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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549






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, 2002 or                                         
| 
|o |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| 
|  |  | For the transition period from

to                                                      

Commission File Number 0-23639

PROVINCE HEALTHCARE COMPANY
(Exact Name of Registrant as Specified in Its Charter)

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

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 7, 2002
48,546,508 shares





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|                                                                                              |                                                             |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------- |  |  |  |  |  |  | 
|                                                                                              | CONDENSED CONSOLIDATED BALANCE SHEETS                      
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)    
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)    
|                                                                                              | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|                                                                                              | 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                           
|SIGNATURES                                                                                   



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PART I
FINANCIAL INFORMATION

|        |  |                                                                                       |  |                                                                                         |    |  |   | 
|------- |  | ------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------- | -- |  | - | 
|Item 1. |  | Financial Statements (Unaudited)                                                      |  |                                                                                         |    | 
|        |  |                                                                                       |  | Condensed Consolidated Balance Sheets
June 30, 2002 and December 31, 2001               |    |  | 1 | 
|        |  |                                                                                       |  | Condensed Consolidated Statements of Income
Three Months Ended June 30, 2002 and 2001   |    |  | 2 | 
|        |  |                                                                                       |  | Condensed Consolidated Statements of Income
Six Months Ended June 30, 2002 and 2001     |    |  | 3 | 
|        |  |                                                                                       |  | Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2002 and 2001 |    |  | 4 | 
|        |  |                                                                                       |  | Notes to Condensed Consolidated Financial Statements                                    |    |  | 5 | 
|Item 2. |  | Managements Discussion and Analysis of Financial Condition
And Results of Operations |  |                                                                                         | 11 | 
|Item 3. |  | Quantitative and Qualitative Disclosures about
Market Risk                            |  |                                                                                         | 21 | 





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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES




CONDENSED CONSOLIDATED BALANCE SHEETS(Dollars in thousands)

|                                               |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |         |         | 
|---------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ----------- | ------- | ------------ | ------- | ------- | ------- | 
|                                               |                                                                                                                                                                                                                                                 |                            |         | June 30,    |         | December 31,
|                                               |                                                                                                                                                                                                                                                 |                            |         | 2002        |         | 2001        
|                                               |                                                                                                                                                                                                                                                 |                            |         |             |         |             
|                                               |                                                                                                                                                                                                                                                 |                            |         | (Unaudited) |         | (Note 1)    
|ASSETS                                         |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|Current assets:                                |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|                                               | Cash and cash equivalents                                                                                                                                                                                                                       |                            | $       | 23,044      |         |              | $       | 39,375  |        
|                                               | Accounts receivable, less allowance for doubtful accounts
of $71,485 in 2002 and $49,678 in 2001                                                                                                                                                |                            |         | 123,310     |         |              |         | 109,826 |        
|                                               | Inventories                                                                                                                                                                                                                                     |                            |         | 20,076      |         |              |         | 15,926  |        
|                                               | Prepaid expenses and other                                                                                                                                                                                                                      |                            |         | 10,081      |         |              |         | 21,515  |        
|                                               |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|                                               |                                                                                                                                                                                                                                                 | Total current assets       |         |             | 176,511 |              |         |         | 186,642 | 
|Property, plant and equipment, net             |                                                                                                                                                                                                                                                 |                            | 442,096 |             |         |              | 306,494 |        
|Goodwill, net                                  |                                                                                                                                                                                                                                                 |                            | 323,921 |             |         |              | 180,497 |        
|Unallocated purchase price                     |                                                                                                                                                                                                                                                 |                            |        |             |         |              | 49,013  |        
|Other                                          |                                                                                                                                                                                                                                                 |                            | 37,539  |             |         |              | 37,251  |        
|                                               |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|Total assets                                   |                                                                                                                                                                                                                                                 | $                          | 980,067 |             |         | $            | 759,897 |        
|                                               |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY           |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|Current liabilities:                           |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|                                               | Accounts payable                                                                                                                                                                                                                                |                            | $       | 26,823      |         |              | $       | 17,515  |        
|                                               | Accrued salaries and benefits                                                                                                                                                                                                                   |                            |         | 29,382      |         |              |         | 18,867  |        
|                                               | Accrued expenses                                                                                                                                                                                                                                |                            |         | 12,553      |         |              |         | 12,139  |        
|                                               | Current maturities of long-term obligations                                                                                                                                                                                                     |                            |         | 1,690       |         |              |         | 1,879   |        
|                                               |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|                                               |                                                                                                                                                                                                                                                 | Total current liabilities  |         |             | 70,448  |              |         |         | 50,400  | 
|Long-term obligations, less current maturities |                                                                                                                                                                                                                                                 |                            | 491,275 |             |         |              | 330,838 |        
|Other liabilities                              |                                                                                                                                                                                                                                                 |                            | 17,307  |             |         |              | 14,000  |        
|Minority interest                              |                                                                                                                                                                                                                                                 |                            | 2,662   |             |         |              | 2,654   |        
|Stockholders equity:                          |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|                                               | Common stock  $0.01 par value; 150,000,000 and
50,000,000 shares authorized at June 30, 2002 and December 31, 2001,
respectively; issued and outstanding
48,472,328 and 47,488,984 shares at June 30, 2002
and December 31, 2001, respectively |                            |         | 485         |         |              |         | 475     |        
|                                               | Additional paid-in-capital                                                                                                                                                                                                                      |                            |         | 302,484     |         |              |         | 288,948 |        
|                                               | Retained earnings                                                                                                                                                                                                                               |                            |         | 95,406      |         |              |         | 72,582  |        
|                                               |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|                                               |                                                                                                                                                                                                                                                 | Total stockholders equity |         |             | 398,375 |              |         |         | 362,005 | 
|                                               |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        
|Total liabilities and stockholders equity     |                                                                                                                                                                                                                                                 | $                          | 980,067 |             |         | $            | 759,897 |        
|                                               |                                                                                                                                                                                                                                                 |                            |         |             |         |              |         |        

