AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 2001
                                                       REGISTRATION NO. 333-
================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               ------------------
                                    FORM S-1
                             REGISTRATION STATEMENT
                                    UNDER THE
                             SECURITIES ACT OF 1933
                               ------------------
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<CAPTION>
<S>                                           <C>                     <C>
            DELAWARE                          8062                    75-2749762
(STATE OR OTHER JURISDICTION OF   (PRIMARY STANDARD INDUSTRIAL    (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)     CLASSIFICATION CODE NUMBER    IDENTIFICATION NO.)
</TABLE>


<TABLE>
<S>                                        <C>
                                                       DONALD E. STEEN
                                                           CHAIRMAN
                                           UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
        17103 PRESTON ROAD                            17103 PRESTON ROAD
         SUITE 200 NORTH                               SUITE 200 NORTH
       DALLAS, TEXAS 75248                           DALLAS, TEXAS 75248
         (972) 713-3500                                 (972) 713-3500
 (ADDRESS, INCLUDING ZIP CODE, AND          (NAME, ADDRESS, INCLUDING ZIP CODE, AND
    TELEPHONE NUMBER, INCLUDING                        TELEPHONE NUMBER,
AREA CODE, OF REGISTRANTS PRINCIPAL        INCLUDING AREA CODE, OF AGENT FOR SERVICE)
        EXECUTIVE OFFICES)
</TABLE>

                        COPIES OF ALL COMMUNICATIONS TO:

<TABLE>
<S>                                 <C>                                  <C>
                                        ROBERT D. MOSHER                    SETH R. MOLAY, P.C.
   JEFFREY A. CHAPMAN               NOSSAMAN, GUTHNER, KNOX &           AKIN, GUMP, STRAUSS, HAUER &
  VINSON & ELKINS L.L.P.                   ELLIOTT, LLP                         FELD, L.L.P.
    2001 ROSS AVENUE                   THIRTY-FIRST FLOOR                  1700 PACIFIC AVENUE
        SUITE 3700                  445 SOUTH FIGUEROA STREET                    SUITE 4100
   DALLAS, TEXAS 75201            LOS ANGELES, CALIFORNIA 90071             DALLAS, TEXAS 75201
TELEPHONE: (214) 220-7700           TELEPHONE: (213) 612-7800            TELEPHONE: (214) 969-2800
FACSIMILE: (214) 220-7716           FACSIMILE: (213) 612-7801            FACSIMILE: (214) 969-4343
</TABLE>

                               ------------------
        Approximate date of commencement of proposed sale to the public:
   As soon as practicable after this Registration Statement becomes effective.
                               ------------------

     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

     If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                               ------------------

                         CALCULATION OF REGISTRATION FEE

<TABLE>
==================================================================================================================
                                                             PROPOSED
                                                              MAXIMUM                         AMOUNT OF
       TITLE OF EACH CLASS OF SECURITIES                AGGREGATE OFFERING                  REGISTRATION
                TO BE REGISTERED                             PRICE(1)                            FEE
------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                                 <C>
Common Stock, $.01 par value per share..........           $138,000,000                        $34,500
==================================================================================================================
</TABLE>

(1)   Estimated solely for purposes of calculating the registration fee pursuant
      to Rule 457(o) under the Securities Act of 1933.

                               ------------------

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

                 SUBJECT TO COMPLETION, DATED FEBRUARY 12, 2001

                                              Shares
                                     [LOGO]
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                  Common Stock

                               ------------------

     Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $      and $      per share. We have applied to list our common stock on
The Nasdaq Stock Market's National Market under the symbol "SURG".

     The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.

     INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON
PAGE 7.

<TABLE>
<CAPTION>
                                                          UNDERWRITING     PROCEEDS TO UNITED
                                           PRICE TO       DISCOUNTS AND     SURGICAL PARTNERS
                                            PUBLIC         COMMISSIONS     INTERNATIONAL, INC.
                                         -------------    -------------    -------------------
<S>                                      <C>              <C>              <C>
Per Share............................    $                $                $
Total................................    $                $                $
</TABLE>

     Delivery of the shares of common stock will be made on or about
             , 2001.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

                               ------------------

CREDIT SUISSE FIRST BOSTON                                       UBS WARBURG LLC

                                         LEHMAN BROTHERS

                                                                        SG COWEN

                 The date of this prospectus is              , 2001.
<PAGE>
         [Photographs of surgery centers and private surgical hospitals]
<PAGE>
                               TABLE OF CONTENTS

                                      PAGE
Prospectus Summary...................   1
Risk Factors.........................   7
Special Note Regarding Forward
  Looking Statements.................  19
Use of Proceeds......................  20
Dividend Policy......................  21
Dilution.............................  22
Capitalization.......................  24
Selected Consolidated Financial and
  Other Data.........................  26
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations......................  27
Business.............................  33
Management...........................  52


                                       PAGE
Certain Relationships and Related
  Transactions.......................   60
Security Ownership of Principal
  Stockholders and Management........   64
Description of Capital Stock.........   66
Shares Eligible for Future Sale......   73
Material United States Federal Tax
  Consequences to Non-United States
  Holders of Common Stock............   75
Underwriting.........................   78
Notice to Canadian Residents.........   81
Legal Matters........................   82
Experts..............................   82
Where You Can Find More
  Information........................   82
Summary Pro Forma Financial
  Statements.........................  P-1
Index to Financial Statements........  F-1

                               ------------------

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

                     DEALER PROSPECTUS DELIVERY OBLIGATION

     UNTIL                               , 2001 (25 DAYS AFTER THE COMMENCEMENT
OF THE OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.

                                       i
<PAGE>
                               PROSPECTUS SUMMARY

     THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS
BUT DOES NOT CONTAIN ALL INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD
READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS AND THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN THIS PROSPECTUS,
BEFORE YOU DECIDE WHETHER TO INVEST IN OUR COMMON STOCK. REFERENCES TO "WE,"
"OUR" OR "US" REFER TO UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

OUR BUSINESS

     We own and operate surgery centers and private surgical hospitals in the
United States, Spain and the United Kingdom. We generally seek to acquire and
develop our facilities through the formation of strategic relationships with
physicians and healthcare systems to access and serve better the communities in
our markets. Our efficient, scalable and portable operating model allows us to
focus on meeting the needs of patients, physicians and payors. Our operating
model is designed to (1) provide an enhanced quality of care and overall
healthcare experience to patients, (2) attract physicians by providing
significant administrative, clinical and economic benefits and (3) offer an
efficient, low cost alternative to payors.

     Since surgeons and other physicians provide and influence the direction of
healthcare worldwide, we have developed our operating model to encourage
surgeons and physicians to affiliate with us and to use our facilities. We have
designed our facilities, structured our strategic relationships and adopted
staffing, scheduling and clinical systems and protocols to increase physician
productivity. We believe that our focus on physician satisfaction, combined with
our model of providing high quality healthcare in a friendly and convenient
environment for patients, will continue to increase the number of procedures
performed at our facilities each year.

     We have ownership interests in 28 surgery centers and one private surgical
hospital, and manage five additional surgery centers in the United States. Also
in the United States, we own interests in and will operate five surgery centers
and one private surgical hospital that are currently under construction and have
identified five additional markets for possible acquisition or development
projects. In Spain, we own and operate six private surgical hospitals, two
surgery centers and one diagnostic facility. In the United Kingdom, we own and
operate two private surgical hospitals and are developing a cancer center.

     Our revenues increased 105% to $98.8 million for the nine months ended
September 30, 2000 from $48.2 million for the nine months ended September 30,
1999. Our EBITDA less minority interest increased 504% to $15.1 million for the
nine months ended September 30, 2000 from $2.5 million for the nine months ended
September 30, 1999. Pro forma revenues and EBITDA less minority interest for the
nine months ended September 30, 2000 were $135.1 million and $27.4 million,
respectively.

     We expect to continue to grow internally, through increasing patient
volumes and reimbursement rates, and through the acquisition and development of
surgical facilities in existing and selected new markets. We believe our
acquisition strategy and operating model position us to capitalize on the
increasing demand for our services in each of our markets. The demand for
outpatient surgery has grown rapidly in the United States. Outpatient surgeries
performed in freestanding surgery centers in the United States increased 191%
from 2.3 million in 1990 to 6.7 million in 2000. Outpatient surgical procedures
represented approximately 15% of all surgical procedures performed in the United
States in 1980 compared to approximately 70% in 2000. In addition, private
healthcare and private health insurance are also emerging in many Western
European countries, including those with government funded

                                       1

<PAGE>
public healthcare systems. We believe the waiting lists for many surgeries and
procedures and restrictions on elective surgeries have created opportunities to
establish successful local networks of private healthcare facilities in selected
national markets in Western Europe.

OUR BUSINESS STRATEGY

     We believe our business strategy will help us maintain growth and increase
market share in each of our markets. The key elements of our strategy are to:

        o  ATTRACT AND RETAIN TOP QUALITY SURGEONS AND OTHER
           PHYSICIANS. Recognizing the importance of physician satisfaction, we
           have designed our facilities and our operating model to encourage
           physicians to choose our facilities. We have identified and seek to
           accommodate the key factors in a physician's decision-making process,
           which we believe include quality of care, patient comfort,
           streamlined administrative processes, efficient operations and
           overall opportunity for increased physician productivity.

        o  GROW THROUGH SELECTIVE ACQUISITIONS AND DEVELOPMENT OF SURGICAL
           FACILITIES. We typically target the acquisition or development of
           multi-specialty centers that perform high volume, non-emergency,
           lower risk procedures requiring lower capital and operating costs
           than hospitals. In addition, we will also consider the acquisition of
           multi-facility companies that fit our overall acquisition profile.

        o  PURSUE STRATEGIC RELATIONSHIPS WITH HEALTHCARE SYSTEMS. We believe
           that developing strategic relationships with nonprofit healthcare
           systems benefits both the healthcare system and us. Our freestanding
           surgical facilities provide healthcare systems with a way to
           accommodate the needs of their doctors and patients without requiring
           significant amounts of their capital or administrative resources. In
           return, we receive the access to and credibility in new local markets
           that we need to appeal to physicians, patients and payors and to
           further our access to potential acquisitions.

        o  EXPAND SELECTIVELY IN WESTERN EUROPE. We intend to leverage our
           presence in Spain and the United Kingdom to expand selectively in
           these countries and to enter one or two additional national markets
           in Western Europe. We intend to continue to acquire and develop
           private surgical hospitals and surgery centers to meet the growing
           demand for private healthcare in that region.

        o  ENHANCE OPERATING EFFICIENCIES. We use systems and protocols
           including our proprietary measurement and monitoring system, USPI's
           EDGE, to enhance operating efficiencies at both existing and newly
           acquired or developed facilities. We believe that this focus on
           efficient operations increases our own profitability and encourages
           physicians to use our facilities by increasing their productivity. In
           addition, efficient operations are critical to our lower cost model
           and our competitive advantage in attracting and negotiating with
           payors.

     We were incorporated under the laws of the State of Delaware and began
operations on February 27, 1998. Our executive offices are located at 17103
Preston Road, Suite 200 North, Dallas, Texas 75248, and our telephone number is
(972) 713-3500. Our website address is WWW.UNITEDSURGICAL.COM. Information
contained on our website does not constitute part of this prospectus.

                                       2

<PAGE>
                                  THE OFFERING

<TABLE>
<S>                                                      <C>
Common stock offered by us...........................    shares

Common stock to be outstanding after this offering...    shares

Use of proceeds......................................    We estimate that our net proceeds from
                                                         this offering will be approximately
                                                         $110.1 million. We intend to:

                                                          o use a portion of these net proceeds to
                                                            redeem for $32.2 million, all
                                                            outstanding shares of our Series A
                                                            redeemable preferred stock, plus
                                                            accrued and unpaid dividends; and

                                                          o use the remaining proceeds to repay a
                                                            portion of our outstanding
                                                            indebtedness.

Proposed Nasdaq Stock Market National Market
  symbol.............................................    "SURG"
</TABLE>

Unless we indicate otherwise, all information in this prospectus:

     o  assumes no exercise of the over-allotment option granted to the
        underwriters;

     o  assumes the conversion into our common stock of each outstanding share
        of our Class A and Class B common stock and Series C convertible
        preferred stock and of our convertible subordinated note with Baylor
        Health Care System Foundation; and

     o  does not give effect to a one-for-     reverse stock split of our
        outstanding shares of common stock to be effected prior to the
        completion of this offering.

Unless we indicate otherwise, all information in this prospectus excludes:

     o  5,920,242 shares of common stock issuable upon the exercise of
        outstanding stock options granted by us with exercise prices ranging
        from $0.85 to $8.47 per share and a weighted average exercise price of
        $3.56 per share;

     o  900,000 shares of common stock issuable upon the exercise of outstanding
        warrants issued by us with exercise prices ranging from $0.01 to $4.00
        per share and a weighted average exercise price of $0.45 per share; and

     o  6,000,000 shares reserved for issuance under our stock option plans and
        employee stock purchase plan.

If the over-allotment option is exercised in full, we will sell an additional
               shares in this offering.

                                       3

<PAGE>
                 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

     The following table summarizes the consolidated statement of operations and
consolidated balance sheet data for our business. The historical results
presented below are not necessarily indicative of the results to be expected for
any future period. The comparability of the financial and other data included in
the table is affected by the acquisition of Aspen Healthcare Holdings Limited on
April 1, 2000 and other acquisitions completed since our inception. For a more
detailed explanation of this financial data, see "Selected Consolidated
Financial and Other Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Summary Pro Forma Financial Statements"
and the consolidated financial statements and related notes included elsewhere
in this prospectus.

     The unaudited pro forma consolidated statement of operations data and the
unaudited pro forma consolidated balance sheet data give effect to:

          o  our acquisitions of OrthoLink Physicians Corporation, completed on
             February 12, 2001, and Aspen Healthcare Holdings Limited completed
             on April 1, 2000, as if these events had occurred on January 1,
             1999, for the statement of operations data and, as if our
             acquisition of OrthoLink had occurred on September 30, 2000 for the
             balance sheet data;

          o  the conversion of all of our Series C convertible preferred stock
             and of our convertible subordinated note with Baylor into shares of
             our common stock; and

          o  the sale of          shares of common stock in this offering at an
             assumed initial public offering price of $     per share, the
             midpoint of the price range set forth on the cover page of this
             prospectus, after deducting the estimated underwriting discount and
             our estimated offering expenses and the application of a portion of
             the net proceeds to repay outstanding indebtedness and to redeem
             each outstanding share of our Series A redeemable preferred stock.

See "Summary Pro Forma Financial Statements." For an explanation of the number
of shares used to compute basic and diluted net income (loss) per share, see
note 12 of the notes to our consolidated financial statements included in this
prospectus.

     When we use the term "EBITDA," we are referring to earnings before
interest, taxes, depreciation and amortization. EBITDA should not be considered
in isolation or as a substitute for net income (loss), operating income (loss),
cash flow provided by operating activities or any other measure of operating
performance calculated in accordance with generally accepted accounting
principles. EBITDA is widely used by financial analysts as a measure of
financial performance. Our calculation of EBITDA may not be comparable to
similarly titled measures reported by other companies.

                                       4

<PAGE>

<TABLE>
<CAPTION>
                                          PERIOD
                                           FROM
                                       FEBRUARY 27,
                                           1998
                                       (INCEPTION)                       NINE MONTHS ENDED SEPTEMBER 30,
                                         THROUGH       YEAR ENDED    ----------------------------------------
                                       DECEMBER 31,   DECEMBER 31,                                PRO FORMA
                                           1998           1999          1999          2000           2000
                                       ------------   ------------   -----------   -----------   ------------
<S>                                    <C>            <C>            <C>           <C>           <C>
                                                                     (UNAUDITED)   (UNAUDITED)   (UNAUDITED)
<CAPTION>
                                                           (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<S>                                         <C>            <C>            <C>           <C>           <C>
Total revenues.........................       $20,572        $ 70,413       $48,233       $98,770       $135,117
Operating expenses excluding depreciation
  and amortization.....................        22,788          65,634        45,587        82,392        106,458
Depreciation and amortization..........         2,015           7,875         5,532         9,295         14,391
                                              -------        --------       -------       -------       --------
Operating income (loss)................        (4,231)         (3,097)       (2,886)        7,083         14,268
Other income (expense):
    Interest income....................           722             329           252           496            595
    Interest expense...................          (497)         (3,144)       (1,772)       (8,267)        (9,256)
    Other expense......................          (246)           (362)         (123)          (50)           (50)
                                              -------        --------       -------       -------       --------
Income (loss) before minority interest...      (4,252)         (6,275)       (4,529)         (737)         5,557
Minority interest in (income) loss of
  consolidated subsidiaries............            23            (118)         (137)       (1,232)        (1,223)
Net income (loss)......................       $(3,928)       $ (6,844)      $(4,965)      $(3,028)      $  1,260
Net income (loss) attributable to common
  shareholders(a)......................        (4,356)         (8,540)       (6,237)       (8,046)         1,260
Net income (loss) per share attributable
  to common shareholders:
    Basic..............................       $ (0.43)       $  (0.39)      $ (0.28)      $ (0.35)
    Diluted............................         (0.43)          (0.39)        (0.28)        (0.35)
Weighted average number of common shares
  outstanding and common equivalent
  shares:
    Basic..............................        10,099          21,924        21,942        23,109
    Diluted............................        10,999          21,924        21,942        23,109
OTHER DATA:
EBITDA.................................       $(2,216)       $  4,778       $ 2,646       $16,378       $ 28,659
EBITDA as a % of revenue...............         (10.8)%           6.8%          5.5%         16.6%          21.2%
EBITDA less minority interest..........       $(2,193)       $  4,660       $ 2,509       $15,146       $ 27,436
EBITDA less minority interest as a % of
  revenue..............................         (10.7)%           6.6%          5.2%         15.3%          20.3%
Number of facilities operated as of the
  end of period........................            17              28            28            33             42
</TABLE>
------------
(a) Includes preferred stock dividends of $428,050, $1,695,803, $1,271,850 and
    $5,018,265 for the period from February 27, 1998 (inception) through
    December 31, 1998, the year ended December 31, 1999 and the nine months
    ended September 30, 1999 and September 30, 2000.

                                       5

<PAGE>
<TABLE>
<CAPTION>
                                            AS OF SEPTEMBER 30, 2000
                                         -------------------------------
                                          ACTUAL            PRO FORMA
                                         --------         --------------
                                         (UNAUDITED)      (UNAUDITED)
                                                 (IN THOUSANDS)
<S>                                      <C>              <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital......................    $  3,201            $ 33,068
Total assets.........................     292,755             414,230
Total long-term debt.................     162,860             133,835
Redeemable preferred stock...........      32,175             --
Total stockholders' equity...........      48,637             210,169
</TABLE>

                                       6
<PAGE>
                                  RISK FACTORS

     THE VALUE OF AN INVESTMENT IN UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
WILL BE SUBJECT TO THE SIGNIFICANT RISKS INHERENT IN OUR BUSINESS. YOU SHOULD
CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND OTHER
INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK. IF
ANY OF THE EVENTS DESCRIBED BELOW OCCUR, OUR BUSINESS AND FINANCIAL RESULTS
COULD BE ADVERSELY AFFECTED IN A MATERIAL WAY. THIS COULD CAUSE THE TRADING
PRICE OF OUR COMMON STOCK TO DECLINE, PERHAPS SIGNIFICANTLY. ADDITIONAL RISKS
AND UNCERTAINTIES, INCLUDING THOSE THAT ARE NOT YET IDENTIFIED OR THAT WE
CURRENTLY BELIEVE ARE IMMATERIAL, MAY ALSO ADVERSELY AFFECT OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

RISKS RELATING TO OUR BUSINESS

WE DEPEND ON PAYMENTS FROM THIRD-PARTY PAYORS, INCLUDING GOVERNMENT HEALTHCARE
PROGRAMS, AND THESE PAYMENTS MAY BE REDUCED WHILE OUR COSTS ARE INCREASING.

     We are dependent upon private and governmental third-party sources of
payment for the services provided to patients in our surgery centers and private
surgical hospitals. The amount of payment a surgery center or private surgical
hospital receives for its services may be adversely affected by market and cost
factors as well as other factors over which we have no control, including
Medicare and Medicaid regulations and the cost containment and utilization
decisions of third-party payors. We derived approximately 19% and 18% of our
domestic revenues in 1999 and the nine months ended September 30, 2000,
respectively, from U.S. government healthcare programs, including Medicare and
Medicaid. For the nine months ended September 30, 2000, we derived approximately
2% and 12% of our revenues from governmental payors in the United Kingdom and
Spain, respectively. This revenue is a result of referrals of patients to our
hospitals by the national health system. We have no control over the number of
patients that are referred to the private sector annually. We can give you no
assurances that fixed fee schedules, capitation payment arrangements, exclusion
from participation in managed care programs or other factors affecting payments
for healthcare services over which we have no control will not have a material
adverse effect on us.

IF WE ARE UNABLE TO ACQUIRE AND DEVELOP ADDITIONAL SURGERY CENTERS OR PRIVATE
SURGICAL HOSPITALS ON FAVORABLE TERMS, WE MAY BE UNABLE TO EXECUTE OUR
ACQUISITION AND DEVELOPMENT STRATEGY.

     Our strategy is to increase our revenues and earnings by continuing to
acquire surgical facility companies, groups of surgical facilities and
individual surgical facilities and to develop additional surgical facilities.
Our efforts to execute our acquisition and development strategy may be affected
by our ability to identify suitable candidates and negotiate and close
acquisition and development transactions. We are currently evaluating potential
acquisitions and development projects and expect to continue to evaluate
acquisitions and development projects in the foreseeable future. The surgical
facilities we develop typically incur losses during the initial months of
operation and, unless and until their case loads grow, they generally experience
lower total revenues and operating margins than established surgical facilities.
Further, while we seek indemnification from prospective sellers covering unknown
or contingent liabilities, we may nevertheless acquire companies and surgical
facilities that have material liabilities for failure to comply with healthcare
laws and regulations or other past activities. We can give you no assurances
that we will be successful in acquiring other companies or additional surgical
facilities, developing surgical facilities or achieving satisfactory operating
results at acquired or newly developed facilities. We can give you no assurances
that the companies or assets we acquire in the future will ultimately produce
returns that justify our related investment.

                                       7
<PAGE>
IF WE DO NOT HAVE SUFFICIENT CAPITAL RESOURCES FOR OUR ACQUISITION AND
DEVELOPMENT STRATEGY, OUR GROWTH COULD BE LIMITED.

     We will need capital to acquire other companies and to acquire, develop,
integrate, operate and expand surgery centers and private surgical hospitals. We
may finance future acquisition and development projects through debt or equity
financings and may use shares of our capital stock for all or a portion of the
consideration to be paid in acquisitions. To the extent that we undertake these
financings or use capital stock as consideration, our stockholders may
experience future ownership dilution. In the event that our common stock does
not maintain a sufficient valuation, or potential acquisition candidates are
unwilling to accept our common stock as all or part of the consideration, we may
be required to use more of our cash resources, if available, or to rely solely
on additional financing arrangements to pursue our acquisition and development
strategy. In such an instance, if we do not have sufficient capital resources,
our growth could be limited and our operations impaired. We can give you no
assurances that we will be able to obtain financing necessary for our
acquisition and development strategy or that, if available, the financing will
be on terms acceptable to us.

