UNITED
      STATES 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, 2006*




(
                  )
              
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES
                    EXCHANGE ACT OF 1934


*For
      the transition period from _________________________*





**Commission
      File Number:** **000-20086**





**UNIVERSAL
      HOSPITAL SERVICES, INC.** ****


*(Exact
      name of registrant as specified in its charter)*


**Delaware**
                ************
                **41-0760940***(State
                    or other jurisdiction of*
                
                *(I.R.S.
                    Employer**incorporation
                    or organization)*
                
                *Identification
                    No.)*


**7700
      France Avenue South, Suite 275**


**** **Edina,
      Minnesota 55435-5228**


*(Address
      of principal executive offices, including zip code)*




**** **(952)
      893-3200** ****


*(Registrant’s
      telephone number, including area code)*







Not
      Applicable


*(Former
      name, former address and former fiscal year, if changed since last
      report)*





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
                  ( )
              No
                (X)





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Larger
                  accelerated filer ( )
              Accelerated
                filer ( )
              Non-accelerated
                  filer (X)




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes
                ( )
            No
              (X)




Number
      of
      shares of common stock outstanding as of August 8, 2006: 123,463,475.21




1


**PART
      I - FINANCIAL INFORMATION**


**Item
      1. Financial Statements - Unaudited**





Universal
                Hospital Services, Inc.Statements
                of Operations(dollars
                in thousands)(unaudited)Three
                Months Ended
            
            Six
                Months EndedJune
                30,
            
            June
                30,Revenue
            
            2006
            
            2005
            
            2006
            
            2005Medical
                equipment outsourcing
            
            $
            43,157
            
            $
            41,718
            
            $
            88,718
            
            $
            84,899Technical
                and professional services
            
            
            7,710
            
            
            7,362
            
            
            15,670
            
            
            14,855Medical
                equipment sales and remarketing
            
            
            4,261
            
            
            4,318
            
            
            8,722
            
            
            8,915Total
                revenues
            
            
            55,128
            
            
            53,398
            
            
            113,110
            
            
            108,669Cost
                of SalesCost
                of medical equipment outsourcing
            
            
            14,163
            
            
            13,235
            
            
            27,940
            
            
            26,472Cost
                of technical and professional services
            
            
            5,247
            
            
            5,703
            
            
            10,707
            
            
            11,148Cost
                of medical equipment sales and remarketing
            
            
            3,259
            
            
            3,478
            
            
            6,436
            
            
            7,114Movable
                medical equipment depreciation
            
            
            9,171
            
            
            9,148
            
            
            18,200
            
            
            18,420Total
                costs of medical equipment outsourcing, technical and professional
                services and medical equipment sales and remarketing
            
            
            31,840
            
            
            31,564
            
            
            63,283
            
            
            63,154Gross
                margin
            
            
            23,288
            
            
            21,834
            
            
            49,827
            
            
            45,515Selling,
                general and administrative
            
            
            15,378
            
            
            15,368
            
            
            30,342
            
            
            30,214Operating
                income
            
            
            7,910
            
            
            6,466
            
            
            19,485
            
            
            15,301Interest
                expense
            
            
            7,887
            
            
            7,774
            
            
            15,704
            
            
            15,421Income
                (loss) before income taxes
            
            
            23
            
            
            (1,308
            )
            
            3,781
            
            
            (120
            )Provision
                for income taxes
            
            
            204
            
            
            214
            
            
            408
            
            
            421Net
                (loss) income
            
            
            ($181
            )
            
            ($1,522
            )
            $
            3,
                373
            
            
            ($541
            )The
                accompanying notes are an integral part of the unaudited financial
                statements.




2




Universal
                  Hospital Services, Inc.Balance
                  Sheets(dollars
                  in thousands, except share and per share information)(unaudited)June
                  30,
              
              December
                  31,2006
              
              2005AssetsCurrent
                  assets:Accounts
                  receivable, less allowance for doubtful accounts of$1,350
                  at June 30, 2006, and December 31, 2005
              
              
              
              
              $
              39,564
              
              $
              41,865Inventories
              
              
              
              
              
              5,304
              
              
              5,117Deferred
                  income taxes
              
              
              
              
              
              4,224
              
              
              4,111Other
                  current assets
              
              
              
              
              
              2,975
              
              
              2,375Total
                  current assets
              
              
              
              
              
              52,067
              
              
              53,468Property
                  and equipment, net:Movable
                  medical equipment, net
              
              
              
              
              
              124,527
              
              
              126,775Property
                  and office equipment, net
              
              
              
              
              
              14,237
              
              
              12,695Total
                  property and equipment, net
              
              
              
              
              
              138,764
              
              
              139,470Intangible
                  assets:Goodwill
              
              
              
              
              
              37,062
              
              
              37,062Other,
                  primarily deferred financing costs, net
              
              
              
              
              
              8,482
              
              
              9,434Other
                  intangibles, net
              
              
              
              
              
              8,830
              
              
              9,751Total
                  assets
              
              
              
              
              $
              245,205
              
              $
              249,185Liabilities
                  and Shareholders' DeficiencyCurrent
                  liabilities:Current
                  portion of long-term debt
              
              
              
              
              $
              1,434
              
              $
              1,084Book
                  overdrafts
              
              
              
              
              
              1,582
              
              
              2,480Accounts
                  payable
              
              
              
              
              
              9,261
              
              
              14,393Accrued
                  compensation
              
              
              
              
              
              7,552
              
              
              8,895Accrued
                  interest
              
              
              
              
              
              4,434
              
              
              4,481Other
                  accrued expenses
              
              
              
              
              
              3,595
              
              
              3,840Total
                  current liabilities
              
              
              
              
              
              27,858
              
              
              35,173Long-term
                  debt, less current portion
              
              298,006
              
              
              299,396Pension
                  liability
              
              5,365
              
              
              5,249Deferred
                  income taxes
              
              6,562
              
              
              6,166Commitments
                  and contingenciesShareholders'
                  deficiency:Common
                  stock, $0.01 par value; 500,000,000 shares authorized,123,463,475.21
                  and 123,438,105.21 shares issued andoutstanding
                  at June 30, 2006, and December 31, 2005, respectively
              
              
              
              
              
              1,235
              
              
              1,234Additional
                  paid in capital
              
              
              
              
              
              1,565
              
              
              820Accumulated
                  deficit
              
              
              
              
              
              (90,206
              )
              
              (93,579
              )Deferred
                  compensation
              
              
              
              
              
              -
              
              
              (94
              )Accumulated
                  other comprehensive loss
              
              
              
              
              
              (5,180
              )
              
              (5,180
              )Total
                  shareholders' deficiency
              
              
              
              
              
              (92,586
              )
              
              (96,799
              )Total
                  liabilities and shareholders' deficiency
              
              
              
              
              $
              245,205
              
              $
              249,185The
                  accompanying notes are an integral part of the unaudited financial
                  statements.




3




Universal
                Hospital Services, Inc.Statements
                of Cash Flows(dollars
                in thousands)(unaudited)Six
                Months Ended June 30,2006
            
            2005Cash
                flows from operating activities:Net
                income (loss)
            
            $
            3,373
            
            
            ($541
            )Adjustments
                to reconcile net income (loss) to net cash provided byoperating
                activities:Depreciation
            
            
            20,721
            
            
            20,286Amortization
                of intangibles and deferred financing costs
            
            
            1,779
            
            
            1,758Provision
                for doubtful accounts
            
            
            655
            
            
            533Provision
                for inventory obsolescence
            
            
            275
            
            
            60Non-cash
                stock-based compensation expense
            
            
            812
            
            
            9Gain
                on sales and disposal of equipment
            
            
            (743
            )
            
            (601
            )Deferred
                income taxes
            
            
            283
            
            
            277Changes
                in operating assets and liabilitiesAccounts
                receivable
            
            
            1,740
            
            
            (917
            )Inventories
                and other operating assets
            
            
            (1,062
            )
            
            1,546Accounts
                payable and accrued expenses
            
            
            (3,010
            )
            
            (1,625
            )Net
                cash provided by operating activities
            
            
            24,823
            
            
            20,785Cash
                flows from investing activities:Movable
                medical equipment purchases
            
            
            (20,273
            )
            