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,
|                                         |                                 |                       |        |                            
|                                         |                                 |                       |        | 2002                        |         | 2001
|                                         |                                 |                       |        |                             |         |     
|Revenue:                                 |                                 |                       |        |                             |         |      |        |        
|                                         | Net patient service revenue     |                       | $      | 168,234                     |         |      | $      | 118,556 |        
|                                         | Other                           |                       |        | 5,766                       |         |      |        | 4,972   |        
|                                         |                                 |                       |        |                             |         |      |        |        
|                                         |                                 | Net operating revenue |        |                             | 174,000 |      |        |         | 123,528 | 
|Expenses:                                |                                 |                       |        |                             |         |      |        |        
|                                         | Salaries, wages and benefits    |                       |        | 67,476                      |         |      |        | 47,607  |        
|                                         | Purchased services              |                       |        | 18,209                      |         |      |        | 11,942  |        
|                                         | Supplies                        |                       |        | 20,465                      |         |      |        | 13,399  |        
|                                         | Provision for doubtful accounts |                       |        | 12,753                      |         |      |        | 11,893  |        
|                                         | Other operating expenses        |                       |        | 20,304                      |         |      |        | 14,218  |        
|                                         | Rentals and leases              |                       |        | 2,200                       |         |      |        | 1,879   |        
|                                         | Depreciation and amortization   |                       |        | 8,752                       |         |      |        | 6,905   |        
|                                         | Interest expense                |                       |        | 5,545                       |         |      |        | 2,142   |        
|                                         | Minority interest               |                       |        | (3                          | )       |      |        | 71      |        
|                                         | Loss on sale of assets          |                       |        | 48                          |         |      |        | 141     |        
|                                         |                                 |                       |        |                             |         |      |        |        
|                                         |                                 | Total expenses        |        |                             | 155,749 |      |        |         | 110,197 | 
|                                         |                                 |                       |        |                             |         |      |        |        
|Income before provision for income taxes |                                 |                       | 18,251 |                             |         |      | 13,331 |        
|Income taxes                             |                                 |                       | 7,300  |                             |         |      | 5,599  |        
|                                         |                                 |                       |        |                             |         |      |        |        
|Net income                               |                                 | $                     | 10,951 |                             |         | $    | 7,732  |        
|                                         |                                 |                       |        |                             |         |      |        |        
|Net income per share:                    |                                 |                       |        |                             |         |      |        |        
|                                         | Basic                           |                       | $      | 0.23                        |         |      | $      | 0.17    |        
|                                         |                                 |                       |        |                             |         |      |        |        
|                                         | Diluted                         |                       | $      | 0.22                        |         |      | $      | 0.16    |        
|                                         |                                 |                       |        |                             |         |      |        |        

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,
|                                         |                                 |                       |        |                          
|                                         |                                 |                       |        | 2002                      |         | 2001
|                                         |                                 |                       |        |                           |         |     
|Revenue:                                 |                                 |                       |        |                           |         |      |        |        
|                                         | Net patient service revenue     |                       | $      | 328,014                   |         |      | $      | 235,442 |        
|                                         | Other                           |                       |        | 11,587                    |         |      |        | 10,522  |        
|                                         |                                 |                       |        |                           |         |      |        |        
|                                         |                                 | Net operating revenue |        |                           | 339,601 |      |        |         | 245,964 | 
|Expenses:                                |                                 |                       |        |                           |         |      |        |        
|                                         | Salaries, wages and benefits    |                       |        | 129,628                   |         |      |        | 94,562  |        
|                                         | Purchased services              |                       |        | 35,300                    |         |      |        | 23,124  |        
|                                         | Supplies                        |                       |        | 40,210                    |         |      |        | 27,174  |        
|                                         | Provision for doubtful accounts |                       |        | 27,491                    |         |      |        | 22,812  |        
|                                         | Other operating expenses        |                       |        | 38,700                    |         |      |        | 27,993  |        
|                                         | Rentals and leases              |                       |        | 4,352                     |         |      |        | 3,608   |        
|                                         | Depreciation and amortization   |                       |        | 16,333                    |         |      |        | 13,587  |        
|                                         | Interest expense                |                       |        | 9,740                     |         |      |        | 4,764   |        
|                                         | Minority interest               |                       |        | 56                        |         |      |        | 169     |        
|                                         | Loss on sale of assets          |                       |        | 53                        |         |      |        | 171     |        
|                                         |                                 |                       |        |                           |         |      |        |        
|                                         |                                 | Total expenses        |        |                           | 301,863 |      |        |         | 217,964 | 
|                                         |                                 |                       |        |                           |         |      |        |        
|Income before provision for income taxes |                                 |                       | 37,738 |                           |         |      | 28,000 |        
|Income taxes                             |                                 |                       | 15,095 |                           |         |      | 11,760 |        
|                                         |                                 |                       |        |                           |         |      |        |        
|Net income                               |                                 | $                     | 22,643 |                           |         | $    | 16,240 |        
|                                         |                                 |                       |        |                           |         |      |        |        
|Net income per share:                    |                                 |                       |        |                           |         |      |        |        
|                                         | Basic                           |                       | $      | 0.47                      |         |      | $      | 0.35    |        
|                                         |                                 |                       |        |                           |         |      |        |        
|                                         | Diluted                         |                       | $      | 0.45                      |         |      | $      | 0.33    |        
|                                         |                                 |                       |        |                           |         |      |        |        

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,
|                                                     |  |                          
|                                                     |  | 2002                      |          | 2001
|                                                     |  |                           |          |     
|Net
cash provided by operating activities            |  | $                         | 52,634   |      |  | $ | 26,742  |  
|Investing
activities                                 |  |                           |          |      |  |   |         |  
|Purchase of property, plant and equipment            |  |                           | (25,788  | )    |  |   | (28,321 | )
|Purchase of acquired hospitals                       |  |                           | (172,028 | )    |  |   |        |  
|                                                     |  |                           |          |      |  |   |         |  
|Net cash used in investing activities                |  |                           | (197,816 | )    |  |   | (28,321 | )
|Financing activities                                 |  |                           |          |      |  |   |         |  
|Proceeds from long-term debt                         |  |                           | 134,328  |      |  |   | 49,433  |  
|Repayments of debt                                   |  |                           | (15,192  | )    |  |   | (48,851 | )
|Issuance of common stock                             |  |                           | 9,715    |      |  |   | 8,444   |  
|                                                     |  |                           |          |      |  |   |         |  
|Net cash provided by financing activities            |  |                           | 128,851  |      |  |   | 9,026   |  
|                                                     |  |                           |          |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents |  |                           | (16,331  | )    |  |   | 7,447   |  
|Cash and cash equivalents at beginning of period     |  |                           | 39,375   |      |  |   |        |  
|                                                     |  |                           |          |      |  |   |         |  
|Cash and cash equivalents at end of period           |  | $                         | 23,044   |      |  | $ | 7,447   |  
|                                                     |  |                           |          |      |  |   |         |  

See accompanying notes.