IF WE ARE UNABLE TO MANAGE GROWTH, WE MAY BE UNABLE TO ACHIEVE OUR GROWTH
STRATEGY.

     Our rapid growth has placed, and will continue to place, increased demands
on our management, operational and financial information systems and other
resources. Further expansion of our operations will require substantial
financial resources and management attention. To accommodate our past and
anticipated future growth, and to compete effectively, we will need to continue
to implement and improve our management, operational and financial information
systems and to expand, train, manage and motivate our workforce. We can give you
no assurances that our personnel, systems, procedures or controls will be
adequate to support our operations in the future or that focusing our financial
resources and management attention on the expansion of our operations will not
adversely affect our financial results. Any failure to implement and improve our
management, operational and financial information systems, or to expand, train,
manage or motivate our workforce, could have a material adverse effect on us.

WE DEPEND ON OUR RELATIONSHIPS WITH THE HEALTHCARE SYSTEMS WITH WHICH WE HAVE
STRATEGIC ALLIANCES.

     Our domestic business depends upon the efforts and success of the
healthcare systems with which we have strategic alliances and the strength of
our alliances with these healthcare systems. Our business could be adversely
affected by the impairment of our relationships with these healthcare systems or
any damage to the reputation of these healthcare systems. We can give you no
assurances that we will be able to maintain or renew our existing alliance
agreements with these healthcare systems on terms and conditions favorable to
us. We also cannot assure you that we will be able to enter into alliances with
additional healthcare systems. If we are unable to maintain and renew our
existing alliance agreements on terms favorable to us or enter into alliances
with additional healthcare systems, we may be unable to implement our business
strategies successfully and our business could be adversely affected.

WE DEPEND ON OUR RELATIONSHIPS WITH THE PHYSICIANS WHO USE OUR FACILITIES.

     Our business depends upon the efforts and success of the physicians who
provide medical services at our domestic and Western European facilities and the
strength of our relationships with these physicians. Our business could be
adversely affected by:

     o  the loss of our relationship with, or a reduction in use of our
        facilities by, a key physician or group of physicians;

     o  any failure of these physicians to maintain the quality of medical care
        provided or to otherwise adhere to professional guidelines at our
        surgical facilities; or

     o  any damage to the reputation of a key physician or group of physicians.

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OUR EUROPEAN OPERATIONS, WHICH WE PLAN TO EXPAND, ARE SUBJECT TO UNIQUE RISKS.
IF ANY OF THESE EVENTS ACTUALLY OCCUR, OUR FINANCIAL RESULTS COULD BE ADVERSELY
AFFECTED.

     Our international operations are located in Spain and the United Kingdom.
For the nine months ended September 30, 2000, approximately 43% of our revenues
were generated from operations in Spain, 39% from the United States and 18% from
the United Kingdom. For 1999 and 1998, respectively, these percentages were 67%
and 91% for Spain and 33% and 9% for the United States. We did not have
operations in the United Kingdom before April 1, 2000. We expect that revenue
from European operations will continue to account for a significant percentage
of our total revenue, and we may pursue additional acquisitions in Spain, the
United Kingdom and other countries in Western Europe. Expansion of our European
operations will require substantial financial resources and management
attention. This focus of financial resources and management attention could have
an adverse effect on our financial results. Our European operations are subject,
and as they continue to develop may become increasingly subject, to risks such
as:

     o  competition with government-sponsored healthcare systems;

     o  unforeseen changes in foreign regulatory requirements or domestic
        regulatory requirements affecting our foreign operations;

     o  identifying, attracting, retaining and working successfully with
        qualified local management;

     o  difficulties in staffing and managing geographically and culturally
        diverse, multinational operations;

     o  currency fluctuations;

     o  potentially adverse tax consequences; and

     o  the possibility of an economic downturn in the Western European
        countries in which we operate, which could adversely affect the ability
        or willingness of employers and individuals in these countries to
        purchase private health insurance.

We can give you no assurances that these or other factors will not have a
material adverse effect on our ability to successfully operate in Europe.

WE MAY ENCOUNTER DIFFICULTIES IN OUR INTEGRATION OF ORTHOLINK.

     Our recent acquisition of OrthoLink requires the integration of two
companies that previously operated independently. We can give you no assurances
that we will not encounter difficulties in integrating the operations of
OrthoLink with our own or that the expected benefits of the acquisition will be
realized. If we are not able to integrate the two companies' operations and
personnel in a timely and efficient manner, then the potential benefits of the
transaction may not be achieved. Further, any delays or unexpected costs
incurred in connection with the integration could have a material adverse effect
on us. In particular, if the operations and personnel of the two companies are
not compatible, if we experience the loss of key personnel or if the effort
devoted to the integration of the two companies diverts significant management
or other resources from other operational activities, our business may be
adversely affected.

OUR SIGNIFICANT INDEBTEDNESS COULD LIMIT OUR FLEXIBILITY.

     We are substantially leveraged and will continue to have significant
indebtedness following this offering. As of September 30, 2000, on a pro forma
basis after giving effect to the OrthoLink acquisition and the use of the
estimated net proceeds of this offering, we would have had total long term debt
of approximately $133.8 million, or approximately 39% of our total
capitalization. Our acquisition and development program requires substantial
capital resources, and the operation of our existing surgical facilities
requires ongoing capital expenditures. We may need to incur additional
indebtedness to fund these acquisitions, developments and operational
expenditures. However, we may be unable to

                                       9
<PAGE>
obtain sufficient financing on terms satisfactory to us, or at all. As a result,
our acquisition and development activities would have to be curtailed or
eliminated and our financial results would be adversely affected.

     The degree to which we are leveraged could have other important
consequences to you, including the following:

     o  we must dedicate a substantial portion of our cash flow from operations
        to the payment of principal and interest on our indebtedness, reducing
        the funds available for our operations;

     o  a portion of our borrowings are at variable rates of interest, making us
        vulnerable to increases in interest rates;

     o  we may be more highly leveraged than some of our competitors, which
        could place us at a competitive disadvantage;

     o  our degree of leverage may make us more vulnerable to a downturn in our
        business or the economy generally; and

     o  the terms of our credit arrangements contain numerous financial and
        other restrictive covenants, including restrictions on paying dividends,
        incurring additional indebtedness and selling assets.

OUR REVENUES MAY BE ADVERSELY AFFECTED BY PENDING CHANGES IN THE SYSTEM OF
PAYING FOR OUTPATIENT SURGICAL PROCEDURES UNDER THE MEDICARE PROGRAM.

     Medicare's system of paying for covered procedures performed in a surgery
center is scheduled to change in the near future. On June 12, 1998, The
Department of Health and Human Services, or DHHS, proposed major revisions to
the surgery center payment methodology. The proposed rule would increase the
number of surgical procedure payment groups from eight to 105 and the number of
procedures covered by the Medicare program from 2,280 to 2,499. All of the
procedures that are paid at a particular rate would constitute a payment group.
Therefore, each of the 2,499 procedures would be paid at one of the 105
prospectively determined payment rates. The recently enacted Medicare, Medicaid
and SCHIP Benefits and Improvement and Protection Act of 2000 prohibits DHHS
from implementing the proposed surgery center methodology before January 1,
2002.

     Under the proposed revisions to the payment methodology, the payment rate
for virtually every covered procedure performed in a surgery center would
change, with some procedures receiving a lower rate and others receiving a
higher rate than they do currently. This change could affect the Medicare
revenues of our surgery centers, depending on such factors as patient volume,
case mix and the types of procedures performed. For that reason, the potential
impact of this new classification system cannot be predicted with certainty. We
can give you no assurances that our revenues will not be adversely affected
under the proposed payment system.

IF WE ARE UNABLE TO NEGOTIATE CONTRACTS AND MAINTAIN SATISFACTORY RELATIONSHIPS
WITH MANAGED CARE ORGANIZATIONS OR OTHER THIRD-PARTY PAYORS, OUR REVENUES MAY
DECREASE.

     Our competitive position has been, and will continue to be, affected by
initiatives undertaken during the past several years by major domestic
purchasers of healthcare services, including federal and state governments,
insurance companies and employers, to revise payment methods and monitor
healthcare expenditures in an effort to contain healthcare costs. As a result of
these initiatives, managed care companies such as health maintenance and
preferred provider organizations, which offer prepaid and discounted medical
service packages, represent a growing segment of healthcare payors, the effect
of which has been to reduce domestic healthcare facility revenue growth.
Similarly, in the United Kingdom, most patients at private surgical hospitals
have private healthcare insurance, either paid for by the patient or received as
part of their employment compensation. The majority of our

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<PAGE>
revenues in the United Kingdom are attributable to patients with private
insurance. Our private surgical hospitals in the United Kingdom contract with
healthcare insurers on an annual basis to provide services to insured patients.

     In Spain, the majority of our revenues are attributable to patients with
private insurance. Our private surgical hospitals in Spain contract with
healthcare insurers on an annual basis to provide services to insured patients.
In addition, our Spanish hospitals contract with the Spanish Public Healthcare
System, which awards contracts based on a hospital's satisfaction of specified
criteria. The Spanish Public Healthcare System has the right to give priority to
hospitals owned by nonprofit entities if the efficiency, quality and cost
conditions of these entities are comparable to those of for profit hospitals.
Our contracts with the Spanish Public Healthcare System are short-term and
renewable at the sole discretion of the Spanish Public Healthcare System. As the
majority of our revenues in Spain are derived from private insurance companies,
the annual negotiation of price increases is very important to the profitability
of our hospitals. Any termination of an existing third-party contract could
result in a significant loss of revenues and could have a material adverse
effect on us.

     As an increasing percentage of domestic patients become subject to
healthcare coverage arrangements with managed care payors, we believe that our
success will continue to depend upon our ability to negotiate favorable
contracts on behalf of our facilities with managed care organizations, employer
groups and other private third-party payors. If we are unable to enter into
these arrangements on satisfactory terms in the future we could be adversely
affected. Many of these payors already have existing provider structures in
place and may not be able or willing to change their provider networks. We can
give you no assurances that we will be able to maintain existing relationships
or establish or maintain satisfactory new relationships with managed care
organizations or other third-party payors. Similarly, if we fail to negotiate
contracts with healthcare insurers in the United Kingdom and Spain on favorable
terms, or if we fail to remain on insurers' networks of approved hospitals, it
could have a material adverse effect on us. Any significant loss of revenue as a
result of the termination of existing third-party payor contracts or otherwise
could have a material adverse effect on us.

EFFORTS TO REGULATE THE CONSTRUCTION, ACQUISITION OR EXPANSION OF HEALTHCARE
FACILITIES COULD PREVENT US FROM ACQUIRING ADDITIONAL SURGERY CENTERS OR PRIVATE
SURGICAL HOSPITALS, RENOVATING OUR EXISTING FACILITIES OR EXPANDING THE BREADTH
OF SERVICES WE OFFER.

     Some states in the United States require prior approval for the
construction, acquisition or expansion of healthcare facilities or expansion of
the services they offer. In giving approval, these states consider the need for
additional or expanded healthcare facilities or services. In some states in
which we operate, we are required to obtain certificates of need, known as CONs,
for capital expenditures exceeding a prescribed amount, changes in bed capacity
or services offered and various other matters. Other states in which we now or
may in the future operate may adopt similar legislation. Spain also requires
prior approval of the construction or expansion of healthcare facilities. In
addition, private surgical hospitals in Spain must obtain a number of licenses,
including a license to operate a pharmacy or to perform tests using radioactive
materials. We may not be able to obtain the CONs or other required approvals for
additional or expanded facilities or services in the future. In addition, at the
time we acquire a facility, we may agree to replace or expand the acquired
facility. If we are unable to obtain required approvals, we may not be able to
acquire additional surgery centers or private surgical hospitals, expand
healthcare services we provide at these facilities or replace or expand acquired
facilities.

NEW FEDERAL AND STATE LEGISLATIVE AND REGULATORY INITIATIVES RELATING TO PATIENT
PRIVACY COULD REQUIRE US TO EXPEND SUBSTANTIAL SUMS ACQUIRING AND IMPLEMENTING
NEW INFORMATION SYSTEMS, WHICH COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS.

     There are currently numerous legislative and regulatory initiatives at the
U.S. state and federal levels addressing patient privacy concerns. In
particular, the Health Insurance Portability and Accountability Act of 1996
contains provisions that may require us to acquire and implement expensive new

                                       11
<PAGE>
computer systems and to adopt business procedures designed to protect the
privacy of each of our patient's individual health information. On December 28,
2000, DHHS released the final health privacy regulations, which generally
require compliance within two years. These regulations are expected to have a
financial impact on the health care industry because they impose extensive new
requirements and restrictions on the use and disclosure of identifiable patient
information. Although we cannot predict the total financial or other impact of
these regulations on our business, compliance with these regulations could
require us to spend substantial sums, which could negatively impact our
financial results. Additionally, if we fail to comply with these regulations, we
could suffer civil penalties up to $25,000 per calendar year for each violation
and criminal penalties with fines up to $250,000.

IF WE FAIL TO COMPLY WITH APPLICABLE LAWS AND REGULATIONS, WE COULD SUFFER
PENALTIES OR BE REQUIRED TO MAKE SIGNIFICANT CHANGES TO OUR OPERATIONS.

     We are subject to many laws and regulations at the federal, state and local
government levels in the domestic and European jurisdictions in which we
operate. These laws and regulations require that our healthcare facilities meet
various licensing, certification and other requirements, including those
relating to:

     o  physician ownership of our domestic facilities;

     o  the adequacy of medical care, equipment, personnel, operating policies
        and procedures;

     o  maintenance and protection of records; and

     o  environmental protection.

     If we fail to comply with applicable laws and regulations, we could suffer
civil or criminal penalties, including the loss of our licenses to operate and
our ability to participate in Medicare, Medicaid and other government sponsored
and other healthcare programs. A number of initiatives have been proposed during
the past several years to reform various aspects of the healthcare system, both
domestically and in the European jurisdictions in which we operate. In the
future, different interpretations or enforcement of existing or new laws and
regulations could subject our current practices to allegations of impropriety or
illegality, or could require us to make changes in our facilities, equipment,
personnel, services, capital expenditure programs and operating expenses. We can
give you no assurances that current or future legislative initiatives or
government regulation will not have a material adverse effect on us or reduce
the demand for our services.

     In pursuing our growth strategy, we may expand our presence into new
geographic markets, including additional foreign countries. In entering a new
geographic market, we will be required to comply with laws and regulations of
jurisdictions that may differ from those applicable to our current operations.
We can give you no assurances that we will be able to comply with these legal
requirements in a cost-effective manner.

IF A FEDERAL OR STATE AGENCY ASSERTS A DIFFERENT POSITION OR ENACTS NEW LAWS OR
REGULATIONS REGARDING ILLEGAL REMUNERATION UNDER THE MEDICARE OR MEDICAID
PROGRAMS, WE MAY BE ADVERSELY AFFECTED.

     The federal Anti-Kickback Statute prohibits the offer, payment,
solicitation or receipt of any form of remuneration in return for referring
items or services payable by Medicare, Medicaid, or any other federal healthcare
program. Additionally, the Anti-Kickback Statute prohibits any form of
remuneration in return for purchasing, leasing, or ordering or arranging for or
recommending the purchasing, leasing or ordering of items or services payable by
Medicare, Medicaid or any other federal healthcare program. The Anti-Kickback
Statute is very broad in scope and many of its provisions have not been
uniformly or definitively interpreted by existing case law or regulations.
Violations of the Anti-Kickback Statute may result in substantial civil or
criminal penalties, including criminal fines of up to $25,000 and civil
penalties of up to $50,000 for each violation, plus three times the amount
claimed and exclusion from participation in the Medicare and Medicaid programs.
The exclusion, if applied to

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<PAGE>
our surgery centers or private surgical hospitals, could result in significant
reductions in revenue and could have a material adverse effect on our business.

     In July 1991, DHHS issued final regulations defining various "safe
harbors." Two of the safe harbors issued in 1991 apply to business arrangements
similar to those used in connection with our surgery centers and private
surgical hospitals, the "investment interest" safe harbor and the "personal
services and management contracts" safe harbor. However, the structure of the
limited partnerships and limited liability companies operating our surgery
centers and private surgical hospitals, as well as our various business
arrangements involving physician group practices, do not satisfy all of the
requirements of either safe harbor. Therefore, our business arrangements with
our surgery centers, private surgical hospitals and physician groups do not
qualify for "safe harbor" protection from government review or prosecution under
the Anti-Kickback Statute. Since there is no legal requirement that transactions
with referral sources fit within a safe harbor, a business arrangement that does
not substantially comply with the relevant safe harbor is not necessarily
illegal under the Anti-Kickback Statute.

     On November 19, 1999, DHHS promulgated final regulations creating
additional safe harbor provisions, including a safe harbor that applies to
physician ownership of or investment interests in surgery centers. The surgery
center safe harbor protects four types of investment arrangements: (1)
surgeon-owned surgery centers; (2) single-specialty surgery centers; (3)
multi-specialty surgery centers; and (4) hospital/physician surgery centers.
Each category has its own requirements with regard to what type of physician may
be an investor in the surgery center. In addition to the physician investor, the
categories permit an "unrelated" investor, who is a person or entity that is not
in a position to provide items or services related to the surgery center or its
investors. Our business arrangements with our surgery centers typically consist
of one of our subsidiaries being an investor in each limited partnership or
limited liability company that owns the surgery center, in addition to providing
management and other services to the surgery center. As a result, these business
arrangements do not comply with all the requirements of the surgery center safe
harbor, and, therefore, are not immune from government review or prosecution.

     Although we believe that our business arrangements do not violate the
Anti-Kickback Statute, we can give you no assurances that a government agency or
a private party will not assert a contrary position. Additionally, we can give
you no assurances that new domestic federal or state laws will not be enacted
that would cause our relationships with the physician investors to become
illegal or result in the imposition of penalties against us or our facilities.
If any of our business arrangements with physician investors were deemed to
violate the Anti-Kickback Statute or similar laws, or if new domestic federal or
state laws were enacted rendering these arrangements illegal, our business could
be adversely affected.

IF PHYSICIAN SELF-REFERRAL LAWS ARE INTERPRETED DIFFERENTLY OR IF OTHER
LEGISLATIVE RESTRICTIONS ARE ISSUED, WE COULD INCUR A SIGNIFICANT LOSS OF
REIMBURSEMENT.

     The U.S. federal physician self-referral law, commonly referred to as the
Stark Law, prohibits a physician from making a referral for a designated health
service to an entity if the physician or a member of the physician's immediate
family has a financial relationship with the entity. The original Stark Law only
addressed referrals involving clinical laboratory services. However, in 1995
additional legislation, commonly known as Stark II, expanded the ban on
self-referrals by adding the following services to the definition of "designated
health services": physical therapy services; occupational therapy services;
radiology services; radiation therapy services and supplies; durable medical
equipment and supplies; parenteral and enteral nutrients, equipment and
supplies; prosthetics, orthotics, and prosthetic devices and supplies; home
health services; outpatient prescription drugs; and inpatient and outpatient
hospital services.

     DHHS issued a final rule on January 4, 2001, which was divided into Phase I
and Phase II, with Phase I regulations taking effect on January 4, 2002. Phase
II of the final rule, which DHHS says that

                                       13
<PAGE>
it intends to publish "shortly," will address services furnished in a surgery
center. Under Phase I, services that would otherwise constitute a designated
health service, but that are paid by Medicare as part of the surgery center
payment rate, are not a designated health service for the purposes of the Stark
Law. Therefore, we believe the Stark Law generally does not prohibit physician
ownership or investment interests in surgery centers to which they refer
patients.

     In addition, we believe that physician ownership of surgery centers is not
prohibited by similar self-referral statutes enacted at the state level.
However, the Stark Law and similar state statutes are subject to different
interpretations with respect to many important provisions. Violations of these
self-referral laws may result in substantial civil or criminal penalties,
including large civil monetary penalties and exclusion from participation in the
Medicare and Medicaid programs. Exclusion of our surgery centers or private
surgical hospitals from these programs could result in significant loss of
revenues and could have a material adverse effect on us. We can give you no
assurances that further judicial or agency interpretation of existing laws or
further legislative restrictions on physician ownership or investment in health
care entities will not be issued that could have a material adverse effect on
us.

     In Spain, there is legislation which prohibits physicians who have
contracted with the Spanish Public Healthcare System on an exclusive basis from
rendering services in a private hospital. Spanish legislation also prohibits
physicians rendering services within the Public Healthcare System on a non-
exclusive basis from rendering services to Spanish Public Healthcare System
patients in private hospitals such as ours that have alliances with the Spanish
Public Healthcare System. Violations of these laws could result in
administrative fines or termination of the alliance with the Spanish Public
Healthcare System. If the physicians who use our Spanish facilites violate these
regulations and their or our contracts are terminated with the Spanish Public
Healthcare System, preventing them from continuing to use our facilities, our
business in Spain could be materially adversely affected.

IF LAWS GOVERNING THE CORPORATE PRACTICE OF MEDICINE CHANGE, WE MAY BE REQUIRED
TO RESTRUCTURE SOME OF OUR DOMESTIC RELATIONSHIPS.

     The laws of various domestic jurisdictions in which we operate or may
operate in the future do not permit business corporations to practice medicine,
exercise control over physicians who practice medicine or engage in various
business practices, such as fee-splitting with physicians. The interpretation
and enforcement of these laws vary significantly from state to state. We are not
required to obtain a license to practice medicine in any jurisdiction in which
we own or operate a surgery center or private surgical hospital because our
facilities are not engaged in the practice of medicine. The physicians who
utilize our facilities are individually licensed to practice medicine. In most
instances, the physicians and physician group practices are not affiliated with
us other than through the physicians ownership interests in the partnerships or
limited liability companies that own and operate our facilities and the service
agreements we have with some physicians.

     As a result of our acquisition of OrthoLink, we provide management services
to a number of physicians and physician group practices affiliated with
OrthoLink. Although we believe that our arrangements with these and other
physicians and physician group practices comply with applicable laws, we can
give you no assurances that a government agency charged with enforcement of
these laws, or a private party, might not assert a contrary position. If our
arrangements with these physicians and physician group practices were deemed to
violate state corporate practice of medicine, fee-splitting or similar laws, or
if new laws were enacted rendering these arrangements illegal, our business
could be materially adversely affected.

NEW YORK LAW RESTRICTS OUR OWNERSHIP OF FACILITIES IN NEW YORK.

     Under New York law, only individuals approved by the New York Department of
Health can own licensed healthcare facilities. Accordingly, we may not be able
to own interests in a partnership

                                       14
<PAGE>
or limited liability company that owns an interest in a New York healthcare
facility unless our designees are approved by the New York Department of Health.
New York law also prohibits any unauthorized delegation of management authority
by a licensed healthcare facility. The law does permit a licensed facility to
obtain various services from non-licensed entities; however, it is not clear
what types of delegation constitute a violation. Although we believe that our
operations or relationships in New York are in compliance with these New York
laws, we can give you no assurance that a third party will not assert a contrary
position.

IF DOMESTIC REGULATIONS CHANGE, WE MAY BE OBLIGATED TO PURCHASE SOME OR ALL OF
THE OWNERSHIP INTERESTS OF THE PHYSICIANS ASSOCIATED WITH US.

