Exhibit 99.1
 PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
 INDEPENDENT AUDITORS REPORT
 AND
 CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008 AND 2007




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##### 



CONTENTS
 PAGEINDEPENDENT AUDITORS REPORT
    
    
    1CONSOLIDATED FINANCIAL STATEMENTSConsolidated balance sheets
    
    
    2-3Consolidated statements of income
    
    
    4Consolidated statements of stockholders equity
    
    
    5Consolidated statements of cash flows
    
    
    6-7Notes to consolidated financial statements
    
    
    8-32




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##### 



INDEPENDENT AUDITORS REPORT
 
     
 1




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 ASSETS
 DECEMBER 31,2008
    
    
    2007CURRENT ASSETSCash and cash equivalents
    
    $
    42,805,635
    
    
    $
    35,821,948Restricted cash
    
    
    2,081,456
    
    
    
    1,081,017Patient accounts receivable, net of allowance
for doubtful accounts of $65,440,000 in 2008
and $25,305,000 in 2007
    
    
    176,834,552
    
    
    
    108,867,874Related party receivables
    
    
    1,012,731
    
    
    
    630,007Notes receivable
    
    
    1,050,000
    
    
    
    Estimated third-party payor settlements
    
    
    
    
    
    
    915,757Supplies inventory
    
    
    6,076,691
    
    
    
    3,919,572Prepaid expenses and other current assets
    
    
    35,722,432
    
    
    
    838,112Deposits
    
    
    3,418,066
    
    
    
    1,208,256Income taxes receivable
    
    
    838,112
    
    
    
    455,169Total current assets
    
    
    269,839,675
    
    
    
    191,788,190PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization
    
    
    205,387,793
    
    
    
    136,666,473INVESTMENTS IN JOINT VENTURES
    
    
    705,777
    
    
    
    GOODWILL
    
    
    13,707,803
    
    
    
    13,707,803OTHER ASSETS
    
    
    3,921,293
    
    
    
    395,220$
    493,562,341
    
    
    $
    342,557,686
 2




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##### 



LIABILITIES AND STOCKHOLDERS EQUITY
 DECEMBER 31,2008
    
    
    2007CURRENT LIABILITIESAccounts payable
    
    $
    34,942,071
    
    
    $
    27,896,703Accrued expenses
    
    
    74,379,591
    
    
    
    47,801,503Medical claims payable
    
    
    4,337,241
    
    
    
    5,828,319Related party payables
    
    
    638,060
    
    
    
    9,673,171Income taxes payable
    
    
    
    
    
    
    558,622Estimated third-party payor settlements
    
    
    248,405
    
    
    
    Current portion of capital leases
    
    
    4,122,950
    
    
    
    2,942,322Current portion of long-term debt
    
    
    53,106,018
    
    
    
    28,323,213Total current liabilities
    
    
    171,774,336
    
    
    
    123,023,853LONG-TERM LIABILITIESAccrued professional liability reserve
    
    
    
    
    
    
    45,429Sale lease-back liability
    
    
    158,000,000
    
    
    
    98,000,000Capital leases, net of current portion
    
    
    13,964,578
    
    
    
    12,236,871Long-term debt, net of current portion
    
    
    65,549,351
    
    
    
    54,542,420Total long-term liabilities
    
    
    237,513,929
    
    
    
    164,824,720STOCKHOLDERS EQUITYCommon
stock, $0.01 par value, 3,000
shares
authorized, 30 shares issued and
outstanding
    
    
    1
    
    
    
    1Additional paid in capital
    
    
    2,999
    
    
    
    2,999Note receivable from related party
    
    
    (3,110,975
    )
    
    
    (35,762,558
    )Retained earnings
    
    
    10,840,152
    
    
    
    49,089,475Non-controlling interest
    
    
    76,541,899
    
    
    
    41,379,19684,274,076
    
    
    
    54,709,113$
    493,562,341
    
    
    $
    342,557,686
 See accompanying notes.
 3




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 YEARS ENDED DECEMBER 31,2008
    
    
    2007REVENUENet patient service revenue
    
    $
    1,161,588,573
    
    
    $
    718,642,341Premium revenue
    
    
    23,759,229
    
    
    
    27,932,067Other revenue
    
    
    10,971,346
    
    
    
    6,487,3931,196,319,148
    
    
    
    753,061,801OPERATING EXPENSESCompensation and employee benefits
    
    
    486,370,624
    
    
    
