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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




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FORM 10-Q


(Mark One)



|[X]  |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
|---- |  | ----------------------------------------------------------------------------------------
|    
|     |  | For the quarterly period ended June 30, 2003 or                                         
|    
|[  ] |  | 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 0-23639

PROVINCE HEALTHCARE COMPANY

(Exact Name of Registrant as Specified in Its Charter)


|                                         |  |                    
|---------------------------------------- |  | -------------------
|Delaware                                 |  | 62-1710772         
|(State or Other Jurisdiction of          |  | (I.R.S. Employer   
|Incorporation or Organization)           |  | Identification No.)
|                                         |  |                    
|105 Westwood Place                       |  |                    
|Suite 400                                |  |                    
|Brentwood, Tennessee                     |  | 37027              
|(Address of Principal Executive Offices) |  | (Zip Code)         

(615) 370-1377
(Registrants Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes [X] No [  ]

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date.

|                                   |  |                                                
|---------------------------------- |  | -----------------------------------------------
|Class
Common Stock, $.01 par value |  | Outstanding at August 1, 2003
48,726,785 shares





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TABLE OF CONTENTS



|                                                   |                                                                                               |                                                                |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|                                                   | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                                   |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                         
|                                                   |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED
|                                                   |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF INCOME SIX MONTHS ENDED  
|                                                   |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                                                   |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS          
|                                                   | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                   | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                                   | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II OTHER INFORMATION                         
|                                                   | ITEM 4. Submission of Matters to a Vote of Security Holders                                  
|                                                   | ITEM 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                        
|EX-4.1 SUBORDINATED INDENTURE 05/27/03            
|EX-4.2 FIRST SUPPLEMENTAL INDENTURE 05/27/03      
|EX-10.1 THIRD AMENDMENT CREDIT AGREEMENT 05/27/03 
|EX-10.2 FOURTH AMENDMENT CREDIT AGREEMENT 06/30/03
|EX-31.1 SECTION 302 CERTIFICATION                 
|EX-31.2 SECTION 302 CERTIFICATION                 
|EX-32.1 SECTION 906 CERTFICATIONS                 



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|               |  |                                                                                       |    |                                                                                         |    |  |   |  |  | 
|-------------- |  | ------------------------------------------------------------------------------------- | -- | --------------------------------------------------------------------------------------- | -- |  | - |  |  | 
|               |  |                                                                                       |    | PART I
FINANCIAL INFORMATION                                                            |    |  |   | 
|Item 1.        |  | Financial Statements (Unaudited)                                                      |    |                                                                                         |    | 
|               |  |                                                                                       |    | Condensed Consolidated Balance Sheets
June 30, 2003 and December 31, 2002               |    |  | 1 | 
|               |  |                                                                                       |    | Condensed Consolidated Statements of Income
Three Months Ended June 30, 2003 and 2002   |    |  | 2 | 
|               |  |                                                                                       |    | Condensed Consolidated Statements of Income
Six Months Ended June 30, 2003 and 2002     |    |  | 3 | 
|               |  |                                                                                       |    | Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2003 and 2002 |    |  | 4 | 
|               |  |                                                                                       |    | Notes to Condensed Consolidated Financial Statements                                    |    |  | 5 | 
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition
And Results of Operations |    |                                                                                         | 13 | 
|Item 3.        |  | Quantitative and Qualitative Disclosures About
Market Risk                            |    |                                                                                         | 24 | 
|Item 4.        |  | Controls and Procedures                                                               |    |                                                                                         | 24 | 
|               |  |                                                                                       |    | PART II
OTHER INFORMATION                                                               |    |  |   | 
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                   |    |                                                                                         | 25 | 
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                      |    |                                                                                         | 25 | 
|Signatures     |  |                                                                                       | 28 |                                                                                        
|Certifications |  |                                                                                       | 29 |                                                                                        





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##### Table of Contents






ITEM 1. FINANCIAL STATEMENTS

PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)

|                                     |                                                                                                                                                                                                                           |                            |           |             |         |              |         |         |         | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | --------- | ----------- | ------- | ------------ | ------- | ------- | ------- | 
|                                     |                                                                                                                                                                                                                           |                            |           | June 30,    |         | December 31,
|                                     |                                                                                                                                                                                                                           |                            |           | 2003        |         | 2002        
|                                     |                                                                                                                                                                                                                           |                            |           |             |         |             
|                                     |                                                                                                                                                                                                                           |                            |           | (Unaudited) |         | (Note 1)    
|ASSETS                               |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|Current assets:                      |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|                                     | Cash and cash equivalents                                                                                                                                                                                                 |                            | $         | 19,053      |         |              | $       | 14,417  |        
|                                     | Accounts receivable, less allowance for doubtful accounts
of $59,773 in 2003 and $68,158 in 2002                                                                                                                          |                            |           | 117,972     |         |              |         | 117,431 |        
|                                     | Inventories                                                                                                                                                                                                               |                            |           | 19,371      |         |              |         | 19,835  |        
|                                     | Prepaid expenses and other                                                                                                                                                                                                |                            |           | 17,737      |         |              |         | 14,071  |        
|                                     |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|                                     |                                                                                                                                                                                                                           |                            | 174,133   |             |         |              | 165,754 |        
|Property and equipment, net          |                                                                                                                                                                                                                           |                            | 460,097   |             |         |              | 447,379 |        
|Goodwill                             |                                                                                                                                                                                                                           |                            | 318,014   |             |         |              | 319,390 |        
|Unallocated purchase price           |                                                                                                                                                                                                                           |                            | 3,153     |             |         |              | 466     |        
|Other assets                         |                                                                                                                                                                                                                           |                            | 45,956    |             |         |              | 38,722  |        
|                                     |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|                                     |                                                                                                                                                                                                                           | $                          | 1,001,353 |             |         | $            | 971,711 |        
|                                     |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|Current liabilities:                 |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|                                     | Accounts payable                                                                                                                                                                                                          |                            | $         | 23,866      |         |              | $       | 20,162  |        
|                                     | Accrued salaries and benefits                                                                                                                                                                                             |                            |           | 26,718      |         |              |         | 25,380  |        
|                                     | Accrued expenses                                                                                                                                                                                                          |                            |           | 15,492      |         |              |         | 13,198  |        
|                                     | Current portion of long-term debt                                                                                                                                                                                         |                            |           | 1,831       |         |              |         | 1,668   |        
|                                     |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|                                     |                                                                                                                                                                                                                           |                            | 67,907    |             |         |              | 60,408  |        
|Long-term debt, less current portion |                                                                                                                                                                                                                           |                            | 456,659   |             |         |              | 461,576 |        
|Other liabilities                    |                                                                                                                                                                                                                           |                            | 40,324    |             |         |              | 33,913  |        
|Minority interests                   |                                                                                                                                                                                                                           |                            | 2,709     |             |         |              | 2,612   |        
|Stockholders equity:                |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|                                     | Preferred stock - $0.01 par value, 100,000 shares
authorized, none issued and outstanding                                                                                                                                 |                            |           |            |         |              |         |        |        
|                                     | Common stock - $0.01 par value; 150,000,000 shares
authorized at June 30, 2003 and December 31, 2002,
issued and outstanding 48,725,504 shares
and 48,581,549 shares at June 30, 2003 and
December 31, 2002, respectively |                            |           | 487         |         |              |         | 486     |        
|                                     | Additional paid-in-capital                                                                                                                                                                                                |                            |           | 305,336     |         |              |         | 304,102 |        
|                                     | Retained earnings                                                                                                                                                                                                         |                            |           | 129,080     |         |              |         | 109,567 |        
|                                     | Accumulated other comprehensive loss                                                                                                                                                                                      |                            |           | (1,149      | )       |              |         | (953    | )      
|                                     |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|                                     |                                                                                                                                                                                                                           | Total stockholders equity |           |             | 433,754 |              |         |         | 413,202 | 
|                                     |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        
|                                     |                                                                                                                                                                                                                           | $                          | 1,001,353 |             |         | $            | 971,711 |        
|                                     |                                                                                                                                                                                                                           |                            |           |             |         |              |         |        

See accompanying notes

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)

|                                         |                                       |         |                       |         |                             |         |        |         |      |         | 
|---------------------------------------- | ------------------------------------- | ------- | --------------------- | ------- | --------------------------- | ------- | ------ | ------- | ---- | ------- | 
|                                         |                                       |         |                       |         | Three Months Ended June 30,
|                                         |                                       |         |                       |         |                            
|                                         |                                       |         |                       |         | 2003                        |         | 2002  
|                                         |                                       |         |                       |         |                             |         |       
|Revenue:                                 |                                       |         |                       |         |                             |         |        |        
|                                         | Net patient service revenue           |         | $                     | 189,649 |                             |         | $      | 168,234 |     
|                                         | Other                                 |         |                       | 6,164   |                             |         |        | 5,766   |     
|                                         |                                       |         |                       |         |                             |         |        |        
|                                         |                                       |         | Net operating revenue |         |                             | 195,813 |        |         |      | 174,000 | 
|Expenses:                                |                                       |         |                       |         |                             |         |        |        
|                                         | Salaries, wages and benefits          |         |                       | 74,939  |                             |         |        | 67,476  |     
|                                         | Purchased services                    |         |                       | 18,878  |                             |         |        | 18,209  |     
|                                         | Supplies                              |         |                       | 23,859  |                             |         |        | 20,465  |     
|                                         | Provision for doubtful accounts       |         |                       | 17,789  |                             |         |        | 12,753  |     
|                                         | Other operating expenses              |         |                       | 25,007  |                             |         |        | 20,304  |     
|                                         | Rentals and leases                    |         |                       | 2,423   |                             |         |        | 2,200   |     
|                                         | Depreciation and amortization         |         |                       | 9,499   |                             |         |        | 8,752   |     
|                                         | Interest expense                      |         |                       | 6,759   |                             |         |        | 5,545   |     
|                                         | Minority interests                    |         |                       | 82      |                             |         |        | (3      | )   
|                                         | Loss on sale of assets                |         |                       |        |                             |         |        | 48      |     
|                                         | Loss on early extinguishments of debt |         |                       | 477     |                             |         |        |        |     
|                                         |                                       |         |                       |         |                             |         |        |        
|                                         |                                       |         | Total expenses        |         |                             | 179,712 |        |         |      | 155,749 | 
|                                         |                                       |         |                       |         |                             |         |        |        
|Income before provision for income taxes |                                       |         | 16,101                |         |                             |         | 18,251 |        
|Income taxes                             |                                       |         | 6,440                 |         |                             |         | 7,300  |        
|                                         |                                       |         |                       |         |                             |         |        |        
|Net income                               |                                       | $       | 9,661                 |         |                             | $       | 10,951 |        
|                                         |                                       |         |                       |         |                             |         |        |        
|Net income per common share (Note 7):    |                                       |         |                       |         |                             |         |        |        
|                                         |                                       | Basic   |                       | $       | 0.20                        |         |        | $       | 0.23 |        
|                                         |                                       |         |                       |         |                             |         |        |        
|                                         |                                       | Diluted |                       | $       | 0.20                        |         |        | $       | 0.22 |        
|                                         |                                       |         |                       |         |                             |         |        |        