     Upon the occurrence of various fundamental domestic regulatory changes, we
will be obligated to purchase some or all of the ownership interests of the
physicians affiliated with us in the limited partnerships or limited liability
companies that own and operate our surgery centers and private surgical
hospitals. The regulatory changes that could create this obligation include
changes that:

     o  make illegal the referral of Medicare or other patients to our surgical
        facilities by physicians affiliated with us;

     o  create the substantial likelihood that cash distributions from the
        limited partnerships or limited liability companies through which we
        operate our surgical facilities to physicians affiliated with us will be
        illegal; or

     o  make illegal the ownership by the physicians affiliated with us of
        interests in the partnerships or limited liability companies through
        which we own and operate our surgical facilities.

Typically, our limited partnership and limited liability company agreements
allow us to use shares of our common stock as consideration for the purchase of
a physicians ownership interest. The use of shares of our common stock for that
purpose would dilute your ownership. In the event that we are required to
purchase a physicians ownership interest and our common stock does not maintain
a sufficient valuation, we could be required to use our cash resources for the
acquisition. We can give you no assurances that our existing capital resources
would be sufficient for us to meet this obligation. The creation of these
obligations and the possible termination of our affiliation with these
physicians could have a material adverse effect on us.

IF WE BECOME SUBJECT TO SIGNIFICANT LEGAL ACTIONS, WE COULD BE SUBJECT TO
SUBSTANTIAL UNINSURED LIABILITIES.

     In recent years, physicians, hospitals and other healthcare providers have
become subject to an increasing number of legal actions alleging malpractice,
product liability or related legal theories. Many of these actions involve large
monetary claims and significant defense costs. To protect us from the cost of
these claims, we maintain professional malpractice liability insurance and
general liability insurance coverage in amounts and with deductibles that we
believe to be appropriate for our operations. However, our insurance coverage
may not cover all claims against us or continue to be available at a cost
allowing us to maintain adequate levels of insurance. If one or more successful
claims against us were not covered by or exceeded the coverage of our insurance,
we could be adversely affected.

IF WE ARE UNABLE TO EFFECTIVELY COMPETE FOR PHYSICIANS, STRATEGIC RELATIONSHIPS,
ACQUISITIONS AND MANAGED CARE CONTRACTS, OUR BUSINESS COULD BE ADVERSELY
AFFECTED.

     The healthcare business is highly competitive. We compete with other
healthcare providers, primarily hospitals, in recruiting physicians and
contracting with managed care payors in each of our markets. In Spain and the
United Kingdom, we also compete with these countries' national health systems in
our recruitment of healthcare professionals. There are major unaffiliated
hospitals in each market in which we operate. These hospitals have established
relationships with physicians and payors.

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In addition, other companies either are currently in the same or similar
business of developing, acquiring and operating surgery centers and private
surgical hospitals or may decide to enter our business. Many of these companies
have greater financial, research, marketing and staff resources than we do. We
may also compete with some of these companies for entry into strategic
relationships with healthcare systems and healthcare professionals. We can give
you no assurances that we can compete effectively with any of these entities.

WE ARE HIGHLY DEPENDENT ON OUR KEY MANAGEMENT PERSONNEL.

     We are highly dependent on our senior management, including Donald E.
Steen, our chairman and chief executive officer, William H. Wilcox, our
president and chief operating officer, and Gabriel Masfurroll, president of our
Spanish operations. We do not maintain "key man" life insurance policies on any
of our officers. The loss of key management personnel or our inability to
attract, retain and motivate sufficient numbers of qualified management
personnel could have a material adverse effect on us.

WE MAY OWE FIDUCIARY DUTIES TO THE HOLDERS OF OWNERSHIP INTERESTS IN THE
ENTITIES THROUGH WHICH WE OWN SURGICAL FACILITIES, AND THOSE DUTIES MAY PREVENT
US FROM ACTING SOLELY IN OUR OWN BEST INTERESTS.

     Our ownership interests in surgery centers and private surgical hospitals
generally are held through limited partnerships or limited liability companies.
We typically maintain an interest in a limited partnership or limited liability
company in which physicians or physician practice groups hold limited
partnership or membership interests. As general partner, manager or owner of the
majority interest in these entities, we may owe fiduciary duties to the other
interest holders and may encounter conflicts between our interests and those of
such holders. In these cases, we are obligated to exercise reasonable, good
faith judgment to resolve the conflicts and may not be free to act solely in our
own best interests. Disputes may arise between us and our affiliated physicians
with respect to a particular business decision or regarding the interpretation
of the provisions of the applicable limited partnership agreement or limited
liability company agreement. We can give you no assurances that any dispute will
be resolved or that any dispute resolution will be on terms favorable or
satisfactory to us.

WE DO NOT HAVE EXCLUSIVE CONTROL OVER THE DISTRIBUTION OF REVENUES FROM SOME OF
OUR OPERATING ENTITIES AND MAY BE UNABLE TO CAUSE ALL OR A PORTION OF THE
REVENUES OF THESE ENTITIES TO BE DISTRIBUTED.

     Our limited partnership and limited liability company agreements typically
provide for the quarterly distribution of net revenues from operations, less
amounts used for expenses and working capital. We generally control the entities
that function as the general partner of the limited partnerships or the managing
member of the limited liability companies through which we conduct operations.
In some instances, we share control of these general partner or managing member
entities with one of the healthcare systems with which we have a strategic
alliance. As a result, we do not have exclusive control in these instances over
the amount of net revenues distributed from some of our operating entities. If
we are unable to cause sufficient revenues to be distributed from one or more of
these entities, our relationships with the physicians who have an interest in
these entities may be damaged and we could be adversely affected. We may not be
able to resolve favorably any dispute regarding revenue distribution or other
matters with a healthcare system with which we share control of one of these
entities. Further, the failure to resolve a dispute with these healthcare
systems could cause the entity we jointly control to be dissolved. In addition,
our credit agreements in Europe prohibit the distribution of revenues out of the
country in which they were generated.

RISKS RELATING TO THIS OFFERING

BECAUSE WELSH, CARSON, ANDERSON & STOWE AND OUR MANAGEMENT CONTROL US, THEY WILL
TOGETHER BE ABLE TO DETERMINE THE OUTCOME OF ALL MATTERS SUBMITTED TO OUR
STOCKHOLDERS FOR APPROVAL, REGARDLESS OF THE PREFERENCES OF OUR OTHER
STOCKHOLDERS.

                                       16
<PAGE>
     Following the offering, Welsh, Carson, Anderson & Stowe and our management
will own       % of our outstanding common stock. Accordingly they will together
be able to:

     o  elect our entire board of directors;

     o  control our management and policies; and

     o  determine, without the consent of our other stockholders, the outcome of
        any corporate transaction or other matter submitted to our stockholders
        for approval, including mergers, consolidations and the sale of all or
        substantially all of our assets.

Welsh, Carson, Anderson & Stowe and our management will also be able to prevent
or cause a change in control of our company and will be able to amend our
certificate of incorporation and bylaws at any time. Their interests may
conflict with the interests of other holders of common stock and they may take
action affecting us with which you disagree.

OUR STOCK PRICE MAY FLUCTUATE AFTER THIS OFFERING. AS A RESULT, INVESTORS IN OUR
COMMON STOCK MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THE INITIAL
PUBLIC OFFERING PRICE.

     Prior to this offering, there has been no public market for shares of our
common stock. An active market may not develop following completion of this
offering or, if developed, may not be maintained. We will negotiate the initial
public offering price with the underwriters. The initial public offering price
may not be indicative of the price at which our common stock will trade
following completion of this offering. Healthcare provider companies with a
limited operating history like ours have been especially subject to sharp
fluctuations in the market price of their publicly traded securities. The market
price of our common stock may also be influenced by other factors, some of which
are beyond our control, including:

     o  changes in prevailing reimbursement rates;

     o  changes in governmental regulations or their interpretations;

     o  variations in quarterly operating results;

     o  changes in financial estimates by securities analysts;

     o  announcements by us or our competitors of significant contracts,
        acquisitions, strategic relationships, joint ventures or capital
        commitments;

     o  future sales of our common stock;

     o  investor perceptions of us and the healthcare industry; and

     o  general economic conditions.

     As a result, investors in our common stock may not be able to resell their
shares at or above the initial public offering price. In addition, the stock
market in general, and the Nasdaq National Market in particular, have
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of healthcare provider
companies. These broad market and industry factors may materially reduce the
market price of our common stock, regardless of our operating performance.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

     After this offering, we will have outstanding        shares of common stock
of which        shares are held by existing officers, directors and existing
stockholders. Sales of a substantial number of these shares of common stock in
the public market following this offering, or the perception that these sales
may occur, could substantially decrease the market price of our common stock. In
addition, the sale of these shares could impair our ability to raise capital
through the sale of additional common or preferred stock. All of the shares sold
in this offering will be freely tradeable, other than those shares sold in this
offering to any of our affiliates. Of the        shares held by existing holders
of our common stock,        shares are subject to the lockup agreements
described in "Underwriting."

                                       17
<PAGE>
     In addition, Welsh, Carson, Anderson & Stowe and other of our stockholders
have the right to require us to register their shares for resale. All of our
stockholders with registration rights have agreed not to exercise their
registration rights during the 180-day period following the date of this
prospectus without the consent of Credit Suisse First Boston Corporation.

INVESTORS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.

     The initial public offering price will be substantially higher than the pro
forma book value per share of our common stock. Purchasers of common stock in
this offering will experience immediate and substantial dilution in the pro
forma net tangible book value of their stock of $       per share, assuming an
initial public offering price for our common stock of $       per share. This
dilution is due in large part to the fact that prior investors paid an average
price of $       per share when they purchased their shares of common stock,
which is substantially less than the assumed initial public offering price of
$       per share.

WE HAVE NOT PAID DIVIDENDS AND DO NOT ANTICIPATE PAYING DIVIDENDS ON OUR COMMON
STOCK IN THE FORESEEABLE FUTURE.

     We currently anticipate that we will retain all future earnings, if any, to
finance the growth and development of our business and do not anticipate paying
cash dividends on our common stock in the foreseeable future. Any payment of
cash dividends will depend upon our financial condition, capital requirements,
earnings and other factors deemed relevant by our board of directors. Under the
terms of our credit agreements, we are restricted from paying cash dividends and
making other distributions to our stockholders.

PROVISIONS OF OUR CHARTER DOCUMENTS, OUR STOCKHOLDER RIGHTS PLAN AND DELAWARE
LAW COULD DISCOURAGE A TAKEOVER YOU MAY CONSIDER FAVORABLE.

     Some provisions of our certificate of incorporation and bylaws may
discourage, delay or prevent a merger or acquisition that you may consider
favorable. These provisions:

     o  authorize the issuance of "blank check" preferred stock;

     o  provide for a classified board of directors with staggered, three-year
        terms;

     o  prohibit cumulative voting in the election of directors;

     o  prohibit our stockholders, at any time after Welsh, Carson, Anderson &
        Stowe and its affiliates own less than 25.0% of our common stock, from
        acting by written consent without the approval of our board of
        directors;

     o  limit the persons who may call special meetings of stockholders; and

     o  establish advance notice requirements for nominations for election to
        the board of directors or for proposing matters to be approved by
        stockholders at stockholder meetings.

     In addition, our certificate of incorporation prohibits the amendment of
many of these provisions in our certificate of incorporation by our stockholders
unless the amendment is approved by the holders of at least 80% of our shares of
common stock.

     Delaware law may also discourage, delay or prevent someone from acquiring
or merging with us. In addition, purchase rights distributed under our
stockholder rights plan will cause substantial dilution to any person or group
attempting to acquire us without conditioning the offer on our redemption of the
rights. As a result, our stock price may decrease and you might not receive a
change of control premium over the then-current market price of the common
stock.

                                       18
<PAGE>
                             SPECIAL NOTE REGARDING
                           FORWARD-LOOKING STATEMENTS

     Our disclosure and analysis in this prospectus include some forward-looking
statements. Forward-looking statements give our current expectations of
forecasts of future events. All statements other than statements of current or
historical fact contained in this prospectus, including statements regarding our
future financial position, business strategy, budgets, projected costs and plans
and objectives of management for future operations, are forward-looking
statements. The words "anticipate," "believe," "continue," "estimate," "expect,"
"intend," "may," "plan," "will," and similar expressions, as they relate to us,
are intended to identify forward-looking statements. In particular, these
include, among other things, statements relating to:

      o  our ability to attract and retain top quality physicians;

      o  our ability to grow through selective acquisitions and development;

      o  our ability to pursue strategic relationships with healthcare systems;

      o  our ability to expand selectively in Western Europe;

      o  our ability to enhance operating efficiencies; and

      o  changes in healthcare regulation that adversely affect our business.

     Any or all of our forward-looking statements in this prospectus may turn
out to be wrong. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends
that we believe may affect our financial condition, results of operations,
business strategy and financial needs. They can be affected by inaccurate
assumptions we might make or by known or unknown risks, uncertainties and
assumptions, including the risks, uncertainties and assumptions described in
"Risk Factors." In light of these risks, uncertainties and assumptions, the
forward-looking events and circumstances discussed in this prospectus may not
occur and actual results could differ materially from those anticipated or
implied in the forward-looking statements. When you consider these
forward-looking statements, you should keep in mind these risk factors and other
cautionary statements in this prospectus.

     Our forward-looking statements speak only as of the date made. We undertake
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

                                       19
<PAGE>
                                USE OF PROCEEDS

     We expect to receive approximately $110.1 million in net proceeds from the
sale of shares of common stock in this offering at an assumed initial public
offering price of $     per share, or approximately $126.7 if the underwriters'
over-allotment option is exercised in full, after deducting underwriting
discounts and commissions and estimated offering expenses, which we expect to be
approximately $9.9 million, or approximately $11.3 million if the underwriters'
over-allotment option is exercised in full.

     We intend to:

     o  use a portion of the net proceeds of this offering to redeem in full,
        for an estimated cash payment of $32.2 million, all outstanding shares
        of our Series A redeemable preferred stock, plus accrued and unpaid
        dividends; and

     o  use the balance of the proceeds to repay a portion of the outstanding
        principal balance, plus accrued and unpaid interest, of our domestic
        credit facilities with Bank of America, N.A., and Chase Bank of Texas,
        N.A.

     Our certificate of incorporation establishes the terms of the Series A
redeemable preferred stock and provides for mandatory redemption of the
Series A redeemable preferred stock upon the consummation of this offering at a
redemption price equal to $1,000 per share, plus all accrued and unpaid
dividends from the date of issuance of the shares of Series A redeemable
preferred stock to the redemption date. Dividends on the Series A redeemable
preferred stock are payable at an annual rate of 7.50%.

     Welsh, Carson, Anderson & Stowe and its affiliates collectively own 30,000
of the 31,200 outstanding shares of Series A redeemable preferred stock as well
as some of our other securities. Upon completion of the offering, Welsh, Carson,
Anderson & Stowe and its affiliates will collectively own      % of our
outstanding common stock.

     Our credit agreement with Bank of America was originally entered into by
OrthoLink, which we acquired on February 12, 2001. It is a $45.0 million
revolving line of credit bearing interest at fluctuating rates ranging from
1.00% to 2.25% above the London Interbank Offering Rate, or LIBOR, with a
maturity date of December 28, 2001. As of February 8, 2001, the interest rate
under this credit agreement was 7.15%.

     Our revolving credit agreement with Chase is a $35.0 million revolving line
of credit bearing interest at fluctuating rates equal to 1.00% above LIBOR, with
a maturity date of June 30, 2002. As of February 8, 2001, the interest rate
under this revolving credit agreement was 6.65%.

     We are in negotiations with lenders to enter into a $75.0 million credit
facility to replace our Chase and Bank of America credit facilities. To the
extent that our net proceeds from this offering are not sufficient to repay all
such debt described above, we intend to borrow the additional amounts needed
under our new domestic credit facility to repay in full our Bank of America and
Chase credit facilities. Based on our assumed initial offering price of $ per
share, we would be required to borrow approximately $ million under this new
facility.

                                       20
<PAGE>
                                DIVIDEND POLICY

     We have never declared or paid any dividends on our common stock, and we do
not anticipate declaring or paying any dividends on our common stock in the
foreseeable future. We currently intend to retain all future earnings to fund
the development and growth of our business. The payment of any future dividends
will be at the discretion of our board of directors and will depend on:

      o  any applicable contractual restrictions limiting our ability to pay
dividends;

      o  our results of operations;

      o  our then current and anticipated cash needs;

      o  our financial condition;

      o  our plans for expansion;

      o  our ability to fund our capital requirements;

      o  regulatory considerations; and

      o  other factors our board deems relevant.

     Our existing credit agreements prohibit our payment of dividends, and we
expect that our new credit facility will also prohibit our payment of dividends.

                                       21
<PAGE>
                                    DILUTION

     If you invest in our common stock, your interest will be diluted to the
extent of the difference between the initial public offering price per share of
our common stock and the pro forma net tangible book value per share of our
common stock after this offering.

     Pro forma net tangible book value per share represents the amount of total
tangible assets less total liabilities, divided by the pro forma number of
shares of common stock then outstanding. Our pro forma net tangible book value
at September 30, 2000, would have been $(87.8) million, or $      per share of
common stock, after giving effect to the conversion of our shares of Class A
common stock and Series C convertible preferred stock and of our convertible
subordinated note with Baylor into shares of common stock upon completion of
this offering. After giving further effect to the sale of the        shares of
common stock in this offering at an assumed initial public offering price of
$           per share, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses, our pro forma net tangible book
value at September 30, 2000, would have been $22.3 million, or $      per share.
This represents an immediate increase in pro forma net tangible book value of
$           per share to existing stockholders and an immediate dilution of
$           per share to new investors purchasing common stock in this offering.
The following table illustrates this per share dilution:

                                         PER SHARE
                                         ---------
Assumed initial public offering price.................................   $
     Actual net tangible book value at September 30, 2000.............
     Decrease attributable to common and preferred stock conversion...
     Pro forma net tangible book value before this offering...........
     Increase attributable to new investors...........................
Pro forma net tangible book value after this offering.................
                                                                         -------
Dilution in pro forma net tangible book value to new investors (1)....   $
------------
(1) If the underwriters' over-allotment option is exercised in full, dilution
    per share to new investors will be $       .

     If the acquisition of OrthoLink Physicians Corporation had occurred as of
September 30, 2000, our pro forma net tangible book value at that date would
have been $(73.5) million, or $               per share. After giving effect to
the receipt of the estimated net proceeds of this offering, our pro forma net
tangible book value would be approximately $36.6 million, or $      per share.
This would represent an immediate increase in pro forma net tangible book value
of $      per share to existing stockholders and an immediate dilution in net
tangible book value of $           per share to new investors.

                                       22
<PAGE>
     The following table summarizes as of September 30, 2000, on the pro forma
basis described above, the total number of shares of common stock purchased from
us, the total consideration paid to us, and the average price per share paid by
existing stockholders and by new investors purchasing shares of common stock
from us in this offering at an assumed initial public offering price of $
per share and before deducting underwriting discounts and commissions and
estimated offering expenses:

<TABLE>
<CAPTION>
                                          SHARES PURCHASED        TOTAL CONSIDERATION
                                         -------------------      -------------------      AVERAGE PRICE
                                          NUMBER     PERCENT       AMOUNT     PERCENT        PER SHARE
                                         --------    -------      --------    -------      -------------
                                               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S>                                      <C>         <C>          <C>         <C>          <C>
Existing common stockholders.........                      %      $                 %
Existing stockholders --                                                                     $
     conversion of preferred stock...
New investors (1)....................
                                         --------     -----       --------     -----
Total................................                 100.0%      $            100.0%
                                         ========     =====       ========     =====
</TABLE>
------------
(1) If the underwriters' over-allotment option is exercised in full, we will
    sell an additional        shares.

     The foregoing discussion and tables assume no exercise of outstanding stock
options or warrants. As of September 30, 2000, there were options outstanding to
purchase a total of 3,008,300 shares of our common stock at a weighted average
exercise price of $3.21 per share, warrants outstanding to purchase a total of
900,000 shares of our common stock at a weighted average exercise price of $0.45
per share and 6,000,000 shares reserved for future grants under our stock option
plans and employee stock purchase plan. Subsequent to September 30, 2000 and
through January 31, 2001, we

       o  granted options to purchase 1,016,000 shares of our common stock under
          our 1998 stock option and restricted stock purchase plan, referred to
          as our 1998 stock option plan, at a weighted average exercise price of
          $4.50 per share, and

       o  cancelled 35,000 options to purchase shares of our common stock under
          our 1998 stock option plan.

     In February 2001, in connection with our acquisition of OrthoLink
Physicians Corporation, we issued 9,961,737 shares of our common stock for all
of the outstanding capital stock of OrthoLink in a transaction accounted for as
a purchase. In addition, we assumed options to purchase shares of OrthoLink
common stock that we converted into options to purchase 1,895,942 shares of our
common stock. To the extent that any of these stock options or warrants are
exercised, there will be further dilution to new investors. See
"Capitalization," "Management -- Stock Option and Restricted Stock Purchase
Plan," "Management -- 2001 Equity-Based Compensation Plan," "Management --
Employee Stock Purchase Plan" and notes 11 and 16 to our consolidated financial
statements included elsewhere in this prospectus.

                                       23
<PAGE>
                                 CAPITALIZATION

     The following table sets forth our cash and cash equivalents and
capitalization as of September 30, 2000:

     o  on an actual basis; and

     o  on a pro forma basis to give effect to:

          o  the issuance of 9,961,737 shares of our common stock in connection
             with our acquisition of OrthoLink Physicians Corporation in
             February 2001;

          o  the conversion of all of our Class A common stock and Series C
             convertible preferred stock and of our convertible subordinated
             note with Baylor into shares of common stock upon the completion of
             this offering;

          o  the sale of             shares of common stock in this offering at
             an assumed initial public offering price of $     per share; and

          o  the application of the net proceeds to repay a portion of our
             outstanding indebtedness and to redeem all outstanding shares of
             our Series A redeemable preferred stock as set forth under "Use of
             Proceeds."

                                       24
<PAGE>
     You should read this table together with "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes appearing elsewhere in
this prospectus.