            (17,148
            )Property
                and office equipment purchases
            
            
            (2,154
            )
            
            (2,092
            )Proceeds
                from disposition of movable medical equipment
            
            
            1,428
            
            
            1,328Net
                cash used in investing activities
            
            
            (20,999
            )
            
            (17,912
            )Cash
                flows from financing activities:Proceeds
                under revolving credit facility agreements
            
            
            48,412
            
            
            52,455Payments
                under revolving credit facility agreements
            
            
            (50,843
            )
            
            (49,906
            )Payments
                under capital lease obligations
            
            
            (523
            )
            
            -Payment
                of deferred financing cost
            
            
            -
            
            
            (856
            )Proceeds
                from issuance of common stock, net of issuance costs
            
            
            28
            
            
            6Change
                in book overdrafts
            
            
            (898
            )
            
            (4,572
            )Net
                cash used in financing activities
            
            
            (3,824
            )
            
            (2,873
            )Net
                change in cash and cash equivalents
            
            $
            -
            
            $
            -Cash
                and cash equivalents at the beginning of period
            
            $
            -
            
            $
            -Cash
                and cash equivalents at the end of period
            
            $
            -
            
            $
            -Supplemental
                cash flow information:Interest
                paid
            
            $
            14,871
            
            $
            14,727Movable
                medical equipment purchases included in accounts payable
            
            $
            2,137
            
            $
            5,241Income
                taxes paid
            
            $
            227
            
            $
            231The
                accompanying notes are an integral part of the unaudited financial
                statements.




4


**Universal
      Hospital Services, Inc.**





**NOTES
      TO UNAUDITED QUARTERLY FINANCIAL STATEMENTS**





**1.**  **Basis
      of Presentation**





The
      interim financial statements included in this Form 10-Q have been prepared
      by
      Universal Hospital Services, Inc. (“we,” “our” or the “Company”) without audit,
      pursuant to the rules and regulations of the Securities and Exchange Commission.
      Certain information and footnote disclosures normally included in financial
      statements prepared in accordance with accounting principles generally accepted
      in the United States of America have been condensed, or omitted, pursuant to
      such rules and regulations. These condensed financial statements should be
      read
      in conjunction with the financial statements and related notes included in
      the
      Company’s 2005 Annual Report on Form 10-K filed with the Securities and Exchange
      Commission.





The
      interim financial statements presented herein as of June 30, 2006, and for
      the
      three and six months ended June 30, 2006 and 2005, reflect, in the opinion
      of
      management, all adjustments necessary for a fair presentation of the financial
      position and the results of operations and cash flows for the periods presented.
      These adjustments are all of a normal, recurring nature. The results of
      operations for any interim period are not necessarily indicative of results
      for
      the full year.





The
      December 31, 2005, balance sheet amounts were derived from audited financial
      statements but do not include all disclosures required by accounting principles
      generally accepted in the United States of America.





**2.**  **Recent
      Accounting Pronouncements**




In
      July
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109* (FIN
      48).
      FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in an
      enterprise’s financial statements in accordance with FASB Statement No. 109, *Accounting
      for Income Taxes.* FIN 48
      also prescribes a recognition threshold and measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in a tax return. The new FASB standard also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure, and transition. The provisions of FIN 48 are
      effective for fiscal years beginning after December 15, 2006. We believe the
      adoption of FIN 48 will not have a material impact on our financial position
      or
      results of operations.




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 123(R) (revised 2004), *Share-Based
      Payments* ,
      which is
      a revision of SFAS No. 123 and supersedes Accounting Principals Board (“APB”)
      Opinion No. 25. SFAS No. 123(R) requires that all share-based payments to
      employees, including grants of employee stock options, be valued at the fair
      value on the date of grant and be expensed over the applicable vesting period.
      We adopted SFAS No. 123(R) on January 1, 2006 (see note 3).




5


**3.**  **Stock-Based
      Compensation**





Prior
      to
      January 1, 2006, we applied the provisions of APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      in
      accounting for stock-based compensation. As a result, no compensation expense
      was recognized for stock options granted with exercise prices equivalent to
      the
      fair market value of stock on date of grant. Effective January 1, 2006, we
      adopted SFAS No. 123(R) using the modified prospective application method.
      Under this method, as of January 1, 2006, we have applied the provisions of
      this Statement to new and modified awards, as well as to the nonvested portion
      of awards granted before the required effective date and outstanding at such
      time.





The
      adoption of this pronouncement had no effect on compensation cost recorded
      in
      2005 related to stock options, which will continue to be disclosed on a pro
      forma basis only. As a result of adopting SFAS No. 123(R) on
      January 1, 2006, our net income for the quarter and six months ended June
      30, 2006 was $0.4 million and $0.8 million lower, respectively, than if we
      had continued to account for stock-based compensation under APB Opinion
      No. 25.




An
      additional requirement of SFAS No. 123(R) is that estimated forfeitures be
      considered in determining compensation expense. As previously permitted, we
      recorded forfeitures when they occurred. We have estimated our forfeiture rate
      at 2.5% per annum. As of June 30, 2006, the total compensation cost for
      nonvested awards not yet recognized in our statements of income was $5.5
      million, net of the effect of estimated forfeitures. This amount is expected
      to
      be recognized over a weighted-average period of 5.1 years.




All
      options allow for the purchase of shares of common stock at prices equal to
      the
      stock’s market value at the date of grant. A portion of our options vest over
      four years. The remaining portion vests at the end of eight years, with
      potential for earlier vesting subject to certain performance or other
      thresholds. Employees forfeit unvested options when they terminate their
      employment with the company and must exercise their vested options at that
      time
      or they will also be forfeited. We determine the fair value of options using
      the
      Black-Scholes option pricing model. The estimated fair value of options,
      including the effect of estimated forfeitures, is recognized as expense on
      the
      straight-line basis over the options’ vesting periods. The following assumptions
      were used in determining the fair value of stock options granted during the
      six
      months ended June 30, 2006, under the Black-Scholes model:




Risk-free
                interest rate
            
            
            4.7
            %Expected
                volatility
            
            
            43.7
            %Dividend
                Yield
            
            
            NoneExpected
                option life (years)
            
            
            8.0





The
      risk-free interest rate for periods within the ten year contractual life of
      the
      option is based on the U.S. Treasury yield curve in effect at the grant date.
      Expected volatility is based on the historical volatility of the stock of
      companies within our peer group. The
      eight
      year expected life of stock options granted to employees represents the weighted
      average of the result of the “simplified” method applied to “plain vanilla”
      options granted during the period, as provided within Staff Accounting Bulletin
      No. 107 (“SAB 107”). The expected life of stock options granted represents the
      weighted average period that those options are expected to remain outstanding
      and is based on analysis of historical behavior of option holders.




6


Information
      regarding our outstanding stock options for the six months ended June 30, 2006
      is as follows:


**(in
                thousands except exercise price and years)**
            
            **Number
                of**
              **Options**
            
            **Weighted**
              **average**
              **e****xercise**
              **price**
            
            **Aggregate**
              **intrinsic**
              **value**
            
            **Weighted**
              **average**
              **remaining**
              **contractual**
              **t****erm
                (years)**Outstanding
                at December 31, 2005
            
            
            15,066
            
            $
            1.04Granted
            
            
            210
            
            
            1.41Exercised
            
            
            (25
            )
            
            1.11Forfeited
                or expired
            
            
            (361
            )
            
            1.17Outstanding
                at June 30, 2006
            
            
            14,890
            
            $
            1.04
            
            $
            2,524
            
            
            8.0Exercisable
                at June 30, 2006
            
            
            2,170
            
            $
            1.00
            
            $
            447
            
            
            7.9Remaining
                authorized options not issued
            
            
            2,230





The
      weighted-average grant-date fair value of options granted during the six months
      ended June 30, 2006 was $0.79 per share. The
      intrinsic value of a stock award is the amount by which the market value of
      the
      underlying stock exceeds the exercise price of the award. The total intrinsic
      value of options exercised during the six months ended June 30, 2006, was
      negligible. The exercise price reflects management’s estimate of fair market
      value of the underlying stock at the time of option issuance. Shares supporting
      option exercises are sourced from new share issuances.