See accompanying notes

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)

|                                         |                                       |         |                       |         |                           |         |        |         |      |         | 
|---------------------------------------- | ------------------------------------- | ------- | --------------------- | ------- | ------------------------- | ------- | ------ | ------- | ---- | ------- | 
|                                         |                                       |         |                       |         | Six Months Ended June 30,
|                                         |                                       |         |                       |         |                          
|                                         |                                       |         |                       |         | 2003                      |         | 2002  
|                                         |                                       |         |                       |         |                           |         |       
|Revenue:                                 |                                       |         |                       |         |                           |         |        |        
|                                         | Net patient service revenue           |         | $                     | 377,208 |                           |         | $      | 328,014 |     
|                                         | Other                                 |         |                       | 13,005  |                           |         |        | 11,587  |     
|                                         |                                       |         |                       |         |                           |         |        |        
|                                         |                                       |         | Net operating revenue |         |                           | 390,213 |        |         |      | 339,601 | 
|Expenses:                                |                                       |         |                       |         |                           |         |        |        
|                                         | Salaries, wages and benefits          |         |                       | 150,269 |                           |         |        | 129,628 |     
|                                         | Purchased services                    |         |                       | 36,662  |                           |         |        | 35,300  |     
|                                         | Supplies                              |         |                       | 48,606  |                           |         |        | 40,210  |     
|                                         | Provision for doubtful accounts       |         |                       | 34,982  |                           |         |        | 27,491  |     
|                                         | Other operating expenses              |         |                       | 50,294  |                           |         |        | 38,700  |     
|                                         | Rentals and leases                    |         |                       | 4,856   |                           |         |        | 4,352   |     
|                                         | Depreciation and amortization         |         |                       | 18,777  |                           |         |        | 16,333  |     
|                                         | Interest expense                      |         |                       | 12,619  |                           |         |        | 9,740   |     
|                                         | Minority interests                    |         |                       | 149     |                           |         |        | 56      |     
|                                         | Loss on sale of assets                |         |                       | 2       |                           |         |        | 53      |     
|                                         | Loss on early extinguishments of debt |         |                       | 477     |                           |         |        |        |     
|                                         |                                       |         |                       |         |                           |         |        |        
|                                         |                                       |         | Total expenses        |         |                           | 357,693 |        |         |      | 301,863 | 
|                                         |                                       |         |                       |         |                           |         |        |        
|Income before provision for income taxes |                                       |         | 32,520                |         |                           |         | 37,738 |        
|Income taxes                             |                                       |         | 13,008                |         |                           |         | 15,095 |        
|                                         |                                       |         |                       |         |                           |         |        |        
|Net income                               |                                       | $       | 19,512                |         |                           | $       | 22,643 |        
|                                         |                                       |         |                       |         |                           |         |        |        
|Net income per common share (Note 7):    |                                       |         |                       |         |                           |         |        |        
|                                         |                                       | Basic   |                       | $       | 0.40                      |         |        | $       | 0.47 |        
|                                         |                                       |         |                       |         |                           |         |        |        
|                                         |                                       | Diluted |                       | $       | 0.40                      |         |        | $       | 0.45 |        
|                                         |                                       |         |                       |         |                           |         |        |        

See accompanying notes

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)

|                                                 |                                                                                   |       |                                                                                              |                                       |       |                           |         |          |     |        |        |  
|------------------------------------------------ | --------------------------------------------------------------------------------- | ----- | -------------------------------------------------------------------------------------------- | ------------------------------------- | ----- | ------------------------- | ------- | -------- | --- | ------ | ------ | -
|                                                 |                                                                                   |       |                                                                                              |                                       |       | Six Months Ended June 30,
|                                                 |                                                                                   |       |                                                                                              |                                       |       |                          
|                                                 |                                                                                   |       |                                                                                              |                                       |       | 2003                      |         | 2002    
|                                                 |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|Cash flows from operating activities:            |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|                                                 | Net income                                                                        |       | $                                                                                            | 19,512                                |       |                           | $       | 22,643   |    
|                                                 | Adjustments to reconcile net income to net cash provided by
operating activities: |       |                                                                                              |                                       |       |                           |         |          |    
|                                                 |                                                                                   |       | Depreciation and amortization                                                                |                                       |       | 18,777                    |         |          |     | 16,333 |       
|                                                 |                                                                                   |       | Deferred income taxes                                                                        |                                       |       | 3,155                     |         |          |     | 113    |       
|                                                 |                                                                                   |       | Provision for professional liability                                                         |                                       |       | 3,383                     |         |          |     | 3,596  |       
|                                                 |                                                                                   |       | Loss on early extinguishment of debt                                                         |                                       |       | 477                       |         |          |     |       |       
|                                                 |                                                                                   |       | Loss of sale of assets                                                                       |                                       |       | 2                         |         |          |     | 53     |       
|                                                 |                                                                                   |       | Changes in operating assets and liabilities, net of effects
from acquisitions and disposals: |                                       |       |                           |         |          |     |        |       
|                                                 |                                                                                   |       |                                                                                              | Accounts receivable                   |       |                           | 474     |          |     |        | (2,015 | )
|                                                 |                                                                                   |       |                                                                                              | Inventories                           |       |                           | 397     |          |     |        | (1,505 | )
|                                                 |                                                                                   |       |                                                                                              | Prepaid expenses and other            |       |                           | (2,652  | )        |     |        | 6,069  |  
|                                                 |                                                                                   |       |                                                                                              | Accounts payable and accrued expenses |       |                           | 5,998   |          |     |        | 4,820  |  
|                                                 |                                                                                   |       |                                                                                              | Accrued salaries and benefits         |       |                           | 1,338   |          |     |        | 1,738  |  
|                                                 |                                                                                   | Other |                                                                                              |                                       | 4,359 |                           |         |          | 789 |       
|                                                 |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|                                                 | Net cash provided by operating activities                                         |       |                                                                                              | 55,220                                |       |                           |         | 52,634   |    
|Cash flows from investing activities:            |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|                                                 | Purchase of property and equipment                                                |       |                                                                                              | (30,854                               | )     |                           |         | (25,788  | )  
|                                                 | Escrow deposit on potential investment                                            |       |                                                                                              | (3,798                                | )     |                           |         |         |    
|                                                 | Purchase of hospitals and healthcare entities                                     |       |                                                                                              | (3,153                                | )     |                           |         | (172,028 | )  
|                                                 |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|                                                 | Net cash used in investing activities                                             |       |                                                                                              | (37,805                               | )     |                           |         | (197,816 | )  
|Cash flows from financing activities:            |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|                                                 | Proceeds from long-term debt                                                      |       |                                                                                              | 194,212                               |       |                           |         | 134,328  |    
|                                                 | Repayments of debts                                                               |       |                                                                                              | (208,226                              | )     |                           |         | (15,192  | )  
|                                                 | Issuance of common stock                                                          |       |                                                                                              | 1,235                                 |       |                           |         | 9,715    |    
|                                                 |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|                                                 | Net cash (used in) provided by financing activities                               |       |                                                                                              | (12,779                               | )     |                           |         | 128,851  |    
|                                                 |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|Increase (decrease) in cash and cash equivalents |                                                                                   |       | 4,636                                                                                        |                                       |       |                           | (16,331 | )       
|Cash and cash equivalents at beginning of period |                                                                                   |       | 14,417                                                                                       |                                       |       |                           | 39,375  |         
|                                                 |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|Cash and cash equivalents at end of period       |                                                                                   | $     | 19,053                                                                                       |                                       |       | $                         | 23,044  |         
|                                                 |                                                                                   |       |                                                                                              |                                       |       |                           |         |         
|Interest payments                                |                                                                                   | $     | 10,323                                                                                       |                                       |       | $                         | 8,484   |         
|Income taxes refund received, net                |                                                                                   | $     | 6,998                                                                                        |                                       |       | $                         | 7,800   |         

See accompanying notes

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. Interim results are not necessarily indicative
of results that may be expected for the full year. In the opinion of
management, the accompanying interim financial statements contain all material
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the consolidated financial position, results of operations and
cash flows of Province Healthcare Company (the Company).

The balance sheet at December 31, 2002, has been derived from the audited
consolidated financial statements at that date, but does not include all of the
financial information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.

For further information, refer to the consolidated financial statements
and footnotes thereto included in the Companys Annual Report on Form 10-K for
the year ended December 31, 2002.

2. USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management of the
Company to make estimates and assumptions that affect the amounts reported in
the condensed consolidated financial statements. Actual results could differ
from the estimates.