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

June 30, 2002

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, 2001, 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, 2001.

On April 30, 2002, the Company effected a three-for-two stock split, in
the form of a 50% stock dividend, to stockholders of record on April 20, 2002.
The stock split resulted in the issuance of 15.9 million shares of common stock
and a transfer between additional paid in capital and common stock of $159,000.
All historical references to common share and earnings per share amounts
included in the condensed consolidated financial statements and notes thereto
have been restated to reflect the three-for-two split.

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 AND GOODWILL

2001 Acquisitions

During the last six months of 2001, the Company acquired five hospitals:
Selma Regional Medical Center, acquired in July 2001; Ashland Regional Medical
Center, acquired in August 2001; Vaughan Regional Medical Center, acquired in
October 2001; Medical Center of Southern Indiana, acquired in October 2001; and
Teche Regional Medical Center, acquired in December 2001.

In the second quarter of 2002, the Company consolidated the operations of
Selma Regional Medical Center and Vaughan Regional Medical Center. The
preliminary allocation of the purchase price of the Selma hospitals has been
determined based upon currently available information and is subject to further
refinement pending final appraisals. The consolidation of the operations of
these hospitals resulted in a regional hospital (Vaughan Regional Medical
Center) that provides more intensive services to the large area it serves.

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. The preliminary allocation of the purchase price
has been determined based upon currently available information and is subject
to further refinement pending final appraisal. 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. The preliminary allocation of the purchase price
has been determined based upon currently available information and is subject
to further refinement pending final appraisal. This is the Companys first New
Mexico hospital and is the only hospital in the community and serves a
population of approximately 50,000.

The operating results of the hospitals acquired in 2001 and 2002 have been
included in the accompanying condensed consolidated statements of income from
the respective dates of acquisition.

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

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

The following pro forma information reflects the operations of the
entities acquired in 2002 and 2001, as if the respective transactions had
occurred as of the first day of the fiscal year immediately preceding the year
of the acquisitions (in thousands, except per share data):

|                      |         |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |      | 
|--------------------- | ------- | - | ------------------ | ---- | ---------------- | - | ------- | ---- | ---- | - | ------- | ---- |  | - | ------- | ---- | 
|                      |         |   | Three Months Ended |      | Six Months Ended
|                      |         |   | June 30,           |      | June 30,        
|                      |         |   |                    |      |                 
|                      |         |   | 2002               |      | 2001             |   | 2002    |      | 2001
|                      |         |   |                    |      |                  |   |         |      |     
|Net operating revenue |         | $ | 186,319            |      |                  | $ | 183,866 |      |      | $ | 383,189 |      |  | $ | 367,769 |     
|Net income            |         | $ | 11,444             |      |                  | $ | 7,404   |      |      | $ | 24,643  |      |  | $ | 16,867  |     
|Earnings per share:   |         |   |                    |      |                  |   |         |      |      |   |         |      |  |   |         |     
|                      | Basic   |   | $                  | 0.24 |                  |   | $       | 0.16 |      |   | $       | 0.52 |  |   | $       | 0.36 | 
|                      | Diluted |   | $                  | 0.19 |                  |   | $       | 0.15 |      |   | $       | 0.40 |  |   | $       | 0.35 | 

The pro forma results of operations do not purport to represent what the
Companys results would have been had such transactions, in fact, occurred at
the beginning of the periods presented or to project the Companys results of
operations in any future period.

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
transitional impairment tests have been completed, and the results of the tests
had no effect on operations or financial position of the Company. Had the
Company been accounting for its goodwill under SFAS No. 142 for all periods
presented, the Companys pro forma net income and earnings per share would have
been as follows:

|                                       |                                        |   |                    |      |                  |   |       |      |      |   |        |      |  |   |        |      | 
|-------------------------------------- | -------------------------------------- | - | ------------------ | ---- | ---------------- | - | ----- | ---- | ---- | - | ------ | ---- |  | - | ------ | ---- | 
|                                       |                                        |   | Three Months Ended |      | Six Months Ended
|                                       |                                        |   | June 30,           |      | June 30,        
|                                       |                                        |   |                    |      |                 
|                                       |                                        |   | 2002               |      | 2001             |   | 2002  |      | 2001
|                                       |                                        |   |                    |      |                  |   |       |      |     
|Reported net income                    |                                        | $ | 10,951             |      |                  | $ | 7,732 |      |      | $ | 22,643 |      |  | $ | 16,240 |     
|Add: Goodwill amortization, net of tax |                                        |   |                   |      |                  |   | 1,080 |      |      |   |       |      |  |   | 2,209  |     
|                                       |                                        |   |                    |      |                  |   |       |      |      |   |        |      |  |   |        |     
|Pro forma adjusted net income          |                                        | $ | 10,951             |      |                  | $ | 8,812 |      |      | $ | 22,643 |      |  | $ | 18,449 |     
|                                       |                                        |   |                    |      |                  |   |       |      |      |   |        |      |  |   |        |     
|Basic earnings per share:              |                                        |   |                    |      |                  |   |       |      |      |   |        |      |  |   |        |     
|                                       | Reported net income                    |   | $                  | 0.23 |                  |   | $     | 0.17 |      |   | $      | 0.47 |  |   | $      | 0.35 | 
|                                       | Add: Goodwill amortization, net of tax |   |                    |     |                  |   |       | 0.02 |      |   |        |     |  |   |        | 0.05 | 
|                                       |                                        |   |                    |      |                  |   |       |      |      |   |        |      |  |   |        |     
|                                       | Pro forma adjusted net income          |   | $                  | 0.23 |                  |   | $     | 0.19 |      |   | $      | 0.47 |  |   | $      | 0.40 | 
|                                       |                                        |   |                    |      |                  |   |       |      |      |   |        |      |  |   |        |     
|Diluted earnings per share:            |                                        |   |                    |      |                  |   |       |      |      |   |        |      |  |   |        |     
|                                       | Reported net income                    |   | $                  | 0.22 |                  |   | $     | 0.16 |      |   | $      | 0.45 |  |   | $      | 0.33 | 
|                                       | Add: Goodwill amortization, net of tax |   |                    |     |                  |   |       | 0.02 |      |   |        |     |  |   |        | 0.05 | 
|                                       |                                        |   |                    |      |                  |   |       |      |      |   |        |      |  |   |        |     
|                                       | Pro forma adjusted net income          |   | $                  | 0.22 |                  |   | $     | 0.18 |      |   | $      | 0.45 |  |   | $      | 0.38 | 
|                                       |                                        |   |                    |      |                  |   |       |      |      |   |        |      |  |   |        |     