Prior
      to
      January 1, 2006, we measured compensation expense for our stock-based
      compensation plan using the intrinsic value method in accordance with APB 25
      as
      allowed under SFAS 123. Under the intrinsic value method, no stock-based
      compensation expense had been recognized in our consolidated financial
      statements. Accordingly, compensation cost for stock options granted to
      employees was measured as the excess, if any, of the value of our stock at
      the
      date of the grant over the amount an employee must pay to acquire the stock.
      Had
      compensation cost for our stock option plans been determined based on the fair
      value at the grant date for awards, our net income would have changed to the
      pro
      forma amounts indicated below for 2005 (dollars in thousands):







Three
                Months
              Ended
            
            Six
                Months
              EndedJune
                30, 2005
            
            June
                30, 2005Net
                loss, as reported
            
            
            ($1,522
            )
            
            ($541
            )Add:
                Stock-based employee compensation includedin
                reported net loss
            
            $
            3
            
            $
            9Less:
                Total stock-based employee compensationexpense
                under fair value-based method
            
            
            ($121
            )
            
            ($245
            )Pro
                forma net loss
            
            
            ($1,640
            )
            
            ($777
            )




7





**4.**  **Long-Term
      Debt**





Long-term
      debt consists of the following (dollars
      in thousands):


June
                30,
              2006
            
            December
                31,
              200510.125%
                senior notes
            
            $
            260,000
            
            $
            260,000Amended
                credit agreement
            
            
            35,675
            
            
            38,106Capital
                lease obligations
            
            
            3,765
            
            
            2,374299,440
            
            
            300,480Less:
                Current portion of long-term debt
            
            
            (1,434
            )
            
            (1,084
            )Total
                long-term debt
            
            $
            298,006
            
            $
            299,396




The
      10.125% Senior Notes (“Senior Notes”) mature on November 1, 2011. Interest
      on the Senior Notes accrues at the rate of 10.125% per annum and is payable
      semiannually on each May 1 and November 1. The Senior Notes are
      redeemable, at the Company’s option, in whole or in part, on or after
      November 1, 2007, at specified redemption prices plus accrued interest to
      the date of redemption. At any time upon an equity offering prior to
      November 1, 2006, as defined in the indenture governing the Senior Notes, the
      Company can redeem up to 35% of the Senior Notes, at a purchase price equal
      to
      110.125% of the principal amount plus accrued interest to the dates of purchase.
      In addition, the Senior Notes have a change of control provision which gives
      each holder the right to require the Company to purchase all or a portion of
      such holders’ Senior Notes upon a change in control, as defined in the
      agreement, at a purchase price equal to 101% of the principal amount plus
      accrued interest to the date of purchase. The Senior Notes have covenants that
      restrict the incurrence of additional debt, the payment of dividends and the
      issuance of preferred stock. The Senior Notes are uncollateralized.





In
      May
      2005, the Company entered into an Amended and Restated Credit Agreement
      (“Amended Credit Agreement”) with a consortium of banks. The Amended Credit
      Agreement allows for borrowing up to $125 million, as defined in the agreement,
      and terminates in May 2010. Availability under the Amended Credit Agreement
      as
      of June 30, 2006, was approximately $72 million, representing our borrowing
      base
      of approximately $110 million less borrowings of $36 million and outstanding
      letters of credit of $2 million at that date. Borrowings under the Amended
      Credit Agreement are collateralized by substantially all of our
      assets.





Amounts
      borrowed under the Amended Credit Agreement generally bear interest on
      LIBOR-based and Index Rate formulas. The interest rate on June 30, 2006 was
      2.00
      percentage points over LIBOR and 0.75 percentage points over the Index Rate,
      with the interest rate margin subject to change based upon quarterly leverage
      ratios. Prior to May 1, 2006 the rates were 2.25 percentage points over LIBOR
      and 1.00 percentage points over the Index Rate. At June 30, 2006, our
      LIBOR-based rate was 7.35% and our Index Rate was 9.00%, both of which include
      the credit spreads noted above.





The
      Amended Credit Agreement contains certain covenants including restrictions
      and
      limitations on dividends, liens, leases, incurrence or guarantees of debt,
      transactions with affiliates, investments or loans, and mergers, acquisitions,
      consolidations and asset sales. Furthermore, the Company is required to maintain
      compliance with certain financial covenants, including a maximum senior debt
      leverage ratio and a minimum interest coverage ratio.




8


**5.**  **Segment
      Information**





Our
      operating segments consist of Medical Equipment Outsourcing, Technical and
      Professional Services, and Medical Equipment Sales and Remarketing. Certain
      operating information for our segments is as follows:





**Three
                Months Ended June 30,****(dollars
                in thousands)****Medical**
              **Equipment**
              **Outsourcing**
            
            **Technical
                and**
              **Professional**
              **Services**
            
            **Medical**
              **Equipment
                Sales**
              **and
                Remarketing**
            
            **Total****2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenues
            
            $
            43,157
            
            $
            41,718
            
            $
            7,710
            
            $
            7,362
            
            $
            4,261
            
            $
            4,318
            
            $
            55,128
            
            $
            53,398Cost
                of revenue
            
            
            14,163
            
            
            13,235
            
            
            5,247
            
            
            5,703
            
            
            3,259
            
            
            3,478
            
            
            22,669
            
            
            22,416Movable
                medical equipment depreciation
            
            
            9,171
            
            
            9,148
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            9,171
            
            
            9,148Gross
                margin
            
            $
            19,823
            
            $
            19,335
            
            $
            2,463
            
            $
            1,659
            
            $
            1,002
            
            $
            840
            
            $
            23,288
            
            $
            21,834








**Six
                Months Ended June 30,****(dollars
                in thousands)****Medical**
              **Equipment**
              **Outsourcing**
            
            **Technical
                and**
              **Professional**
              **Services**
            
            **Medical**
              **Equipment
                Sales**
              **and
                Remarketing**
            
            **Total****2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **2006**
            
            **2005**Revenues
            
            $
            88,718
            
            $
            84,899
            
            $
            15,670
            
            $
            14,855
            
            $
            8,722
            
            $
            8,915
            
            $
            113,110
            
            $
            108,669Cost
                of revenue
            
            
            27,940
            
            
            26,472
            
            
            10,707
            
            
            11,148
            
            
            6,436
            
            
            7,114
            
            
            45,083
            
            
            44,734Movable
                medical equipment depreciation
            
            
            18,200
            
            
            18,420
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            18,200
            
            
            18,420Gross
                margin
            
            $
            42,578
            
            $
            40,007
            
            $
            4,963
            
            $
            3,707
            
            $
            2,286
            
            $
            1,801
            
            $
            49,827
            
            $
            45,515





**6.**  **Pension
      Plan**





The
      components of net periodic pension costs are as follows (dollars in
      thousands):





**Three
                Months Ended**
              **June
                30,**
            
            **Six
                Months Ended**
              **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Interest
                cost
            
            $
            240
            
            $
            238
            
            
            487
            
            $
            475Expected
                return on plan assets
            
            
            (253
            )
            
            (247
            )
            
            (505
            )
            
            (493
            )Recognized
                net actuarial loss
            
            
            57
            
            
            58
            
            
            134
            
            
            117Service
                cost
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
                cost
            
            $
            44
            
            $
            49
            
            $
            116
            
            $
            99





Future
      benefit accruals for all participants were frozen as of December 31, 2002.




9


**Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of
      Operations**





The
      following should be read in conjunction with the accompanying financial
      statements and notes.




**BUSINESS
      OVERVIEW**





**Our
      Company**





Universal
      Hospital Services, Inc. (“we,” “our,” “UHS” or “the Company”) is a leading,
      nationwide provider of medical equipment outsourcing and services to the health
      care industry. Our customers include national, regional and local acute care
      hospitals, alternate site providers (such as nursing homes and home care
      providers) and medical equipment manufacturers. Our diverse customer base
      includes more than 3,300 acute care hospitals and approximately 3,050 alternate
      site providers. We also have extensive and long-standing relationships with
      over
      200 major medical equipment manufacturers and many of the nation’s largest group
      purchasing organizations (“GPOs”) and integrated delivery networks. All of our
      services leverage our nationwide network of offices and our more than 65 years
      of experience managing and servicing all aspects of movable medical equipment.
      These services are paid for by our customers and not directly through
      reimbursement from governmental or other third-party payors.