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (continued)

3. ACQUISITIONS

Memorial Hospital of Martinsville and Henry County

In May 2002, the Company acquired Memorial Hospital of Martinsville and
Henry County in Martinsville, Virginia, for approximately $129.2 million,
including working capital. To finance this acquisition, the Company borrowed
$86.0 million under its revolving credit facility and used approximately $43.2
million of available cash. This is the Companys first Virginia hospital and is
the only hospital in the county, serving a population in excess of 100,000.

Los Alamos Medical Center

In June 2002, the Company acquired Los Alamos Medical Center in Los
Alamos, New Mexico, for approximately $39.0 million, including working capital.
To finance this acquisition, the Company borrowed $37.0 million under its
revolving credit facility and used $2.0 million from available cash. This is
the Companys first New Mexico hospital and is the only hospital in the
community, serving a population of approximately 50,000.

In May
2003, the Company acquired a radiology and lab business for
approximately $3.2 million. The purchase price is not yet allocated, as the
Company is waiting on a final appraisal of the healthcare entities.

The operating results of the hospitals and healthcare entities acquired in
2002 and 2003 have been included in the accompanying condensed consolidated
statements of income from the respective dates of acquisition.

4. GOODWILL AND INTANGIBLE ASSETS

The Company adopted Statement of Financial Accounting Standards No. 142
(SFAS No. 142), Goodwill and Other Intangible
Assets, effective January 1,
2002. Under SFAS No. 142, goodwill is no longer amortized, but is subject to
annual impairment tests, or more frequently if certain indicators arise. The
Company performed its annual impairment test on October 1, 2002. The results
of the tests had no effect on the operations or financial position of the
Company. The company is currently not aware of any impairment indicators at
June 30, 2003.

The Company has other intangible assets, net of accumulated amortization
of $1.3 million as of June 30, 2003, which are included in other assets on
the condensed consolidated balance sheet. The intangible assets relate
primarily to non-compete agreements and are amortized over two (2) years.

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (continued)

5. LONG-TERM DEBT

In May 2003, the Company completed its public offering of $200.0 million
aggregate principal amount of 7 1⁄2% Senior Subordinated Notes due 2013 at
par. Net proceeds of the offering totaling $194.2 million were used to repay
$114.3 million in existing borrowings under our senior credit facility and to
repurchase approximately $69.0 million of the Companys 4 1⁄2% Convertible
Subordinated Notes due 2005 through privately negotiated transactions. The
Company recorded a $477,000 pretax loss associated with the early
extinguishment of debt related to this repurchase. During May and June 2003,
the Company amended its senior credit facility to (i) add additional
hospitals as collateral security, (ii) obtain consent for various
transactions, including the issuance of $200.0 million of Senior Subordinated
Notes due 2013 and repurchase of a portion of the outstanding 4 1⁄2%
Convertible Subordinated Notes due 2005, (iii) increase the flexibility of
certain investment covenants, and (iv) increase the amount available on its
revolving line of credit to $250.0 million from $209.7 million.

Subsequent to the quarter end, the Company repurchased an additional
$5.0 million of the 2005 Notes in July 2003, for total repurchases of $74.0
million, reducing the outstanding balance of the 2005 Notes to $76.0 million.
An insignificant loss will be recorded in the third quarter of 2003 related
to this repurchase.

Also, subsequent to second quarter end, the Company entered into an
interest rate swap agreement in July 2003, which effectively converted for a
ten-year period $100.0 million of the $200.0 million fixed-rate borrowings
under the 7 1⁄2% Senior Subordinated Notes due 2013 to floating-rate
borrowings. The Company secured a LIBOR plus 2.79% floating interest rate
over the term of the interest rate swap agreement. In accordance with the
provisions of SFAS No. 133, the Company designated its interest rate swap
agreement as a fair value hedge.

6. COMPREHENSIVE INCOME

The following table presents the components of comprehensive income, net
of related taxes (in thousands):

|                                               |  |                    |       |                  |  |      |        |      |  |   |        |   |  |   |        | 
|---------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | 
|                                               |  | Three Months Ended |       | Six Months Ended
|                                               |  | June 30,           |       | June 30,        
|                                               |  |                    |       |                 
|                                               |  | 2003               |       | 2002             |  | 2003 |        | 2002
|                                               |  |                    |       |                  |  |      |        |     
|Net income                                     |  | $                  | 9,661 |                  |  | $    | 10,951 |      |  | $ | 19,512 |   |  | $ | 22,643 | 
|Net change in fair value of interest rate swap |  |                    | (196  | )                |  |      | 2      |      |  |   | (196   | ) |  |   | 181    | 
|                                               |  |                    |       |                  |  |      |        |      |  |   |        |   |  |   |        | 
|Comprehensive income                           |  | $                  | 9,465 |                  |  | $    | 10,953 |      |  | $ | 19,316 |   |  | $ | 22,824 | 
|                                               |  |                    |       |                  |  |      |        |      |  |   |        |   |  |   |        | 

The net change in fair value of the interest rate swap is included in retained
earnings on the condensed consolidated balance sheets.

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (continued)

7. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):

|             |                                            |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |        | 
|------------ | ------------------------------------------ | -------------------------------- | - | ------------------ | ------ | ---------------- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|             |                                            |                                  |   | Three Months Ended |        | Six Months Ended
|             |                                            |                                  |   | June 30,           |        | June 30,        
|             |                                            |                                  |   | 2003               |        | 2002             |   | 2003   |        | 2002
|             |                                            |                                  |   |                    |        |                  |   |        |        |     
|Numerator:   |                                            |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |       
|             | Net income                                 |                                  | $ | 9,661              |        |                  | $ | 10,951 |        |      | $ | 19,512 |        |  | $ | 22,643 |       
|             | Add convertible notes interest net of tax  |                                  |   |                   |        |                  |   | 2,434  |        |      |   |       |        |  |   | 4,841  |       
|             |                                            |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |       
|             | Adjusted net income                        |                                  | $ | 9,661              |        |                  | $ | 13,385 |        |      | $ | 19,512 |        |  | $ | 27,484 |       
|             |                                            |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |       
|Denominator: |                                            |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |       
|             | Denominator for basic income per share    |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|             |                                            | Weighted-average shares          |   |                    | 48,585 |                  |   |        | 47,901 |      |   |        | 48,633 |  |   |        | 47,726 | 
|             | Effective of dilutive securities          |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|             |                                            | Employee stock options           |   |                    | 447    |                  |   |        | 1,871  |      |   |        | 262    |  |   |        | 1,770  | 
|             |                                            | Convertible notes                |   |                    |       |                  |   |        | 11,899 |      |   |        |       |  |   |        | 11,899 | 
|             |                                            |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |       
|             | Denominator for diluted income per share  |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|             |                                            | Adjusted weighted average shares |   |                    | 49,032 |                  |   |        | 61,671 |      |   |        | 48,895 |  |   |        | 61,395 | 
|             |                                            |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |       
|             | Basic net income per share                 |                                  | $ | 0.20               |        |                  | $ | 0.23   |        |      | $ | 0.40   |        |  | $ | 0.47   |       
|             |                                            |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |       
|             | Diluted net income per share               |                                  | $ | 0.20               |        |                  | $ | 0.22   |        |      | $ | 0.40   |        |  | $ | 0.45   |       
|             |                                            |                                  |   |                    |        |                  |   |        |        |      |   |        |        |  |   |       

The add-back of the interest and potential issuance of shares related to
the convertible notes was not included in the computation for 2003, because the
effect would have been anti-dilutive.

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (continued)

8. STOCK BASED COMPENSATION

The Company, from time to time, grants stock options for a fixed number of
common shares to employees and directors. The Company accounts for employee
stock option grants using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees(Opinion 25), and related interpretations, and accordingly,
recognizes no compensation expense for the stock option grants when the
exercise price of the options equals, or is greater than, the market price of
the underlying stock on the date of grant.

The following pro forma information is being presented in accordance with
SFAS No. 148, Accounting for Stock-Based Compensation-Transition & Disclosure
(adopted by the Company on January 1, 2003). If the compensation cost for the
Companys stock-based compensation plans had been determined based on the fair
value at the grant date for awards under these plans consistent with the
methodology prescribed under SFAS No. 123, Accounting for Stock-Based
Compensation, net income and earnings per share would have been reduced to the
pro forma amounts indicated in the following table:

|                                                                                                |             |   |                    |      |                  |   |        |      |      |   |        |      |  |   |        |      | 
|----------------------------------------------------------------------------------------------- | ----------- | - | ------------------ | ---- | ---------------- | - | ------ | ---- | ---- | - | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                |             |   | Three Months Ended |      | Six Months Ended
|                                                                                                |             |   | June 30,           |      | June 30,        
|                                                                                                |             |   |                    |      |                 
|                                                                                                |             |   | 2003               |      | 2002             |   | 2003   |      | 2002
|                                                                                                |             |   |                    |      |                  |   |        |      |     
|Net income  as reported                                                                        |             | $ | 9,661              |      |                  | $ | 10,951 |      |      | $ | 19,512 |      |  | $ | 22,643 |     
|Less stock-based compensation
expense determined under a
fair value method, net of
income taxes |             |   | (1,125             | )    |                  |   | (5,520 | )    |      |   | (2,167 | )    |  |   | (9,087 | )   
|                                                                                                |             |   |                    |      |                  |   |        |      |      |   |        |      |  |   |        |     
|Pro forma net income                                                                            |             | $ | 8,536              |      |                  | $ | 5,431  |      |      | $ | 17,345 |      |  | $ | 13,556 |     
|                                                                                                |             |   |                    |      |                  |   |        |      |      |   |        |      |  |   |        |     
|Basic earnings per share                                                                        |             |   |                    |      |                  |   |        |      |      |   |        |      |  |   |        |     
|                                                                                                | As reported |   | $                  | 0.20 |                  |   | $      | 0.23 |      |   | $      | 0.40 |  |   | $      | 0.47 | 
|                                                                                                | Pro forma   |   | $                  | 0.18 |                  |   | $      | 0.11 |      |   | $      | 0.36 |  |   | $      | 0.28 | 
|Diluted earnings per share                                                                      |             |   |                    |      |                  |   |        |      |      |   |        |      |  |   |        |     
|                                                                                                | As reported |   | $                  | 0.20 |                  |   | $      | 0.22 |      |   | $      | 0.40 |  |   | $      | 0.45 | 
|                                                                                                | Pro forma   |   | $                  | 0.17 |                  |   | $      | 0.11 |      |   | $      | 0.35 |  |   | $      | 0.27 | 