                                                        AS OF SEPTEMBER 30, 2000
                                                         ----------------------
                                                          ACTUAL      PRO FORMA
                                                         ---------    ---------
                                                             (IN THOUSANDS)
Cash and cash equivalents .............................  $   6,422    $  10,764
                                                         =========    =========
Current portion of long-term debt .....................  $   5,514    $   7,814
Long-term debt:
  Senior debt .........................................     91,410       53,658
  Subordinated debt ...................................     54,420       51,133
  Other long-term debt ................................     11,515       21,229
                                                         ---------    ---------
       Total long-term debt ...........................    157,346      126,021
                                                         ---------    ---------
Series A redeemable preferred stock $.01 par value;
  31,200 shares authorized, issued and outstanding,
  actual; no shares authorized, issued or
  outstanding, pro forma ..............................     32,175         --
Stockholders' equity:
  Series C convertible preferred stock $.01 par value;
     18,750 shares authorized, issued and outstanding,
     actual; no shares authorized, issued or
     outstanding, pro forma ...........................     19,421         --
  Class A common stock $.01 par value; 30,000,000
     shares authorized, 23,519,534 shares issued and
     outstanding, actual; no shares authorized, issued
     or outstanding, pro forma ........................        235
  Class B common stock $.01 par value; 3,000,000 shares
     authorized, no shares issued and outstanding,
     actual; no shares authorized, issued or
     outstanding, pro forma ...........................       --
  Common stock $.01 par value; 40,000,000 shares
     authorized, 510,140 shares issued and outstanding,
     actual; shares authorized, shares issued and
     outstanding, pro forma ...........................          5
  Additional paid-in capital ..........................     60,422
  Treasury stock ......................................       (344)
  Receivables from sales of common stock ..............     (2,179)
  Accumulated other comprehensive loss, net of tax ....    (15,123)
  Accumulated deficit .................................    (13,800)
                                                         ---------    ---------
     Total stockholders' equity .......................     48,637      210,169
                                                         ---------    ---------
       Total capitalization ...........................  $ 243,672    $ 344,003
                                                         =========    =========

                                       25
<PAGE>
                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     The selected consolidated statement of operations data set forth below for
the period from February 27, 1998 (inception) through December 31, 1998 and the
year ended December 31, 1999, and the consolidated balance sheet data at
December 31, 1998 and 1999, are derived from our consolidated financial
statements. These financial statements, which have been audited by KPMG LLP, are
included elsewhere in this prospectus, and are qualified by this reference to
them. The selected consolidated statement of operations data for the nine months
ended September 30, 1999 and 2000, and the consolidated balance sheet data at
September 30, 2000, are derived from unaudited financial statements included
elsewhere in this prospectus. We have prepared the unaudited information on the
same basis as the audited consolidated financial statements and have included
all adjustments, consisting only of normal recurring adjustments, that we
consider necessary for a fair presentation of our consolidated financial
position at that date and our consolidated operating results for this period.

     The historical results presented below are not necessarily indicative of
the results to be expected for any future period. You should read the selected
financial information set forth below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and related notes appearing elsewhere in
this prospectus.

     When we use the term "EBITDA," we are referring to earnings before
interest, taxes, depreciation and amortization. EBITDA should not be considered
in isolation or as a substitute for net income (loss), operating income (loss),
cash flow provided by operating activities or any other measure of operating
performance calculated in accordance with generally accepted accounting
principles. EBITDA is widely used by financial analysts as a measure of
financial performance. Our calculation of EBITDA may not be comparable to
similarly titled measures reported by other companies.

<TABLE>
<CAPTION>
                                            PERIOD FROM
                                           FEBRUARY 27,
                                         1998 (INCEPTION)                            NINE MONTHS ENDED
                                              THROUGH          YEAR ENDED              SEPTEMBER 30,
                                           DECEMBER 31,       DECEMBER 31,    --------------------------------
                                               1998               1999             1999              2000
                                         -----------------    ------------    --------------    --------------
                                                                              (UNAUDITED)       (UNAUDITED)
                                                            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                           <C>                  <C>             <C>               <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues.........................            $20,572           $70,413          $48,233           $98,770
Operating expenses excluding depreciation
  and amortization.....................             22,788            65,634           45,587            82,392
Depreciation and amortization..........              2,015             7,875            5,532             9,295
                                                   -------           -------          -------           -------
Operating income (loss)................             (4,231)           (3,097)          (2,886)            7,083
Other income (expense):
    Interest income....................                722               329              252               496
    Interest expense...................               (497)           (3,144)          (1,772)           (8,267)
    Other expense......................               (246)             (362)            (123)              (50)
                                                   -------           -------          -------           -------
Loss before minority interest..........             (4,252)           (6,275)          (4,529)             (737)
Minority interest in (income) loss of
  consolidated subsidiaries............                 23              (118)            (137)           (1,232)
Net loss...............................            $(3,928)          $(6,844)         $(4,965)          $(3,028)
Net loss attributable to common
  shareholders(a)......................             (4,356)           (8,540)          (6,237)           (8,046)
Net loss per share attributable to common
  shareholders:
    Basic..............................            $ (0.43)          $ (0.39)         $ (0.28)          $ (0.35)
    Diluted............................              (0.43)            (0.39)           (0.28)            (0.35)
Weighted average number of common shares
  outstanding and common equivalent
  shares:
    Basic..............................             10,099            21,924           21,942            23,109
    Diluted............................             10,099            21,924           21,942            23,109
OTHER DATA:
EBITDA.................................            $(2,216)          $ 4,778          $ 2,646           $16,378
EBITDA as a % of revenue...............              (10.8)%             6.8%             5.5%             16.6%
EBITDA less minority interest..........            $(2,193)          $ 4,660          $ 2,509           $15,146
EBITDA less minority interest as a % of
  revenue..............................              (10.7)%             6.6%             5.2%             15.3%
</TABLE>

(a) Includes preferred stock dividends of $428,050, $1,695,803, $1,271,850 and
    $5,018,265 for the period from February 27, 1998 (inception) through
    December 31, 1998, the year ended December 31, 1999 and the nine months
    ended September 30, 1999 and 2000.

                                          AS OF DECEMBER 31,         AS OF
                                         --------------------    SEPTEMBER 30,
                                           1998        1999           2000
                                         --------    --------    --------------
                                                                 (UNAUDITED)
                                                     (IN THOUSANDS)
BALANCE SHEET DATA:
Working capital......................    $ 18,490    $ 10,461       $  3,201
Total assets.........................     124,792     176,703        292,755
Total long-term debt.................      11,675      72,684        162,860
Redeemable preferred stock...........      34,344      36,040         32,175
Total stockholders' equity...........      52,103      36,571         48,637

                                       26
<PAGE>
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

     The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with "Selected Consolidated
Financial and Other Data" and our consolidated financial statements and related
notes included elsewhere in this prospectus.

OVERVIEW

     We were organized in February 1998 and we operate surgery centers and
private surgical hospitals in the United States, Spain and the United Kingdom.
We began operations on February 27, 1998, and our first acquisition was one
hospital and a group of clinics located in Barcelona, Spain in April 1998. We
have grown through the acquisition of additional facilities in Spain, the United
States and the United Kingdom as well as the development of new facilities in
the United States. We have ownership interests in 28 surgery centers and one
private surgical hospital and manage five additional surgery centers in the
United States. Also in the United States, we own interests in and will operate
five surgery centers and one private surgical hospital that are currently under
construction and have identified five additional markets for possible
acquisition or development projects. In Spain, we own and operate six private
surgical hospitals, two surgery centers and a diagnostic facility. In the United
Kingdom, we own and operate two private surgical hospitals and are developing a
cancer center. For the year ended December 31, 1999, our first full year in
operation, we generated $70.4 million of revenues and $4.7 million of EBITDA
less minority interest. For the nine months ended September 30, 2000, our
revenues had grown to $98.8 million and our EBITDA less minority interest had
grown to $15.1 million.

ACQUISITIONS, EQUITY INVESTMENTS AND DEVELOPMENT PROJECTS

     On February 12, 2001, we completed a merger with OrthoLink Physicians
Corporation effective February 1, 2001. The transaction was funded through the
issuance of 9,961,737 shares of our common stock to OrthoLink stockholders.
OrthoLink was incorporated in 1996 and, as of February 1, 2001, held a direct or
indirect ownership interest in eight surgery centers, one of which we also held
an ownership interest in and managed. OrthoLink managed six of the eight surgery
centers in which it held an ownership interest and managed two additional
surgery centers in which it had no ownership interest. OrthoLink also provides
specialized management services for hospitals. In addition. OrthoLink has
service agreements with 14 physician groups in six states. For the nine months
ended September 30, 2000, OrthoLink had pro forma revenues of $26.3 million.

     During the first quarter of 2000, we acquired a majority interest in a
hospital and a radiology center in Madrid, Spain through two separate
transactions. We paid approximately $19.2 million for these two acquisitions,
which we borrowed under a credit agreement denominated in Euros with a
commercial lender. Also, during the first quarter of 2000, we opened two newly
developed surgery centers in the United States. We have management contracts
with and a minority ownership interest in each of these two centers. In April
2000, we acquired 100% of the outstanding common stock of a holding company
incorporated in England and Wales that owns and operates two private surgical
hospitals in England. We paid approximately $89.2 million in cash for that
acquisition, approximately $54.0 million of which we borrowed under a credit
agreement denominated in British pounds with a commercial lender.

     During 1999, we acquired interests in seven surgery centers in the United
States and opened three additional newly developed surgery centers. We have
management agreements with all of these centers and have ownership interests in
nine of the ten, ranging from 10% to 100%. Our total investment related to these
centers was approximately $42.1 million, $3.3 million of which we financed
through convertible subordinated notes issued to a seller and the remaining
$38.8 million of which we paid in cash. Additionally during 1999, we acquired a
majority interest in a surgery center in Spain for approximately $1.6 million in
cash.

                                       27
<PAGE>
     During 1998, we acquired four hospitals and a diagnostic center in Spain
for total consideration of approximately $46.3 million. Also during 1998, we
acquired ownership interests, ranging from 30% to 100%, in nine existing surgery
centers in the United States and a project then under development of a surgery
center in the United States, which opened during 1999. We entered into
management contracts for these ten centers as well as management contracts with
two additional surgery centers in the United States during 1998. Our investment
in these United States centers totaled approximately $36.6 million in 1998, $4.5
million of which we funded with our capital stock and the remaining $32.1
million of which we paid in cash.

SOURCES OF REVENUE

     Revenues include:

     o  net patient services revenues for the facilities that we consolidate for
        financial reporting purposes, which are typically those in which we have
        ownership interests of greater than 50%, and

     o  management fees earned from, and our share of net income of, the
        non-consolidated facilities that we account for under the equity method
        of accounting. These amounts are included in revenues as these
        operations are central to our business strategy.

For the nine months ended September 30, 2000, revenue from net patient services
represented approximately 96% of our total revenues and management fees from,
and our share of net income of, the non-consolidated facilities accounted for
under the equity method of accounting together with other income represented
approximately 4% of our total revenues. For 1999, revenue from net patient
services represented approximately 91% of our total revenues and management fees
from, and our share of net income of, the non-consolidated facilities accounted
for under the equity method of accounting together with other income represented
approximately 9% of our total revenues. For the 1998 fiscal period, revenue from
net patient services represented approximately 93% of our total revenues and
management fees from, and our share of net income of, the non-consolidated
facilities accounted for under the equity method of accounting together with
other income represented approximately 7% of our total revenues.

     For the nine months ended September 30, 2000, approximately 43% of our
revenues were generated from operations in Spain, 39% from the United States and
18% from the United Kingdom. For 1999 and 1998, respectively, these percentages
were 67% and 91% for Spain and 33% and 9% for the United States. We did not
operate in the United Kingdom before April 1, 2000.

RESULTS OF OPERATIONS

     The following table summarizes certain statements of operations items
expressed as a percentage of revenues for the periods indicated:

<TABLE>
<CAPTION>
                                                                                       NINE MONTHS
                                                                                          ENDED
                                          FEBRUARY 27, 1998                           SEPTEMBER 30,
                                         (INCEPTION) THROUGH       YEAR ENDED        ----------------
                                          DECEMBER 31, 1998     DECEMBER 31, 1999    1999       2000
                                         -------------------    -----------------    -----      -----
<S>                                      <C>                    <C>                  <C>        <C>
Total revenues.......................           100.0%                100.0%         100.0%     100.0%
Total operating expenses, excluding
  depreciation and amortization......           110.8                  93.2           94.5       83.4
                                                -----                 -----          -----      -----
EBITDA...............................           (10.8)                  6.8            5.5       16.6
Minority interest in (income) loss of
  consolidated subsidiaries..........            (0.1)                  0.2            0.3        1.2
                                                -----                 -----          -----      -----
EBITDA less minority interest........           (10.7)                  6.6            5.2       15.3
Depreciation and amortization........             9.8                  11.2           11.5        9.4
Interest and other expense (income),
  net................................            (0.1)                  4.5            3.4        7.9
                                                -----                 -----          -----      -----
Loss before income taxes.............           (20.6)                 (9.1)          (9.7)      (2.0)
Income tax (expense) benefit.........            (1.5)                  0.6            0.6        1.1
                                                -----                 -----          -----      -----
Net loss.............................           (19.1)%                (9.7)%        (10.3)%     (3.1)%
                                                =====                 =====          =====      =====
</TABLE>

                                       28
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999

     Revenues increased by $50.5 million, or 105%, to $98.8 million for the nine
months ended September 30, 2000 from $48.2 million for the nine months ended
September 30, 1999. Of this increase in revenues, $25.9 million was contributed
by facilities we acquired during 2000, of which $17.3 million was generated by
the two hospitals we acquired in the United Kingdom on April 1, 2000 and
$7.5 million was generated by two facilities we acquired in Spain in March 2000
and November 2000. The exchange rate of the Euro to the U.S. dollar declined
during the first nine months of 2000, resulting in a negative impact of
$4.4 million on same store revenues for the facilities in Spain relative to
1999. Excluding this foreign exchange impact, same store facilities in Spain
contributed $39.6 million to consolidated revenues in the first nine months of
2000, an increase of $4.4 million over the same period in 1999. The remaining
increase in revenues was contributed by same store U.S. facilities, which
increased 188% to $38.7 million for the nine months ended September 30, 2000
versus $13.4 million for the nine months ended September 30, 1999.

     Operating expenses, excluding depreciation and amortization, increased by
$36.8 million, or 81%, to $82.4 million for the nine months ended September 30,
2000 from $45.6 million for the nine months ended September 30, 1999. Operating
expenses as a percentage of revenues decreased to 83.4% for the nine months
ended September 30, 2000 from 94.5% for the nine months ended September 30,
1999, primarily as a result of leveraging our corporate overhead expenses over
the increased revenue contributed by our facilities.

     EBITDA less minority interest increased $12.6 million, or 504%, to
$15.1 million for the nine months ended September 30, 2000 from $2.5 million for
the nine months ended September 30, 1999. EBITDA less minority interest, as a
percentage of revenues, increased to 15.3% for the nine months ended
September 30, 2000 from 5.2% for the nine months ended September 30, 1999,
primarily as a result of leveraging our corporate overhead expenses over the
increased revenue contributed by our facilities.

     Depreciation and amortization increased to $9.3 million, or 68%, for the
nine months ended September 30, 2000 from $5.5 million for the nine months ended
September 30, 1999. The $3.8 million increase resulted from the amortization of
goodwill and the depreciation of property and equipment we acquired during 1999
and 2000.

     Interest expense, net of interest income, increased 411% to $7.8 million
for the nine months ended September 30, 2000 from $1.5 million for the nine
months ended September 30, 1999. Of the $6.3 million increase, approximately
$2.1 million related to borrowings to finance acquisitions in Spain and the
United Kingdom and the remainder of the increase was incurred in the U.S. as a
result of the additional subordinated and commercial long-term debt incurred to
finance acquisitions.

     Provision for income taxes increased 254% to $1.1 million for the nine
months ended September 30, 2000 from $0.3 million for the nine months ended
September 30, 1999. The $0.8 million increase resulted from taxable income in
certain of our subsidiaries. Income tax regulations in Spain do not allow pretax
losses from one legal entity to offset pretax income in other entities until
common ownership at certain levels exists for a specified period of time.
Additionally, in some instances, state income tax regulations in the U.S.
prevent this type of offsetting for state income tax purposes. Accordingly, we
have incurred income tax expense in spite of our consolidated operating losses.

     Net loss decreased by $1.9 million, or 39%, to $3.0 million for the nine
months ended September 30, 2000 from $5.0 million for the nine months ended
September 30, 1999 primarily as a result of the factors discussed above.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE PERIOD FROM FEBRUARY 27, 1998
(INCEPTION) THROUGH DECEMBER 31, 1998

     We do not believe that our results for the year ended December 31, 1999 are
comparable to the period from February 27, 1998 through December 31, 1998, which
we refer to as the "1998 fiscal

                                       29
<PAGE>
period," because in the 1998 fiscal period we had fifty-seven fewer days of
operations than we did in 1999.

     Revenues increased by $49.8 million, or 242%, to $70.4 million for the year
ended December 31, 1999 from $20.6 million for the 1998 fiscal period. Our
Spanish facilities contributed $28.3 million of this increase in revenues and
our U.S. facilities contributed the remaining $21.5 million. We completed our
initial acquisition of an operating entity, which owned a hospital and a group
of clinics in Barcelona, Spain, in April 1998. We completed our acquisition of
our initial U.S. operating entity in July 1998. Accordingly, all of our
facilities contributing to our 1999 revenue were not owned or were not
operational (in the case of development projects that opened during 1999) for a
significant portion of the 1998 fiscal period.

     Operating expenses, excluding depreciation and amortization, increased by
$42.8 million, or 188%, to $65.6 million in 1999 from $22.8 million in the 1998
fiscal period. This increase was primarily the result of our acquisitions and
the development of facilities in 1998 and 1999 that we did not own or operate
for a significant portion of the 1998 fiscal period. Operating expenses as a
percentage of revenues decreased to 93.2% in 1999 from 110.8% for the 1998
fiscal period.

     EBITDA less minority interest increased $6.9 million to $4.7 million for
the year ended December 31, 1999 from $(2.2) million for the 1998 fiscal period.
EBITDA less minority interest, as a percentage of revenues, increased to 6.6%
for the year ended December 31, 1999 from (10.7)% for the 1998 fiscal period, as
a result of our leveraging of expenses.

     Depreciation and amortization increased 291% to $7.9 million for the year
ended December 31, 1999 from $2.0 million for the 1998 fiscal period. The
$5.9 million increase was a result of amortization of the goodwill and
depreciation of the property and equipment associated with the acquisitions
completed during these periods.

     For the year ended December 31, 1999, interest expense, net of interest
income was $2.8 million, as we borrowed funds from commercial lenders and issued
subordinated notes to finance acquisitions. Interest income, net of interest
expense, was $0.2 million for the 1998 fiscal period as a result of investing
proceeds from our initial equity fundings prior to use of those funds for
acquisitions.

     Provision for income taxes increased to $0.5 million for the year ended
December 31, 1999 from an income tax benefit of $0.3 million for the 1998 fiscal
period. The increase was a result of tax regulations restricting the offsetting
of taxable income of legal entities with taxable losses at other legal entities.
The income tax benefit of $0.3 million recognized for the 1998 fiscal period was
a result of net operating loss carryforwards for some of our Spanish
subsidiaries that were deemed realizable under U.S. generally accepted
accounting principles.

     Net loss increased by $2.9 million, or 74%, to $6.8 million for the year
ended December 31, 1999 from $3.9 million for the 1998 fiscal period primarily
as a result of the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

     We have used capital principally to acquire and develop surgery centers and
private surgical hospitals. Our cash flows from operations decreased by
$1.5 million to $2.1 million for the nine months ended September 30, 2000 from
flows from operations of $3.6 million for the nine months ended September 30,
1999. Our cash flows from operations increased by $3.6 million, or 575%, for the
year ended December 31, 1999 to $4.2 million from $0.6 million for the 1998
fiscal period. For the period from inception, February 27, 1998, through
September 30, 2000, our cash requirements for acquisitions and purchases of
property and equipment totaled $185.8 million, which we funded with a
combination of $105.3 million we raised from the issuance of capital stock, $6.9
million of cash flows from operations and net borrowings of $79.1 million.

     At September 30, 2000, we had working capital of $3.2 million. We have
credit agreements with commercial lenders in each of the three countries in
which we operate. Our credit agreement in Spain

                                       30
<PAGE>
provides for total borrowings of up to 100 million Euros (approximately
$88.0 million as of September 30, 2000) with borrowing availability calculated
quarterly based on trailing EBITDA, including historical EBITDA of acquired
entities. Borrowings under this agreement may be used for acquisitions of
healthcare facilities in Spain or Portugal and working capital purposes, bear
interest at rates ranging from 0.75% to 1.75% over Euribor and mature on
December 31, 2007. At September 30, 2000, approximately $19.7 million was
outstanding under this agreement, representing the entire amount available for
borrowing at that date.

     The credit agreement in the United Kingdom provides for total borrowings of
Pounds 42.0 million (approximately $62.0 million as of September 30, 2000) under
three separate facilities. In April 2000, we borrowed approximately $54.0
million under the term facility of this agreement to fund a portion of the
purchase price of the acquisition of two hospitals in London. At September 30,
2000, total outstanding borrowings under this term facility were approximately
$50.0 million. Of the remaining approximately $12.0 million available for
borrowings under this agreement, we intend to use approximately $10.0 million to
fund a portion of the estimated $13.0 million cost of constructing a cancer
center near Parkside Hospital in southwest London and the remaining $2.0 million
for working capital purposes in the United Kingdom. See "Business -- Operations
in United Kingdom." Borrowings under this agreement bear interest at rates of
1.50% to 2.00% over LIBOR and mature in April 2010. We were not in compliance
with the cash flow and loan to EBITDA covenants under our term facility at
December 31, 2000 and the lender has waived our compliance with such covenants.
Following the completion of this offering, we believe we will be in compliance
with all of our covenants under this facility. In the event this offering is not
consummated the Company will seek additional financing from Welsh, Carson,
Anderson & Stowe.

     Our revolving credit agreement with Chase provides for borrowings of up to
$35.0 million to be utilized for general corporate purposes. Borrowings under
this agreement bear interest at a rate of 1.00% over LIBOR and mature on
June 30, 2001. At September 30, 2000, $20.0 million was outstanding under this
agreement.

     Our Bank of America credit agreement provides for borrowing of up to $45.0
million to be utilized for general corporate purposes. Borrowings under this
agreement bear interest at rates of 1.75% to 3.25% over LIBOR and mature on
December 28, 2001.

     We intend to use the net proceeds of this offering together with the
proceeds of a new credit facility to repay in full the outstanding principal
balance under our Chase and Bank of America credit facilities, plus accrued and
unpaid interest.

     We are in negotiations with lenders to enter into a $75.0 million credit
facility to replace our Chase and Bank of America credit facilities. To the
extent that our net proceeds from this offering are not sufficient to repay in
full all outstanding debt under the revolving credit agreement with Chase and
the revolving credit agreement with Bank of America, we intend to borrow the
additional amounts needed under our new domestic credit facility. Based on our
assumed initial offering price of $      per share, we would be required to
borrow approximately $      million under this new facility.

     Currently, we have (1) five surgery centers and one private surgical
hospital that are under construction in the United States, (2) one cancer center
under development in the United Kingdom and (3) a non-binding letter of intent
to purchase an additional center in the United States. A typical surgery center
costs five to six million dollars to construct and fit out with equipment. These
costs vary depending on the range of specialties that will be undertaken at the
facility. We typically fund development costs with approximately 50% debt at the
facility level with the remainder provided as equity from the owners of the
facility. Our ownership interests range from 10% to 100%, although we anticipate
that our ownership interest in future facilities will range from 30% to 60%.

     We expect that cash flows from operations, existing funds and borrowings
under our credit facilities will be sufficient to fund our operations and our
identified capital requirements for the year following this offering. However,
we may need to increase our borrowings or obtain additional capital,

                                       31
<PAGE>
possibly by issuing additional equity or debt securities, to complete future
acquisitions after that year. We may also use our securities to complete
acquisitions. We cannot assure you that needed capital will be available on
terms acceptable to us, if at all. If we are unable to obtain funds when needed
or on terms acceptable to us, we will be required to curtail our acquisition and
development programs.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We have exposure to interest rate risk related to our financing, investing
and cash management activities. Our financing arrangements with banks are based
on the spread over LIBOR or Euribor. Our financing arrangements with private
equity firms are based on fixed rates. Inflation and changing prices have not
significantly affected our operating results or the markets in which we perform
services.