Technical
                and Professional
              Services
                Segment
            equipment lifecycles services graph
            Medical
                Equipment
              Outsourcing
                SegmentMedical
                Equipment Sales and
              Remarketing
                Segment
            
            Technical
                and Professional
              Services
                Segment




Our
      operating segments consist of Medical Equipment Outsourcing, Technical and
      Professional Services, and Medical Equipment Sales and Remarketing. We evaluate
      the performance of our operating segments based on gross margin. The accounting
      policies of the individual operating segments are the same as those of the
      entire company.





**Medical
      Equipment Outsourcing Segment - Manage & Utilize**





Our
      flagship business is our Medical Equipment Outsourcing segment, which accounted
      for $43.2 million, or approximately 78.3%, of our revenues for the second
      quarter of 2006 and $88.7 million, or approximately 78.4%, of our revenues
      for
      the first half of 2006. We own approximately 164,000 pieces of movable medical
      equipment, primarily in the categories of respiratory therapy, newborn care,
      critical care, patient monitors, and bariatric and pressure area management.
      In
      our outsourcing programs we provide our customers with the use of movable
      medical equipment, and we maintain the equipment for our customers by performing
      preventative maintenance, repairs, cleaning and testing, and maintaining certain
      reporting records. We also provide prompt replacement of any defective equipment
      and the flexibility to upgrade equipment as technology changes. We have three
      primary outsourcing programs: Supplemental (Peak Needs) Outsourcing; Long Term
      Outsourcing; and the Asset Management Partnership Program (“AMPP”).




10




We
      have
      contracts in place with many of the leading national GPOs for both the acute
      care and alternate site markets. We also have agreements directly with national
      acute care and alternate site providers. We expect much of our future growth
      in
      this segment to be driven by our customers outsourcing more of their movable
      medical equipment needs and taking full advantage of our expanded offering
      of
      Long Term Outsourcing agreements and AMPPs.





**Technical
      and Professional Services Segment - Plan & Acquire; Maintain &
Repair**





Our
      Technical and Professional Services segment accounted for $7.7 million, or
      approximately 14.0%, of our revenues for the second quarter of 2006 and $15.7
      million, or approximately 13.9%, of our revenues for the first half of 2006.
      We
      leverage our 65 plus years of experience and our extensive equipment database
      in
      repairing and maintaining medical equipment. We offer a broad range of
      inspection, preventative maintenance, repair, logistic and consulting services
      through our team of over 225 technicians and professionals located in our
      nationwide network of district offices and service centers. Our technical and
      professional service offerings are less capital intensive than our Medical
      Equipment Outsourcing segment, and provide a complementary alternative for
      customers that wish to own their medical equipment, but lack the expertise,
      funding or scale to perform maintenance, repair and analytical functions.





**Medical
      Equipment Sales and Remarketing Segment - Redeploy &
Remarket**




Our
      Medical Equipment Sales and Remarketing segment accounted for $4.3 million,
      or
      approximately 7.7%, of our revenues for the second quarter of 2006 and $8.7
      million, or approximately 7.7%, of our revenues for the first half of 2006.
      This
      segment includes three business activities:





***Medical
      Equipment Remarketing and Disposal.*** ****** We
      are one
      of the nation’s largest buyers and sellers of pre-owned movable medical
      equipment. We also remarket used medical equipment to hospitals, alternate
      care
      providers, veterinarians and equipment brokers. We offer a wide range of
      equipment from our standard movable medical equipment to diagnostic, ultrasound
      and x-ray equipment.





***Specialty
      Medical Equipment Sales and Distribution.*** ****** We
      use our
      national infrastructure to provide sales and distribution for manufacturers
      of
      specialty medical equipment. We currently sell equipment in many product lines
      including, but not limited to, percussion vests, continuous passive motion
      machines, patient monitors, patient transfer systems and infant security
      systems.





***Disposables
      Sales*** ***.*** We
      offer
      our customers single use disposable items. Most of these items are used in
      connection with our outsourced equipment. Although we do not view this as a
      core
      growth business, we offer these products as a convenience to customers and
      to
      complement our full medical equipment lifecycle offerings.




11


**RESULTS
      OF OPERATIONS**





The
      following discussion addresses our financial condition as of June 30, 2006,
      and
      the results of operations for the three and six months ended June 30, 2006,
      and
      2005; and the cash flows for the six months ended June 30, 2006, and 2005.
      This
      discussion should be read in conjunction with the financial statements included
      elsewhere in this report and the Management's Discussion and Analysis and
      Financial section included in our 2005 Annual Report on Form 10-K filed with
      the
      Securities and Exchange Commission.





The
      following table provides a summary of selected financial data as a percentage
      of
      total revenues and also indicates the percentage increase or decrease of this
      data over the prior comparable period:





Percent
                of Total Revenues
            
            Percent
                Increase (Decrease)Three
                Months Ended
            
            Six
                Months Ended
            
            Qtr
                2 2006
            
            Six
                MonthsJune
                30,
            
            June
                30,
            
            Over
            
            2006
                OverQtr
                2
            
            Six
                MonthsRevenue
            
            2006
            
            2005
            
            2006
            
            2005
            
            2005
            
            2005Medical
                equipment outsourcing
            
            
            78.3
            %
            
            78.1
            %
            
            78.4
            %
            
            78.1
            %
            
            3.4
            %
            
            4.5
            %Technical
                and professional services
            
            
            14.0
            
            
            13.8
            
            
            13.9
            
            
            13.7
            
            
            4.7
            
            
            5.5Medical
                equipment sales and remarketing
            
            
            7.7
            
            
            8.1
            
            
            7.7
            
            
            8.2
            
            
            (1.3
            )
            
            (2.2
            )Total
                revenues
            
            
            100.0
            
            
            100.0
            
            
            100.0
            
            
            100.0
            
            
            3.2
            
            
            4.1Cost
                of SalesCost
                of medical equipment outsourcing
            
            
            25.7
            
            
            24.8
            
            
            24.7
            
            
            24.4
            
            
            7.0
            
            
            5.5Cost
                of technical and professional services
            
            
            9.5
            
            
            10.7
            
            
            9.5
            
            
            10.2
            
            
            (8.0
            )
            
            (4.0
            )Cost
                of medical equipment sales and remarketing
            
            
            5.9
            
            
            6.5
            
            
            5.7
            
            
            6.5
            
            
            (6.3
            )
            
            (9.5
            )Movable
                medical equipment depreciation
            
            
            16.6
            
            
            17.1
            
            
            16.1
            
            
            17.0
            
            
            0.3
            
            
            (1.2
            )Total
                costs of medical equipment outsourcing, technical and professional
                services and medical equipment sales and remarketing
            
            
            57.7
            
            
            59.1
            
            
            56.0
            
            
            58.1
            
            
            0.9
            
            
            0.2Gross
                margin
            
            
            42.3
            
            
            40.9
            
            
            44.0
            
            
            41.9
            
            
            6.7
            
            
            9.5Selling,
                general and administrative
            
            
            27.9
            
            
            28.8
            
            
            26.8
            
            
            27.8
            
            
            0.1
            
            
            0.4Operating
                income
            
            
            14.4
            
            
            12.1
            
            
            17.2
            
            
            14.1
            
            
            22.3
            
            
            27.3Interest
                expense
            
            
            14.3
            
            
            14.6
            
            
            13.9
            
            
            14.2
            
            
            1.5
            
            
            1.8Income
                (loss) before income taxes
            
            
            0.1
            
            
            (2.5
            )
            
            3.3
            
            
            (0.1
            )
            
            *
            
            
            *Provision
                for income taxes
            
            
            0.4
            
            
            0.4
            
            
            0.4
            
            
            0.4
            
            
            (4.7
            )%
            
            (3.1
            )%Net
                (loss) income
            
            
            (0.3
            )%
            
            (2.9
            )%
            
            2.9
            %
            
            (0.5
            )%
            
            *
            
            
            *





*
      Not
      Meaningful




12


**Comparison
      of Second Quarter 2006 to Second Quarter 2005**





**Medical
      Equipment Outsourcing Segment - Manage & Utilize**


(dollars
                in thousands)
              
              **Three
                  Months Ended****June
                  30,****2006**
              
              **2005**
              
              **Change**
              
              **%
                  Change**Total
                  revenue
              
              $
              43,157
              
              $
              41,718
              
              $
              1,439
              
              
              3.4
              %Cost
                  of revenue
              
              
              14,163
              
              
              13,235
              
              
              928
              
              
              7.0Movable
                  medical equipment depreciation
              
              
              9,171
              
              
              9,148
              
              
              23
              
              
              0.3Gross
                  margin
              
              $
              19,823
              
              $
              19,335
              
              $
              488
              
              
              2.5
              %Gross
                  margin %
              
              
              45.9
              %
              
              46.3
              %
 Total
        revenue in the Medical Equipment Outsourcing segment rose $1.4 million, or
        3.4%,
        to $43.2 million in the second quarter of 2006. This increase was driven
        by
        organic and competitive takeaway growth in our acute care customer base,
        increased activity in our AMPP customers, and incremental business from new
        and
        existing technology in our fleet, offsetting a weaker flu season as compared
        to
        2005.