    301,833,718Provision for doubtful accounts
    
    
    254,060,627
    
    
    
    125,405,390General and administrative
    
    
    169,032,727
    
    
    
    121,010,000Medical supplies
    
    
    98,577,638
    
    
    
    57,162,219Professional services
    
    
    65,392,697
    
    
    
    43,337,880Depreciation and amortization
    
    
    18,294,556
    
    
    
    7,901,078Medical claims
    
    
    3,817,340
    
    
    
    5,209,737(Gain) on sale of assets
    
    
    (1,500
    )
    
    
    (5,486
    )1,095,544,709
    
    
    
    661,854,536INCOME FROM OPERATIONS
    
    
    100,774,439
    
    
    
    91,207,265INTEREST EXPENSE, net
    
    
    (19,417,215
    )
    
    
    (5,574,878
    )LOSS FROM JOINT VENTURES
    
    
    (119,223
    )
    
    
    INCOME BEFORE PROVISION FOR INCOME TAXES
    
    
    81,238,001
    
    
    
    85,632,387INCOME TAX PROVISION
    
    
    1,286,887
    
    
    
    1,249,091INCOME BEFORE ALLOCATION TO
NON-CONTROLLING INTEREST
    
    
    79,951,114
    
    
    
    84,383,296ALLOCATION OF INCOME TO
NON-CONTROLLING INTEREST
    
    
    (57,138,689
    )
    
    
    (69,983,150
    )CONTROLLING INTEREST IN NET INCOME
    
    $
    22,812,425
    
    
    $
    14,400,146
 See accompanying notes.
 4




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Common
    
    
    Additional
    
    
    Note Receivable
    
    
    Note Receivable
    
    
    Retained
    
    
    Non-controllingShares
    
    
    Stock
    
    
    Paid in Capital
    
    
    from Stockholder
    
    
    from Related Party
    
    
    Earnings
    
    
    Interest
    
    
    TotalBALANCE,
December 31, 2006
    
    
    30
    
    
    $
    1
    
    
    $
    2,999
    
    
    $
    (9,000,000
    )
    
    $
    
    
    
    $
    43,689,329
    
    
    $
    31,299,046
    
    
    $
    65,991,375Distributions to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,000,000
    )
    
    
    
    
    
    
    (9,000,000
    )Notes receivable collected from stockholder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,000,000Notes payable proceeds to be received from Prime A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,762,558
    )
    
    
    
    
    
    
    
    
    
    
    (35,762,558
    )Controlling interest in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,400,146
    
    
    
    
    
    
    
    14,400,146Distributions to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,903,000
    )
    
    
    (59,903,000
    )Non-controlling interest in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,983,150
    
    
    
    69,983,150BALANCE,
December 31, 2007
    
    
    30
    
    
    
    1
    
    
    
    2,999
    
    
    
    
    
    
    
    (35,762,558
    )
    
    
    49,089,475
    
    
    
    41,379,196
    
    
    
    54,709,113Distributions to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,061,748
    )
    
    
    
    
    
    
    (61,061,748
    )Notes receivable collected from related party
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,762,558
    
    
    
    
    
    
    
    
    
    
    
    35,762,558Notes receivable from Prime A
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,110,975
    )
    
    
    
    
    
    
    
    
    
    
    (3,110,975
    )Controlling interest in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,812,425
    
    
    
    
    
    
    
    22,812,425Distributions to non-controlling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,975,986
    )
    
    
    (21,975,986
    )Non-controlling interest in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,138,689
    
    
    
    57,138,689BALANCE,
December 31, 2008
    
    
    30
    
    
    $
    1
    
    
    $
    2,999
    
    
    $
    
    
    
    $
    (3,110,975
    )
    
    $
    10,840,152
    
    
    $
    76,541,899
    
    
    $
    84,274,076
 See accompanying notes.
 5




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED DECEMBER 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESControlling interest in net income
    
    $
    22,812,425
    
    
    $
    14,400,146Adjustments to reconcile controlling interest in net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    18,294,556
    
    
    
    7,901,078(Gain) on sale of assets
    
    
    (1,500
    )
    
    
    (5,486
    )Loss from joint venture
    
    
    119,223
    
    
    
    Provision for doubtful accounts
    
    
    254,060,627
    
    
    
    125,405,390Non controlling interest in net income
    
    
    57,138,689
    
    
    
    69,983,150Changes in assets and liabilities net of acquisitions:Patient accounts receivable
    