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

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

At June 30, 2002, and December 31, 2001, goodwill totaled $347.4 million
and $204.0 million, respectively. Accumulated amortization totaled $23.5
million at June 30, 2002, and December 31, 2001. The $143.4 million increase
in goodwill resulted primarily from the allocation of purchase price for the
Martinsville and Los Alamos acquisitions. The Company has no other intangible
assets.

4. LONG-TERM OBLIGATIONS

At June 30, 2002, the Company had letters of credit totaling approximately
$4.3 million outstanding, and $82.4 million available under its credit
facility. During the first quarter of 2002, the Company made the decision to
modify the terms of the end-loaded lease facility to enable it to account for
the related properties and borrowings on the balance sheet. The Company
recorded approximately $46.7 million in property and equipment and
approximately $40.2 million in long-term debt on the balance sheet related to
this modification of the end-loaded lease facility.

5. 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,        
|                                               |  |                    |        |                 
|                                               |  | 2002               |        | 2001             |  | 2002 |       | 2001
|                                               |  |                    |        |                  |  |      |       |     
|Net income                                     |  | $                  | 10,951 |                  |  | $    | 7,732 |      |  | $ | 22,643 |  |  | $ | 16,240 |  
|Net change in fair value of interest rate swap |  |                    | 2      |                  |  |      | 15    |      |  |   | 181    |  |  |   | (272   | )
|                                               |  |                    |        |                  |  |      |       |      |  |   |        |  |  |   |        |  
|Comprehensive income                           |  | $                  | 10,953 |                  |  | $    | 7,747 |      |  | $ | 22,824 |  |  | $ | 15,968 |  
|                                               |  |                    |        |                  |  |      |       |      |  |   |        |  |  |   |        |  

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

6. INCOME TAXES

The income tax provision for the three and six-month periods ended June
30, 2002 and 2001, differs from the statutory income tax computation primarily
due to permanent differences and the provision for state income taxes. These
provisions reflect effective income tax rates of 40.0% for the 2002 periods and
42.0% for the 2001 periods.

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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,        
|                                                                           |                                                                 |                                            |        |                    |        |                 
|                                                                           |                                                                 |                                            |        | 2002               |        | 2001             |        | 2002   |       | 2001
|                                                                           |                                                                 |                                            |        |                    |        |                  |        |        |       |     
|Numerator:                                                                 |                                                                 |                                            |        |                    |        |                  |        |        |       |      |        |        |        |   |        |       
|                                                                           |                                                                 | Net income                                 |        | $                  | 10,951 |                  |        | $      | 7,732 |      |        | $      | 22,643 |   |        | $      | 16,240 | 
|                                                                           |                                                                 | Add convertible notes interest,
net of tax |        |                    | 2,434  |                  |        |        |      |      |        |        | 4,841  |   |        |        |       | 
|                                                                           |                                                                 |                                            |        |                    |        |                  |        |        |       |      |        |        |        |   |        |       
|                                                                           |                                                                 | Adjusted net income                        |        | $                  | 13,385 |                  |        | $      | 7,732 |      |        | $      | 27,484 |   |        | $      | 16,240 | 
|                                                                           |                                                                 |                                            |        |                    |        |                  |        |        |       |      |        |        |        |   |        |       
|Denominator:                                                               |                                                                 |                                            |        |                    |        |                  |        |        |       |      |        |        |        |   |        |       
|                                                                           | Denominator for basic income per share
Weighted-average shares |                                            |        | 47,901             |        |                  |        | 46,986 |       |      |        | 47,726 |        |   |        | 46,787 |       
|                                                                           | Effective of dilutive securities
  Employee stock options      |                                            |        | 1,871              |        |                  |        | 1,940  |       |      |        | 1,770  |        |   |        | 1,938  |       
|                                                                           |                                                                 | Convertible notes                          |        |                    | 11,899 |                  |        |        |      |      |        |        | 11,899 |   |        |        |       | 
|                                                                           |                                                                 |                                            |        |                    |        |                  |        |        |       |      |        |        |        |   |        |       
|Denominator for diluted income
per share
Adjusted weighted average shares |                                                                 |                                            | 61,671 |                    |        |                  | 48,926 |        |       |      | 61,395 |        |        |   | 48,725 |       
|                                                                           |                                                                 |                                            |        |                    |        |                  |        |        |       |      |        |        |        |   |        |       
|Basic net income per share                                                 |                                                                 | $                                          | 0.23   |                    |        | $                | 0.17   |        |       | $    | 0.47   |        |        | $ | 0.35   |       
|                                                                           |                                                                 |                                            |        |                    |        |                  |        |        |       |      |        |        |        |   |        |       
|Diluted net income per share                                               |                                                                 | $                                          | 0.22   |                    |        | $                | 0.16   |        |       | $    | 0.45   |        |        | $ | 0.33   |       
|                                                                           |                                                                 |                                            |        |                    |        |                  |        |        |       |      |        |        |        |   |        |       

During the three-month period ended June 30, 2002, employees exercised
options to acquire 864,917 shares of common stock at an average exercise price
of $9.91 per share. During the six-month period ended June 30, 2002, employees
exercised options to acquire 922,776 shares of common stock at an average
exercise price of $9.83 per share, and the Company issued 59,022 shares of
common stock at a price of $17.49 per share under its Employee Stock Purchase
Plan. There were 26% more diluted shares outstanding in both the three and
six-month periods ended June 30, 2002, than in the comparable periods of 2001,
primarily as a result of the Companys two outstanding series of convertible
subordinated notes.

