Principal Financial and Accounting Officer)
 61




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##### Table of Contents



Exhibit Number
    
    Description2.1
    
    Agreement and Plan of Merger, dated as of August 15, 2004, by and among LifePoint Hospitals, Inc., Lakers
Holding Corp., Lakers Acquisition Corp., Pacers Acquisition Corp. and Province Healthcare Company (a)2.2
    
    Amendment No. 1 to Agreement and Plan of Merger, dated as of January 25, 2005, by and among LifePoint
Hospitals, Inc., Lakers Holding Corp., Lakers Acquisition Corp., Pacers Acquisition Corp. and Province
Healthcare Company (a)2.3
    
    Amendment No. 2 to Agreement and Plan of Merger, dated as of March 15, 2005, by and among LifePoint Hospitals,
Inc., Lakers Holding Corp., Lakers Acquisition Corp., Pacers Acquisition Corp. and Province Healthcare Company
(b)3.1
    
    Amended and Restated Certificate of Incorporation of LifePoint Hospitals, Inc. (c)3.2
    
    Amended and Restated By-Laws of LifePoint Hospitals, Inc. (c)4.1
    
    Indenture, dated August 10, 2005, between LifePoint Hospitals, Inc. as Issuer and Citibank, N.A., as Trustee (e)4.2
    
    Form of 3.25% Convertible Senior Subordinated Debenture due 2025 (included as part of Exhibit 4.1) (e)4.3
    
    Registration Rights Agreement, dated August 10, 2005, between LifePoint Hospitals, Inc. and Citigroup Global
Markets Inc. as Representatives of the Initial Purchasers (e)10.1
    
    Credit Agreement, dated as of April 15, 2005, among Lakers Holding Corp. (to be renamed 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 (d)10.2
    
    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 (f)10.3
    
    Amendment No. 2 to Credit Agreement, dated October 14, 2005, among LifePoint Hospitals, Inc., as borrower,
Citicorp North America, Inc., as administrative agent and the lenders party thereto (g)10.4
    
    Form of Senior Subordinated Credit
Agreement, dated as of June 15, 2005, among LifePoint Hospitals,
Inc., as borrower, the lenders referred to therein and Citigroup
Global Markets Inc. as sole lead arranger, sole bookrunner and sole
syndication agent (h)31.1
    
    Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of the Chief Executive Officer of LifePoint Hospitals, Inc. Pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of the Chief Financial Officer of LifePoint Hospitals, Inc. Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 
 (a)
    
    Incorporated by reference to Appendix A to the Registration Statement on Form S-4, as
amended, filed by LifePoint Hospitals, Inc. (formerly Lakers Holding Corp.) on February 18,
2005, File Number 333-119929.(b)
    
    Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Historic
LifePoint Hospitals, Inc. on March 16, 2005, File Number 0-29818.(c)
    
    Incorporated by reference to exhibits to the Registration Statement on Form S-8 filed by
LifePoint Hospitals, Inc. (formerly Lakers Holding Corp.) dated April 15, 2005, File Number
333-124151.(d)
    
    Incorporated by reference to the exhibits to the Current Report on Form 8-K filed by
LifePoint Hospitals, Inc. (formerly Lakers Holding Corp.), dated April 15, 2005, File Number
0-51251.(e)
    
    Incorporated by reference to exhibits to the Current Report on Form 8-K dated August 10, 2005
of LifePoint Hospitals, Inc., File Number 0-51251(f)
    
    Incorporated by reference to the exhibits to the Current Report on Form 8-K dated August 23,
2005 of LifePoint Hospitals, Inc., File Number 0-51251(g)
    
    Incorporated by reference to the exhibits to the Current Report on Form 8-K dated October 18,
2005 of LifePoint Hospitals, Inc., File Number 0-51251(h)
    
    Incorporated by reference to the exhibits to the Current
Report on Form 8-K filed by LifePoint Hospitals, Inc., dated
June 15, 2005, File Number 0-51251.