    
    (322,027,305
    )
    
    
    (180,970,003
    )Supplies inventory
    
    
    (1,124,944
    )
    
    
    (208,825
    )Prepaid expenses and other assets
    
    
    3,768,744
    
    
    
    (10,977,615
    )Deposits
    
    
    (2,209,810
    )
    
    
    673,288Other assets
    
    
    (3,526,073
    )
    
    
    Due to/ from related parties
    
    
    (9,417,835
    )
    
    
    9,544,179Accounts payable
    
    
    7,045,368
    
    
    
    10,522,876Accrued expenses
    
    
    24,597,631
    
    
    
    29,501,492Medical claims payable
    
    
    (1,491,078
    )
    
    
    1,869,231Income taxes
    
    
    (941,565
    )
    
    
    (25,134
    )Estimated third-party payor settlements
    
    
    1,164,162
    
    
    
    (3,555,947
    )Pre-petition liabilities
    
    
    
    
    
    
    (1,219,450
    )Net assets of discontinued operation
    
    
    
    
    
    
    139,785Accrued professional liability reserve
    
    
    (45,429
    )
    
    
    (2,242,571
    )Net cash provided by operating activities
    
    
    48,215,886
    
    
    
    70,735,584CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (25,474,340
    )
    
    
    (17,008,262
    )Proceeds from the sale of assets
    
    
    10,194
    
    
    
    6,812Investment in joint venture
    
    
    (825,000
    )
    
    
    Additional purchase price paid to Vanguard Health System
due to working capital adjustment subsequent to acquisition
    
    
    
    
    
    
    (1,391,091
    )Cash paid for acquisitions, net of cash acquired
    
    
    (54,225,425
    )
    
    
    Advances on related party notes receivable
    
    
    (1,050,000
    )
    
    
    (14,300,207
    )Collection of related party notes receivable
    
    
    
    
    
    
    5,069,416Net cash used in investing activities
    
    
    (81,564,571
    )
    
    
    (27,623,332
    )CASH FLOWS FROM FINANCING ACTIVITIES(Decrease) increase in bank overdraft
    
    
    
    
    
    
    (1,159,486
    )Net borrowing on line of credit
    
    
    34,567,189
    
    
    
    18,452,257Net change in restricted cash
    
    
    (1,000,439
    )
    
    
    (1,081,017
    )Proceeds from long-term debt borrowing
    
    
    4,043,477
    
    
    
    25,242,985Proceeds from sale lease-back borrowings
    
    
    60,000,000
    
    
    
    Payments on long term debt
    
    
    (2,820,930
    )
    
    
    (6,182,335
    )Payments on capital lease obligations
    
    
    (4,070,774
    )
    
    
    (541,094
    )Proceeds from related party notes payables
    
    
    
    
    
    
    39,009,668Repayments on related party notes receivable
    
    
    35,762,558
    
    
    
    Advances on related party notes receivable
    
    
    (3,110,975
    )
    
    
    (34,993,316
    )Collection of stockholders notes receivable
    
    
    
    
    
    
    9,000,000Distribution to non-controlling interest
    
    
    (21,975,986
    )
    
    
    (59,903,000
    )Distribution to stockholder
    
    
    (61,061,748
    )
    
    
    (9,000,000
    )Net cash provided by (used in) financing activities
    
    
    40,332,372
    
    
    
    (21,155,338
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    6,983,687
    
    
    
    21,956,914CASH AND CASH EQUIVALENTS, beginning of year
    
    
    35,821,948
    
    
    
    13,865,034CASH AND CASH EQUIVALENTS, end of year
    
    $
    42,805,635
    
    
    $
    35,821,948
 6




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##### 



SUPPLEMENTAL CASH FLOW INFORMATION
 YEARS ENDED DECEMBER 31,2008
    
    
    2007Cash paid during the year for:Interest
    
    $
    20,233,889
    
    
    $
    7,434,641Income taxes
    
    $
    2,265,214
    
    
    $
    1,128,069SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIESCapital lease obligations incurred for the
acquisition of property and equipment
    
    $
    6,979,109
    
    
    $
    14,576,421Sale lease-back liability incurred for the
acquisition of various hospitals (see Note
9)
    
    $
    
    
    
    $
    83,762,000Notes payable proceeds deposited directly
with a related party by lender
    
    $
    
    
    