8. 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.

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PROVINCE HEALTHCARE COMPANY AND SUBSIDIARIES

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

General and Professional Liability Risks

Effective January 1, 2002, the Company purchased liability
claims made reporting policy for professional and general liability risks.
This coverage is subject to a $750,000 deductible per occurrence for general
and professional liability and an additional $2.0 million self-insured
retention for professional and general liability. The policy provides coverage up to
$51.0 million for claims incurred during the annual policy term. The Company
has established reserves for estimated claims within the deductible and
self-insured retention.

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.

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 minimal adjustments for the
three and six-month periods ended June 30, 2002 and 2001.

Financial Instruments

Interest rate swap agreements are used to manage the Companys interest
rate exposure under the revolving credit facility. The Company maintains a
$28.5 million interest rate swap agreement with a 5.625% fixed interest rate.
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.

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##### Table of Contents






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, 2002, we owned or leased 20 general acute care hospitals in 13 states with
a total of 2,315 licensed beds, and managed 35 hospitals in 14 states, with a
total of 2,863 licensed beds.

Our owned and leased hospitals accounted for 97.8% and 97.0% of our net
operating revenue in the three months ended June 30, 2002 and 2001,
respectively, and 97.8% and 96.8% of our net operating revenue in the six
months ended June 30, 2002 and 2001, 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.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, information
expressed as a
percentage of net operating revenue. Such information has been derived from
our unaudited Condensed Consolidated Statements of Income included elsewhere in
this report. The results of operations for the periods presented include
hospitals from their acquisition dates, as discussed in the notes to the
condensed consolidated financial statements.

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|                              |  |                             |       |                    |  |                   |       |   |  |  |       |  
|----------------------------- |  | --------------------------- | ----- | ------------------ |  | ----------------- | ----- | - |  |  | ----- | -
|                              |  | Three Months Ended June 30, |       | Percentage        
|                              |  |                             |       | Increase(Decrease)
|                              |  | 2002                        |       | 2001               |  | of Dollar Amounts
|                              |  |                             |       |                    |  |                  
|Net operating revenue         |  |                             | 100.0 | %                  |  |                   | 100.0 | % |  |  | 40.9  | %
|Operating expenses (1)        |  |                             | (81.3 | )                  |  |                   | (81.7 | ) |  |  | 40.1  |  
|                              |  |                             |       |                    |  |                   |       |   |  |  |       |  
|EBITDA (2)                    |  |                             | 18.7  |                    |  |                   | 18.3  |   |  |  | 44.3  |  
|Depreciation and amortization |  |                             | (5.0  | )                  |  |                   | (5.6  | ) |  |  | 26.7  |  
|Interest                      |  |                             | (3.2  | )                  |  |                   | (1.7  | ) |  |  | 158.9 |  
|Other                         |  |                             |      |                    |  |                   | (0.1  | ) |  |  | (78.8 | )
|                              |  |                             |       |                    |  |                   |       |   |  |  |       |  
|Income before income taxes    |  |                             | 10.5  |                    |  |                   | 10.9  |   |  |  | 36.9  |  
|Provision for income taxes    |  |                             | (4.2  | )                  |  |                   | (4.6  | ) |  |  | 30.4  |  
|                              |  |                             |       |                    |  |                   |       |   |  |  |       |  
|Net income                    |  |                             | 6.3   | %                  |  |                   | 6.3   | % |  |  | 41.6  | %
|                              |  |                             |       |                    |  |                   |       |   |  |  |       |  

|                              |  |                           |       |                    |  |                   |       |   |  |  |       |  
|----------------------------- |  | ------------------------- | ----- | ------------------ |  | ----------------- | ----- | - |  |  | ----- | -
|                              |  | Six Months Ended June 30, |       | Percentage        
|                              |  |                           |       | Increase(Decrease)
|                              |  | 2002                      |       | 2001               |  | of Dollar Amounts
|                              |  |                           |       |                    |  |                  
|Net operating revenue         |  |                           | 100.0 | %                  |  |                   | 100.0 | % |  |  | 38.1  | %
|Operating expenses (1)        |  |                           | (81.2 | )                  |  |                   | (81.0 | ) |  |  | 38.3  |  
|                              |  |                           |       |                    |  |                   |       |   |  |  |       |  
|EBITDA (2)                    |  |                           | 18.8  |                    |  |                   | 19.0  |   |  |  | 36.9  |  
|Depreciation and amortization |  |                           | (4.8  | )                  |  |                   | (5.5  | ) |  |  | 20.2  |  
|Interest                      |  |                           | (2.9  | )                  |  |                   | (1.9  | ) |  |  | 104.5 |  
|Other                         |  |                           |      |                    |  |                   | (0.1  | ) |  |  | (67.9 | )
|                              |  |                           |       |                    |  |                   |       |   |  |  |       |  
|Income before income taxes    |  |                           | 11.1  |                    |  |                   | 11.5  |   |  |  | 34.8  |  
|Provision for income taxes    |  |                           | (4.4  | )                  |  |                   | (4.9  | ) |  |  | 28.4  |  
|                              |  |                           |       |                    |  |                   |       |   |  |  |       |  
|Net income                    |  |                           | 6.7   | %                  |  |                   | 6.6   | % |  |  | 39.4  | %
|                              |  |                           |       |                    |  |                   |       |   |  |  |       |  



---

|(1) |  | Operating expenses represent expenses before income taxes, interest,
minority interest, depreciation and amortization expense and loss on sale
of assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | EBITDA represents the sum of income before income taxes, interest,
minority interest, depreciation and amortization, and loss on sale of
assets. We understand that industry analysts generally consider EBITDA to
be one measure of the financial performance of a company that is presented
to assist investors in analyzing the operating performance of the Company
and its ability to service debt. We believe that an increase in EBITDA
level is an indicator of our improved ability to service existing debt, to
sustain potential future increases in debt and to satisfy capital
requirements. However, EBITDA 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. Given that EBITDA is not a
measurement determined in accordance with accounting principles generally
accepted in the United States and is thus susceptible to varying
calculations, EBITDA, as presented, may not be comparable to other
similarly titled measures of other companies.