The weighted average fair values of the Companys stock options granted
during the three months ended June 30, 2003 and 2002 and six months ended June
30, 2003 and 2002 were $4.87, $10.18, $3.89 and $9.75, respectively. The fair
values were estimated at the date of grant using a Black-Scholes option
valuation model based on the following weighted-average assumptions:

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (continued)

|                         |  |                    |      |                  |  |      |      |      |  |  |      |   |  |  |      |  
|------------------------ |  | ------------------ | ---- | ---------------- |  | ---- | ---- | ---- |  |  | ---- | - |  |  | ---- | -
|                         |  | Three Months Ended |      | Six Months Ended
|                         |  | June 30,           |      | June 30,        
|                         |  |                    |      |                 
|                         |  | 2003               |      | 2002             |  | 2003 |      | 2002
|                         |  |                    |      |                  |  |      |      |     
|Risk-free interest rate  |  |                    | 2.5  | %                |  |      | 4.5  | %    |  |  | 2.4  | % |  |  | 4.7  | %
|Dividend yield           |  |                    | 0.0  | %                |  |      | 0.0  | %    |  |  | 0.0  | % |  |  | 0.0  | %
|Volatility               |  |                    | 61.4 | %                |  |      | 59.4 | %    |  |  | 63.7 | % |  |  | 59.4 | %
|Expected life (in years) |  |                    | 4.0  |                  |  |      | 3.0  |      |  |  | 4.0  |   |  |  | 3.1  |  

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. Option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
The Companys employee stock options have characteristics significantly
different from those of traded options. Changes in subjective input
assumptions can materially affect the fair value estimate. Other option
valuation models may produce significantly different fair values of the
Companys employee stock options.

9. CONTINGENCIES

Management continually evaluates contingencies based on the best available
evidence and believes that adequate provision for losses has been provided to
the extent necessary. In the opinion of management, the ultimate resolution of
the following contingencies will not have a material effect on the Companys
results of operations or financial position.

General and Professional Liability Risks

Effective January 1, 2003, the Company increased its self-insurance
retention related to general and professional liability risks to $5.0 million.
The 2003 policy provides coverage up to $50.0 million for claims incurred
during the annual policy term.

The Company estimates its self-insured retention portion of the
malpractice risks using historical claims data, demographic factors, severity
factors and other actuarial assumptions. We maintain a reserve for the
anticipated claims within our deductible and self-insured retentions. The
reserve for general and professional liability risks is included in other
liabilities on the condensed consolidated balance sheet.

Workers Compensation Risks

Effective January 1, 2003, the Company increased its deductible for
workers compensation claims to $500,000 per accident. The Company has
purchased a minimum cap of $12.0 million for total workers compensation losses
within this deductible for 2003. The Companys arrangement

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (continued)

with the insurance provider allows us to prepay the expected amounts of annual
workers compensation claims, which is based upon claims experience. The claims
processor tracks payments for the policy year. At the end of the policy year,
the claims processor compares the total amount prepaid by us to the actual
amount paid by the claims processor. This comparison will ultimately result in
a receivable from or a payable to the claims processor.

Litigation

The Company currently is, and from time to time is expected to be, subject
to claims and suits arising in the ordinary course of business. The Company is
not aware of any such proceeding which, in managements opinion, would have a
material adverse effect on the Companys business, financial condition or
results of operations.

Net Patient Service Revenue

Final determination of amounts earned under the Medicare and Medicaid
programs often occurs in subsequent periods because of audits by the programs,
rights of appeal and the application of numerous technical provisions.
Differences between original estimates and subsequent revisions (including
settlements) are included in the consolidated statements of income in the
period in which revisions are made, and resulted in an increase in net patient
service revenue of approximately $0.6 million and $0.8 million the three and
six-month periods ended June 30, 2003, respectively. The adjustments for the
three and six-month periods ended June 30, 2002 were not material.

Financial Instruments

During the second quarter 2003, the Company terminated its previously
existing interest rate swap contract at fair value, which was recorded as a
liability on the balance sheet. The loss on the termination was not considered
material. Subsequent to quarter end, the Company entered into an interest rate
swap agreement which effectively converted, for a ten-year period, $100.0
million of the $200.0 million fixed-rate borrowings under its 7 1⁄2% Senior
Subordinated Notes due 2013 to floating rate borrowings. This agreement
exposes the Company to credit losses in the event of non-performance by the
counterparty to the financial instrument. The Company anticipates that the
counterparty will fully satisfy its obligations under the contract.

10. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46, Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51(FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (continued)

activities without additional subordinated financial support from other
parties. FIN 46 is effective for all new variable interest entities created or
acquired after January 31, 2003. For variable
interest entities created or acquired prior to February 1, 2003, the provisions
of FIN 46 must be applied for the first interim or annual period after June 15,
2003. The Company does not expect this new interpretation to have a material
effect on its future results of operations or financial position.

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|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

You should read the following along with the Condensed Consolidated
Financial Statements and accompanying notes.

OVERVIEW

We are a healthcare services company focused on acquiring and operating
hospitals in attractive non-urban markets in the United States. As of June 30,
2003, we owned or leased 20 general acute care hospitals in 13 states with a
total of 2,281 licensed beds, and managed 38 hospitals in 14 states, with a
total of 3,130 licensed beds.

Our owned and leased hospitals accounted for 98.0% and 97.8% of our net
operating revenue in the three months ended June 30, 2003 and 2002,
respectively.

IMPACT OF ACQUISITIONS

An integral part of our strategy is to acquire non-urban acute care
hospitals. Because of the financial impact of our recent acquisitions, it is
difficult to make meaningful comparisons between our financial statements for
the fiscal periods presented. In addition, because of the relatively small
number of owned and leased hospitals, each hospital acquisition can materially
affect our overall operating performance. Upon the acquisition of a hospital,
we typically take a number of steps to lower operating costs. The impact of
such actions may be offset by cost increases to expand services, strengthen
medical staff and improve market position. The benefits of these investments
and of other activities to improve operating margins generally do not occur
immediately. Consequently, the financial performance of a newly-acquired
hospital may adversely affect overall operating margins in the near term. As we
make additional hospital acquisitions, we expect that this effect will be
mitigated by the expanded financial base of existing hospitals and the
allocation of corporate overhead among a larger number of hospitals. We may
also divest certain hospitals in the future, if we determine a hospital no
longer fits within our strategy.

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RESULTS OF OPERATIONS

Operating Results Summary

The following are comparative summaries of results from operations for the
three months and six months ended June 30, 2003 and 2002 (dollars in
thousands):

|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |    |  |      |  
|---------------------------------------- | ------------------------------- | ------- | --------------------- | ------- | --------------------------- | ------- | -------- | ---- | ------ | ----- | -------- | ------- | --------------- | ------- | ---- | ---- | -------- | ----- | ----- | -- |  | ---- | -
|                                         |                                 |         |                       |         | Three Months Ended June 30, |         |          |      |       
|                                         |                                 |         |                       |         | 2003                        |         | 2002     |      |        |       |         
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |         
|                                         |                                 |         |                       |         |                             |         |          |      | % of   |       |          |         |                 |         | % of |      | % Change
|                                         |                                 |         |                       |         | Amount                      |         | Revenues |      | Amount |       | Revenues |         | from prior year
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                
|Revenue:                                 |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         | Net patient service revenue     |         | $                     | 189,649 |                             |         |          |      |        |       | $        | 168,234 |                 |         |      |      |          |       |       |    | 
|                                         | Other                           |         |                       | 6,164   |                             |         |          |      |        |       |          | 5,766   |                 |         |      |      |          |       |       |    | 
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         |                                 |         | Net operating revenue |         |                             | 195,813 |          |      |        | 100.0 | %        |         |                 | 174,000 |      |      |          | 100.0 | %     |    |  | 12.5 | %
|Operating expenses:                      |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         | Salaries, wages and benefits    |         |                       | 74,939  |                             |         |          | 38.3 | %      |       |          | 67,476  |                 |         |      | 38.8 | %        |       |       |    | 
|                                         | Purchases services              |         |                       | 18,878  |                             |         |          | 9.6  | %      |       |          | 18,209  |                 |         |      | 10.4 | %        |       |       |    | 
|                                         | Supplies                        |         |                       | 23,859  |                             |         |          | 12.2 | %      |       |          | 20,465  |                 |         |      | 11.8 | %        |       |       |    | 
|                                         | Provision for doubtful accounts |         |                       | 17,789  |                             |         |          | 9.1  | %      |       |          | 12,753  |                 |         |      | 7.3  | %        |       |       |    | 
|                                         | Other operating expenses        |         |                       | 25,007  |                             |         |          | 12.8 | %      |       |          | 20,304  |                 |         |      | 11.7 | %        |       |       |    | 
|                                         | Rentals and leases              |         |                       | 2,423   |                             |         |          | 1.2  | %      |       |          | 2,200   |                 |         |      | 1.3  | %        |       |       |    | 
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         |                                 |         | 162,895               |         |                             |         | 83.2     | %    |        |       | 141,407  |         |                 |         | 81.3 | %    |          |       | 15.2  | % 
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|Adjusted EBITDA (*)                      |                                 |         | 32,918                |         |                             |         | 16.8     | %    |        |       | 32,593   |         |                 |         | 18.7 | %    |          |       | 1.0   | % 
|Depreciation and amortization            |                                 |         | 9,499                 |         |                             |         | 4.9      | %    |        |       | 8,752    |         |                 |         | 5.0  | %    |          |       |       |   
|Interest expense                         |                                 |         | 6,759                 |         |                             |         | 3.5      | %    |        |       | 5,545    |         |                 |         | 3.2  | %    |          |       |       |   
|Minority interests                       |                                 |         | 82                    |         |                             |         |         |      |        |       | (3       | )       |                 |         |     |      |          |       |       |   
|Loss on sale of assets                   |                                 |         |                      |         |                             |         |         |      |        |       | 48       |         |                 |         |     |      |          |       |       |   
|Loss on early extinguishment of debt     |                                 |         | 477                   |         |                             |         | 0.2      | %    |        |       |         |         |                 |         |     |      |          |       |       |   
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|Income before provision for income taxes |                                 |         | 16,101                |         |                             |         | 8.2      | %    |        |       | 18,251   |         |                 |         | 10.5 | %    |          |       | (11.8 | %)
|Income taxes                             |                                 |         | 6,440                 |         |                             |         | 3.3      | %    |        |       | 7,300    |         |                 |         | 4.2  | %    |          |       |       |   
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|Net income                               |                                 | $       | 9,661                 |         |                             |         | 4.9      | %    |        | $     | 10,951   |         |                 |         | 6.3  | %    |          |       | (11.8 | %)
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|Net income per common share:             |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         |                                 | Basic   |                       | $       | 0.20                        |         |          |      |        |       |          | $       | 0.23            |         |      |      |          |       |       |    |  |     
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         |                                 | Diluted |                       | $       | 0.20                        |         |          |      |        |       |          | $       | 0.22            |         |      |      |          |       |       |    |  |     
|                                         |                                 |         |                       |         |                             |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   