     We currently have an interest rate swap transaction agreement for a
notional amount of $4.0 million under which we pay a fixed rate of interest
hedging against the variable interest rates charged under our financing
arrangements with banks. The interest rate swap expires in the year 2009 which
coincides with the maturity date on the related loan.

     Our international revenues are a growing portion of our total revenues; we
are exposed to risks associated with operating internationally, including the
following:

      o  foreign currency exchange risk; and

      o  taxes and regulatory changes.

     Historically, we have not held or issued derivative financial instruments.
We do not use derivative financial instruments for speculative purposes. Our
international operations in some instances operate in a natural hedge because
both operating expenses and revenues are denominated in local currency.

NEW ACCOUNTING PRONOUNCEMENTS

     In 2001, we plan to adopt Statement of Financial Accounting Standards
No. 133, "Accounting for Derivatives Instruments and Hedging Activities," as
amended by SFAS 137. This standard will require us to recognize all derivative
financial instruments on our balance sheet at fair value with changes in fair
value recorded to the statement of operations or comprehensive income, depending
on the nature of the investment. Because our interest rate swap agreement is our
only derivative financial instrument, we do not expect the adoption of the
standard to have a material effect on our consolidated financial statements.

                                       32
<PAGE>
                                    BUSINESS

OVERVIEW

     We own and operate surgery centers and private surgical hospitals in the
United States, Spain and the United Kingdom. We focus on providing high quality
surgical facilities that meet the needs of patients, physicians and payors
better than hospital-based and other outpatient surgical facilities. We believe
that our facilities (1) enhance the quality of care and the healthcare
experience of patients, (2) offer significant administrative, clinical and
economic benefits to physicians and (3) offer an efficient and low cost
alternative to payors. We acquire and develop our facilities through the
formation of strategic relationships with physicians and healthcare systems to
better access and serve the communities in our markets. Our operating model is
efficient, scalable and portable and we have adapted it to each of our national
markets. We believe that our acquisition and development strategy and operating
model enable us to continue to grow by taking advantage of highly-fragmented
markets and an increasing demand for outpatient surgery.

     Since physicians provide and influence the direction of healthcare
worldwide, we have developed our operating model to encourage physicians to
affiliate with us and to use our facilities. We have designed our facilities,
structured our strategic relationships and adopted staffing, scheduling and
clinical systems and protocols to increase physician productivity. We believe
that our focus on physician satisfaction, combined with providing high quality
healthcare in a friendly and convenient environment for patients, will continue
to increase the number of procedures performed at our facilities each year.

     Donald E. Steen, our chairman and chief executive officer, and Welsh,
Carson, Anderson & Stowe formed United Surgical Partners International in
February 1998. We have ownership interests in 28 surgery centers and one private
surgical hospital and manage five additional surgery centers in the United
States. Also in the United States, we own interests in and will operate five
surgery centers and one private surgical hospital that are currently under
construction and have identified five additional markets for possible
acquisition or development projects. In Spain, we own and operate six private
surgical hospitals, two surgery centers and a diagnostic facility. In the United
Kingdom, we own and operate two private surgical hospitals and are developing a
cancer center. Our revenues increased 105% to $98.8 million in the first nine
months of 2000 from $48.2 million in the first nine months of 1999. Our EBITDA
less minority interest increased 504% to $15.1 million in the first nine months
of 2000 from $2.5 million in the first nine months of 1999. Pro forma revenues
and EBITDA less minority interest for the first nine months of 2000 were $135.1
million and $27.4 million, respectively.

INDUSTRY BACKGROUND

     We believe many physicians prefer surgery centers and private surgical
hospitals to general acute care hospitals because surgery centers and private
surgical hospitals enhance physicians' productivity, which increases the number
of surgeries they can perform in a given amount of time. In addition, these
facilities usually provide physicians with greater scheduling flexibility, more
consistent nurse staffing and faster turnaround time between cases. While
surgery centers and private surgical hospitals generally perform scheduled
surgeries, private acute care hospitals and national health service facilities
generally provide a broad range of services, including high priority and
emergency procedures. Medical emergencies often demand the unplanned use of
operating rooms and result in the postponement or delay of scheduled surgeries,
disrupting physicians' practices and inconveniencing patients. Surgery centers
and private surgical hospitals in both the United States and Western Europe are
designed to improve physician work environments and improve physician
efficiency. In Western Europe, our surgery centers are also designed to provide
an opportunity to physicians to supplement their incomes. In addition, many
physicians choose to perform surgery in facilities like ours because their
patients prefer the comfort of a less institutional atmosphere, and the
convenience of simplified admissions and discharge procedures.

     UNITED STATES

     According to SMG Marketing Group Inc.'s Freestanding Outpatient Surgery
Center Directory, the number of outpatient surgery cases performed in
freestanding surgery centers increased 191% from

                                       33
<PAGE>
2.3 million in 1990 to 6.7 million in 2000. Outpatient surgical procedures
represented approximately 15% of all surgical procedures performed in the United
States in 1980 compared to approximately 70% in 2000. New surgical techniques
and technology, as well as advances in anesthesia, have significantly expanded
the types of surgical procedures that are being performed in surgery centers and
have helped drive the growth in outpatient surgery. Lasers, arthroscopy,
enhanced endoscopic techniques and fiber optics have reduced the trauma and
recovery time associated with many surgical procedures. Improved anesthesia has
shortened recovery time by minimizing post-operative side effects such as nausea
and drowsiness, thereby avoiding the need for overnight hospitalization in many
cases. In addition, some states in the United States now permit surgery centers
to keep a patient for up to 23 hours. This allows more complex surgeries,
previously only performed in an inpatient setting, to be performed in a surgery
center.

     In addition to these technological and other clinical advancements, a
changing payor environment has contributed to the rapid growth in outpatient
surgery in recent years. Government programs, private insurance companies,
managed care organizations and self-insured employers have implemented cost
containment measures to limit increases in healthcare expenditures, including
procedure reimbursement. These cost containment measures have greatly
contributed to the significant shift in the delivery of healthcare services away
from traditional inpatient hospitals to more cost-effective alternate sites,
including surgery centers. We believe that surgery performed at a surgery center
is generally less expensive than hospital-based outpatient surgery because of
lower facility development costs, more efficient staffing and space utilization
and a specialized operating environment focused on cost containment.

     Today, large healthcare systems in the United States generally offer both
inpatient and outpatient surgery on site. In addition, a number of nonprofit
healthcare systems have begun to expand their portfolios of facilities and
services by entering into strategic relationships with specialty operators of
surgery centers. These strategic relationships enable nonprofit healthcare
systems to offer patients, physicians and payors the cost advantages,
convenience and other benefits of outpatient surgery in a freestanding facility.
Further, these relationships allow the nonprofit healthcare systems to focus
their attention and resources on their core business without the challenge of
acquiring, developing and operating these facilities. According to SMG Marketing
Group, as of June 30, 2000, there were 3,191 freestanding surgery centers in the
United States, of which 3% were owned by healthcare systems and 27% were owned
by corporate entities. The remaining 70% were independently owned, primarily by
physicians.

     WESTERN EUROPE

     Most countries in Western Europe provide their populations with some level
of government funded healthcare. Despite the success of these public programs,
the practical limitations of these systems have resulted in delays or rationing
of elective surgeries and certain other procedures. In many of these countries,
funding and capacity constraints of public healthcare systems have created an
opportunity for private healthcare systems to develop.

     While Spain's national health service covers substantially all of the
country's population, a private healthcare industry has emerged that currently
serves the 17.2% of Spain's population that maintains private insurance and
another growing portion of the population that pays for elective procedures from
personal funds. Total healthcare expenditures in Spain grew from 5.9% of gross
domestic product, or GDP, in 1997 to 7.6% in 1998. In addition, Spain's GDP and
wages have experienced compound annual growth of 1.9% and 2.6%, respectively,
from 1975 to 1998. We believe that these increases support our view that the
number of privately insured citizens, the amount of private healthcare
expenditures and the resulting demand for private networks such as ours will
continue to grow. We also believe that the growth in Spain's private healthcare
industry has been driven in large part by an increase in the number of employers
offering private insurance as a benefit to their employees. Like their U.S.
counterparts, private insurance companies in Spain typically offer comprehensive
health coverage. Since only 57 of the 347 private surgical hospitals in Spain
are owned by multi-facility systems, we believe an opportunity exists to build a
private hospital network that will enable us to negotiate more effectively with
the country's large health insurance companies. Our facilities also supplement
the national health service as public hospitals sometimes refer overload cases
to our facilities.

                                       34
<PAGE>
We are able to accept or reject these cases based on the available capacity of
our facilities and the profitability of the cases. As of September 30, 2000, we
derived approximately 65.0% of our revenues in Spain from private insurance and
approximately 22.0% of our revenues in Spain from private pay.

     The United Kingdom also provides government funded healthcare to all of its
residents through a national health service. It, however, is also subject to
funding and capacity limitations. Since the demand for healthcare services
exceeds the public system's capacity, U.K. residents may encounter waiting lists
for elective surgery of up to 18 months as well as delays in obtaining cancer
biopsies and other diagnostic procedures. The World Health Organization reports
that 25,000 people die unnecessarily of cancer in Britain each year due to
underfinanced and poorly managed cancer programs. In response to these
shortfalls, private healthcare networks and private insurance companies have
developed in the United Kingdom. Approximately 11.0% of the U.K. population has
private insurance to cover elective surgical procedures, and another rapidly
growing segment of the population pays for elective procedures from personal
funds. As of September 30, 2000, in the United Kingdom, we derived approximately
58.0% of our revenues from private insurance and approximately 31.0% of our
revenues from private pay patients.

OUR BUSINESS STRATEGY

     Our goal is to steadily increase our revenues and cash flows by becoming a
leading operator of surgery centers and private surgical hospitals in the United
States and selected nations in Western Europe. The key elements of our business
strategy are to:

     o  attract and retain top quality surgeons and other physicians,

     o  grow through selective acquisitions and development of surgery centers
        and private surgical hospitals,

     o  pursue strategic relationships with healthcare systems,

     o  expand selectively in Western Europe, and

     o  enhance operating efficiencies.

     ATTRACT AND RETAIN TOP QUALITY SURGEONS AND OTHER PHYSICIANS

     Since physicians provide and influence the direction of healthcare
worldwide, we have developed our operating model to encourage physicians to
affiliate with us and to use our facilities. We believe we attract physicians
because we design our facilities, structure our strategic relationships and
adopt staffing, scheduling and clinical systems and protocols to increase
physician productivity and promote their professional and financial success. We
believe this focus on physicians, combined with providing high quality
healthcare in a friendly and convenient environment for patients, will continue
to increase case volumes at our facilities. In addition, in the United States,
we generally offer physicians the opportunity to purchase equity interests in
the facilities they use. We believe this opportunity attracts quality physicians
to our facilities and ownership increases the physicians' involvement in
facility operations, enhancing quality of patient care, increasing productivity
and reducing costs. In addition, we believe our recent acquisition of OrthoLink
will strengthen our ability to attract leading physicians in the profitable
field of orthopedics.

     GROW THROUGH SELECTIVE ACQUISITIONS AND DEVELOPMENT

     We intend to continue to enter targeted markets by acquiring and developing
surgical facilities. In the United States, we expect to do this primarily in
conjunction with a local healthcare system or hospital. We typically target the
acquisition or development of multi-specialty centers that perform high volume,
non-emergency, lower risk procedures requiring lower capital and operating costs
than hospitals. In addition, we will also consider the acquisition of
multi-facility companies. Since inception, we have successfully acquired and
integrated facilities, generating average EBITDA less minority interest growth
of 19.0% over the twelve months following acquisition.

                                       35
<PAGE>
     In determining whether to enter a new market, we examine numerous criteria,
including:

     o  the potential to achieve strong increases in revenues and cash flows;

     o  the size of the market;

     o  the number of surgical facilities in the market;

     o  the number and nature of outpatient surgical procedures performed in the
        market;

     o  the case mix of the facilities to be acquired;

     o  whether the physicians, healthcare systems and payors in the market are
        receptive to surgery centers;

     o  whether the facility is well-positioned to negotiate agreements with
        insurers, other payors and suppliers; and

     o  licensing and other regulatory considerations.

     Upon identifying a target facility, we conduct financial, legal,
engineering, operational, technology and systems audits of the facility and
conduct interviews with the facility's management, affiliated physicians and
staff. Once we acquire or develop a facility, we focus on upgrading systems and
protocols, including implementing USPI's EDGE, to increase case volume and
improve operating efficiencies.

     PURSUE STRATEGIC RELATIONSHIPS WITH HEALTHCARE SYSTEMS

     Through strategic relationships with us, healthcare systems can leverage
our operating expertise and create a new cash flow opportunity with limited
capital expenditures. We believe that these relationships also allow nonprofit
healthcare systems in particular to attract and retain physicians and improve
their hospital operations by focusing on their core business. We also believe
that strategic relationships with these healthcare systems help us to develop
more quickly relationships with physicians, communities, suppliers and payors.
Generally, the healthcare systems with which we develop relationships have
strong local market positions and excellent reputations that we use in branding
our facilities. In addition, our relationships with healthcare systems enhance
our acquisition and development efforts by (1) providing opportunities to
acquire facilities the systems may own, (2) providing access to physicians
already affiliated with the systems, (3) attracting additional physicians to
affiliate with newly developed facilities and (4) encouraging physicians who own
facilities to consider a strategic relationship with us.

     EXPAND SELECTIVELY IN WESTERN EUROPE

     We are well-positioned in Western Europe to take advantage of the demand
for privately provided surgery and cancer treatment. To this end, we intend to
continue to acquire private surgical hospitals in existing markets and selected
new countries. We own two private surgical hospitals in the United Kingdom and
six private surgical hospitals, two surgery centers and a diagnostic facility in
Spain. We enter new national markets through the acquisition of anchor hospitals
in or near major cities. In accordance with this acquisition strategy, we
established our presence in the United Kingdom and Spain through the
acquisitions of Parkside Hospital outside London and Instituto Universitario
Dexeus in Barcelona. We intend to continue to execute our acquisition strategy
in Western Europe by continuing to develop local networks of private healthcare
facilities in major population centers of the United Kingdom and Spain and by
entering one or two additional national markets. As we enter a new country, we
intend to establish a local management team with in-depth knowledge of the
culture and complexities of that country's delivery system. While our operating
model is designed to be applied consistently in different countries, it is
flexible enough to allow local management to help us capitalize on
country-specific opportunities, work more efficiently with local physicians,
surgeons, patients and payors and adapt more effectively to local customs. We
also seek to establish a brand name in selected markets to heighten awareness of
our facilities.

                                       36
<PAGE>
     ENHANCE OPERATING EFFICIENCIES

     Once we acquire a new facility, we integrate it into our existing network
by implementing a specific action plan to support the local management team, and
incorporate the new facility into our group purchasing contracts. We also
implement our systems and protocols to improve operating efficiencies and
contain costs. Our most important operational tool is USPI's EDGE. This
proprietary measurement system allows us to track our clinical, service and
financial performance, best practices and key indicators in each of our
facilities. Our goal is to use USPI's EDGE to ensure that we provide each of the
patients using our facilities with high quality healthcare, offer physicians a
superior work environment and eliminate inefficiencies. Using USPI's EDGE, we
track and monitor our performance in clinical care areas such as: (1) providing
surgeons the equipment, supplies and surgical support they need; (2) starting
cases on time; (3) minimizing turnover time between cases; and (4) providing
efficient schedules. USPI's EDGE compiles and organizes the specified
information on a daily basis and is easily accessed over the Internet by our
facilities on a secure basis. The information provided by USPI's EDGE enables
our employees, facility administrators and management to analyze trends over
time and share processes and best practices among our facilities. In addition,
the information is used as an evaluative tool by our administrators and a
budgeting and planning tool by our management. USPI's EDGE is now fully deployed
in all our U.S. facilities, except for the facilities we acquired in the
OrthoLink transaction. We have begun deployment of USPI's EDGE in the United
Kingdom and anticipate introducing it in Spain in the fourth quarter of 2001.

OPERATIONS

     OPERATIONS IN THE UNITED STATES

     Our operations in the United States consist primarily of our ownership and
management of surgery centers. We have ownership interests in 28 surgery centers
and one private surgical hospital and manage five additional surgery centers. In
addition, we own interests in and will operate five surgery centers and one
private surgical hospital that are currently under construction and have
identified five additional markets for possible acquisition or development
projects. Over 2,000 physicians have access privileges to use our facilities.
Our surgery centers are licensed outpatient surgery centers and are generally
equipped and staffed for multiple surgical specialties and located in
freestanding buildings or medical office buildings. Our average surgery center
has approximately 15,000 square feet of space with four or five operating rooms,
as well as ancillary areas for preparation, recovery, reception and
administration. Our surgery center facilities range from a 6,700 square foot,
two operating room facility to a 17,000 square foot, six operating room
facility. Our surgery centers are normally open weekdays from 7:00 a.m. to
approximately 5:00 p.m. or until the last patient is discharged. We estimate
that a surgery center with four operating rooms can accommodate up to 6,000
procedures per year.

     Our surgery center support staff typically consists of registered nurses,
operating room technicians, an administrator who supervises the day-to-day
activities of the surgery center, a receptionist and a small number of office
staff. Each center also has a medical director, who is typically an
anesthesiologist and responsible for and supervises the quality of medical care
provided at the center. Use of our surgery centers is limited to licensed
physicians, podiatrists and oral surgeons who are also on the medical staff of a
local accredited hospital. Each center maintains a peer review committee
consisting of physicians who use our facilities and who review the professional
credentials of physicians applying for surgical privileges.

     All of our surgery centers eligible for accreditation are accredited by the
Joint Commission on Accreditation of Healthcare Organizations or by the
Accreditation Association for Ambulatory Healthcare. We believe that
accreditation is the quality benchmark for managed care organizations. Many
managed care organizations will not contract with a facility until it is
accredited. We believe that our historical performance in the accreditation
process reflects our commitment to providing high quality care in our surgery
centers.

                                       37
<PAGE>
     Our ownership interests in surgery centers are generally held through
limited partnerships or limited liability companies in which ownership interests
are also held by local physicians who are on the medical staff of the centers.
Our ownership interests in the centers range from 10% to 100%. Our partnership
and limited liability company agreements typically provide for the quarterly pro
rata distribution of net revenues from operations, less amounts held in reserve
for expenses and working capital. We also have a management agreement with each
of the centers under which we provide day-to-day management services for a
management fee that is a percentage of the net revenues of the center.

     Our partnership and limited liability company agreements typically provide
that if various regulatory changes take place we will be obligated to purchase
some or all of the ownership interests of the physicians in the partnerships or
limited liability companies that own and operate the applicable surgery centers.
The regulatory changes that could trigger such an obligation include changes
that:

     o  make the referral of Medicare and other patients to our surgery centers
        by physicians affiliated with us illegal;

     o  create the substantial likelihood that cash distributions from the
        partnership or limited liability company to the physicians associated
        therewith will be illegal; or

     o  cause physician ownership interests in the partnerships or limited
        liability companies to be illegal.

Typically, our partnership and limited liability company agreements allow us to
use shares of our common stock as consideration for the purchase of a
physician's interest should we be required to purchase these interests. In the
event we are required to purchase these interests and our common stock does not
maintain a sufficient valuation, we may be required to use cash for the
acquisition of a physician's interest. As a result, the triggering of these
obligations and the possible termination of our affiliation with these
physicians could have a material adverse effect on us. See "Risk Factors" and
" -- Government Regulation."

     STRATEGIC RELATIONSHIPS

     We have entered into strategic relationships with established healthcare
systems and hospitals in the United States. Our largest joint venture is with
the Baylor Health Care System in Dallas, Texas. This venture owns an outpatient
surgery network that serves the approximately four million persons located in
the Dallas/Fort Worth area. The Baylor joint venture currently has ownership
interests, or management agreements with options to purchase an ownership
interest, in ten operational surgery centers. The Baylor joint venture is
developing two private surgical hospitals and two surgery centers. We also have
a joint venture with the Meridian Health System in Wall, New Jersey. This joint
venture currently operates one surgery center and is developing two additional
surgery centers.

     A key element of our business strategy is to pursue additional strategic
relationships with healthcare providers in selected markets. To this end, we
have signed an agreement for a strategic relationship with Mt. Sinai Health
System in New York City through which we would develop a surgery center in
Manhattan. However, this transaction is subject to approval from New York
regulatory authorities. We can give no assurance that this transaction will be
consummated. In addition, we have also entered into preliminary discussions and
a non-binding letter of intent with St. Thomas Health System in Nashville,
Tennessee. We intend to structure our future joint ventures with service
providers in a manner similar to our joint venture with Baylor.

     OPERATIONS IN SPAIN

     We believe our operations in Spain comprise one of the largest private
hospital networks in this highly fragmented market. We own and operate six
private surgical hospitals, two surgery centers and a diagnostic facility in
Spain and over 700 physicians use our facilities. These facilities, located
primarily in Barcelona, Madrid and Seville, range in size from 19 beds to 133
beds with an average of 92 beds. In this market, we focus primarily on five
specialties: obstetrics/gynecology, orthopedic surgery, general surgery,
internal medicine and plastic surgery.

                                       38
<PAGE>
     In addition, we are developing our brand name, "USPE," in all of our
markets in Spain in an effort to attract top quality physicians and a greater
number of patients. We are developing this brand by leveraging the reputation of
our more prominent physicians and facilities, particularly Instituto
Universitario Dexeus in Barcelona. Dexeus is one of only two private teaching
hospitals in Spain. We believe Dexeus' affiliation with the University of
Barcelona, which has nationally renowned physicians, makes it one of Spain's
most respected private hospitals and that it greatly enhances the USPE brand
image.

     OPERATIONS IN UNITED KINGDOM

     We acquired Parkside Hospital in Wimbledon, a suburb southwest of London,
and Holly House Hospital in a suburb northeast of London near Essex in
April 2000. Parkside Hospital is our flagship hospital due to its strong market
position and its proximity to several other leading hospitals. Parkside has 69
registered acute care beds, including four high dependency beds, on three
floors. The hospital has four operating theatres, including a dedicated
endoscopy suite that opened in 1998. Parkside also has its own on-site pathology
laboratory, pharmacy and a diagnostic suite with an MRI scanner, two X-ray
screening rooms and a color Doppler ultrasound machine. Approximately 270
surgeons and physicians, all of whom have or have held consulting positions in
NHS hospitals, have admitting privileges to the hospital. Parkside has
established practices including orthopedics, gynecology and general surgery, as
well as neurosurgery and endoscopic procedures. Parkside also intends to expand
its outpatient department from 12 to 15 physicians' offices, which are referred
to as consulting rooms.

     We are in the process of developing a comprehensive cancer center, the
Parkside Clinic, near Parkside Hospital. Our development of Parkside Clinic has
the support of a number of oncologists at Parkside Hospital and the center has
already contracted with the BUPA Group, Britain's largest insurance company. We
anticipate that the center will provide superior inpatient and outpatient
services. We anticipate that Parkside Clinic will be fully operational in 2002
and will provide radiotherapy, chemotherapy and nuclear medicine facilities on
an outpatient basis with inpatient cancer services being provided at Parkside
Hospital. Parkside Clinic also will provide additional space for expansion of
other specialties and programs at Parkside Hospital.