    $
    35,762,558
 See accompanying notes.
 7




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PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Nature of Business
   LicensedHospital
    
    Beds
    
    LocationDesert Valley Hospital (DVH)
    
    
    83
    
    
    VictorvilleChino Valley Medical Center (CVMC)
    
    
    126
    
    
    ChinoSherman Oaks Hospital (SOH)
    
    
    153
    
    
    Sherman OaksMontclair Hospital Medical Center (MHMC)
    
    
    102
    
    
    MontclairHuntington Beach Hospital (HBH)
    
    
    131
    
    
    Huntington BeachLa Palma Intercommunity Hospital (LPIH)
    
    
    141
    
    
    La PalmaWest Anaheim Medical Center (WAMC)
    
    
    219
    
    
    AnaheimParadise Valley Hospital (PVH)
    
    
    301
    
    
    National CityCentinela Hospital Medical Center (CHMC)
    
    
    370
    
    
    InglewoodGarden Grove Hospital Medical Center (GGHMC)
    
    
    167
    
    
    Garden GroveSan Dimas Community Hospital (SDCH)
    
    
    93
    
    
    San DimasEncino Hospital Medical Center (EHMC)
    
    
    151
    
    
    EncinoShasta Regional Medical Center (SRMC)
    
    
    246
    
    
    Redding
 Note 2  Organization and Summary of Significant Accounting Policies
 Basis of consolidation
   8




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Note 2  Organization and Summary of Significant Accounting Policies
 Basis of consolidation
  
  
   Net patient service revenue
 9




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Organization and Summary of Significant Accounting Policies
 Premium revenue and medical claims expense
 Supplies inventory
 Property and equipment
 Asset retirement obligations
 Use of estimates
 10




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##### 



Note 2  Organization and Summary of Significant Accounting Policies
 Income taxes
  Cash and cash equivalents
 Goodwill
  Fair value of financial instruments
 11




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 2  Organization and Summary of Significant Accounting Policies
 Recent Accounting Pronouncements
   12




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##### 



Note 3  Net Patient Service Revenue
  Medicare
  Medi-Cal
 Other
  13




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4  Acquisitions
    Allocation atMarch 1, 2007Inventories
    
    $
    500,000Land
    
    
    10,160,000Building andl land improvements
    
    
    12,380,000Equipment
    
    
    4,710,000Other  covenant not to compete
    
    
    250,000Net cash consideration
    
    $
    28,000,000
  14




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##### 



Note 4  Acquisitions
  Allocation atNovember 2, 2007Inventories
    
    $
    1,000,000Land
    
    
    16,100,000Building and land improvements
    
    
    31,833,000Equipment
    
    
    6,829,000Net cash consideration
    
    $
    55,762,000
   Allocation atJuly 1, 2008Prepaids and other current assets
    
    $
    325,897Supplies inventory
    
    
    403,432Land
    
    
    6,406,010Building and land improvements
    
    
    17,838,745Equipment
    
    
    4,517,923Accrued liabilities
    
    
    (439,780
    )Net cash consideration
    
    $
    29,052,227
 15




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 4  Acquisitions
   Allocation atJuly 1, 2008Prepaids and other current assets
    
    $
    70,142Supplies inventory
    
    
    375,743Land
    
    
    4,696,558Building and land improvements
    
    
    4,393,217Equipment
    
    
    4,471,668Accrued liabilities
    
    
    (730,552
    )Net cash consideration
    
    $
    13,276,776
   Allocation atJune 1, 2008Prepaids and other current assets
    
    $
    206,547Supplies inventory
    
    
    253,000Land
    
    
    3,769,354Building and land improvements
    
    
    6,069,069Equipment
    
    
    2,408,577Accrued liabilities
    
    
    (810,125
    )Net cash consideration
    
    $
    11,896,422
 16




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##### 



Note 5  New Operations
  Note 6  Concentration of Credit Risk
   17




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##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 7  Property and Equipment
  2008
    
    
    2007Land
    
    $
    42,275,328
    
    
    $
    26,210,000Buildings
    
    
    71,830,543
    
    
    
    51,383,935Building improvements
    
    
    11,075,807
    
    
    
    5,460,712Equipment
    
    
    117,992,936
    
    
    
    68,757,631Automobiles and aircraft
    
    
    3,524,198
    
    
    
    3,387,746Construction in progress (estimated cost to complete
at December 31, 2008 is approximately $1,785,000)
    
    
    3,776,686
    
    
    
    8,292,297250,475,498
    
    
    
    163,492,321Accumulated depreciation and amortization
    
    
    (45,087,705
    )
    
    
    (26,825,848
    )$
    205,387,793
    
    
    $
    136,666,473
  18




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##### 



Note 8  Long-Term Debt
  2008
    
    2007Line of credit with City National Bank,
secured by accounts receivable of DVH,
interest payable monthly at an annual rate
of prime (3.25% at December 31, 2008), due
September 1, 2009.
    