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|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |    |  |      |  
|---------------------------------------- | ------------------------------- | ------- | --------------------- | ------- | ------------------------- | ------- | -------- | ---- | ------ | ----- | -------- | ------- | --------------- | ------- | ---- | ---- | -------- | ----- | ----- | -- |  | ---- | -
|                                         |                                 |         |                       |         | Six Months Ended June 30, |         |          |      |       
|                                         |                                 |         |                       |         | 2003                      |         | 2002     |      |        |       |         
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |         
|                                         |                                 |         |                       |         |                           |         |          |      | % of   |       |          |         |                 |         | % of |      | % Change
|                                         |                                 |         |                       |         | Amount                    |         | Revenues |      | Amount |       | Revenues |         | from prior year
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                
|Revenue:                                 |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         | Net patient service revenue     |         | $                     | 377,208 |                           |         |          |      |        |       | $        | 328,014 |                 |         |      |      |          |       |       |    | 
|                                         | Other                           |         |                       | 13,005  |                           |         |          |      |        |       |          | 11,587  |                 |         |      |      |          |       |       |    | 
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         |                                 |         | Net operating revenue |         |                           | 390,213 |          |      |        | 100.0 | %        |         |                 | 339,601 |      |      |          | 100.0 | %     |    |  | 14.9 | %
|Operating expenses:                      |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         | Salaries, wages and benefits    |         |                       | 150,269 |                           |         |          | 38.5 | %      |       |          | 129,628 |                 |         |      | 38.2 | %        |       |       |    | 
|                                         | Purchases services              |         |                       | 36,662  |                           |         |          | 9.4  | %      |       |          | 35,300  |                 |         |      | 10.4 | %        |       |       |    | 
|                                         | Supplies                        |         |                       | 48,606  |                           |         |          | 12.5 | %      |       |          | 40,210  |                 |         |      | 11.8 | %        |       |       |    | 
|                                         | Provision for doubtful accounts |         |                       | 34,982  |                           |         |          | 9.0  | %      |       |          | 27,491  |                 |         |      | 8.1  | %        |       |       |    | 
|                                         | Other operating expenses        |         |                       | 50,294  |                           |         |          | 12.9 | %      |       |          | 38,700  |                 |         |      | 11.4 | %        |       |       |    | 
|                                         | Rentals and leases              |         |                       | 4,856   |                           |         |          | 1.2  | %      |       |          | 4,352   |                 |         |      | 1.3  | %        |       |       |    | 
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         |                                 |         | 325,669               |         |                           |         | 83.5     | %    |        |       | 275,681  |         |                 |         | 81.2 | %    |          |       | 18.1  | % 
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|Adjusted EBITDA (*)                      |                                 |         | 64,544                |         |                           |         | 16.5     | %    |        |       | 63,920   |         |                 |         | 18.8 | %    |          |       | 1.0   | % 
|Depreciation and amortization            |                                 |         | 18,777                |         |                           |         | 4.8      | %    |        |       | 16,333   |         |                 |         | 4.8  | %    |          |       |       |   
|Interest expense                         |                                 |         | 12,619                |         |                           |         | 3.3      | %    |        |       | 9,740    |         |                 |         | 2.9  | %    |          |       |       |   
|Minority interests                       |                                 |         | 149                   |         |                           |         |         |      |        |       | 56       |         |                 |         |     |      |          |       |       |   
|Loss on sale of assets                   |                                 |         | 2                     |         |                           |         |         |      |        |       | 53       |         |                 |         |     |      |          |       |       |   
|Loss on early extinguishment of debt     |                                 |         | 477                   |         |                           |         | 0.1      | %    |        |       |         |         |                 |         |     |      |          |       |       |   
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|Income before provision for income taxes |                                 |         | 32,520                |         |                           |         | 8.3      | %    |        |       | 37,738   |         |                 |         | 11.1 | %    |          |       | (13.8 | %)
|Income taxes                             |                                 |         | 13,008                |         |                           |         | 3.3      | %    |        |       | 15,095   |         |                 |         | 4.4  | %    |          |       |       |   
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|Net income                               |                                 | $       | 19,512                |         |                           |         | 5.0      | %    |        | $     | 22,643   |         |                 |         | 6.7  | %    |          |       | (13.8 | %)
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|Net income per common share:             |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         |                                 | Basic   |                       | $       | 0.40                      |         |          |      |        |       |          | $       | 0.47            |         |      |      |          |       |       |    |  |     
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   
|                                         |                                 | Diluted |                       | $       | 0.40                      |         |          |      |        |       |          | $       | 0.45            |         |      |      |          |       |       |    |  |     
|                                         |                                 |         |                       |         |                           |         |          |      |        |       |          |         |                 |         |      |      |          |       |       |   



|(*) |  | Adjusted EBITDA for 2003 and 2002, represents income before
provision for income taxes, depreciation and amortization, interest,
minority interests, loss on sale of assets, and loss on early
extinguishment of debt (Adjusted EBITDA). Adjusted EBITDA serves as a
measure of leverage capacity and debt service ability, and is commonly
used as an analytical indicator within the healthcare industry. Our
management considers Adjusted EBITDA to be one measure of our ability to
service existing debt, sustain potential increases in debt in the future
and to satisfy capital requirements. Adjusted EBITDA, however, is not a
measure of financial performance under accounting principles generally
accepted in the United States, and should not be considered an
alternative to net income as a measure of operating performance or to
cash flows from operating, investing or financing activities as a
measure of liquidity. Because Adjusted EBITDA is not a measurement
determined in accordance with accounting principles generally accepted
in the United States and is susceptible to varying calculations,
Adjusted EBITDA as presented may not be comparable to other similarly
titled measures of other companies.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | 15                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            



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##### Table of Contents



|                        |                                            |            |         |                    |         |      |         |          |         |  |      |      |      |  
|----------------------- | ------------------------------------------ | ---------- | ------- | ------------------ | ------- | ---- | ------- | -------- | ------- |  | ---- | ---- | ---- | -
|                        |                                            |            |         | Three Months Ended
|                        |                                            |            |         | June 30,          
|                        |                                            |            |         |                   
|                        |                                            |            |         | 2003               |         | 2002 |         | % Change
|                        |                                            |            |         |                    |         |      |         |         
|Consolidated Hospitals: |                                            |            |         |                    |         |      |         |          |         |  |      |     
|                        | Number of hospitals at end of period       |            |         | 20                 |         |      |         | 20       |         |  |      |     |     
|                        | Licensed beds at end of period (a)         |            |         | 2,281              |         |      |         | 2,315    |         |  |      | (1.5 | %)  
|                        | Beds in service at end of period           |            |         | 1,993              |         |      |         | 1,905    |         |  |      | 4.6  | %   
|                        | Net patient service revenue (in thousands) |            | $       | 189,649            |         |      | $       | 168,234  |         |  |      | 12.7 | %   
|                        | Admissions (b)                             |            |         | 18,520             |         |      |         | 17,849   |         |  |      | 3.8  | %   
|                        | Adjusted admissions (c)                    |            |         | 33,501             |         |      |         | 31,156   |         |  |      | 7.5  | %   
|                        | Patient days (d)                           |            |         | 78,124             |         |      |         | 76,425   |         |  |      | 2.2  | %   
|                        | Adjusted patient days (e)                  |            |         | 141,331            |         |      |         | 133,444  |         |  |      | 5.9  | %   
|                        | Average length of stay (days) (f)          |            |         | 4.2                |         |      |         | 4.3      |         |  |      | (2.3 | %)  
|                        | Gross revenue (in thousands) (g):          |            |         |                    |         |      |         |          |         |  |      |      |     
|                        |                                            | Inpatient  |         | $                  | 234,130 |      |         | $        | 204,689 |  |      |      | 14.4 | %
|                        |                                            | Outpatient |         |                    | 189,354 |      |         |          | 152,542 |  |      |      | 24.1 | %
|                        |                                            |            |         |                    |         |      |         |          |         |  |      |     
|                        |                                            | $          | 423,484 |                    |         | $    | 357,231 |          |         |  | 18.5 | %   
|                        |                                            |            |         |                    |         |      |         |          |         |  |      |     
|Same Hospitals (h):     |                                            |            |         |                    |         |      |         |          |         |  |      |     
|                        | Number of hospitals at end of period       |            |         | 18                 |         |      |         | 18       |         |  |      |     |     
|                        | Licensed beds at end of period (a)         |            |         | 1,997              |         |      |         | 2,031    |         |  |      | (1.7 | %)  
|                        | Beds in service at end of period           |            |         | 1,794              |         |      |         | 1,706    |         |  |      | 5.2  | %   
|                        | Net patient service revenue (in thousands) |            | $       | 157,671            |         |      | $       | 150,673  |         |  |      | 4.6  | %   
|                        | Admissions (b)                             |            |         | 16,322             |         |      |         | 16,436   |         |  |      | (0.7 | %)  
|                        | Adjusted admissions (c)                    |            |         | 28,600             |         |      |         | 28,216   |         |  |      | 1.4  | %   
|                        | Patient days (d)                           |            |         | 68,735             |         |      |         | 70,535   |         |  |      | (2.6 | %)  
|                        | Adjusted patient days (e)                  |            |         | 120,439            |         |      |         | 121,117  |         |  |      | (0.6 | %)  
|                        | Average length of stay (days) (f)          |            |         | 4.2                |         |      |         | 4.3      |         |  |      | (2.3 | %)  
|                        | Gross revenue (in thousands) (g):          |            |         |                    |         |      |         |          |         |  |      |      |     
|                        |                                            | Inpatient  |         | $                  | 210,996 |      |         | $        | 192,381 |  |      |      | 9.7  | %
|                        |                                            | Outpatient |         |                    | 158,715 |      |         |          | 137,897 |  |      |      | 15.1 | %
|                        |                                            |            |         |                    |         |      |         |          |         |  |      |     
|                        |                                            | $          | 369,711 |                    |         | $    | 330,278 |          |         |  | 11.9 | %   
|                        |                                            |            |         |                    |         |      |         |          |         |  |      |     