Total
      cost
      of revenue in the segment rose $0.9 million, or 7%, to $14.2 million in the
      second quarter of 2006. This increase is primarily attributable to higher
      employee related expenses of $0.6 million, higher gasoline costs of $0.1 million
      and other costs associated with increased revenues.





Movable
      medical equipment depreciation remained relatively flat at $9.2 million for
      the
      second quarter of 2006 as compared to the same period of 2005.





Gross
      margin percentage for the medical equipment outsourcing segment decreased
      slightly from 46.3% in the second quarter of 2005 to 45.9% in the second quarter
      of 2006. This decrease is primarily attributable to the impact of weak hospital
      admissions and the comparative lack of flu activity over 2005 moderately
      offsetting the benefits of operating efficiency programs begun in
      2005.





**Technical
      and Professional Services Segment - Plan & Acquire; Maintain &
Repair**


(dollars
                in thousands)
              
              **Three
                  Months Ended****June
                  30,****2006**
              
              **2005**
              
              **Change**
              
              **%
                  Change**Total
                  revenue
              
              $
              7,710
              
              $
              7,362
              
              $
              348
              
              
              4.7
              %Cost
                  of revenue
              
              
              5,247
              
              
              5,703
              
              
              (456
              )
              
              (8.0
              )Gross
                  margin
              
              $
              2,463
              
              $
              1,659
              
              $
              804
              
              
              48.5
              %Gross
                  margin %
              
              
              31.9
              %
              
              22.5
              %
 
 13





Total
      revenue in the Technical and Professional Services segment rose $0.3 million,
      or
      4.7%, to $7.7 million in the second quarter of 2006. This revenue increase
      was
      primarily driven by growth in activity with customers under our Community
      Hospital Asset Management Programs (CHAMP) and Total Equipment Asset Management
      program (TEAM). We also experienced growth in our supplemental, or
      response-based, and manufacturer services businesses, both of which are
      transactional in nature and such results reflect increased customer
      demand.





Total
      cost
      of revenue in the segment decreased $0.5 million, or 8.0% to $5.2 million in
      the
      second quarter of 2006. This decrease is primarily attributable to improved
      technician productivity and the benefits of our operating efficiency program
      begun in 2005.





Gross
      margin percentage for the technical and professional services segment increased
      from 22.5% in the second quarter of 2005 to 31.9% in the second quarter of
      2006.
      Margins benefited from increased revenues, the continued benefit of operating
      efficiency programs begun in 2005 and improved technician productivity. We
      believe that margin levels experienced during the quarter are not sustainable
      due to competitive settings.





**Medical
      Equipment Sales and Remarketing Segment - Redeploy &
Remarket**


(dollars
                  in thousands)
              
              **Three
                  Months Ended****June
                  30,****2006**
              
              **2005**
              
              **Change**
              
              **%
                  Change**Total
                  revenue
              
              $
              4,261
              
              $
              4,318
              
              
              ($57
              )
              
              (1.3
              )%Cost
                  of revenue
              
              
              3,259
              
              
              3,478
              
              
              (219
              )
              
              (6.3
              )Gross
                  margin
              
              $
              1,002
              
              $
              840
              
              $
              162
              
              
              19.3
              %Gross
                  margin %
              
              
              23.5
              %
              
              19.5
              %
 Total
        revenue in the Medical Equipment Sales and Remarketing segment declined slightly
        by 1.3% to $4.3 million in the second quarter of 2006. This decrease was
        caused
        by reduced sales of disposable items.





Total
      cost
      of revenue in the segment decreased $0.2 million, or 6.3%, to $3.3 million
      in
      the second quarter of 2006. This decrease is primarily attributable to lower
      costs of disposable goods sold.





Gross
      margin percentage for the medical equipment sales and remarketing segment
      increased from 19.5% in the second quarter of 2005 to 23.5% in the second
      quarter of 2006. Margins in this segment will fluctuate based on used equipment
      availability and the transactional nature of the business.





**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative expenses remained relatively flat at $15.4 million
      for the second quarter of 2006 as compared to the same period of 2005. Selling,
      general and administrative expenses as a percentage of total revenue for the
      second quarter of 2006, decreased to 27.9% from 28.8% for the same period of
      2005.




14




**Interest
      Expense**





Interest
      expense rose $0.1 million, or 1.5%, to $7.9 million in the second quarter of
      2006. The increase was driven by higher interest rates, partially offsetting
      marginally lower average borrowings. Average total borrowings decreased for
      the
      second quarter of 2006 to $296.6 million from $299.8 million for the same period
      of 2005. Our average effective interest rate on variable rate debt increased
      to
      7.4% during the second quarter of 2006 from 5.9% in the second quarter of
      2005.





**Income
      Taxes**





Income
      tax
      expense remained relatively flat at $0.2 million for the second quarter of
      2006
      as compared to the same period of 2005. Income tax expense relates primarily
      to
      valuation allowances established for net operating losses not recognized as
      well
      as minimum state taxes.





**Net
      Loss**





For
      the
      second quarter of 2006 net loss decreased $1.3 million to a loss of $0.2
      million. The increase is primarily due to increase in gross margin of $1.5
      million, being partially offset by increased interest expense of $0.1 million
      and other costs associated with increased revenue levels.





**Comparison
      of the First Six Months of 2006 to the First Six Months of
      2005**





**Medical
      Equipment Outsourcing Segment - Manage & Utilize**


(dollars
                  in thousands)
              
              **Six
                  Months Ended****June
                  30,****2006**
              
              **2005**
              
              **Change**
              
              **%
                  Change**Total
                  revenue
              
              $
              88,718
              
              $
              84,899
              
              $
              3,819
              
              
              4.5
              %Cost
                  of revenue
              
              
              27,940
              
              
              26,472
              
              
              1,468
              
              
              5.5Movable
                  medical equipment depreciation
              
              
              18,200
              
              
              18,420
              
              
              (220
              )
              
              (1.2
              )Gross
                  margin
              
              $
              42,578
              
              $
              40,007
              
              $
              2,571
              
              
              6.4
              %Gross
                  margin %
              
              
              48.0
              %
              
              47.1
              %
 Total
        revenue in the Medical Equipment Outsourcing segment rose $3.8 million, or
        4.5%,
        to $88.7 million in the first six months of 2006. This increase was driven
        by
        organic and competitive takeaway growth in our acute care customer base,
        increased activity in our AMPP customers, and incremental business from new
        and
        existing technology in our fleet, offsetting a weaker flu season as compared
        to
        2005.





Total
      cost
      of revenue in the segment rose $1.5 million, or 5.5%, to $27.9 million in the
      first six months of 2006. This increase is primarily attributable to higher
      employee related costs of $1.0 million, higher gasoline costs of $0.2 million
      and other costs associated with increased revenues.




15


Movable
      medical equipment depreciation decreased $0.2 million, or 1.2%, to $18.2 million
      in the first six months of 2006.





Gross
      margin percentage for the medical equipment outsourcing segment increased from
      47.1% in the first six months of 2005 to 48.0% for the same period of 2006.
      This
      increase is primarily attributable to increased revenues and the benefits of
      operating efficiency programs put in place in the second half of
      2005.