     Holly House Hospital has been an acute care hospital for 20 years and has
56 registered acute care beds on two floors, including three high dependency
beds. The hospital has three operating theatres built in 1988 and its own
on-site pathology laboratory and pharmacy with cytotoxic reconstitution
facilities to serve its expanding oncology program. A diagnostic suite houses
MRI and CT scanners and two X-ray screening rooms together with a color Doppler
ultrasound machine. Over 100 surgeons and physicians have admitting privileges
at the hospital. The hospital has established orthopedic and general surgery
practices and is developing oncology and plastic surgery programs.

                                       39
<PAGE>
     CASE MIX

     The following table sets forth the percentage of our revenues generated in
the first nine months of 2000 for our company as a whole and by country from
each of the following specialties:

              SPECIALTY         TOTAL         U.S.          SPAIN         U.K.
              ---------        -------       -------       -------       -------
Orthopedic.................     25 %          30 %          18 %          23 %
Obstetrics/gynecology......     14             5 (1)        23 (2)        19 (3)
General surgery............     10             7            10            15
Ear, nose and throat.......      8            12             3             5
Pain management............      8            16            --            --
Gastrointestinal...........      7             9             7             4
Plastic surgery............      6             6             7             4
Ophthalmology..............      5             9             1             4
Other......................     17             6            31            26
                               --- ---       --- ---       --- ---       --- ---
     Total.................    100 %         100 %         100 %         100 %
                               === ===       === ===       === ===       ===
------------
  (1) Includes gynecology only

  (2) Includes obstetrics and gynecology

  (3) Includes gynecology and in vitro fertilization

     PAYOR MIX

     The following table sets forth the percentage of our revenues generated in
the first nine months of 2000 for our company as a whole and by country from
each of the following payors:

                PAYOR             TOTAL         U.S.         SPAIN         U.K.
                -----             -----         ----         -----         ----
Private insurance.............     67%           72%          65%           58%
Self-pay......................      15             3           22            31
Government....................      13            18           12             2
Other.........................       5             7            1             9
                                  ----          ----         ----          ----
     Total....................    100%          100%         100%          100%
                                  ====          ====         ====          ====

                                       40
<PAGE>
     FACILITIES

     SURGERY CENTERS

     The following table sets forth information relating to the surgery centers
that we operate:

<TABLE>
<CAPTION>
                                           DATE OF
                                         ACQUISITION        NUMBER OF        PERCENTAGE
                                              OR            OPERATING         OWNED BY
              FACILITY                   AFFILIATION          ROOMS             USPI
              --------                   ------------       ----------       -----------
<S>                                      <C>                <C>              <C>
UNITED STATES
Decatur Surgery Center, Decatur,
  Alabama (1)........................       7/31/98              2                66%
Decatur GI Center, Decatur,
  Georgia............................       7/31/98              2                34
Warner Park Surgery Center, Chandler,
  Arizona (1)........................        7/1/99              4               100
University Surgical Center, Winter
  Park, Florida......................       10/1/98              3                70
Atlanta East West, Austell,
  Georgia............................        9/1/00 (4)          3               100
Resurgens Surgery Center, Atlanta,
  Georgia............................       10/1/98 (4)          4                15
Creekwood Surgery Center, Kansas
  City, Missouri (1).................       7/31/98              3                75
Parkway Surgery Center, Henderson,
  Nevada.............................       11/1/98              5                50
Shrewsbury Ambulatory Surgery Center,
  Shrewsbury, New Jersey.............        3/1/00              4                35
New Mexico Orthopaedic Surgery
  Center, Albuquerque, New Mexico....        4/1/00 (4)          6                51
Las Cruces Surgery Center, Las
  Cruces, New Mexico (1).............        2/1/01              3                50
Day-Op Center of Long Island,
  Mineola, New York..................       12/1/98              4               100
Eastside Surgery Center, Columbus,
  Ohio (2)...........................       3/20/00 (4)          4                 0
Riverside Outpatient Surgery Center,
  Columbus, Ohio (2).................       3/20/00 (4)          6                 0
Mountain Empire Surgery Center,
  Johnson City, Tennessee............        4/1/00 (4)          3                20
Baptist Ambulatory Surgery Center,
  Nashville, Tennessee...............        3/1/98 (4)          6                19
Centennial, Nashville, Tennessee.....        6/1/98 (4)          6                11
Middle Tennessee Ambulatory Surgery
  Center, Murfreesboro, Tennessee....       7/31/98              4                37
Physicians Pavilion Surgery Center,
  Nashville, Tennessee (1)...........       7/31/98              4                71
Arlington Surgery Center, Arlington,
  Texas (1)..........................        2/1/99              3                10
Baylor Medical Center Garland
  Outpatient Department, Garland,
  Texas (2)..........................
Baylor Surgicare, Dallas, Texas(1)...        6/1/99              6                48
Denton Surgicare, Denton,
  Texas (1)..........................        2/1/99              4                29
Doctors Surgery Center (Houston),
  Pasadena, Texas (1)................        9/1/99              4                91
Irving Surgery Center, Irving,
  Texas (1)(3).......................       12/1/98              4                 0
Medical Centre Surgicare, Fort Worth,
  Texas (1)(3).......................       12/1/98              5                 0
Metroplex Surgery Center, Bedford,
  Texas (1)..........................       12/1/98              4                37
North Texas Surgery Center, Dallas,
  Texas (1)..........................       12/1/98              4                39
Physicians Day Surgery Center,
  Dallas, Texas......................      10/15/00              4                44
Premier Ambulatory Surgery Center of
  Garland, Garland, Texas............        2/1/99              2                15
Texas Surgery Center, Dallas,
  Texas (1)..........................        6/1/99              4                48
United Surgery Center -- Southeast,
  Houston, Texas (1).................        9/1/99              3               100
Valley View Surgery Center, Dallas,
  Texas (1)(3).......................       12/1/98              4                 0
Teton Outpatient Services, Jackson
  Hole, Wyoming......................        8/1/98 (4)          2                39
SPAIN
Centro de Cirugia Ambulatario,
  Barcelona..........................        3/1/99              3               100
USP Dermoestetica, S.L. Madrid.......        4/1/99              2                70
</TABLE>

                                                   (FOOTNOTES ON FOLLOWING PAGE)

                                       41
<PAGE>
------------
(1) Licensed and equipped to accommodate 23-hour stays.

(2) Management agreement only.

(3) Management agreement only. We have an option to acquire an ownership
    interest.

(4) Indicates date of acquisition by OrthoLink. We acquired OrthoLink in
    February 2001.

     PRIVATE SURGICAL HOSPITALS

     The following table sets forth information relating to the private surgical
hospitals that we operate:

<TABLE>
<CAPTION>
                                           DATE OF
                                         ACQUISITION      NUMBER OF                       PERCENTAGE
                                             OR           OPERATING       NUMBER OF        OWNED BY
              FACILITY                   AFFILIATION        ROOMS           BEDS             USPI
              --------                   -----------      ---------      -----------      ----------
<S>                                      <C>              <C>            <C>              <C>
UNITED STATES
TOPS Specialty Hospital, Houston,
  Texas (1)..........................       7/1/99            7                2              100%
SPAIN
Instituto Universitario Dexeus,
  Barcelona..........................       4/1/98           12              106               79
Hospital Santa Teresa, La Coruna.....      11/1/98            5              133               95
Hospital Sagrado Corazon, Seville....     10/16/98            9               95              100
Clinica Nuestra Senora de la
  Esperanza, Vitoria.................      10/1/98            3               19              100
Clinica San Camilo, Madrid...........      4/30/00            8              130               96
Clinica San Jose, Madrid.............      11/1/00            7               72              100
Juan XXIII, Madrid (2)...............       2/1/00         --              --                 100
UNITED KINGDOM
Parkside Hospital, Wimbledon.........      4/30/00            4               69              100
Holly House Hospital, Essex..........      4/30/00            3               59              100
</TABLE>

------------

  (1) Also licensed and equipped to accommodate stays of up to 72 hours.

  (2) Imaging center only.

     We own the buildings and property of four of our surgery centers and lease
all other facilities where our various surgery centers and private surgical
hospitals conduct their operations. Our leases have initial terms ranging from
one to twenty years and most of the leases contain options to extend the lease
period for up to ten additional years.

     Our corporate headquarters are located in Dallas, Texas. We currently lease
approximately 11,000 square feet of space at 17103 Preston Road, Suite 200
North, Dallas, Texas. The lease expires in 2001.

     Our office in the United Kingdom is located in London. We currently lease
1,900 square feet. The lease expires in February 2004.

     Our Spanish offices are located in Madrid and Barcelona. We currently lease
2,600 square feet of space in Madrid. The lease expires in December 2001.
Additionally, we lease 2,800 square feet of space in Barcelona. The lease
expires in December 2002.

     We also have a lease of 13,504 square feet of space in Brentwood,
Tennessee. The lease expires in November 2002.

                                       42
<PAGE>
     DEVELOPMENT

     The following table sets forth information relating to facilities that are
currently under construction:

<TABLE>
<CAPTION>
                                                                               NUMBER OF
                                                               EXPECTED     OPERATING ROOMS,
                                                                OPENING        PROCEDURE
              FACILITY                          TYPE             DATE        ROOMS OR BEDS
              --------                          ----           ---------    ----------------
<S>                                      <C>                   <C>          <C>
Lawrenceville Surgery Center,
  Lawrenceville, Georgia.............    Surgery Center         3Q 2001          2 OR's
Toms River Surgery Center, Toms
  River,
  New Jersey.........................    Surgery Center         1Q 2002          4 OR's
Knoxville Surgery Center, Knoxville,
  Tennessee..........................    Surgery Center         2Q 2001          5 OR's
Frisco Surgical Hospital, Frisco,
  Texas..............................    Surgical Hospital      4Q 2001      6 OR's/8 beds
Grapevine Surgery Center, Grapevine,
  Texas..............................    Surgery Center         4Q 2001          4 OR's
Lewisville Surgicare, Lewisville,
  Texas..............................    Surgery Center         1Q 2002          4 OR's
Cancer Center adjacent to Parkside
  Hospital, Wimbledon, United
  Kingdom............................    Cancer Center          1Q 2002            --
</TABLE>

     In addition, we have identified the following markets for possible future
acquisition and development projects. Any acquisition or development in these or
other markets must meet our acquisition and development criteria. We cannot
assure you that we will be successful in developing facilities in any of the
following markets:

      o  Vail, Colorado

      o  Brick, New Jersey

      o  Manhattan, New York

      o  Nashville, Tennessee

      o  Fort Worth, Texas

     In February 2001, we acquired OrthoLink Physicians Corporation. In total,
we acquired ownership interests in seven additional surgery centers, six of
which OrthoLink manages. OrthoLink also manages two additional surgery centers
in which it has no ownership interests and provides specialized management
services for hospitals. Prior to the transaction, OrthoLink managed the
practices of 207 physicians in eight markets working at 64 facilities in
Colorado, Georgia, New Mexico, Ohio, Tennessee and Wyoming. We did not acquire
all of OrthoLink's historical management services obligations. As a condition to
our completing the OrthoLink acquisition, we required that the affiliated
physician groups assume from OrthoLink various employment agreements, office
leases and other agreements previously held by OrthoLink in connection with the
performance of its management services. While we may enter into additional
management services agreements with physician groups, we do not intend to
purchase the assets of any of these groups.

MARKETING

     Our sales and marketing efforts are directed primarily at physicians, which
are principally responsible for referring patients to our facilities. We market
our facilities to physicians by emphasizing the higher level of patient
satisfaction with our surgery centers compared to hospitals, the quality and
responsiveness of our services and the practice efficiencies provided by our
facilities. In those U.S. markets in which we have established a strategic
alliance with a healthcare system, we coordinate the marketing effort with the
healthcare system and generally benefit from this managed care strategy. We also
directly negotiate agreements with third-party payors, which generally focus on
the pricing, number of facilities in the market and affiliation with physician
groups in a particular market. Maintaining access to physicians and patients
through third-party payor contracting is essential for the economic viability of
most of our facilities.

                                       43
<PAGE>
COMPETITION

     In all of our markets, we compete with other providers, including major
acute care hospitals. Hospitals have various competitive advantages over us,
including their established managed care contracts, community position,
physician loyalty and geographical convenience for physicians' in-patient and
out-patient practices. However, we believe that, in comparison to hospitals with
which we compete for managed care contracts, our surgery centers and private
surgical hospitals compete favorably on the basis of cost, quality, efficiency
and responsiveness to physician needs in a more comfortable environment for the
patient.

     We compete with other providers in each of our markets for patients and for
contracts with insurers or managed care payors. Competition for managed care
contracts with other providers is focused on the pricing, number of facilities
in the market and affiliation with key physician groups in a particular market.
We also encounter competition with other companies for acquisition and
development of facilities and in the U.S. for strategic relationships with
healthcare systems and physicians.

     There are several large, publicly-held companies, or divisions or
subsidiaries of large publicly-held companies, that acquire and develop
freestanding multi-specialty surgery centers and private surgical hospitals.
Some of these competitors have greater resources than we do. The principal
competitive factors that affect our ability and the ability of our competitors
to acquire surgery centers and private surgical hospitals are price, experience
and reputation and access to capital. Further, in the U.S. some physician groups
develop surgery centers without a corporate partner. It is generally difficult,
however, for a single practice to create effectively the efficient operations
and marketing programs necessary to compete with other provider networks and
companies. As a result, and also due to the financial investment necessary to
develop surgery centers and private surgical hospitals, many healthcare systems
and physician groups are attracted to corporate partners such as us.

     In the United Kingdom, we face competition from both the national health
service, or NHS, and other privately operated hospitals. Across the United
Kingdom, a large number of private hospitals are owned by the four largest
hospital operators. In addition, the two largest payors account for over half of
the privately insured market. We believe our hospitals can effectively compete
in this market due to location and specialty mix of our facilities. Our
hospitals also have a higher portion of self pay business than the overall
market. Self pay business is not influenced by the private insurers.

     In Spain, there are several privately held independent hospitals and a few
networks of hospitals that are owned by insurance companies. Insurance companies
that own hospitals have the benefit of a captured market of their insured. These
insurance companies compete with us in acquisitions of strategically placed
hospitals in major cities. Other hospital networks are attempting to replicate
our model and have begun to compete with us in the acquisition of hospitals. The
acquisition of hospitals in Spain is greatly affected by price. In our
experience, sellers are typically the physicians that have built the hospitals,
and most physicians prefer an independent position in a market rather than
becoming a provider for an insurance company. We focus our efforts on partnering
with physicians and assisting them in growing their business and medical
practices by encouraging group rather than practices.

     Our hospitals compete with other providers in the Spanish market, including
other private hospitals and NHS hospitals. The national health coverage makes
these NHS hospitals accessible to the entire Spanish population. In contrast,
private hospitals such as ours must negotiate agreements with third-party
payors, which focus on services available to their members as well as pricing.
We plan to leverage our size in Spain with the insurance companies.

EMPLOYEES

     We employ approximately 2,400 persons, 2,100 of whom are full-time
employees and 300 of whom are part-time employees. Of these employees, we employ
approximately 600 in the United States, 600 in the United Kingdom and 1,200 in
Spain, respectively.

                                       44
<PAGE>
LEGAL PROCEEDINGS AND INSURANCE

     From time to time, we may be named a party to legal claims and proceedings
in the ordinary course of business. We are not aware of any claims or
proceedings against us or our partnerships that might have a material impact on
us.

     We maintain professional liability insurance that provides coverage on a
claims made basis of $1.0 million per incident and $3.0 million in annual
aggregate amount per location. We also maintain general liability insurance
coverage of $1.0 million per occurrence and $2.0 million in annual aggregate
amount per location, as well as business interruption insurance and property
damage insurance. In addition, we maintain umbrella liability insurance in the
aggregate amount of $10.0 million.

GOVERNMENT REGULATION

     UNITED STATES

     The healthcare industry is subject to extensive regulation by federal,
state and local governments. Government regulation affects our business by
controlling growth, requiring licensure or certification of facilities,
regulating how facilities are used, and controlling payment for services
provided. Further, the regulatory environment in which we operate may not change
significantly in the future. While we believe we have structured our agreements
and operations in material compliance with applicable law, there can be no
assurance that we will be able to successfully address changes in the regulatory
environment.

     Every state imposes licensing and other requirements on healthcare
facilities. In addition, many states require regulatory approval, including
certificates of need, before establishing or expanding various types of
healthcare facilities, including surgery centers and private surgical hospitals,
offering services or making capital expenditures in excess of statutory
thresholds for healthcare equipment, facilities or programs. In connection with
expanding existing operations and entering into new markets, we may become
subject to additional burdensome regulations.

     In addition to extensive existing government healthcare regulation, there
have been numerous initiatives on the federal and state levels for comprehensive
reforms affecting the payment for and availability of healthcare services. We
believe that these healthcare reform initiatives will continue during the
foreseeable future. If adopted, some aspects of previously proposed reforms,
such as further reductions in Medicare or Medicaid payments, or additional
prohibitions on physicians' financial relationships with facilities to which
they refer patients, could adversely affect us.

     We believe that our business operations materially comply with applicable
law. However, we have not received a legal opinion from counsel or from any
federal or state judicial or regulatory authority to this effect, and many
aspects of our business operations have not been the subject of state or federal
regulatory scrutiny or interpretation. Some of the laws applicable to our
company are subject to limited or evolving interpretations; therefore, a review
of our operations by a court or law enforcement or regulatory authority might
result in a determination that could have a material adverse effect on us.
Furthermore, the laws applicable to us may be amended in a manner that could
have a material adverse effect on us. Our ability to conduct our business and to
operate profitably will depend in part upon obtaining and maintaining all
necessary licenses, certificates of need and other approvals, and complying with
applicable healthcare regulations.

     LICENSURE AND CERTIFICATE OF NEED REGULATIONS

     Capital expenditures for the construction of new facilities, the addition
of beds or the acquisition of existing facilities may be reviewable by state
regulators under statutory schemes that are sometimes referred to as certificate
of need laws. States with certificate of need laws place limits on the
construction and acquisition of healthcare facilities and the expansion of
existing facilities and services. In these states, approvals are required for
capital expenditures exceeding amounts that involve certain facilities or
services, including surgery centers and private surgical hospitals.

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<PAGE>
     State certificate of need laws generally provide that, prior to the
addition of new beds, the construction of new facilities or the introduction of
new services, a designated state health planning agency must determine that a
need exists for those beds, facilities or services. The certificate of need
process is intended to promote comprehensive healthcare planning, assist in
providing high quality healthcare at the lowest possible cost and avoid
unnecessary duplication by ensuring that only those healthcare facilities that
are needed will be built.

     Typically, the provider of services submits an application to the
appropriate agency with information concerning the area and population to be
served, the anticipated demand for the facility or service to be provided, the
amount of capital expenditure, the estimated annual operating costs, the
relationship of the proposed facility or service to the overall state health
plan and the cost per patient day for the type of care contemplated. The
issuance of a certificate of need is based upon a finding of need by the agency
in accordance with criteria set forth in certificate of need laws and state and
regional health facilities plans. If the proposed facility or service is found
to be necessary and the applicant to be the appropriate provider, the agency
will issue a certificate of need containing a maximum amount of expenditure and
a specific time period for the holder of the certificate of need to implement
the approved project.

     Our healthcare facilities are also subject to state and local licensing
regulations ranging from the adequacy of medical care to compliance with
building codes and environmental protection laws. To assure continued compliance
with these regulations, governmental and other authorities periodically inspect
our facilities. The failure to comply with these regulations could result in the
suspension or revocation of a healthcare facility's license.

     Our healthcare facilities receive accreditation from the Joint Commission
on Accreditation of Healthcare Organizations or the Accreditation Association
for Ambulatory Health Care, Inc., nationwide commissions which establish
standards relating to the physical plant, administration, quality of patient
care and operation of medical staffs of various types of healthcare facilities.
Generally, our healthcare facilities have to be in operation for at least six
months before they are eligible for accreditation. As of December 31, 2000, all
but our four most recently opened healthcare facilities had been accredited by
either the Joint Commission on Accreditation of Healthcare Organizations or the
Accreditation Association for Ambulatory Health Care, Inc. Many managed care
companies and third-party payors require our facilities to be accredited in
order to be considered a participating provider under their health plans.

     MEDICARE PARTICIPATION IN SURGERY CENTERS

     Medicare is a federally funded and administered health insurance program,
primarily for individuals entitled to social security benefits who are 65 or
older or who are disabled. Medicare payments for procedures performed at surgery
centers are not based on costs or reasonable charges. Instead, Medicare
prospectively determines fixed payment amounts for procedures performed at
surgery centers. These amounts are adjusted for regional wage variations. A
portion of our revenues are attributable to payments received from the Medicare
and Medicaid programs. 19% and 18% of our total revenues for 1999 and the nine
months ended September 30, 2000, respectively, were attributable to Medicare and
Medicaid payments.

     To participate in the Medicare program and receive Medicare payment, our
facilities must comply with regulations promulgated by the United States
Department of Health and Human Services, referred to in this prospectus as
"DHHS." Among other things, these regulations, known as "conditions of
participation," relate to the type of facility, its equipment, its personnel and
its standards of medical care, as well as compliance with state and local laws
and regulations. All of our surgery centers and private surgical hospitals in
the United States are certified or awaiting certification to participate in the
Medicare program. These facilities are subject to annual on-site surveys to
maintain their certification. Failure to comply with Medicare's conditions of
participation may result in loss of program payment

                                       46
<PAGE>
or other governmental sanctions. We have established ongoing quality assurance
activities to monitor and ensure our facilities' compliance with these
conditions of participation.

     As with most government programs, the Medicare and Medicaid programs are
subject to statutory and regulatory changes, possible retroactive and
prospective rate adjustments, administrative rulings, freezes and funding
reductions, all of which may adversely affect the level of payments to our
surgery centers. Reductions or changes in Medicare or Medicaid funding could
significantly affect our results of operations. We cannot predict at this time
whether additional healthcare reform initiatives will be implemented or whether
there will be other changes in the administration of government healthcare
programs or the interpretation of government policies that would adversely
affect our business.

     FEDERAL ANTI-KICKBACK AND PHYSICIAN SELF-REFERRAL LAWS

     State and federal laws regulate relationships among providers of healthcare
services, including employment or service contracts and investment
relationships. These restrictions include a federal criminal law, referred to in
this prospectus as the Anti-Kickback Statute, that prohibits:

     o  offering, paying, soliciting, or receiving any form of remuneration in
        return for referring patients for services or items payable under a
        federal healthcare program, including Medicare or Medicaid, or

     o  purchasing, leasing, or ordering, or arranging for or recommending
        purchasing, leasing, or ordering any good, facility, service, or item
        for which payment may be made in whole or in part by a federal
        healthcare program.

A violation of the Anti-Kickback Statute constitutes a felony. Potential
sanctions include imprisonment of up to five years, criminal fines of up to
$25,000, civil money penalties of up to $50,000 per act plus three times the
remuneration offered or three times the amount claimed and/or exclusion from all
federally funded healthcare programs, including the Medicare and Medicaid
programs. The applicability of these provisions to many business transactions in
the healthcare industry has not yet been subject to judicial and regulatory
interpretation.