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|                        |                                            |            |         |                  |         |      |         |          |         |  |      |      |      |  
|----------------------- | ------------------------------------------ | ---------- | ------- | ---------------- | ------- | ---- | ------- | -------- | ------- |  | ---- | ---- | ---- | -
|                        |                                            |            |         | Six Months Ended
|                        |                                            |            |         | June 30,        
|                        |                                            |            |         |                 
|                        |                                            |            |         | 2003             |         | 2002 |         | % Change
|                        |                                            |            |         |                  |         |      |         |         
|Consolidated Hospitals: |                                            |            |         |                  |         |      |         |          |         |  |      |     
|                        | Number of hospitals at end of period       |            |         | 20               |         |      |         | 20       |         |  |      |     |     
|                        | Licensed beds at end of period (a)         |            |         | 2,281            |         |      |         | 2,315    |         |  |      | (1.5 | %)  
|                        | Beds in service at end of period           |            |         | 1,993            |         |      |         | 1,905    |         |  |      | 4.6  | %   
|                        | Net patient service revenue (in thousands) |            | $       | 377,208          |         |      | $       | 328,014  |         |  |      | 15.0 | %   
|                        | Admissions (b)                             |            |         | 38,288           |         |      |         | 35,848   |         |  |      | 6.8  | %   
|                        | Adjusted admissions (c)                    |            |         | 68,193           |         |      |         | 60,253   |         |  |      | 13.2 | %   
|                        | Patient days (d)                           |            |         | 162,256          |         |      |         | 156,754  |         |  |      | 3.5  | %   
|                        | Adjusted patient days (e)                  |            |         | 289,014          |         |      |         | 263,340  |         |  |      | 9.7  | %   
|                        | Average length of stay (days) (f)          |            |         | 4.2              |         |      |         | 4.4      |         |  |      | (4.5 | %)  
|                        | Gross revenue (in thousands) (g):          |            |         |                  |         |      |         |          |         |  |      |      |     
|                        |                                            | Inpatient  |         | $                | 476,192 |      |         | $        | 420,078 |  |      |      | 13.4 | %
|                        |                                            | Outpatient |         |                  | 372,143 |      |         |          | 285,409 |  |      |      | 30.4 | %
|                        |                                            |            |         |                  |         |      |         |          |         |  |      |     
|                        |                                            | $          | 848,335 |                  |         | $    | 705,487 |          |         |  | 20.2 | %   
|                        |                                            |            |         |                  |         |      |         |          |         |  |      |     
|Same Hospitals (h):     |                                            |            |         |                  |         |      |         |          |         |  |      |     
|                        | Number of hospitals at end of period       |            |         | 18               |         |      |         | 18       |         |  |      |     |     
|                        | Licensed beds at end of period (a)         |            |         | 1,997            |         |      |         | 2,031    |         |  |      | (1.7 | %)  
|                        | Beds in service at end of period           |            |         | 1,794            |         |      |         | 1,706    |         |  |      | 5.2  | %   
|                        | Net patient service revenue (in thousands) |            | $       | 313,276          |         |      | $       | 310,309  |         |  |      | 1.0  | %   
|                        | Admissions (b)                             |            |         | 33,863           |         |      |         | 34,435   |         |  |      | (1.7 | %)  
|                        | Adjusted admissions (c)                    |            |         | 58,371           |         |      |         | 57,313   |         |  |      | 1.8  | %   
|                        | Patient days (d)                           |            |         | 142,941          |         |      |         | 150,894  |         |  |      | (5.3 | %)  
|                        | Adjusted patient days (e)                  |            |         | 246,406          |         |      |         | 251,013  |         |  |      | (1.8 | %)  
|                        | Average length of stay (days) (f)          |            |         | 4.2              |         |      |         | 4.4      |         |  |      | (4.5 | %)  
|                        | Gross revenue (in thousands) (g):          |            |         |                  |         |      |         |          |         |  |      |      |     
|                        |                                            | Inpatient  |         | $                | 429,791 |      |         | $        | 407,770 |  |      |      | 5.4  | %
|                        |                                            | Outpatient |         |                  | 311,318 |      |         |          | 270,764 |  |      |      | 15.0 | %
|                        |                                            |            |         |                  |         |      |         |          |         |  |      |     
|                        |                                            | $          | 741,109 |                  |         | $    | 678,534 |          |         |  | 9.2  | %   
|                        |                                            |            |         |                  |         |      |         |          |         |  |      |     



|(a) |  | Beds for which a hospital has been granted approval to operate from
the applicable state licensing agency.                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Represents the total number of patients admitted (in a facility
for a period in excess of 23 hours) and used by management and
investors as a general measure of inpatient volume.                                                                                                                                                                                                                                                                                                                                                                     
|   
|(c) |  | Used by management and investors as a general measure of combined
inpatient and outpatient volume. Adjusted admissions are computed by
multiplying admissions (inpatient volume) by the outpatient factor.
The outpatient factor is the sum of gross inpatient revenue and gross
outpatient revenue divided by gross inpatient revenue. The adjusted
admissions computation equates outpatient revenue to the volume
measure (admissions) used to measure inpatient volume, resulting in a
general measure of combined inpatient and outpatient volume.
|   
|(d) |  | Represents the total number of days the patients who are admitted
stay in our hospitals.                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(e) |  | Adjusted patient days are computed by multiplying patient days
(inpatient volume) by the outpatient factor. The outpatient factor
is the sum of gross inpatient revenue and gross outpatient revenue
divided by gross inpatient revenue. The adjusted patient days
computation equates outpatient revenue to the volume measure (patient
days) used to measure inpatient volume, resulting in a general
measure of combined inpatient and outpatient volume.                                                                                           
|   
|(f) |  | The average number of days admitted patients stay in our hospitals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(g) |  | Represents revenues prior to reductions for discounts and
contractual allowances.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(h) |  | Same hospital information includes the operations of only
those hospitals which were owned during both entire periods
presented.                                                                                                                                                                                                                                                                                                                                                                                                                       

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Three Months Ended June 30, 2003 Compared to Three Months Ended June 30,
2002

Net operating revenue increased 12.5% or $21.8 million to $195.8 million
for the three months ended June 30, 2003, compared to the same period last
year. The increase was primarily attributable to the acquisitions of Los Alamos
Medical Center and Memorial Hospital of Martinsville and Henry County, which
were completed in the second quarter of last year and a 4.6% increase in
revenues from hospitals owned during both entire periods (same hospitals).
Same hospital revenues increased primarily from a 3.2% increase in same
hospital net revenue per adjusted admissions.

Operating expenses totaled $162.9 million, or 83.2% of net operating
revenue, for the three months ended June 30, 2003, compared to $141.4 million,
or 81.3% of net operating revenue, for the comparable period of 2002. Salaries
and benefits as a percentage of net operating revenue, decreased to 38.3% from
38.8%. Purchased services, as a percentage of net operating revenue, decreased
to 9.6% for the three months ended June 30, 2003, compared to 10.4% for the
comparable period of the prior year. This decrease is primarily attributable
to reductions in contract labor and collection fees as our company was less
reliant on outside collection consultants and staffing. Supplies increased to
12.2% of net operating revenue, for the three months ended June 30, 2003,
compared to 11.8% for the comparable period of 2002, due primarily to the
acquisitions of Memorial Hospital of Martinsville and Henry County and Los
Alamos Medical Center, which have a higher supplies expense as a percentage of
revenue compared to other owned hospitals. The provision for doubtful accounts
increased to 9.1% of net operating revenue for the three months ended June 30,
2003 compared to 7.3% for the comparable period of 2002, primarily due to
increases in self-pay and uninsured patient volumes as a percentage of total
patient volumes and the corresponding effect of rate increases on those
accounts. The net revenues associated with those patients are generally
recorded at gross charges, which are typically higher than what government
programs and managed care plans pay. As a result, failure to receive payments
from self-pay and uninsured patients results in higher provision for doubtful
accounts as a percentage of net operating revenue. Other operating expenses
increased as a percentage of net operating revenue to 12.8% from 11.7% in the
prior year primarily due to increases in insurance costs and physician
recruitment expenses. Rentals and leases were relatively unchanged as a
percentage of net operating revenue for both periods.