    $
    7,000,000
    
    
    $
    7,000,000Term loans with GE Commercial Finance,
secured by various equipment of DVH,
payable in monthly installments
ranging from approximately $7,000 to
$60,000 including interest at fixed
interest rates ranging from 6.59% to 7.43%
per annum, maturing in 2010.
    
    
    2,827,472
    
    
    
    4,526,344Term loan with City National Bank, secured
by equipment of CVMC, interest payable
monthly at an annual rate of prime (3.25%
at December 31, 2008), principal payable in
monthly payments of $116,667, maturing on
August 1, 2011.
    
    
    3,693,446
    
    
    
    5,093,450Bank note payable, secured by certain real
estate of DVMG, bearing interest at 5.75%
per annum, payable in monthly payments of
$1,258, maturing in August 2024.
    
    
    148,913
    
    
    
    154,903Note payable with City National Bank,
secured by equipment of SOH, bearing
interest at an annual rate of Prime (3.25%
at December 31, 2008), principal payable in
monthly payment of $63,837, maturing
September 1, 2012.
    
    
    2,872,642
    
    
    
    3,638,679Note payable with Medical Properties Trust
secured by certain equipment and purchase
options of SOH, bearing a fixed interest
rate of 11.21% per annum as of December 31,
2008. Interest only payments due monthly,
principal balance due at maturity on
December 30, 2020.
    
    
    5,000,000
    
    
    
    5,000,000Note payable with Medical Properties Trust
secured by certain equipment and purchase
options of MHMC, bearing a fixed interest
rate of 10.15% per annum. Interest only
payments due monthly, principal balance due
at maturity on August 9, 2021.
    
    $
    5,000,000
    
    
    $
    5,000,000
 19




---



##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 8  Long-Term Debt
 2008
    
    2007Note payable with Medical Properties Trust
secured by certain equipment and purchase
options of HBH, LPIH and WAMC, bearing a
fixed interest rate of 9.89% per annum as
of December 31, 2008. Interest only
payments due monthly, principal balance
due at maturity on November 8, 2021.
    
    $
    10,000,000
    
    
    $
    10,000,000Line of credit with Medical Properties
Trust secured by the building, building
improvements and all related receivables
of SRMC, interest payable monthly at an
annual rate of 9.25% as of December 31,
2008, maturing in November 2018.
    
    
    15,000,000
    
    
    
    Line of credit with Healthcare Finance
Group (HFG), secured by accounts
receivable of HBH, LPIH and WAMC, interest
payable monthly at an annual rate of LIBOR
+ 2.50% (5.25% at December 31, 2008),
maturing in November 2009.
    
    
    9,925,557
    
    
    
    12,360,880Line of credit with HFG, secured by
accounts receivable and inventory of SOH,
interest payable monthly at an annual rate
of LIBOR + 3.00% (5.75% at December 31,
2008), maturing in January 2010.
    
    
    4,015,691
    
    
    
    Line of credit with HFG, secured by
accounts receivable and inventory of CHMC,
interest payable monthly at an annual rate
of LIBOR + 3.00% (5.75% at December 31,
2008), maturing in December 2010.
    
    
    15,231,033
    
    
    
    Line of credit with HFG, secured by
accounts receivable and inventory of CVMC,
interest payable monthly at an annual rate
of LIBOR + 2.50% (5.25% at December 31,
2008), maturing in September 2011.
    
    
    6,263,196
    
    
    
    Line of credit with HFG, secured by
accounts receivable and inventory of PVH,
interest payable monthly at an annual rate
of LIBOR + 2.50% (5.25% at December 31,
2008), maturing in December 2011.
    
    $
    6,677,419
    
    
    $
    5,091,377
 20




---



##### 



Note 8  Long-Term Debt
 2008
    
    
    2007Note payable with Medical Properties Trust secured by
certain property and equipment and lease deposits of PVH,
bearing a fixed interest rate of 9.24% per annum as of
December 31, 2008. Interest only payments due monthly,
principal balance due at matuity on May 8, 2022.
    