     Pursuant to the Anti-Kickback Statute, and in an effort to reduce potential
fraud and abuse relating to federal health care programs, the federal government
has announced a policy of increased scrutiny of joint ventures and other
transactions among healthcare providers. The Office of the Inspector General of
DHHS, referred to in this prospectus as the "OIG," closely scrutinizes
healthcare joint ventures involving physicians and other referral sources. In
1989, the OIG published a fraud alert that outlined questionable features of
"suspect" joint ventures, and the OIG has continued to rely on fraud alerts in
later pronouncements. Our partnerships and limited liability companies that are
providers of services under the Medicare program, and their respective limited
partners and members, are subject to the Anti-Kickback Statute. A number of the
relationships that we have established with physicians and other healthcare
providers do not fit within any of the safe harbor regulations promulgated by
the DHHS. These safe harbor regulations, if fully complied with, assure
participants in particular types of arrangements that the OIG will not treat
their participation as a criminal offense under the Anti-Kickback Statute. The
safe harbor regulations do not expand the scope of activities that the Anti-
Kickback Statute prohibits, nor do they provide that failure to satisfy the
terms of a safe harbor constitutes a violation of the Anti-Kickback Statute.
However, the OIG has indicated that failure to satisfy the terms of a safe
harbor may subject an arrangement to increased scrutiny.

     Our partnerships and limited liability companies that are providers of
services under the Medicare program, and their respective limited partners and
members, are subject to the Anti-Kickback Statute. A number of the relationships
that we have established with physicians and other healthcare providers do not
fit within any of the safe harbor regulations issued by the OIG. Of our 33
surgical facilities in the United States, 28 are owned by partnerships or
limited liability companies, which include as partners or members physicians who
perform surgical or other procedures at the centers and hospitals. Our private
surgical hospital in the United States does not have any physician owners.

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<PAGE>
     On November 19, 1999, the OIG promulgated rules setting forth additional
safe harbors under the Anti-Kickback Statute. The new safe harbors include a
safe harbor applicable to surgery centers, referred to in this prospectus as the
"ASC safe harbor." The ASC safe harbor generally protects ownership or
investment interests in a center by physicians who are in a position to refer
patients directly to the center and perform procedures at the center on referred
patients, if certain conditions are met. More specifically, the ASC safe harbor
protects any payment that is a return on an ownership or investment interest to
an investor if certain standards are met in one of four categories of ambulatory
surgery centers: (1) surgeon-owned surgery centers; (2) single-specialty surgery
centers; (3) multi-specialty surgery centers; and (4) hospital/physician surgery
centers.

     For multi-specialty ambulatory surgery centers, for example, the following
standards, among others, apply:

     (1)  All of the investors must be:

          o  physicians who are in a position to refer patients directly to the
             center and perform procedures on such referred patients,

          o  group practices composed exclusively of such physicians, or

          o  investors who are not employed by the entity or by any of its
             investors, are not in a position to provide items or services to
             the entity or any of its investors, and are not in a position to
             make or influence referrals directly or indirectly to the entity or
             any of its investors;

     (2)  At least one-third of each physician investor's medical practice
income from all sources for the previous fiscal year or twelve-month period must
be derived from performing procedures that require a surgery center or private
specialty hospital setting in accordance with Medicare reimbursement rules; and

     (3)  At least one third of the Medicare-eligible surgery procedures
performed by each physician investor for the previous fiscal year or previous
twelve-month period must be performed at the surgery center in which the
investment is made.

     Similar standards apply to each of the remaining four categories of surgery
centers set forth in the regulations. In particular, each of the four categories
includes a requirement that no ownership interests be held by a non-physician or
non-hospital investor if that investor is employed by the center or another
investor, is in a position to provide items or services to the center or any of
its other investors, or is in a position to make or influence referrals directly
or indirectly to the center or any of its investors.

     Since one of our subsidiaries is an investor in each partnership or limited
liability company that owns one of our surgery centers, and since this
subsidiary provides management and other services to the surgery center, our
arrangements with physician investors do not fit within the specific terms of
the 1999 safe harbor or any other safe harbor.

     In addition, because we do not control the medical practices of our
physician investors or control where they perform surgical procedures, it is
possible that the quantitative tests described above will not be met, or that
other conditions of the ASC safe harbor will not be met. Accordingly, while the
ASC safe harbor is helpful in establishing that a physician's investment in a
surgery center should be considered an extension of the physician's practice and
not as a prohibited financial relationship, we can give you no assurances that
these ownership interests will not be challenged under the Anti-Kickback
Statute. However, we believe, that our arrangements involving physician
ownership interests in our surgery centers and private surgical hospital
facilities should not fall within the activities prohibited by the Anti-Kickback
Statute.

     While several federal court decisions have aggressively applied the
restrictions of the Anti-Kickback Statute, they provide little guidance
regarding the application of the Anti-Kickback Statute to our partnerships and
limited liability companies. We believe that our operations mutually comply with
the

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<PAGE>
requirements of federal and state law, but can give you no assurances that a
federal or state agency charged with enforcement of the Anti-Kickback Statute or
similar laws might not assert a contrary position or that new federal or state
laws, or new interpretations of existing laws, might not adversely affect
relationships we have established with physicians or other healthcare providers
or result in the imposition of penalties on us or some of our facilities. Even
the assertion of a violation could have a material adverse effect upon us.

     A federal law known as the Stark Law prohibits a physician (or immediate
family member) who has a financial relationship with an entity from making a
referral to the entity for the furnishing of designated health services for
which payment may be made under the Medicare or Medicaid programs. These
prohibitions, contained in the Omnibus Budget Reconciliation Act of 1993,
commonly known as "Stark II," amended prior physician self-referral Medicare
legislation known as "Stark I" by dramatically enlarging the scope of services
to which the referral prohibitions apply. The Stark Law also prohibits Medicare
or Medicaid payment for any designated health services resulting from a
prohibited referral. Additional penalties for violating the Stark Law include
civil penalties of as much as $15,000 for each bill or claim submitted in
violation of the Stark Law and $100,000 for participation in a "circumvention
scheme" and exclusion from Medicare and Medicaid. Ambulatory surgery is not
identified as a "designated health service" under Stark II, and we do not
believe the statute is intended to cover ambulatory surgery services. In
addition, the Stark Law includes a specific exception for services furnished at
surgery center payment rates.

     FALSE AND OTHER IMPROPER CLAIMS

     The federal government is authorized to impose criminal, civil and
administrative penalties on any person or entity that files a false claim for
payment from Medicare or Medicaid. Claims filed with private insurers can also
lead to criminal and civil penalties, including, but not limited to, penalties
relating to violations of federal mail and wire fraud statutes. While the
criminal statutes are generally reserved for instances of fraudulent intent, the
government is applying its criminal, civil, and administrative penalty statutes
in an ever-expanding range of circumstances. For example, the government has
taken the position that a pattern of claiming reimbursement for unnecessary
services violates these statutes if the claimant merely should have known the
services were unnecessary, even if the government cannot demonstrate actual
knowledge. The government has also taken the position that claiming payment for
low-quality services is a violation of these statutes if the claimant should
have known that the care was substandard.

     Over the past several years, the government has accused an increasing
number of healthcare providers of violating the federal False Claims Act. The
False Claims Act prohibits a person from knowingly presenting, or causing to be
presented, a false or fraudulent claim to the United States government. The
statute defines "knowingly" to include not only actual knowledge of a claims
falsity, but also reckless disregard for or intentional ignorance of the truth
or falsity of a claim. Because our facilities perform hundreds of similar
procedures a year for which they are paid by Medicare, and there is a relatively
long statute of limitations, a billing error or cost reporting error could
result in significant civil or criminal penalties.

     Under the "qui tam," or whistleblower, provisions of the False Claims Act,
private parties may bring actions on behalf of the federal government. Such
private parties, often referred to as relators, are entitled to share in any
amounts recovered by the government through trial or settlement. Both direct
enforcement activity by the government and whistleblower lawsuits have increased
significantly in recent years and have increased the risk that a healthcare
company, like us, will have to defend a false claims action, pay fines or be
excluded from the Medicare and Medicaid programs as a result of an investigation
resulting from a whistleblower case. Although we believe that our operations
materially comply with federal and state laws, they may nevertheless be the
subject of a whistleblower lawsuit, or otherwise challenged or scrutinized by
governmental authorities. A determination that we have violated these laws could
have a material adverse effect on us.

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<PAGE>
     STATE ANTI-KICKBACK AND PHYSICIAN SELF-REFERRAL LAWS

     Many states, including those in which we do or expect to do business, have
laws that prohibit payment of kickbacks or other remuneration in return for the
referral of patients. Some of these laws apply only to services reimbursable
under state Medicaid programs. However, a number of these laws apply to all
healthcare services in the state, regardless of the source of payment for the
service. Based on court and administrative interpretations of the federal
Anti-Kickback Statute, we believe that the Anti-Kickback Statute prohibits
payments only if they are intended to induce referrals. However, the laws in
most states regarding kickbacks have been subjected to limited judicial and
regulatory interpretation than federal law. Therefore, we can give you no
assurances that our activities will be found to be in compliance with these
laws. Noncompliance with these laws could subject us to penalties and sanctions
and have a material adverse effect upon us.

     A number of states, including those in which we do or expect to do
business, have enacted physician self-referral laws that are similar in purpose
to the Stark Law but which impose different restrictions. Some states, for
example, only prohibit referrals when the physician's financial relationship
with a healthcare provider is based upon an investment interest. Other state
laws apply only to a limited number of designated health services. Some states
do not prohibit referrals, but require that a patient be informed of the
financial relationship before the referral is made. We believe that our
operations are in material compliance with the physician self-referral laws of
the states in which our facilities are located.

     HEALTH INFORMATION PRACTICES

     The Health Insurance Portability and Accountability Act of 1996, commonly
referred to as "HIPAA," contains, among other measures, provisions that may
require many organizations, including us, to implement very significant,
potentially expensive new computer systems and business procedures designed to
protect each patients individual healthcare information. HIPAA requires the DHHS
to issue rules to define and implement patient privacy standards. Among the
standards that the DHHS will adopt pursuant to HIPAA are standards for the
following:

     o  electronic transactions and code sets;

     o  unique identifiers for providers, employers, health plans and
        individuals;

     o  security and electronic signatures;

     o  privacy; and

     o  enforcement.

     On August 12, 1998, the Secretary of the DHHS issued a proposed rule that
establishes, in part, standards for the security of health information by health
plans, healthcare clearinghouses and healthcare providers that maintain or
transmit any health information in electronic form, regardless of format. Under
the proposed rule we would be an affected entity. These security standards
require affected entities to establish and maintain reasonable and appropriate
administrative, technical and physical safeguards to ensure integrity,
confidentiality and the availability of the information. The security standards
were designed to protect the health information against reasonably anticipated
threats or hazards to the security or integrity of the information and to
protect the information against unauthorized use or disclosure. Although the
security standards do not reference or advocate a specific technology, and
affected entities have the flexibility to choose their own technical solutions,
we expect that the security standards will require us to implement significant
systems.

     On November 3, 1999, the Secretary of the DHHS issued a proposed rule
establishing standards for the privacy of individually identifiable health
information. These privacy standards would apply to all health plans, all
healthcare clearinghouses and many healthcare providers, including healthcare
providers that transmit health information in an electronic form in connection
with certain standard transactions. We would be a covered entity under the
proposed rule. The privacy standards apply to protect individually identifiable
health information that is or has been electronically transmitted or maintained
by a covered entity, including information when it is non-electronic form or
discussed orally. As proposed, these standards not only require our compliance
with rules governing the use and

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<PAGE>
disclosure of protected health information, but they also require us to impose
those rules, by contract, on any business partner to whom such information is
disclosed. Under the proposed privacy standards, patients would be required to
be made third-party beneficiaries of our contracts with business partners, which
would, in many states, entitle them to sue either us or the business partner for
improper uses or disclosures of their protected health information.

     The DHHS finalized the new transaction standards on August 17, 2000, and we
will be required to comply with them by October 16, 2002. The DHHS finalized the
new privacy regulations on December 28, 2000, and we will generally be required
to comply with them by February 26, 2003. The security regulations under HIPAA
were scheduled to be finalized by the DHHS prior to the end of the year 2000,
but have not yet been finalized. Once these security regulations are issued in
final form, we will have approximately two years to be fully compliant.
Sanctions for failing to comply with HIPAA privacy standards include criminal
penalties and civil sanctions.

     We expect that compliance with these standards will require significant
commitment and action by us. We have appointed members of our management team to
direct our compliance with these standards. Although we and other covered
entities generally are not required to be in compliance with these standards
until two years following the effective date of the final rules issued or to be
issued by the Secretary of the DHHS, implementation will require us to conduct
extensive preparation and make significant expenditures. Because the security
standards are proposed regulations, we cannot predict the total financial impact
of the regulations on our operations.

     SPAIN

     Under the Spanish General Health Act and related regulations, private
hospitals must report periodically to the applicable health authorities. These
reports, which describe a hospital's activities, provide a method to identify
and control epidemics. Private hospitals in Spain must obtain a number of
licenses, permits and authorizations, including those required to begin
operating the facility and to dispense drugs. In addition, private hospitals are
subject to regular inspections by the health and administrative authorities to
ensure compliance with applicable regulations. Private hospitals must register
their personal databases with the Data Protection Agency. The Law of Personal
Data Protection provides specific protection for the health information portion
of this personal data. Private hospitals must adopt the necessary measures to
ensure the safety of the personal data. Violations of these regulations could
subject the hospital to administrative fines and civil and criminal liability.
Administrative fines range from 500,000 Pesetas (approximately $3,000) to
100,000,000 Pesetas (approximately $560,000), or five times the value of the
products and services that are the subject of the violation, depending on the
seriousness of the violation. Health authorities may also close a private
hospital for up to five years for serious violations. A violation that endangers
the public health is a criminal offense. We believe that our operations in Spain
are in material compliance with the laws referred to in this paragraph.

     UNITED KINGDOM

     While there is no specific anti-kickback legislation in the United Kingdom
that is unique to the medical profession, general criminal legislation prohibits
bribery and corruption. Our private surgical hospitals in the United Kingdom do
not pay commissions to or share profits with referring physicians, who invoice
patients or insurers directly for fees relating to the provisions of their
services. Private surgical hospitals in the United Kingdom are required to
register with the local Social Services Authority pursuant to the Registered
Homes Act 1984 which provides for regular inspections of the facility by the
registering authority. The operation of a private surgical hospital without
registration is a criminal offense. Under the Misuse of Drugs Act 1971, the
supply, possession or production of controlled drugs without a license from the
Secretary of State is a criminal offense. The Data Protection Act 1998 requires
private surgical hospitals to register as "data controllers." The processing of
personal data, such as patient information and medical records, without prior
registration is a criminal offense. We believe that our operations in the United
Kingdom are in material compliance with the laws referred to in this paragraph.

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                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

     The following table sets forth information with respect to our executive
officers and directors:

NAME                              AGE                    POSITION
------------------------------    --       -------------------------------------
Donald E. Steen...............    54       Chief Executive Officer and Chairman
                                           of the Board
William H. Wilcox.............    49       President and Director
Sue H. Shelley................    46       Executive Vice President
Mark A. Kopser................    36       Senior Vice President and Chief
                                           Financial Officer
Jonathan R. Bond..............    42       Senior Vice President, Operations
Mark Garvin...................    36       Senior Vice President, Operations
Brett Brodnax.................    36       Senior Vice President, Development
Philip J. Parker..............    41       Vice President and Chief Information
                                           Officer
John J. Wellik................    39       Vice President, Controller and
                                           Compliance Officer and Secretary
Gabriel Masfurroll............    47       President of Spanish operations
John M. Wotherspoon...........    58       Managing Director of United Kingdom
                                           operations
Dave A. Alexander, Jr., M.D...    49       President of OrthoLink and Director
Dale L. Stegall...............    54       Chief Administrative Officer of
                                           OrthoLink
John C. Garrett, M.D..........    58       Director
Carlos A. Ferrer(1)...........    47       Director
D. Scott Mackesy(2)...........    32       Director
Thomas L. Mills(1)............    53       Director
Boone Powell, Jr.(1)..........    63       Director
Paul B. Queally(2)............    36       Director
David P. Zarin, M.D...........    52       Director
------------
(1) Member of Audit Committee.

(2) Member of Options and Compensation Committee.

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<PAGE>
     DONALD E. STEEN founded our company in February 1998 and has been our chief
executive officer and chairman since that time. Mr. Steen served as president of
the International Group of HCA -- The Healthcare Company, formerly known as
Columbia/HCA Healthcare Corporation, from 1995 until 1997 and as president of
the Western Group of HCA from 1994 until 1995. Mr. Steen founded Medical Care
International, Inc., a pioneer in the surgery center business, in 1988. Mr.
Steen is also a member of the board of directors of Horizon Health Corporation
and Kinetic Concepts, Inc.

     WILLIAM H. WILCOX joined us as our president and a director in
September 1998. Mr. Wilcox served as president and chief executive officer of
United Dental Care, Inc. from 1996 until joining us. Mr. Wilcox served as
president of the Surgery Group of HCA and president and chief executive officer
of the Ambulatory Surgery Division of HCA from 1994 until 1996.

     SUE H. SHELLEY is a founder of our company and has been our executive vice
president since September 1999. Ms. Shelley served as our senior vice president
from February 1998 until September 1999 and as one of our directors from October
1998 until May 1999. Ms. Shelley served as a private healthcare consultant from
August 1995 until February 1998. Ms. Shelley also served as vice president,
Strategic Operations and Development for the Western Group of HCA from 1994
until 1995.

     MARK A. KOPSER joined us as our senior vice president and chief financial
officer in May 2000. Prior to that time, Mr. Kopser served as chief financial
officer for the International Division of HCA from 1997 until 2000 and as chief
financial officer for the London Division of HCA from 1992 until 1996.

     JONATHAN R. BOND joined us as our senior vice president, operations in
April 1999. Prior to that time, Mr. Bond served as senior vice president for the
Surgery Division of Physician Resource Group, Inc. from November 1995 until
April 1999.

     BRETT BRODNAX is our senior vice president, development. Prior to joining
us in December 1999, Mr. Brodnax was an assistant vice president for Baylor
Healthcare System from May 1990 until December 1999.

     PHILIP J. PARKER joined us as our vice president and chief information
officer in February 1999. Prior to that time, Mr. Parker served as director of
information services at United Dental Care, Inc. from March 1997 until January
1999. From March 1996 until March 1997, Mr. Parker was a consultant with
Ensemble Systems Consulting. Mr. Parker held various positions with Blue Cross
and Blue Shield of Texas, Inc from July 1992 until March 1996.

     JOHN J. WELLIK is our vice president, controller, chief compliance officer
and secretary. Prior to joining us in April 1999, Mr. Wellik served as vice
president and controller for Dynamex, Inc., a transportation services company,
from November 1997 until February 1999. Mr. Wellik also served as an assistant
controller for American Pad & Paper Company from May 1997 until November 1997.
Mr. Wellik served in various accounting management positions, including director
of financial accounting, for Avnet, Inc., an electronics distributor, from July
1993 until February 1997.

     GABRIEL MASFURROLL has been the president of United Surgical Partners
Europe, S.L., our wholly owned Spanish subsidiary through which he conducts our
operations in Spain, since April 1998. From 1996 to 1998, Mr. Masfurroll was
president and chief executive officer of HCA's Spanish subsidiary. From 1994 to
1996, Mr. Masfurroll served as a director of the hospital division of Sanitas,
S.A., the second largest Spanish health insurance company and an affiliate of
the BUPA Group, Britain's largest insurance company. From 1991 to 1993, Mr.
Masfurroll was a healthcare consultant with GESGRUP.

     JOHN M. WOTHERSPOON is the managing director of Aspen Healthcare Holdings
Limited in London and manages our facilities in the United Kingdom. We acquired
Aspen in April 2000. Mr. Wotherspoon joined Aspen in 1987 as financial director,
a post he held until September 1997 when he was promoted to managing director.
In April 1998, Mr. Wotherspoon led the management buyout of Aspen backed by
Electra Fleming. Mr. Wotherspoon has been qualified as a chartered accountant
since 1966.

     DAVE A. ALEXANDER, JR., M.D. joined us as a director and the president of
OrthoLink in February 2001. Prior to joining us, Dr. Alexander was the chairman
and a director of OrthoLink since it was founded in July 1996. From 1992 to
1996, Dr. Alexander served as president of Tennessee Orthopedic

                                       53
<PAGE>
Alliance. Dr. Alexander has been in private practice of orthopedics in
Nashville, Tennessee since 1982. Dr. Alexander is a Fellow of the American
Academy of Orthopedic Surgeons and holds a Surgery Certificate of Added
Qualification in Surgery of the Hand.

     DALE L. STEGALL joined us as the chief administrative officer of OrthoLink
in February 2001. Mr. Stegall is a founder of OrthoLink and has been serving as
OrthoLink's senior vice president, general counsel and secretary since its
inception in 1996. From 1973 to 1996, Mr. Stegall was in the private practice of
law and a healthcare consultant in Nashville, Tennessee.

     MARK GARVIN joined us as our senior vice president, operations, in February
2001. Mr. Garvin joined OrthoLink in 1996, serving in various senior management
positions until 1999, when he became OrthoLink's senior vice president, surgical
operations. From 1992 to 1996, Mr. Garvin was vice president, operations, with
the surgery division of HealthSouth Corporation.

     JOHN C. GARRETT, M.D. joined us as a director in February 2001. Mr. Garrett
had been a director of OrthoLink since July 1997. Dr. Garrett founded Resurgens,
P.C. in 1986, where he continues his specialized orthopedics practice in
arthroscopic and reconstructive knee surgery. He is a Fellow of the American
Academy of Orthopedic Surgeons.

     CARLOS A. FERRER has served as one of our directors since October 1998. In
1995 Mr. Ferrer co-founded Ferrer, Freeman, Thompson & Co., which manages
private equity funds dedicated exclusively to the healthcare industry and is a
member of Ferrer, Freeman & Thompson & Co., LLC, the general partner of both FFT
Partners I, L.P. and FFT Executive Partners I, L.P., which are investment
partnerships. Previously he was a managing director at Credit Suisse First
Boston Corporation.

     D. SCOTT MACKESY has served as one of our directors since our inception in
February 1998. Mr. Mackesy has been a principal with Welsh, Carson, Anderson &
Stowe since January 1998. Prior to joining Welsh, Carson, Anderson & Stowe, Mr.
Mackesy was senior research analyst and vice president in the Investment
Research Department at Morgan Stanley Dean Witter from January 1996 to January
1998.

     THOMAS L. MILLS has served as one of our directors since September 1999.
Mr. Mills is the chairman of our audit committee. Mr. Mills has been a partner
in the law firm of Winston & Strawn since 1995, specializing in health law.

     BOONE POWELL, JR. has served as one of our directors since June 1999. Mr.
Powell is the chairman of Baylor Health Care System and served as its president
and chief executive officer from 1980 until 2000.

     PAUL B. QUEALLY has served as one of our directors since our inception in
February 1998. Mr. Queally has been a general partner at Welsh, Carson, Anderson
& Stowe since January 1996. Prior to joining Walsh, Carson, Anderson & Stowe,
Mr. Queally was a general partner at The Sprout Group, which was the private
equity group of Donaldson, Lufkin & Jenrette Securities Corporation.