**Technical
      and Professional Services Segment - Plan & Acquire; Maintain &
Repair**


(dollars
                  in thousands)
              
              **Six
                  Months Ended****June
                  30,****2006**
              
              **2005**
              
              **Change**
              
              **%
                  Change**Total
                  revenue
              
              $
              15,670
              
              $
              14,855
              
              $
              815
              
              
              5.5
              %Cost
                  of revenue
              
              
              10,707
              
              
              11,148
              
              
              (441
              )
              
              (4.0
              )Gross
                  margin
              
              $
              4,963
              
              $
              3,707
              
              $
              1,256
              
              
              33.9
              %Gross
                  margin %
              
              
              31.7
              %
              
              25.0
              %
 Total
        revenue in the Technical and Professional Services segment rose $0.8 million,
        or
        5.5%, to $15.7 million in the first six months of 2006. This revenue increase
        was primarily driven by growth in activity with customers under our CHAMP
        and
        TEAM programs. We also experienced growth in our supplemental, or
        response-based, and manufacturer services businesses, both of which are
        transactional in nature and such results reflect increased customer
        demand.





Total
      cost
      of revenue in the segment decreased $0.4 million, or 4.0% to $10.7 million
      in
      the first six months of 2006. This decrease is primarily attributable to
      improved technician productivity and the benefits of our operating efficiency
      programs begun in 2005.




Gross
      margin percentage for the technical and professional services segment increased
      from 25.0% in the first six months of 2005 to 31.7% for the same period of
      2006.
      Margins benefited from increased revenues, the continued benefit of operating
      efficiency programs begun in 2005 and improved technician productivity. We
      believe that margin levels experienced during the first six months are not
      sustainable due to competitive settings.




16


**Medical
      Equipment Sales and Remarketing Segment - Redeploy &
Remarket**


(dollars
                  in thousands)
              
              **Six
                  Months Ended****June
                  30,****2006**
              
              **2005**
              
              **Change**
              
              **%
                  Change**Total
                  revenue
              
              $
              8,722
              
              $
              8,915
              
              
              ($193
              )
              
              (2.2
              )%Cost
                  of revenue
              
              
              6,436
              
              
              7,114
              
              
              (678
              )
              
              (9.5
              )Gross
                  margin
              
              $
              2,286
              
              $
              1,801
              
              $
              485
              
              
              26.9
              %Gross
                  margin %
              
              
              26.2
              %
              
              20.2
              %
 Total
        revenue in the Medical Equipment Sales and Remarketing segment declined $0.2
        million, or 2.2%, to $8.7 million in the first six months of 2006. This decrease
        was caused by reduced sales of disposable items of $0.5 million partially
        offset
        by higher new equipment sales of $0.2 million and higher used and brokerage
        equipment sales of $0.1 million.





Total
      cost
      of revenue in the segment decreased $0.7 million, or 9.5%, to $6.4 million
      in
      the first six months of 2006. This decrease is primarily attributable to lower
      costs of used and brokerage equipment of $0.3 million and lower costs of
      disposable goods sold of $0.4 million.





Gross
      margin percentage for the medical equipment sales and remarketing segment
      increased from 20.2% in the first six months of 2005 to 26.2% in the first
      six
      months of 2006. Margins in this segment will fluctuate based on used equipment
      availability and the transactional nature of the business.





**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative expenses increased $0.1 million, or 0.4%, to $30.3
      million in the first six months of 2006 as compared to the same period of 2005.
      Selling, general and administrative expenses as a percentage of total revenue
      for the first six months of 2006, decreased to 26.8% from 27.8% for the same
      period of 2005.





**Interest
      Expense**





Interest
      expense increased $0.3 million, or 1.8%, to $15.7 million in the first six
      months of 2006. The increase was driven primarily by higher interest rates.
      Average total borrowings decreased slightly to $297.9 million as compared to
      $298.1 for the same period of 2005. Our average effective interest rate on
      variable rate debt increased to 7.2% during the first six months of 2006 from
      5.7% in the first six months of 2005.





**Income
      Taxes**





Income
      tax
      expense remained relatively flat at $0.4 million for the six months ended June
      30, 2006 as compared to the same period of 2005. Income tax expense relates
      primarily to valuation allowances established for net operating losses not
      recognized as well as minimum state taxes.




17


**Net
        Income**
 
 Net
        income
        rose $3.9 million to $3.4 million in the first six months of 2006. The increase
        is primarily due to increase in gross margin of $4.3 million offset by increased
        selling general and administrative expenses of $0.1 million and an increase
        in
        interest expense of $0.3 million.
  **EBITDA**
 
 Earnings
        Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) for the six
        months ended June 30, 2006, was $41.1 million, representing a $4.6 million,
        or
        12.7%, increase from $36.5 million for the same period of 2005. This increase
        is
        primarily driven by revenue growth and the continued benefits of operating
        efficiency programs put in place during the second half of 2005 generating
        increased gross margin of $4.3 million.
 
 EBITDA
        is
        not intended to represent an alternative to operating income or cash flows
        from
        operating, financing or investing activities (as determined in accordance
        with
        generally accepted accounting principles (“GAAP”)) as a measure of performance,
        and is not representative of funds available for discretionary use due to
        our
        financing obligations. EBITDA, as defined by us, may not be calculated
        consistently among other companies applying similar reporting measures. EBITDA
        is included because it is a widely accepted financial indicator used by certain
        investors and financial analysts to assess and compare companies, and a version
        of EBITDA is an integral part of our debt covenant calculations. Management
        believes that EBITDA provides an important perspective on our ability to
        service
        our long-term obligations, our ability to fund continuing growth, and our
        ability to continue as a going concern. A reconciliation of operating cash
        flows
        to EBITDA is included below (dollars in thousands):
  Six
                        Months Ended
                      June
                        30,2006
                  
                  2005Net
                      cash provided by operating activities
                  
                  $
                  24,823
                  
                  $
                  20,785Changes
                      in operating assets and liabilities
                  
                  
                  2,332
                  
                  
                  996Other
                      non-cash expenses
                  
                  
                  (2,141
                  )
                  
                  (1,145
                  )Income
                      tax expense
                  
                  
                  408
                  
                  
                  421Interest
                      expense
                  
                  
                  15,704
                  
                  
                  15,421EBITDA
                  
                  $
                  41,126
                  
                  $
                  36,478
  18
  Six
                    Months Ended
                  June
                    30,Supplemental
                    Information (dollars in thousands):
                
                2006
                
                2005EBITDA
                
                $
                41,126
                
                $
                36,478Net
                    cash provided by operating activities
                
                
                24,823
                
                
                20,785Net
                    cash used in investing activities
                
                
                (20,999
                )
                
                (17,912
                )Net
                    cash used in financing activities
                
                
                (3,824
                )
                
                (2,873
                )Movable
                    medical equipment depreciation
                
                
                18,200
                
                
                18,420Non-movable
                    medical equipment depreciation and amortization
                
                
                3,442
                
                
                2,756Other
                    operating data:Movable
                    medical equipment owned (approximate units at end of
                    period)
                
                
                164,000
                
                
                156,000Offices
                    (at end of period)
                
                
                78
                
                
                77Number
                    of outsourcing hospital customers (approximate number at end
                    of
                    period)
                
                
                3,200
                
                
                3,200Number
                    of total outsourcing customers (approximate number at end of
                    period)
                
                
                6,350
                
                
                6,350
  **SEASONALITY**
 
 Quarterly
          operating results are typically affected by seasonal factors. Historically,
          our
          first and fourth quarters are the strongest, reflecting increased hospital
          utilization during the fall and winter months.
 
 **LIQUIDITY
          AND CAPITAL RESOURCES**
 
 Our
          principal sources of liquidity are expected to be cash flows from operating
          activities and borrowings under our Amended Credit Agreement that we entered
          into in May 2005 which matures in May 2010. It is anticipated that our
          principal
          uses of liquidity will be to fund capital expenditures related to purchases
          of
          movable medical equipment, provide working capital, meet debt service
          requirements and finance our strategic plans.
 
 We
          require
          substantial cash to operate our Medical Equipment Outsourcing programs
          and
          service our debt. Our outsourcing programs require us to invest a significant
          amount of cash in movable medical equipment purchases. To the extent that
          such
          expenditures cannot be funded from our operating cash flow, borrowing under
          our
          Amended Credit Agreement or other financing sources, we may not be able
          to
          conduct our business or grow as currently planned.
 