    $
    25,000,000
    
    
    $
    25,000,000118,655,369
    
    
    
    82,865,633Less current portion
    
    
    (53,106,018
    )
    
    
    (28,323,213
    )$
    65,549,351
    
    
    $
    54,542,420
  Years ending December 31,2009
    
    $
    53,106,0182010
    
    
    3,179,6742011
    
    
    1,666,6592012
    
    
    582,1302013
    
    
    7,885Thereafter
    
    
    60,113,003$
    118,655,369
   21




---



##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 8  Long-Term Debt
       22




---



##### 



Note 9  Sales Lease-Back Liability
  .
 .
 23




---



##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 9  Sales Lease-Back Liability
 .
 .
 24




---



##### 



Note 9  Sales Lease-Back Liability
  Sale Lease BackHospital
    
    LiabilityParadise Valley Hospital (PVH)
    
    $
    23,000,000Centinela Hospital Medical Center (CHMC)
    
    
    75,000,000Encino Hospital Medical Center (EHMC)
    
    
    15,000,000San Dimas Community Hospital (SDCH)
    
    
    13,000,000San Dimas Medical Office Building (SDCH)
    
    
    7,000,000Garden Grove Hospital Medical Center (GGHMC)
    
    
    16,250,000Garden Grove Medical Office Building (GGHMC)
    
    
    8,750,000$
    158,000,000
 Note 10  Professional Liability and Workers Compensation Insurance
   25




---



##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 10  Professional Liability and Workers Compensation Insurance
    Note 11  Leases
    26




---



##### 



Note 11  Leases
        27




---



##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 11  Leases
  OperatingCapital
    
    
    LeaseYears ending December 31,
    
    Leases
    
    
    Commitments2009
    
    $
    5,148,735
    
    
    $
    33,867,0102010
    
    
    5,104,303
    
    
    
    34,752,7032011
    
    
    4,970,212
    
    
    
    33,727,7532012
    
    
    4,841,891
    
    
    
    33,641,5672013
    
    
    488,271
    
    
    
    32,780,818Thereafter
    
    
    
    
    
    
    259,946,554Total minimum lease payments
    
    
    20,553,412
    
    
    $
    428,716,405Less amounts representing interest
    
    
    (2,465,884
    )18,087,528Less current portion
    
    
    (4,122,950
    )$
    13,964,578
 28




---



##### 



Note 12  Related Party Transactions
  2008
    
    
    2007Notes receivable from Action Collection, unsecured, non interest bearing, due on demand
    
    $
    
    
    
    $
    3,922Short term unsecured advances to employees, non interest bearing, due on demand
    
    
    99,147
    
    
    
    127,757Receivable from DVIL, related to expenses incurred in excess of deductibles
    
    
    900,248
    
    
    
    492,388Notes receivable from Prime A, unsecured, non interest bearing, due on demand
    
    
    3,110,975
    
    
    
    35,762,558Various
    
    
    13,336
    
    
    
    5,940Less: notes receivable from Prime A classified as contra-equity
    
    
    (3,110,975
    )
    
    
    (35,762,558
    )$
    1,012,731
    
    
    $
    630,007
 29




---



##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 12  Related Party Transactions
  2008
    
    
    2007Notes payable to stockholder, unsecured, bearing interest
at 7.25% as of December 31,
2007, payable on demand
    
    $
    
    
    
    $
    9,000,000Notes payable to Prime A, unsecured, non interest bearing, payable on demand
    
    
    
    
    
    
    317,668Notes payable to DVIL, unsecured, non interest bearing, payable on demand
    
    
    628,393
    
    
    
    Notes payable to Action Collection, unsecured, non interest bearing, due on demand
    
    
    
    
    
    
    355,503Various
    
    
    9,667
    
    
    
    $
    638,060
    
    
    $
    9,673,171
     30




---



##### 



Note 12  Related Party Transactions
  Note 13  Retirement Savings Plan
  Note 14  Contingencies
    31




---



##### 



PRIME HEALTHCARE SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 15  Legislation
  Note 16  Income taxes
  2008
    
    
    2007CurrentFederal
    
    $
    
    
    
    $
    State
    
    
    1,286,887
    
    
    
    1,249,0911,286,887
    
    
    
    1,249,091Deferred expenseFederal
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    $
    1,286,887
    
    
    $
    1,249,091
 32