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Selected Operating Statistics  Owned or Leased Hospitals

The following table sets forth certain operating statistics for our
companys owned or leased hospitals for each of the periods presented.

|                                          |  |                    |             |                  |  |      |             |      |  |   |             |   |  |   |             |  
|----------------------------------------- |  | ------------------ | ----------- | ---------------- |  | ---- | ----------- | ---- |  | - | ----------- | - |  | - | ----------- | -
|                                          |  | Three Months Ended |             | Six Months Ended
|                                          |  | June 30,           |             | June 30,        
|                                          |  |                    |             |                 
|                                          |  | 2002               |             | 2001             |  | 2002 |             | 2001
|                                          |  |                    |             |                  |  |      |             |     
|Consolidated Hospitals:                   |  |                    |             |                  |  |      |             |      |  |   |             |   |  |   |             |  
|Number of hospitals at end of period      |  |                    | 20          |                  |  |      | 14          |      |  |   | 20          |   |  |   | 14          |  
|Licensed beds at end of period            |  |                    | 2,315       |                  |  |      | 1,393       |      |  |   | 2,315       |   |  |   | 1,393       |  
|Beds in service at end of period          |  |                    | 1,905       |                  |  |      | 1,291       |      |  |   | 1,905       |   |  |   | 1,291       |  
|Inpatient admissions                      |  |                    | 17,849      |                  |  |      | 12,501      |      |  |   | 35,848      |   |  |   | 25,914      |  
|Patient days                              |  |                    | 76,425      |                  |  |      | 53,963      |      |  |   | 156,754     |   |  |   | 110,800     |  
|Adjusted patient days                     |  |                    | 133,444     |                  |  |      | 88,552      |      |  |   | 263,340     |   |  |   | 181,232     |  
|Average length of stay (days)             |  |                    | 4.3         |                  |  |      | 4.3         |      |  |   | 4.4         |   |  |   | 4.3         |  
|Occupancy rates (average licensed beds)   |  |                    | 36.3        | %                |  |      | 42.6        | %    |  |   | 37.4        | % |  |   | 43.9        | %
|Occupancy rates (average beds in service) |  |                    | 44.1        | %                |  |      | 45.9        | %    |  |   | 45.5        | % |  |   | 47.4        | %
|Gross inpatient revenue                   |  | $                  | 204,689,260 |                  |  | $    | 148,217,091 |      |  | $ | 420,078,438 |   |  | $ | 297,324,707 |  
|Gross outpatient revenue                  |  |                    | 152,541,998 |                  |  |      | 94,987,243  |      |  |   | 285,409,088 |   |  |   | 188,961,118 |  

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001

Net operating revenue was $174.0 million for the three months ended June
30, 2002, compared to $123.5 million for the comparable period of 2001, an
increase of $50.5 million, or 40.9%. This represented an increase in net
patient service revenue generated by hospitals owned during both periods of
$2.0 million. Included in net patient revenue growth was an approximate 2.6%
growth in net patient revenues, excluding closed units, of hospitals owned
during both periods. The remaining increase is due primarily to net operating
revenues generated by the hospitals acquired in 2001 and 2002.

Operating expenses were $141.4 million, or 81.3% of net operating revenue,
for the three months ended June 30, 2002, compared to $100.9 million, or 81.7%
of net operating revenue, for the comparable period of 2001. Purchased
services, as a percentage of net operating revenue, increased to 10.5% for the
three months ended June 30, 2002, compared to 9.7% for the comparable period of
the prior year. This increase is primarily attributable to the hospitals
acquired in the last six months of 2001. Also, temporary outside vendors are
being utilized to assist with accounts receivable management, resulting in
aggressive collection efforts and reduction in accounts receivable days.
Supplies increased to 11.8% of net operating revenue, for the three months
ended June 30, 2002, compared to 10.8% of net operating revenue, for the
comparable period of 2001, due primarily to the hospitals acquired in 2001 and
2002. The provision for doubtful accounts was 7.3% of net operating revenue
for the three months ended June 30, 2002, compared to 9.6% for the comparable
period of 2001. This improvement resulted primarily from an aggressive program
to increase front-end collections and reduce overall days outstanding.

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EBITDA was $32.6 million, or 18.7% of net operating revenue, for the three
months ended June 30, 2002, compared to $22.6 million, or 18.3% of net
operating revenue, for the comparable period of 2001.

Depreciation and amortization expense was $8.8 million, or 5.0% of net
operating revenue, for the three months ended June 30, 2002, compared to $6.9
million, or 5.6% of net operating revenue for the comparable period of 2001.
The increase in depreciation and amortization resulted primarily from capital
expenditures at hospitals owned during both periods, offset by a decrease in
amortization expense related to our adoption of SFAS No. 142.

Interest expense was $5.5 million for the three months ended June 30,
2002, compared to $2.1 million for the comparable period of 2001, an increase
of $3.4 million or 158.9%, primarily related to interest on the 4 1/4%
convertible subordinated notes issued in October 2001.

Income before provision for income taxes was $18.2 million for the three
months ended June 30, 2002, compared to $13.4 million for the comparable period
of 2001, an increase of $4.8 million or 36.9%. Our provision for income taxes was $7.3 million for the three months ended
June 30, 2002, compared to $5.6 million for the comparable period of 2001.

As a result of the foregoing, our net income was $11.0 million, or 6.3% of
net operating revenue, for the three months ended June 30, 2002, compared to
$7.7 million, or 6.3% of net operating revenue for the comparable period of
2001. The comparison of net income for the three months ended June 30, 2002,
to the comparable period of 2001, was materially impacted by the adoption of
Statement of Financial Accounting Standards No. 142, effective January 1, 2002,
which requires that goodwill no longer be amortized.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001

Net operating revenue was $339.6 million for the six months ended June 30,
2002, compared to $246.0 million for the comparable period of 2001, an increase
of $93.6 million or 38.1%. Cost report settlements and the filing of cost
reports resulted in minimal revenue adjustments for the six months ended June
30, 2002 and 2001. Net patient service revenue generated by hospitals owned
during both periods increased $11.5 million, or 4.9%, resulting from inpatient
volume increases, new services and price increases. The remaining increase
relates to hospitals acquired in 2001 and 2002.