The increase in operating expenses as a percentage of net operating
revenue described above resulted in a decrease in Adjusted EBITDA as a
percentage of net operating revenue. Adjusted EBITDA was $32.9 million, or
16.8% of net operating revenue, for the three months ended June 30, 2003,
compared to $32.6 million, or 18.7% of net operating revenue, for the
comparable period of 2002.

Depreciation and amortization expense was $9.5 million, or 4.9% of net
operating revenue, for the three months ended June 30, compared to $8.8
million, or 5.0% of net operating revenue, for the comparable period of 2002.
The increase in depreciation and amortization expense resulted primarily due to
depreciation at the hospitals acquired in 2002.

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Interest expense increased to $6.8 million for the three months ended June
30, 2003, compared to $5.5 million for the comparable period of 2002, primarily
due to the May 27, 2003, issuance of $200.0
million aggregate principal amount of 7 1⁄2% Senior Subordinated Notes due 2013 offset by repayments of
borrowings outstanding on our senior bank credit facility and repurchases of a
portion of our outstanding 4 1⁄2% Convertible Subordinated Notes. The
write-off of deferred loan costs and the gain resulting from repurchasing a
portion of the 4 1⁄2% Convertible Subordinated Notes due 2005 at a discount
resulted in a net pre-tax loss on extinguishment of debt of $0.5 million during
the second quarter ended June 30, 2003.

Income before provision for income taxes was $16.1 million for the three
months ended June 30, 2003, compared to $18.3 million for the comparable period
of 2002, a decrease of $2.2 million or 11.8%, primarily due to the factors
discussed above. Our provision for income taxes was $6.4 million for the three
months ended June 30, 2003, compared to $7.3 million for the comparable period
of 2002, primarily due to the decrease in pre-tax income.

As a result of the foregoing, our net income was $9.7 million, or 4.9% of
net operating revenue, for the three months ended June 30, 2003, compared to
$11.0 million, or 6.3% of net operating revenue for the comparable period of
2002.

Six Months Ended June 30, 2003 Compared to Six Months Ended June 30,
2002

Net operating revenue increased 14.9% or $50.6 million to $390.2 million
for the six months ended June 30, 2003, compared to the same period last year.
The increase was primarily attributable to the acquisitions of Los Alamos
Medical Center and Memorial Hospital of Martinsville and Henry County, which
were completed in the second quarter of last year.

Operating expenses totaled $325.7 million, or 83.5% of net operating
revenue, for the six months ended June 30, 2003, compared to $275.7 million, or
81.2% of net operating revenue, for the comparable period of 2002. Salaries
and benefits as a percentage of net operating revenue, increased to 38.5% from
for the six months ended June 30, 2003 from 38.2% last year, primarily due to
an increase in employed workers resulting from reductions in contract labor.
Purchased services, as a percentage of net operating revenue, decreased to 9.4%
for the six months ended June 30, 2003, compared to 10.4% for the comparable
period of the prior year. This decrease is primarily attributable to
reductions in contract labor and collection fees as our company was less
reliant on outside collection consultants and staffing. Supplies increased to
12.5% of net operating revenue, for the six months ended June 30, 2003,
compared to 11.8% for the comparable period of 2002, due primarily to the
acquisitions of Memorial Hospital of Martinsville and Henry County and Los
Alamos Medical Center. The provision for doubtful accounts increased to 9.0%
of net operating revenue for the six months ended June 30, 2003 compared to
8.1% for the comparable period of 2002, primarily due to the increases in
self-pay and uninsured patient volumes as a percent of total patient volumes
and the corresponding effect of rate increases on those accounts.

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The net revenues associated with those patients are generally recorded at gross
charges, which are typically higher than what government programs and managed
care plans pay. As a result, failure to receive payments from self-pay and
uninsured patients results in higher provision for doubtful accounts as a
percentage of net operating revenue. Other operating expenses increased as a
percentage of net operating revenue to 12.9% from 11.4% in the prior year
primarily due to increases in insurance costs and physician recruitment
expenses. Rentals and leases were relatively unchanged as a percentage of net
operating revenue for both periods.

The increase in operating expenses as a percentage of net operating
revenue described above resulted in a decrease in Adjusted EBITDA as a
percentage of net operating revenue. Adjusted EBITDA was $64.5 million, or
16.5% of net operating revenue, for the six months ended June 30, 2003,
compared to $63.9 million, or 18.8% of net operating revenue, for the
comparable period of 2002.

Depreciation and amortization expense was $18.8 million, or 4.8% of net
operating revenue, for the six months ended June 30, compared to $16.3 million,
or 4.8% of net operating revenue, for the comparable period of 2002. The
increase in depreciation and amortization expense resulted primarily due to
depreciation at the hospitals acquired in 2002.

Interest expense increased to $12.6 million for the six months ended June
30, 2003, compared to $9.7 million for the comparable period of 2002, primarily
due to higher average outstanding borrowings of our senior credit facility and
the issuance of an aggregate principal amount of $200.0 million, 7 1⁄2%
Senior Subordinated Notes due 2013, offset by repurchases of a portion of our
outstanding 4 1⁄2% Convertible Subordinated Notes due 2005. The write-off of
deferred loan costs associated with the repurchases, and the gain resulting
from repurchasing a portion of the 4 1⁄2% Convertible Subordinated Notes at a
discount resulted in a net pre-tax loss on extinguishment of debt of $0.5
million during the six months ended June 20, 2003.

Income before provision for income taxes was $32.5 million for the six
months ended June 30, 2003, compared to $37.7 million for the comparable period
of 2002, a decrease of $5.2 million or 13.8%, primarily due to the factors
discussed above. Our provision for income taxes decreased to $13.0 million for
the six months ended June 30, 2003, compared to $15.1 million for the
comparable period of 2002, primarily due to the decrease in pre-tax income.

As a result of the foregoing, our net income was $19.5 million, or 5.0% of
net operating revenue, for the six months ended June 30, 2003, compared to
$22.6 million, or 6.7% of net operating revenue for the comparable period of
2002.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2003, we had working capital of $106.2 million, including cash
and cash equivalents of $19.1 million compared to working capital of $105.3
million, including $14.4 million in cash and cash equivalents at December 31,
2002.

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Cash provided by operations was $55.2 million for the six months ended
June 30, 2003, compared to $52.6 million last year, primarily due to improved
cash collections as our average daily revenues were in accounts receivable an
average of 54 days at June 30, 2003 which was down from 61 days at June 30,
2002. Cash used in investing activities was down significantly to $37.8
million for the six months ended June 30, 2003 from $197.8 million for the same
period last year, primarily due to the purchases of Memorial Hospital of
Martinsville and Henry County in May 2002, and Los Alamos Medical Center in
June 2002. Net cash used in financing activities totaled $12.8 million for the
six months ended June 30, 2003 compared to $128.9 million of net cash provided
by financing activities during the same period last year. Last years net cash
provided by financing activities was primarily a result of borrowings under our
revolving credit facility to fund acquisitions.

During the six months ended June 30, 2003, we received $194.2 million in
net proceeds from the issuance of the 7 1⁄2% Senior Subordinated Notes due
2013. We used the proceeds, along with existing cash, to repay all amounts
outstanding on our senior credit facility ($114.3 million) and $69.0 million of
our 4 1⁄2% Convertible Notes due 2005. At June 30, 2003, we had $246.4
million (net of outstanding letters of credit) available for borrowing under
our senior credit facility.

We intend to acquire additional acute care facilities and are actively
seeking out such acquisitions. There can be no assurance that we will not
require additional debt or equity financing for any particular acquisition.
Also, we continually review our capital needs and financing opportunities and
may seek additional equity or debt financing for our acquisition program or
other needs.

On June 14, 2002, the Securities and Exchange Commission (SEC) declared
effective our shelf registration statement on Form S-3 providing for the offer,
from time to time, of common stock and debt securities, up to an aggregate of
$300.0 million. Our issuance of the 71⁄2% Senior Subordinated Notes in May 2003
was registered under the shelf registration statement, leaving capacity to register
up to $100.0 million of additional securities. The shelf registration
statement will enable us to raise funds from the offering of any individual
securities covered by the shelf registration statement as well as any
combination thereof, subject to market conditions and our capital needs.

Capital expenditures for our owned hospitals may vary from year to year
depending on facility improvements and service enhancements undertaken by the
hospitals. We expect to make total capital expenditures in 2003 of
approximately $60.0 million, exclusive of any acquisitions of businesses or new
hospital construction projects. Planned capital expenditures for 2003 consist
principally of capital improvements to owned and leased hospitals. We expect
to fund these expenditures through cash provided by operating activities and
borrowings under our revolving credit facility.

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CRITICAL ACCOUNTING POLICIES AND IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

A description of the accounting policies we consider critical to our
business is contained in our Annual Report on Form 10-K for the year ended
December 31, 2002. We have made no changes in those policies since year end.

MARKET RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS

Our interest expense is sensitive to changes in the general level of
interest rates. To mitigate the impact of fluctuations in interest rates, we
generally maintain 50% - 75% of our debt at a fixed rate, either by borrowings
on a long-term basis or entering into an interest rate swap.

At June 30, 2003, approximately all of our outstanding debt was
effectively at fixed rates primarily due to repayments of all borrowings on our
revolving line of credit during the quarter.

During the quarter ended June 30, 2003, we terminated our previously
existing interest rate swap contract. Subsequent to quarter end, we entered
into an interest rate swap agreement which effectively converted, for a
ten-year period, $100.0 million of the $200.0 million fixed-rate borrowings
under our 7 1⁄2% Senior Subordinated Notes due 2013 to floating-rate
borrowings. We secured a LIBOR plus 2.79% floating interest rate over the term
of the agreement. After giving effect to the interest rate swap agreement,
approximately 78% of our debt was at fixed rates.