 If
          we are
          unable to generate sufficient cash flow from operations in order to service
          our
          debt, we will be forced to take actions such as reducing or delaying capital
          expenditures, selling assets, restructuring or refinancing our debt or
          seeking
          additional equity capital. This, to a certain extent, is subject to general
          economic, financial, competitive, legislative, regulatory and other factors
          that
          are beyond our control. If we are unable to repay our debt at maturity,
          we may
          have to obtain alternative financing, which may not be available to
          us.
  19
  Net
          cash
          provided by operating activities during the six months ended June 30, 2006,
          was
          $24.8 million, compared to $20.8 million in the same period of 2005. This
          increase is primarily attributable to an increase in net income of $3.9
          million.
          Net cash used in investing activities during the six months ended June
          30, 2006,
          was $21.0 million, compared to $17.9 million in the same period of 2005.
          This
          increase was primarily attributable to higher purchases of rental equipment
          to
          meet customer demand. Net cash used in financing activities during the
          six
          months ended June 30, 2006, was $3.8 million, compared to $2.9 million
          in 2005,
          the primary difference relating to higher net pay down of debt in
          2006.
 
 Based
          on
          the level of operating performance expected in 2006, we believe our cash
          from
          operations, together with additional borrowings under our Amended Credit
          Agreement, will meet our liquidity needs for the foreseeable future, exclusive
          of any borrowings that we may make to finance potential acquisitions .
          However,
          if during that period or thereafter we are not successful in generating
          sufficient cash flows from operations or in raising additional capital
          when
          required in sufficient amounts and on terms acceptable to us, our business
          could
          be adversely affected.  Availability
          under our Amended Credit Agreement as of June 30, 2006, was approximately
          $72
          million, representing our borrowing base of $110 million, net of outstanding
          letters of credit of $2 million and borrowings of $36 million. Our levels
          of
          borrowing are further restricted by the financial covenants set forth in
          our
          Amended Credit Agreement and the indenture governing our 10.125% Senior
          Notes,
          which covenants are described in our 2005 annual report on Form 10-K filed
          with
          the Securities and Exchange Commission. As of June 30, 2006, the Company
          was in
          compliance with all covenants under the Amended Credit Agreement.
 
 **RECENT
          ACCOUNTING PRONOUNCEMENT**
 
 Prior
          to
          January 1, 2006, we applied the provisions of Accounting Principles Board
          (“APB”) Opinion No. 25, *Accounting
          for Stock Issued to Employees* ,
          in
          accounting for stock-based compensation. As a result, no compensation expense
          was recognized for stock options granted with exercise prices equivalent
          to the
          fair market value of stock on date of grant. Effective January 1, 2006, we
          adopted SFAS No. 123(R), *Share-Based
          Payment* ,
          using
          the modified prospective application method. Under this method, as of
          January 1, 2006, we have applied the provisions of this Statement to new
          and modified awards, as well as to the nonvested portion of awards granted
          before the required effective date and outstanding at such time.
 
 The
          adoption of this pronouncement had no effect on compensation cost recorded
          in
          2005 related to stock options, which will continue to be disclosed on a
          pro
          forma basis only. As a result of adopting SFAS No. 123(R) on
          January 1, 2006, our net income for the quarter and six months ended June
          30, 2006 was $0.4 million and $0.8 million lower, respectively, than if we
          had continued to account for stock-based compensation under APB Opinion
          No. 25.
  An
          additional requirement of SFAS No. 123(R) is that estimated forfeitures be
          considered in determining compensation expense. As previously permitted,
          we
          recorded forfeitures when they occurred. We have estimated our forfeiture
          rate
          at 2.5% per annum. As of June 30, 2006, the total compensation cost for
          nonvested awards not yet recognized in our statements of income was $5.5
          million, net of the effect of estimated forfeitures. This amount is expected
          to
          be recognized over a weighted-average period of 5.1 years.
  20
  **Safe
          Harbor Statement under the Private Securities Litigation Reform Act of
          1995:** We
          believe statements in this quarterly report looking forward in time involve
          risks and uncertainties. The following factors, among others, could adversely
          affect our business, operations and financial condition causing our actual
          results to differ materially from those expressed in any forward-looking
          statements: our history of net losses and substantial interest expense;
          our need
          for substantial cash to operate and expand our business as planned; our
          substantial outstanding debt and debt service obligations; restrictions
          imposed
          by the terms of our debt; a decrease in the number of patients our customers
          are
          serving; our ability to effect change in the manner in which healthcare
          providers traditionally procure medical equipment; the absence of long-term
          commitments with customers; our ability to renew contracts with group purchasing
          organizations and integrated delivery networks; changes in reimbursement
          rates
          and policies by third-party payors; the impact of health care reform
          initiatives; the impact of significant regulation of the health care industry
          and the need to comply with those regulations; difficulties or delays in
          our
          continued expansion into certain of our businesses/geographic markets and
          developments of new businesses/geographic markets; additional credit risks
          in
          increasing business with home care providers and nursing homes, impacts
          of
          equipment product recalls or obsolescence; and increases in vendor costs
          that
          cannot be passed through to our customers. See the risk factors discussed
          under
          Part I, Item 1A of our Annual Report on Form 10-K for the year ended December
          31, 2005, filed with the Securities and Exchange Commission.
 
 **Item
          3. Quantitative and Qualitative Disclosures about Market
          Risk**
 
 Our
          primary exposure to market risk is interest rate risk associated with our
          debt
          instruments. We use both fixed and variable rate debt as sources of financing.
          At June 30, 2006, we had approximately $299.4 million of total debt outstanding,
          of which $35.7 million was bearing interest at variable rates approximating
          7.6%. A one percentage point change in interest rates on variable rate
          debt
          would have resulted in interest expense fluctuating approximately $0.2
          million
          for the first six months ended June 30, 2006 and 2005. We have not entered
          into,
          and do not plan to enter into, any derivative financial instruments for
          trading
          or speculative purposes. Historically, we have not engaged in hedging
          activities. As of June 30, 2006, we had no other material exposure to market
          risk.
 
 **Item
          4. Controls and Procedures**
 
 (a). Evaluation
          of disclosure controls and procedures.
 
 Under
          the
          supervision and with the participation of our management, including our
          Chief
          Executive Officer and Chief Financial Officer, we evaluated the effectiveness
          of
          the design and operation of our disclosure controls and procedures (as
          defined
          in Rule 15d-15(e) under the Securities Exchange Act of 1934 as amended
          (the
“Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and
          Chief Financial Officer concluded that, as of the end of the period covered
          by
          this report, our disclosure controls and procedures were effective.
  21
  (b). Changes
          in internal control over financial reporting.
 
 During
          the
          second quarter of 2006, there has been no change in our internal control
          over
          financial reporting (as defined in Rule 15d-15(f) under the Exchange Act)
          that
          has materially affected, or is reasonably likely to materially affect,
          our
          internal control over financial reporting.
 
 **PART
          II - OTHER INFORMATION**
 
 **Item
          1.** **Legal Proceedings**
 
 From
          time
          to time, we may become involved in litigation arising out of operations
          in the
          normal course of business. As of June 30, 2006, we were not a party to
          any
          pending legal proceedings the adverse outcome of which could reasonably
          be
          expected to have a material adverse effect on our operating results, financial
          position, or cash flows.
 
 **Item
          1A. Risk Factors**
 
 In
          addition to the other information set forth in this report, you should
          carefully
          consider the factors discussed in Part I, Item 1A of our Annual Report
          on Form
          10-K for the year ended December 31, 2005, which could materially affect
          our
          business, financial condition or results of operations. The risks described
          in
          our Annual Report on Form 10-K are not the only risks facing the Company.
          Additional risks and uncertainties not presently known to us or that we
          currently believe to be immaterial may also adversely affect our business,
          financial condition or results of operations.
 