Operating expenses were $275.7 million, or 81.2% of net operating revenue,
for the six months ended June 30, 2002, compared to $199.3 million, or 81.0% of
net operating revenue, for the comparable period of 2001. Purchased services,
as a percentage of net operating revenue, increased to 10.4% for the six months
ended June 30, 2002, compared to 9.4% for the comparable period of the prior
year, primarily attributable to hospitals acquired in 2001 and 2002. Also,
temporary outside vendors are being utilized to assist with accounts receivable
management, resulting in aggressive collection efforts and reduction in days
outstanding. Supplies increased to 11.8% of net operating revenue for the six
months ended June 30, 2002, compared to 11.0% for the comparable period of the
prior year, due primarily to the hospitals

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##### Table of Contents



acquired in 2001 and 2002. The provision for doubtful accounts decreased to
8.1% of net operating revenue in 2002 from 9.3% of net operating revenue in
2001, primarily as a result of the focus on accounts receivable management.

EBITDA was $63.9 million, or 18.8% of net operating revenue, for the six
months ended June 30, 2002, compared to $46.7 million, or 19.0% of net
operating revenue, for the comparable period of 2001.

Depreciation and amortization expense was $16.3 million, or 4.8% of net
operating revenue, for the six months ended June 30, 2002, compared to $13.6
million, or 5.5% of net operating revenue for the comparable period of 2001.
The increase in depreciation and amortization resulted primarily from hospitals
acquired in 2001, offset by a decrease in amortization expense related to our
adoption of SFAS No. 142.

Interest expense was $9.7 million for the six months ended June 30, 2002,
compared to $4.8 million for the comparable period of 2001, an increase of $5.0
million or 104.5% primarily related to interest on the 4 1/4% convertible
subordinated notes issued in October 2001.

Income before provision for income taxes was $37.7 million for the six
months ended June 30, 2002, compared to $28.0 million for the comparable period
of 2001, an increase of $9.7 million or 34.8%. Our provision for income taxes was $15.1 million for the six months ended
June 30, 2002, compared to $11.8 million for the comparable period of 2001.

As a result of the foregoing, our net income was $22.6 million, or 6.7% of net
operating revenue, for the six months ended June 30, 2002, compared to $16.2
million, or 6.6% of net operating revenue for the comparable period
of 2001. The comparison of net income for the six months ended June
30, 2002, to the comparable period of 2001, was materially impacted
by the adoption of Statement of Financial Accounting Standards No.
142, effective January 1, 2002, which requires that goodwill no
longer be amortized.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2002, we had working capital of $106.1 million, including cash
and cash equivalents of $23.0 million. The ratio of current assets to current
liabilities was 2.5 to 1.0 at June 30, 2002, and 3.7 to 1.0 at December 31,
2001.

Cash provided by operations was $52.6 million for the six months ended
June 30, 2002. Cash used in investing activities was $197.8 million for the
six months ended June 30, 2002, relating primarily to the purchase of Memorial
Hospital of Martinsville and Henry County in May 2002, and Los Alamos Medical
Center in June 2002. Net cash provided by financing activities was $128.9
million for the six months ended June 30, 2002, primarily as a result of
borrowings under our revolving credit facility to fund acquisitions and
issuance of common stock through exercises of stock options under our Long-Term
Equity Incentive Plan and through our Employee Stock Purchase Plan.

Total long-term obligations, less current maturities, increased to $491.3
million at June 30, 2002, from $330.8 million at December 31, 2001. The
increase resulted primarily from borrowings to finance the two hospitals
acquired in the second quarter of 2002 and the $40.2

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million in long-term debt related to the properties financed under our amended
end-loaded lease facility in the first quarter of 2002. At June 30,
2002, we had $82.4 million available for borrowing under our senior
credit facility.

On April 30, 2002, we effected a three-for-two stock split, in the form of
a 50% stock dividend, to stockholders of record on April 20, 2002. All
historical references to common share and earnings per share amounts included
in this Report and in our condensed consolidated financial statements and notes
thereto have been restated to reflect the three-for-two split.

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. 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, excluding acquisitions, for the six months ended
June 30, 2002 and 2001, were $25.8 million and $28.3 million, respectively,
inclusive of construction projects. Capital expenditures for the 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 2002 of approximately $27.4 million, exclusive of any
acquisitions of businesses or construction projects. Planned capital
expenditures for 2002 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.

CRITICAL ACCOUNTING POLICIES AND IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

A description of our critical accounting policies is contained in our
Annual Report on Form 10-K for the year ended December 31, 2001. We have made
no changes in those policies since year end.

Effective January 1, 2002, we adopted Statement of Financial Accounting
Standards No. 142, (SFAS No. 142) Goodwill and Other Intangible Assets.
Under the new rules in SFAS No. 142, goodwill and indefinite lived intangible
assets are no longer amortized, but are subject to annual impairment tests, or
more frequently if certain indicators arise. We have no intangible assets,
other than goodwill.

We applied the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of SFAS No. 142 is expected to result in an increase
in net income of approximately $4.4 million ($0.09 per share) per year. The
required impairment tests of goodwill as of January 1, 2002, was

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completed in the second quarter of 2002, and the results of those tests had no
effect on our operations or financial position.

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, 2002, approximately 73% of our outstanding debt amounts were
effectively at a fixed rate. Our interest rate swap contract allows us to
periodically exchange fixed rate and floating rate payments over the life of
the agreement. Floating-rate payments are based on LIBOR and fixed-rate
payments are dependent upon market levels at the time the interest rate swap
was consummated. Our interest rate swap is a cash flow hedge, which
effectively converted an aggregate notional amount of $28.5 million of floating
rate borrowings to fixed rate borrowings at June 30, 2002. Our policy is not
to hold or issue derivatives for trading purposes and to avoid derivatives with
leverage features. We are exposed to credit losses in the event of
nonperformance by the counterparty to the financial instrument. We anticipate
that the counterparty will fully satisfy its obligations under the contract.

GENERAL

The Medicare program accounted for approximately 55.3% and 56.4% of
hospital patient days for the three and six months ended June 30, 2002,
respectively. The Medicaid programs accounted for approximately 19.1% of
hospital patient days for both the three and six-month periods ended June 30,
2002. The payment rates under the Medicare program for inpatients are
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.