GENERAL

The Medicare program accounted for approximately 38.8% and 41.9% of net
patient revenue for the six months ended June 30, 2003 and 2002, respectively.
The Medicaid programs accounted for approximately 11.2% and 12.5% of net
patient revenue for the six months ended June 30, 2003 and 2002, respectively.
The majority of payment rates under the Medicare program are now prospective,
based upon the diagnosis of a patient. The Medicare payment rate increases
historically have been less than actual inflation.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires us to make
estimates and assumptions that affect the amounts reported in our financial
statements. Resolution of matters, for example, final settlements with third
party payors, may result in changes from those estimates. The timing and amount
of such changes in estimates may cause fluctuations in our quarterly or annual
operating results.

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FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this report contain some forward-looking
statements. Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. Such statements may
include words such as anticipate, estimate, expect, project, intend,
plan, believe and other words and terms of similar meaning in connection
with any discussion of future operating or financial performance. Any or all
of our forward-looking statements in this report may turn out to be wrong. They
can be affected by inaccurate assumptions we might make or by known or unknown
risks and uncertainties. Many factors mentioned in our discussion in this
report will be important in determining future results. Consequently, no
forward-looking statement can be guaranteed. Actual future results may vary
materially. Factors that may cause our plans, expectations, future financial
condition and results to change include, but are not limited to:



| |  |  | the highly competitive nature of the healthcare business;                                                                                                     
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the efforts of insurers, healthcare providers and others to contain healthcare costs;                                                                         
|
| |  |  | the financial condition of managed care organizations that
pay us for healthcare services;                                                                    
|
| |  |  | possible changes in the levels and terms of reimbursement for
our charges by government programs, including Medicare and Medicaid
or other third-party payors;
|
| |  |  | changes in or failure to comply with federal, state or local
laws and regulations affecting the healthcare industry;                                          
|
| |  |  | the possible enactment of federal or state healthcare reform;                                                                                                 
|
| |  |  | the departure of key members of our management;                                                                                                               
|
| |  |  | claims and legal actions relating to professional liability;                                                                                                  
|
| |  |  | our ability to implement successfully our acquisition and development strategy;                                                                               
|
| |  |  | our ability to recruit and retain qualified personnel and physicians;                                                                                         
|
| |  |  | potential federal or state investigations;                                                                                                                    
|
| |  |  | fluctuations in the market value of our common stock or debt securities;                                                                                      
|
| |  |  | changes in accounting principles generally accepted in the
United States or in our critical accounting policies;                                              
|
| |  |  | changes in demographic, general economic and business
conditions, both nationally and in the regions in which we operate;                                     

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| |  |  | changes in the availability, cost and terms of insurance
coverage for our hospitals and physicians who practice at our
hospitals; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | other risks described in this report.                                                                                                

Except as required by law, we undertake no obligation to publicly update
any forward-looking statements, whether as a result of new information, future
events or otherwise. You are advised, however, to consult any additional
disclosures and discussions of risks we make in our Form 10-K, 10-Q and 8-K
reports and other filings with the Securities and Exchange Commission. These
are factors that we think could cause our actual results to differ materially
from expected results. Other factors besides those listed here also could
affect us adversely. This discussion is provided as permitted by the Private
Securities Litigation Reform Act of 1995.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the six months ended June 30, 2003, there were no material changes
in the quantitative and qualitative disclosures about market risks presented in
our Annual Report on Form 10-K for the year ended December 31, 2002. Our only
derivative instrument relates to an interest rate swap agreement entered into
subsequent to June 30, 2003. See Item 2. Managements Discussion and
Analysis of Financial Condition and Results of Operations  Market Risks
Associated with Financial Instruments.




ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our management carried
out an evaluation, with the participation of our chief executive officer and
chief financial officer, of the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rule
13a 
15(e) and 15d  15(e). Based on their evaluation of such controls and
procedures, our management concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
our company in the reports we file under the Securities Exchange Act of 1934,
as amended, is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange
Commission and that such information is accumulated and communicated to
management, including our chief executive officer and chief financial officer,
as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no significant changes in our internal control over
financial reporting during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

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PART II
OTHER INFORMATION




ITEM 4. Submission of Matters to a Vote of Security Holders

On Thursday, May 1, 2003, we held our 2003 annual meeting of shareholders.
At such meeting, the shareholders voted on the following two proposals:

First, the shareholders voted on the election of seven nominees to the
Board of Directors. The incumbent Board of Directors, consisting of Martin S.
Rash, John M. Rutledge, Joseph P. Nolan, David L. Steffy, Winfield C. Dunn,
Paul J. Feldstein and David R. Klock, determined that the size of the Board of
Directors be set at seven members. The Board of Directors then nominated
Martin S. Rash, John M. Rutledge, Joseph P. Nolan, David L. Steffy, Winfield C.
Dunn, Paul J. Feldstein and David R. Klock, for election at such annual meeting
to serve until the 2004 annual meeting of shareholders. The directors were
elected by the following vote:

|                  |  |     |            |           |  |          |           | 
|----------------- |  | --- | ---------- | --------- |  | -------- | --------- | 
|                  |  |     |            |           |  | Withhold
|Name              |  | For |            | Authority
|                  |  |     |            |          
|Martin S. Rash    |  |     | 43,839,057 |           |  |          | 121,023   | 
|John M. Rutledge  |  |     | 43,837,534 |           |  |          | 122,546   | 
|Joseph P. Nolan   |  |     | 43,835,411 |           |  |          | 124,669   | 
|David L. Steffy   |  |     | 42,434,984 |           |  |          | 1,525,096 | 
|Winfield C. Dunn  |  |     | 42,532,458 |           |  |          | 1,427,622 | 
|Paul J. Feldstein |  |     | 43,734,472 |           |  |          | 225,608   | 
|David R. Klock    |  |     | 42,433,334 |           |  |          | 1,526,746 | 

Second, the shareholders voted to approve the appointment of Ernst & Young
LLP as independent auditors of our company and its subsidiaries for the fiscal
year ending December 31, 2003. At the annual meeting, the shareholders voted to
ratify the appointment of Ernst & Young LLP, with 43,347,070 votes for, 594,864
votes against and 18,146 abstentions.




ITEM 6. Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------

|        |  |                                                                                                                                                     
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                     
|Number  |  | Description of Exhibits                                                                                                                             
|        |  |                                                                                                                                                     
|3.1     |  | Amended and Restated Certificate of Incorporation of Province
Healthcare Company, as filed with the Delaware Secretary of State on
June 16, 2000 (a)

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|        |  |                                                                                                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                        
|Number  |  | Description of Exhibits                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                        
|3.2     |  | Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of Province Healthcare Company, as
filed with the Delaware Secretary of State on May 22, 2002 (b)                                                                    
|        |  |                                                                                                                                                                                                                                                        
|3.3     |  | Amended and Restated Bylaws of Province Healthcare Company
(c)                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                        
|4.1     |  | Subordinated Indenture, dated as of May 27, 2003, between
Province Healthcare Company and U.S. Bank Trust National Association
(*)                                                                                                                     
|        |  |                                                                                                                                                                                                                                                        
|4.2     |  | First Supplemental Indenture to Subordinated Indenture, dated
as of May 27, 2003, between Province Healthcare Company and U.S.
Bank Trust National Association, as Trustee, with respect to the
issuance of 7 1⁄2% Senior Subordinated Notes due 2013 (*)
|        |  |                                                                                                                                                                                                                                                        
|10.1    |  | Third Amendment to Credit Agreement and Consent, dated May
27, 2003, among Province Healthcare Company, Wachovia Bank, National
Association, as Agent, and various parties thereto (*)                                                                 
|        |  |                                                                                                                                                                                                                                                        
|10.2    |  | Fourth Amendment to Credit Agreement and Consent, dated June
30, 2003, among Province Healthcare Company, Wachovia Bank, National
Association, as Agent, and various parties thereto (*)                                                               
|        |  |                                                                                                                                                                                                                                                        
|31.1    |  | Certification pursuant to Exchange Act Rule 13a-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)                                                                                                                        
|        |  |                                                                                                                                                                                                                                                        
|31.2    |  | Certification pursuant to Exchange Act Rule 13a-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (*)                                                                                                                        
|        |  |                                                                                                                                                                                                                                                        
|32.1    |  | Certifications pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (*)                                                                                            

|    |  |                                                                                                                                                                                      
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  |                                                                                                                                                                                      
|(a) |  | Incorporated by reference to the exhibits filed with the
Registrants Quarterly Report filed on Form 10-Q, for the quarterly
period ended June 30, 2000, Commission File No. 0-23639.
|    |  |                                                                                                                                                                                      
|(b) |  | Incorporated by reference to the exhibits filed with the
Registrants Registration Statement on Form S-3/A, filed on June 11,
2002, Registration Number 333-86578.                   
|    |  |                                                                                                                                                                                      
|(c) |  | Incorporated by reference to the exhibits filed with the
Registrants Current Report on Form 8-K, filed
on December 12, 2002, Commission File No. 0-23639.                           



|* |  | Filed herewith
|- |  | --------------

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|(b) |  | Reports on Form 8-K
|--- |  | -------------------

During
the three months ended June 30, 2002, we filed or furnished the following
reports on Form 8-K:



| | (i)   |  | Form 8-K, filed on April 4, 2003, with respect to
the announcement of an amendment to our $250 million senior
credit facility.        
| | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii)  |  | Form 8-K, furnished on April 28, 2003, with respect
to the announcement of our financial results for the first
quarter of 2003.       
|
| | (iii) |  | Form 8-K, filed on May 29, 2003, with respect to
the completion of the public offering of our 7 1⁄2% Senior
Subordinated Notes due 2013.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                     |                             |     |  |                              
|-------------------- | --------------------------- | --- |  | -----------------------------
|                     | PROVINCE HEALTHCARE COMPANY
|                     |                             |     |  |                              
|Date: August 8, 2003 |                             | By: |  | /s/ Brenda B. Rector         
|                     |                             |     |  |                              
|                     |                             |     |  | Brenda B. Rector             
|                     |                             |     |  | Vice President and Controller

28