 **Item
          2.** **Unregistered Sales of Equity Securities and Use of
          Proceeds**
 
 In
          the
          second quarter of 2006, pursuant to the exercise of outstanding options,
          we sold
          common stock to departing employees in the amounts and on the dates set
          forth
          below.
  Date
                      of Sale
                  
                  Shares
                      Sold (#)
                  
                  Amount
                      of Sale ($)April
                      4, 2006
                  
                  
                  166
                  
                  $
                  166.00May
                      17, 2006
                  
                  
                  208
                  
                  
                  249.60June
                      9, 2006
                  
                  
                  1,666
                  
                  
                  1,666.00June
                      19, 2006
                  
                  
                  5,833
                  
                  
                  6,999.607,873
                  
                  $
                  9,081.20
  Such
          sales
          were completed pursuant to the exemption from registration provided under
          Rule
          701 of the regulations of the Securities Act of 1933, as amended.
 The
          proceeds from the sale of such shares were added to our general funds and
          used
          for general corporate purposes.
 
 We
          did not
          repurchase any of our equity securities during the second quarter of
          2006.
 
 **Item
          3.** **Defaults upon Senior Securities**
 
 Not
          applicable.
  22
  **Item
          4. Submission of Matters to a Vote of Security Holders**
 
 Not
          applicable.
 
 **Item
          5.** **Other Information**
 
 Not
          applicable.
 
 **Item
          6.** **Exhibits**
  **Number**
                  
                  **Description**3.1a
                  
                  Certificate
                      of Amendment to Certificate of Incorporation of Universal Hospital
                      Services, Inc.*3.1b
                  
                  Certificate
                      of Incorporation of Universal Hospital Services, Inc.
                      **3.2a
                  
                  Amended
                      and Restated Bylaws of Universal Hospital Services,
                      Inc.*3.3
                  
                  Certification
                      of Elimination of Series B 13% Cumulative Accruing Pay-In-Kind
                      Preferred
                      Stock of Universal Hospital Services, Inc.****4.1
                  
                  Form
                      of certificate of common stock. **4.2
                  
                  Indenture,
                      dated as of October 17, 2003, by and between Universal Hospital
                      Services,
                      Inc. and Wells Fargo Bank, National Association, as Trustee,
                      relating to
                      the registrant’s 10.125% Senior Notes due 2011 (including Form of
                      Note).*4.3
                  
                  Form
                      of Amended and Restated Stockholders’ Agreement, dated October 17, 2003,
                      by and among Universal Hospital Services, Inc., J.W. Childs
                      Equity
                      Partners III, L.P., JWC Fund III Co-invest LLC, Halifax Capital
                      Partners,
                      L.P. and the other stockholders of Universal Hospital Services,
                      Inc.*4.4
                  
                  Exchange
                      and Registration Rights Agreement, dated as of October 17,
                      2003, among
                      Universal Hospital Services, Inc., Goldman, Sachs & Co,. Credit Suisse
                      First Boston LLC, CIBC World Markets Corp. and Jefferies & Company,
                      Inc.***4.5
                  
                  10.125%
                      Senior Notes due 2011 in the aggregate principal amount of
                      $259,880,000.***4.6
                  
                  10.125%
                      Senior Note due 2011 in the aggregate principal amount of
                      $120,000.**4.7
                  
                  Blanket
                      Issuer Letter of Representations, dated as of October 17, 2003,
                      among
                      Universal Hospital Services, Inc., Wells Fargo Bank, National
                      Association
                      and the Depository Trust Company.**31.1
                  
                  Rule
                      13a-14(a)/15d-14(a) Certification of Chief Executive
                      Officer31.2
                  
                  Rule
                      13a-14(a)/15d-14(a) Certification of Chief Financial
                      Officer32.1
                  
                  Certification
                      of Gary D. Blackford Pursuant to 18 U.S.C § 1350, as adopted pursuant to
                      Section 906 of the Sarbanes-Oxley Act of 200232.2
                  
                  Certification
                      of Rex T. Clevenger Pursuant to 18 U.S.C § 1350, as adopted pursuant to
                      Section 906 of the Sarbanes-Oxley Act of
                      2002
  *Previously
          filed as an Exhibit to the Registrant’s Quarterly Report on Form 10-Q for the
          fiscal quarter ended September 30, 2003, and incorporated by reference
          herein.
 **
          Previously filed as an Exhibit to Form S-1/A filed on September 5, 2001,
          and
          incorporated herein by reference.
 ***Previously
          filed as an Exhibit to the Registrant’s Registration Statement on Form S-4 (File
          No. 333-111606) and incorporated by reference herein.
 ****Previously
          filed as an Exhibit to Amendment No. 1 to the Registrant’s Registration
          Statement on Form S-4 (File No. 333-111606) and incorporated by reference
          herein.
  23
  **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.
 
 Date:
          August 8, 2006
 Universal
                    Hospital Services, Inc.By/s/
                    Gary D. BlackfordGary
                    D. Blackford,President
                    and Chief Executive Officer(Principal
                    Executive Officer and Duly Authorized Officer)By/s/
                    Rex T. ClevengerRex
                    T. Clevenger,Senior
                    Vice President and Chief Financial Officer
                  (Principal
                    Financial Officer)
  24
 **Universal
          Hospital Services, Inc.**
 
 **EXHIBIT
          INDEX TO REPORT ON FORM 10-Q**
 **Number**
                  
                  **Description**3.1a
                  
                  Certificate
                      of Amendment to Certificate of Incorporation of Universal Hospital
                      Services, Inc.*3.1b
                  
                  Certificate
                      of Incorporation of Universal Hospital Services, Inc.
                      **3.2a
                  
                  Amended
                      and Restated Bylaws of Universal Hospital Services,
                      Inc.*3.3
                  
                  Certification
                      of Elimination of Series B 13% Cumulative Accruing Pay-In-Kind
                      Preferred
                      Stock of Universal Hospital Services, Inc.****4.1
                  
                  Form
                      of certificate of common stock. **4.2
                  
                  Indenture,
                      dated as of October 17, 2003, by and between Universal Hospital
                      Services,
                      Inc. and Wells Fargo Bank, National Association, as Trustee,
                      relating to
                      the registrant’s 10.125% Senior Notes due 2011 (including Form of
                      Note).*4.3
                  
                  Form
                      of Amended and Restated Stockholders’ Agreement, dated October 17, 2003,
                      by and among Universal Hospital Services, Inc., J.W. Childs
                      Equity
                      Partners III, L.P., JWC Fund III Co-invest LLC, Halifax Capital
                      Partners,
                      L.P. and the other stockholders of Universal Hospital Services,
                      Inc.*4.4
                  
                  Exchange
                      and Registration Rights Agreement, dated as of October 17,
                      2003, among
                      Universal Hospital Services, Inc., Goldman, Sachs & Co,. Credit Suisse
                      First Boston LLC, CIBC World Markets Corp. and Jefferies & Company,
                      Inc.***4.5
                  
                  10.125%
                      Senior Notes due 2011 in the aggregate principal amount of
                      $259,880,000.***4.6
                  
                  10.125%
                      Senior Note due 2011 in the aggregate principal amount of
                      $120,000.**4.7
                  
                  Blanket
                      Issuer Letter of Representations, dated as of October 17, 2003,
                      among
                      Universal Hospital Services, Inc., Wells Fargo Bank, National
                      Association
                      and the Depository Trust Company.**31.1
                  
                  Rule
                      13a-14(a)/15d-14(a) Certification of Chief Executive
                      Officer31.2
                  
                  Rule
                      13a-14(a)/15d-14(a) Certification of Chief Financial
                      Officer32.1
                  
                  Certification
                      of Gary D. Blackford Pursuant to 18 U.S.C § 1350, as adopted pursuant to
                      Section 906 of the Sarbanes-Oxley Act of 200232.2
                  
                  Certification
                      of Rex T. Clevenger Pursuant to 18 U.S.C § 1350, as adopted pursuant to
                      Section 906 of the Sarbanes-Oxley Act of
                      2002
 *Previously
          filed as an Exhibit to the Registrant’s Quarterly Report on Form 10-Q for the
          fiscal quarter ended September 30, 2003, and incorporated by reference
          herein.
 **
          Previously filed as an Exhibit to Form S-1/A filed on September 5, 2001,
          and
          incorporated herein by reference.
 ***Previously
          filed as an Exhibit to the Registrant’s Registration Statement on Form S-4 (File
          No. 333-111606) and incorporated by reference herein.
 ****Previously
          filed as an Exhibit to Amendment No. 1 to the Registrant’s Registration
          Statement on Form S-4 (File No. 333-111606) and incorporated by reference
          herein.
  25