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.

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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 attract and retain qualified personnel and recruit physicians;                                                                                 
|
| |  |  | potential federal or state investigations;                                                                                                                    
|
| |  |  | fluctuations in the market value of our common stock or notes;                                                                                                
|
| |  |  | 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;
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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the three and six-month periods ended June 30, 2002, 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, 2001. Our only derivative instrument relates to an interest rate swap
agreement.

PART II
OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On May 22, 2002, we filed with the Secretary of State of the State of
Delaware a Certificate of Amendment to our Amended and Restated Certificate of
Incorporation. The purpose of the amendment was to increase the number of
authorized shares of our common stock from 50,000,000 to 150,000,000
shares, which will enable us to continue our acquisition strategy or to engage in
future equity financings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On Wednesday, May 22, 2002, we held our 2002 annual meeting of
shareholders. At such meeting, the shareholders voted on the following five
proposals:

First, the shareholders voted on the election of eight nominees to the
Board of Directors. The incumbent Board of Directors, consisting of Martin S.
Rash, John M. Rutledge, Stephen M. Ray, 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 eight members. The Board of Directors
then nominated Martin S. Rash, John M. Rutledge, Stephen M. Ray, 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 2003 annual meeting of
shareholders. The directors were elected by the following vote:

|                  |  |     |            |           |  |          |         | 
|----------------- |  | --- | ---------- | --------- |  | -------- | ------- | 
|                  |  |     |            |           |  | Withhold
|Name              |  | For |            | Authority
|                  |  |     |            |          
|Martin S. Rash    |  |     | 42,523,233 |           |  |          | 283,351 | 
|John M. Rutledge  |  |     | 42,520,170 |           |  |          | 286,414 | 
|Stephen M. Ray    |  |     | 42,524,992 |           |  |          | 281,592 | 
|Joseph P. Nolan   |  |     | 42,524,767 |           |  |          | 281,817 | 
|David L. Steffy   |  |     | 42,527,767 |           |  |          | 278,817 | 
|Winfield C. Dunn  |  |     | 42,522,517 |           |  |          | 284,067 | 
|Paul J. Feldstein |  |     | 42,527,542 |           |  |          | 279,042 | 
|David R. Klock    |  |     | 42,527,992 |           |  |          | 278,592 | 

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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, 2002. At the annual meeting, the shareholders voted to
ratify the appointment of Ernst & Young LLP, with 41,522,007
votes for, 1,252,267
votes against and 32,310 abstentions.

Third, the shareholders voted to approve the adoption of the Amended and
Restated Province Healthcare Company 1997 Long-Term Equity Incentive Plan (the
LTEIP). Prior to the annual meeting the Board of Directors had amended and
restated the plan, subject to shareholder approval, to (i) increase the number
of authorized shares of common stock that are available for incentive awards
under the plan by 4,500,000 shares which resulted in an increase from 8,120,286
to 12,620,286 shares, (ii) increase the number of shares that can be available
under awards to an individual in a year to 841,352, (iii) limit the methods of
payment that our company may accept on exercise of an option, (iv) eliminate
the automatic termination of the plan and (v) limit awards to incentive stock
options, nonqualified stock options and restricted stock. At the annual
meeting, the shareholders voted to approve the LTEIP, with 29,925,609 votes
for, 9,877,069 votes against, 86,539 abstentions and 2,917,367 broker
non-votes.

Fourth, the shareholders voted to approve the adoption of the Amended and
Restated Province Healthcare Company Employee Stock Purchase Plan (the ESPP).
Prior to the annual meeting, the Board of Directors had amended and restated
the plan, subject to shareholder approval, to (i) increase the number of
authorized shares of common stock that are available for incentive awards under
the plan by 562,500 which resulted in an increase from 562,500 to 1,125,000
shares, and (ii) to eliminate the three month employment requirement for
eligibility to participate in the plan. At the annual meeting, the
shareholders voted to approve the ESPP, with 37,973,347 votes for,
1,861,378
votes against, 54,492 abstentions and 2,917,367 broker non-votes.

Fifth, the shareholders voted to approve the adoption of the Certificate
of Amendment to our Amended and Restated Certificate of Incorporation (the
Amendment). Prior to the annual meeting, the Board of Directors had adopted,
subject to shareholder approval, an amendment to increase the number of
authorized shares of our common stock from 50,000,000 to 150,000,000. At the
annual meeting, the shareholders voted to approve the Amendment, with
36,816,574 votes for, 5,596,598 votes against, and 13,411 abstentions.

ITEM 5. OTHER INFORMATION

The deadline for delivering your notice of a shareholder proposal, other
than a proposal to be included in the proxy statement, for the 2003 annual
meeting of shareholders will be March 7, 2003, pursuant to Rule 14a-4 under the
Securities Exchange Act of 1934. The persons named as proxies in the proxy
statement may exercise discretionary voting authority with respect to any
matter that is not submitted to us by such date.

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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)                               
|       
|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 (b)                                                                                                                     
|       
|10.1    |  | Amended and Restated Province Healthcare Company 1997 Long-Term Equity Incentive Plan (c) *                                                                                        
|       
|10.2    |  | Amended and Restated Province Healthcare Company Employee
Stock Purchase Plan (c) *                                                                                                



---

|(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 Definitive Proxy Statement on Schedule 14A, filed on
April 26, 2002, Commission File No. 000-23639.            
|   
|*   |  | Management Compensatory Plan or Arrangement                                                                                                                                          

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(b)  Reports on Form 8-K

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



| | (i)   |  | Form 8-K, filed on April 10, 2002, with respect
to the announcement that our Board of Directors approved a
3-for-2 stock split to be effected in the form of a 50% stock
dividend.
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (ii)  |  | Form 8-K, filed on May 16, 2002, with respect to
the closing of the acquisition of Memorial Hospital of
Martinsville and Henry County in Martinsville, Virginia.                  
|
| | (iii) |  | Form 8-K, filed on June 3, 2002, with respect to
the closing of the acquisition of Los Alamos Medical Center in
Los Alamos, New Mexico.                                           

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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 14, 2002 |  | By:                         |  | /s/ Brenda B.
Rector                          
|                      |  |                             |  |                                               
|                      |  |                             |  | Brenda B. Rector
Vice President and Controller

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