     DAVID P. ZARIN, M.D. has served as one of our directors since February
2000. Dr. Zarin has practiced otolaryngology in Houston, Texas since 1979. Dr.
Zarin was a founding partner and serves as vice president of Texas ENT
Specialists, PA, formed in 1997. Dr. Zarin was also a founding partner and a
director of TOPS Surgical Specialty Hospital which we acquired in July 1999. Dr.
Zarin has served as chairman and president of the medical staff of TOPS
Specialty Hospital since 1999.

BOARD OF DIRECTORS

     Upon completion of this offering, our board of directors will be divided
into three classes serving staggered three-year terms. Each year, the directors
of one class will stand for election as their terms of office expire. Messrs.
Ferrer, Garrett, Mills and Wilcox have been designated as Class I directors with
their terms of office expiring in 2002; Messrs. Alexander, Mackesy and Zarin
have been designated as Class II directors with their terms of office expiring
in 2003; and Messrs. Powell, Queally and Steen have been designated as Class III
directors with their terms of office expiring in 2004.

                                       54
<PAGE>
BOARD COMPENSATION

     Directors who are also our officers or employees do not receive
compensation for their services as directors. Each non-employee director who has
not previously been granted options to purchase our common stock is entitled to
an award of stock options to purchase up to 25,000 shares of our common stock
when he becomes a non-employee director, at an exercise price equal to the fair
market value of our common stock on the date of grant. In each case, the stock
options granted to the non-employee directors will have a three-year vesting
schedule. Directors are entitled to a $1,000 fee for attendance at board
meetings and reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to and attendance at meetings of the board of
directors or committees thereof.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

     We have entered into agreements to indemnify our directors and executive
officers. Under these agreements, we are obligated to indemnify our directors
and officers to the fullest extent permitted under the Delaware General
Corporate Law for expenses, including attorney's fees, judgments, fines and
settlement amounts incurred by them in any action or proceeding arising out of
their services as a director or officer. We believe that these agreements are
helpful in attracting and retaining qualified directors and officers.

COMPENSATION OF EXECUTIVE OFFICERS

     The following table contains summary information concerning the total
compensation paid to or earned for the fiscal year ended December 31, 2000 by
our chief executive officer and by our four other most highly compensated
executive officers serving in this capacity as of December 31, 2000, whose total
annual salary and bonus exceeded $100,000 for that fiscal year. We refer to
these persons as our "named executive officers."

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                  LONG-TERM
                                         ANNUAL COMPENSATION     COMPENSATION
                                         -------------------    --------------
                                                                  SECURITIES
                                                                  UNDERLYING          ALL OTHER
                                          SALARY      BONUS      OPTIONS (1)       COMPENSATION(1)
     NAME AND PRINCIPAL POSITION           ($)         ($)           (#)                 ($)
     ---------------------------         --------    -------    --------------    -----------------
<S>                                      <C>         <C>        <C>               <C>
Donald E. Steen......................    300,000       --           --                  1,708
     Chief Executive Officer
       and Chairman of the Board
William H. Wilcox....................    300,000       --           --                  1,500
     President
Sue H. Shelley.......................    155,000       --           --                  1,375
     Executive Vice President
Jonathan R. Bond.....................    158,125       --           50,000            --
     Senior Vice President,
       Operations
Gabriel Masfurroll...................    228,000      52,000        --                  9,600
     President of Spanish Operations
</TABLE>
------------
  (1) Consists of contributions to the named executive officer's 401(k) plan
      account.

                                       55
<PAGE>
     The following table provides information regarding stock options granted to
our named executive officers in 2000.

                             OPTION GRANTS IN 2000
<TABLE>
<CAPTION>
                                                                                                     POTENTIAL REALIZABLE
                                                                       INDIVIDUAL GRANTS               VALUES AT ASSUMED
                     ----------------------------------------------------------------------------       ANNUAL RATES OF
                         NUMBER OF                                                                        STOCK PRICE
                        SECURITIES          PERCENT OF TOTAL         EXERCISE                           APPRECIATION FOR
                        UNDERLYING         OPTIONS GRANTED TO          PRICE                              OPTION TERM
                      OPTIONS GRANTED         EMPLOYEES IN         OR BASE PRICE      EXPIRATION     --------------------
       NAME                  (#)               FISCAL YEAR            ($/SHARE)           DATE         5%           10%
       ----          -----------------    --------------------    ---------------    ------------    -------      -------
<S>                  <C>                  <C>                     <C>                <C>              <C>          <C>
Donald E. Steen.....      500,000(1)             34.7%                 4.50            12/01/10         --           --
William H. Wilcox...      150,000(1)             10.4%                 4.50            12/01/10         --           --
Sue H. Shelley......      --                   --                    --                  --             --           --
Jonathan R. Bond....       25,000(2)              1.7%                 4.00             8/01/10         --           --
                           25,000(1)              1.7%                 4.50            12/01/10         --           --
Gabriel Masfurroll..      --                   --                    --                  --             --           --
</TABLE>
------------
(1) 25% of the stock options become exercisable on December 1 in each of 2001,
    2002, 2003 and 2004.

(2) 25% of the stock options become exercisable on August 1 in each of 2001,
    2002, 2003 and 2004.

     The following table provides summary information with respect to stock
options held by our named executive officers as of December 31, 2000. The value
of unexercised in-the-money options is based on an assumed initial public
offering price of $      , less the exercise price payable for the shares.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

<TABLE>
                                                                      NUMBER OF SECURITIES          VALUE OF THE UNEXERCISED
                                                                       UNDERLYING OPTIONS             IN-THE-MONEY OPTIONS
                                         SHARES                        AT FISCAL YEAR-END              AT FISCAL YEAR-END
                                         ACQUIRED                             (#)                             ($)
                                           ON          VALUE      ----------------------------    ----------------------------
                NAME                     EXERCISE (#)   REALIZED ($)  EXERCISABLE UNEXERCISABLE   EXERCISABLE    UNEXERCISABLE
-------------------------------------    --------    ---------    -----------    -------------    -----------    -------------
Donald E. Steen......................      --           --          484,980         873,320
<S>                                      <C>         <C>          <C>            <C>              <C>            <C>
William H. Wilcox....................      --           --          430,000         520,000
Sue H. Shelley.......................      --           --          140,000         110,000
Jonathan R. Bond.....................      --           --           12,500          87,500
Gabriel Masfurroll...................      --           --           --              --
</TABLE>

COMMITTEES OF THE BOARD

     Our board of directors has established an audit committee and an options
and compensation committee.

     AUDIT COMMITTEE.  The audit committee is comprised of Messrs. Ferrer, Mills
and Powell. The audit committee reports on its activities to the board of
directors and is responsible for reviewing:

     o  the recommendation to our board of directors of the appointment of our
        independent auditors;

     o  the independence of our outside auditors;

     o  the scope, timing and results of the audit and non-audit services
        performed by our independent auditors;

     o  the audit committee charter on an annual basis;

     o  the appropriateness of our accounting policies;

                                       56
<PAGE>
     o  the adequacy of our accounting and financial controls;

     o  compliance with our accounting policies and accounting and financial
        controls;

     o  the reliability of the financial information that we report to the
        public; and

     o  the proxy statement disclosures required by the audit committee.

     OPTIONS AND COMPENSATION COMMITTEE.  The options and compensation committee
is comprised of Messrs. Mackesy and Queally. The primary functions of the
options and compensation committee are to:

     o  review and recommend the compensation arrangements for our directors and
        officers; and

     o  monitor and administer our stock option plans.

EMPLOYMENT AGREEMENTS

     DONALD E. STEEN.  On November 1, 2000, we entered into a four-year
employment agreement with Donald E. Steen that provides that he will serve as
our chairman and chief executive officer. The employment agreement provides for
annual base compensation of $400,000. Mr. Steen is also eligible for a
performance bonus of up to 100% of his annual base salary. During any time when
Mr. Steen is no longer serving as chief executive officer and, therefore, only
serving as chairman, his annual base compensation would be reduced by $100,000.
The employment agreement provides that, at any time after November 1, 2002, Mr.
Steen is entitled to resign and that our board of directors is entitled to
remove Mr. Steen from his position as chief executive officer, but not as
chairman of the board of directors. In the event that we terminate the
employment agreement other than for cause, Mr. Steen would be entitled to
receive his annual base salary for the balance of the term of the employment
agreement plus the average annual bonus, if any, awarded to Mr. Steen for the
prior two calendar years until the later of 12 months following termination or
the expiration of the initial four-year term of the agreement. The employment
agreement further provides that all of Mr. Steen's stock options automatically
become fully vested if we terminate the agreement for any reason other than for
cause.

     WILLIAM H. WILCOX.  On January 1, 2001, we entered into a two-year
employment agreement with William H. Wilcox that provides that he will serve as
our president. The employment agreement provides for annual base compensation of
$350,000. Mr. Wilcox is also eligible for a performance bonus of up to 100% of
his base salary. In the event that we terminate the employment agreement other
than for cause, Mr. Wilcox would be entitled to receive his annual base salary
for the balance of the term of the employment agreement plus the average annual
bonus, if any, awarded to Mr. Wilcox for the prior two calendar years until the
later of 12 months following termination or the expiration of the initial
two-year term of the agreement. The employment agreement further provides that
if we terminate the agreement for any reason other than for cause all of Mr.
Wilcox's stock options automatically become fully vested.

STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN

     We adopted our 1998 stock option plan on April 30, 1998. A total of
6,000,000 shares of common stock are authorized for issuance under the plan. We
do not intend to grant any additional stock options under this plan after the
completion of this offering. The plan provides for grants of incentive stock
options to our employees, including officers and employee-directors, and for
grants of non-qualified stock options and the right to purchase restricted stock
to our officers, other employees, directors and consultants and other key
persons. The purposes of the plan are to:

     o  promote our interests and the interests of our stockholders by providing
        an opportunity to selected employees, officers, directors and other
        persons to purchase our common stock; and

     o  attract, retain and motivate our employees and other persons and to
        encourage our employees and other persons to devote their best efforts
        to our business and financial success.

     Our options and compensation committee administers the plan. Our options
and compensation committee designates the individuals to receive options or
stock purchase awards, the number of

                                       57
<PAGE>
shares subject to options or stock purchase awards, and the terms and conditions
of each option or stock purchase award granted under the plan.

     While our options and compensation committee determines the terms of
options or stock purchase awards granted under the plan, the term of any
incentive stock option cannot exceed ten years from the date of the grant and
any incentive stock option granted to an employee who possesses more than ten
percent of the total combined voting power of all classes of our shares within
the meaning of Section 422(b)(6) of the Internal Revenue Code of 1986 cannot be
exercisable after the expiration of five years from the date of grant.

     The plan is not subject to the Employee Retirement Income Security Act of
1974; however, the plan is designed to allow for awards that constitute
performance-based awards as provided for in Section 162(m) of the Internal
Revenue Code of 1986. Therefore, awards may be exempt from the limitations on
the deductibility of compensation that exceeds $1 million.

     Our options and compensation committee determines the exercise price of
options granted under the plan. Incentive stock options must be granted at the
fair market value of the underlying stock at the time the option is granted.
Further, the exercise price of any incentive stock option granted to an employee
who possesses more than ten percent of the total combined voting power of all
classes of our shares within the meaning of Section 422(b)(6) of the Internal
Revenue Code of 1986 must be at least 110% of the fair market value of the
underlying stock at the time the option is granted. The exercise price of
options granted under the plan will be paid in full in a manner prescribed by
our options and compensation committee.

     Our options and compensation committee determines the purchase price for
shares of our common stock sold pursuant to stock purchase awards. The purchase
price need not be equal to the fair market value of our common stock. The
purchase price is payable in cash or, at the discretion of the committee, with
the grantee's promissory note, secured by the stock subject to the award, or any
other consideration approved by the committee.

2001 EQUITY-BASED COMPENSATION PLAN

     We adopted our 2001 Equity-Based Compensation Plan on
                        , 2001. At any given time, the number of shares of
common stock issued under the plan plus the number of shares of common stock
issuable upon the exercise of all outstanding awards under the plan and our 1998
stock option plan may not exceed the lesser of       shares or 15% of the total
number of shares of common stock then outstanding, assuming the exercise of all
outstanding options and warrants. The plan provides for grants of incentive
stock options, within the meaning of Section 422 of the Internal Revenue Code,
to our employees, including officers and employee-directors, and for grants of
nonstatutory stock options, restricted stock awards, stock appreciation rights,
phantom stock awards and annual incentive awards to our employees, consultants
and nonemployee directors. The purposes of the plan are:

     o  to attract and retain the best available personnel for positions of
        substantial responsibility;

     o  to provide additional incentives to our employees and consultants; and

     o  to promote the success of our business.

     Our options and compensation committee administers the plan and at all
times will be comprised of two or more individuals that constitute "outside
directors" for purposes of Section 162 of the Internal Revenue Code of 1986 and
"nonemployee directors" for purposes of Rule 16b-3 under the Securities Exchange
Act of 1934. Our options and compensation committee will designate the
individuals to receive awards, the number of shares subject to the awards and
the terms and conditions of each award, subject to the terms of the plan.

     While our options and compensation committee determines the terms of awards
granted under the plan, the term of any incentive stock option cannot exceed ten
years from the date of grant. Further, any incentive stock option granted to an
employee who possesses more than ten percent of the total combined voting power
of all classes of our shares within the meaning of Section 422(b)(6) of the

                                       58
<PAGE>
Internal Revenue Code of 1986 cannot be exercisable after the expiration of five
years from the date of grant.

     While our options and compensation committee determines the exercise price
of options granted under the plan, the exercise price of any incentive stock
option granted to an employee who possesses more than ten percent of the total
combined voting power of all classes of our shares within the meaning of Section
422(b)(6) of the Internal Revenue Code of 1986 must be at least 110% of the fair
market value of the underlying share at the time the option is granted. The
exercise price of options granted under the plan will be paid in full in a
manner prescribed by our options and compensation committee.

     The plan is not subject to the Employee Retirement Income Security Act of
1974; however, the plan is designed to allow for awards that constitute
performance-based awards as provided for in Section 162(m) of the Internal
Revenue Code of 1986. Therefore, awards may be exempt from the limitations on
the deductibility of compensation that exceeds $1 million.

EMPLOYEE STOCK PURCHASE PLAN

     We adopted our Employee Stock Purchase Plan on                         ,
2001. A total of                   shares of common stock are authorized for
issuance under the plan. The plan provides for the grant of stock options to
selected eligible employees. The purpose of the plan is to provide eligible
employees with an incentive to advance our interests by providing an opportunity
to purchase stock of the company at a favorable price. The plan is administered
by our options and compensation committee.

     Any eligible employee may elect to participate in the plan by authorizing
our options and compensation committee to make payroll deductions to pay the
exercise price of an option at the time and in the manner prescribed by our
options and compensation committee. This payroll deduction may be a specific
amount or a designated percentage to be determined by the employee, but the
specific amount may not be less than an amount established by us and the
designated percentage may not exceed an amount of eligible compensation
established by us from which the deduction is made. In no event will an employee
be granted an option under the plan that would permit the purchase of stock with
a fair market value in excess of $          , or to purchase more than
          shares, in a period established by us.

     There are two six-month offering periods in each calendar year. The date of
grant and the date of exercise for the first option period is January 1 and June
30, respectively, and the date of grant and date of exercise for the second
option period is July 1 and December 31, respectively. The first offering period
of the plan will commence on the date we close this offering, and will conclude
on June 30, 2001. The exercise price of options granted under the plan will be
an amount equal to the lesser of 85% of the fair market value of our common
stock on the date of exercise or on the date of grant.

                                       59
<PAGE>
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ISSUANCE OF EQUITY SECURITIES

     COMMON STOCK AND CLASS A COMMON STOCK

     From March 1998 to August 2000, we issued 510,140 shares of our common
stock in private placements at prices ranging from $2.00 to $4.00 per share and
we issued 23,519,534 shares of our Class A common stock in private placements at
prices ranging from $2.00 to $4.00 per share. Some of the purchasers of our
common stock and our Class A common stock in these private placements are
officers, directors and stockholders owning more than 5% of our outstanding
common stock and persons and entities associated with our officers, directors
and those stockholders. See "Security Ownership of Principal Stockholders and
Management." Each share of Class A common stock will convert into one share of
common stock upon completion of this offering.

     SERIES A REDEEMABLE PREFERRED STOCK

     From September 28, 1998 to October 9, 1998, we sold to Welsh, Carson,
Anderson & Stowe 30,000 shares of our Series A redeemable preferred stock at a
purchase price of $1,000 per share. As of September 30, 2000, we had 31,200
shares of Series A redeemable preferred stock outstanding. We intend to use
$32.6 million of the net proceeds of this offering to redeem all outstanding
shares of our Series A redeemable preferred stock and pay all accrued and unpaid
dividends on those shares.

     SERIES C CONVERTIBLE PREFERRED STOCK

     On March 27, 2000, we sold 18,750 shares of our Series C convertible
preferred stock, which represent all of our outstanding shares of Series C
convertible preferred stock, at a purchase price of $1,000 per share. We sold
15,000 shares to Welsh, Carson, Anderson & Stowe, a stockholder owning more than
5% of our outstanding common stock, and its affiliates. We sold 3,601 shares to
FFT Partners I, L.P. and 149 shares to FFT Executive Partners I, L.P.,
affiliates of Carlos A. Ferrer, a director and a stockholder owning more than 5%
of our outstanding common stock. Each share of Series C convertible preferred
stock is convertible into the number of shares of our common stock that is equal
to the initial purchase price plus accrued dividends divided by $3.50, which as
of December 31, 2000 would have been 300 shares.

     The following table sets forth the aggregate number of shares acquired by,
and the aggregate consideration paid by, our executive officers, directors and
stockholders owning more than 5% of our outstanding common stock in the private
placement transactions described above and in connection with our acquisition of
OrthoLink. We sold each share of our Series A redeemable and Series C
convertible preferred stock for $1,000 per share.
<TABLE>
<CAPTION>
                                                                                                      SERIES A        SERIES C
                                                                                    CLASS A          REDEEMABLE      CONVERTIBLE
                                           COMMON STOCK                           COMMON STOCK     PREFERRED STOCK PREFERRED STOCK
EXECUTIVE OFFICERS,          ---------------------------------- ---------------------------------- --------------- ---------------
DIRECTORS                       NUMBER OF        AGGREGATE         NUMBER OF        AGGREGATE         NUMBER OF       NUMBER OF
AND 5% STOCKHOLDERS          SHARES ACQUIRED CONSIDERATION PAID SHARES ACQUIRED CONSIDERATION PAID SHARES ACQUIRED SHARES ACQUIRED
---------------------------- --------------- ------------------ --------------- ------------------ --------------- ---------------
<S>                            <C>           <C>                <C>             <C>                <C>             <C>
FFT Partners I, L.P. ........        --                           $--               $ 5,761,620            --            3,601
FFT Executive Partners I, ...         149
L.P. ........................      68,109           238,380              --                --
WCAS Capital Partners III,
L.P. ........................        --                --           1,500,000         5,250,000          28,050         14,017
Welsh, Carson, Anderson & ...        --                --
Stowe VII, L.P. .............   2,193,222                (1)       15,813,272        41,246,782              60           --
Donald E. Steen .............        --                --           1,089,000         2,499,000            --             --
William H. Wilcox ...........        --                --             278,000           943,000            --             --
Sue H. Shelley ..............        --                --             260,000           535,000            --             --
Jonathan R. Bond ............      28,571            99,999              --                --              --             --
John J. Wellik ..............      30,000           105,000              --                --              --             --
Mark A. Kopser ..............     125,000           437,500              --                --                12              6
Brett Brodnax ...............      53,571           199,999              --                --                48             23
D. Scott Mackesy ............        --                --               6,753            17,615            --             --
Paul B. Queally .............       4,720                (1)           25,999            67,816            --             --
Dave A. Alexander, Jr., M.D .      79,125                (1)             --                --              --             --
John C. Garrett, M.D ........     214,844                (1)             --                --
Dale L. Stegall .............      29,500                (1)             --                --
</TABLE>
------------
(1) These shares of common stock were issued in connection with our acquisition
    of OrthoLink in February 2001.

                                       60
<PAGE>
WARRANTS

     We issued a warrant, dated March 27, 2000, to Welsh, Carson, Anderson &
Stowe VII, L.P., a stockholder owning more than 5% of our outstanding common
stock, to purchase 800,000 shares of our Class A common stock at an exercise
price of $.01 per share in connection with its purchase of shares of our Series
C convertible preferred stock. The warrants are exercisable to purchase 800,000
shares of our common stock at an exercise price of $.01 per share. The warrant
will terminate on June 18, 2009.

7% SENIOR SUBORDINATED NOTES

     In November 1998, March 1999 and June 1999, we issued $16.0 million
principal amount of our 7% senior subordinated notes due April 30, 2008 to
Welsh, Carson, Anderson & Stowe and its affiliates, $3.8 million principal
amount of our 7% senior subordinated notes to FFT Partners I, L.P. and
$0.2 million principal amount of our 7% senior subordinated notes to FFT
Executive Partners I, L.P. We paid to these entities $91,013 in accrued interest
on the notes in 1999 and $1,271,811 in accrued interest on the notes during the
nine months ended September 30, 2000. Under the notes, we are required to repay
in full the principal balance of the notes and any accrued and unpaid interest
on the notes upon completion of this offering. However, Welsh, Carson, Anderson
& Stowe, FFT Partners I, L.P. and FFT Executive Partners I, L.P. have advised us
that they intend to waive their rights to such mandatory prepayment under the
notes.

10% SENIOR SUBORDINATED NOTES

     In March 2000, in connection with the issuance of 1,500,000 shares of our
Class A common stock for an aggregate purchase price of $5,250,000, we issued
$36,000,000 principal amount of our 10% senior subordinated notes due March 27,
2010, for a purchase price of $30,750,000 to WCAS Capital Partners III, L.P., an
affiliate of Welsh, Carson, Anderson & Stowe. We paid no interest on the notes
during the nine months ended September 30, 2000. Under the notes, we are
required to repay in full the principal balance of the notes and any accrued and
unpaid interest on the notes upon completion of this offering. However, WCAS
Capital Partners III, L.P. has advised us that it intends to waive its rights to
such mandatory prepayment under the notes.

STOCKHOLDERS AGREEMENT

     We are party to a stockholders agreement with:

      o  Donald E. Steen;

      o  Sue H. Shelley;

      o  William H. Wilcox;

      o  FFT Partners I, L.P.;

      o  FFT Executive Partners I, L.P.;

      o  Baylor Health Care System Foundation;

      o  Welsh, Carson, Anderson & Stowe VII, L.P.;

      o  WCAS Capital Partners III, L.P.;

      o  WCAS Healthcare Partners, L.P.; and

      o  some other holders of our capital stock.

     The stockholders agreement contains customary transfer restrictions
including co-sale and right of first refusal provisions as well as provisions
regarding voting for specified director nominees. This agreement will
automatically terminate upon the completion of this offering.

REGISTRATION RIGHTS AGREEMENT

     Donald E. Steen, William H. Wilcox, Sue H. Shelley, Paul B. Queally, D.
Scott Mackesy, Dave A. Alexander, Jr., M.D., Dale L. Stegall, Mark Garvin, John
C. Garrett, M.D., Baylor Health Services, Welsh, Carson, Anderson & Stowe VII,
L.P., WCAS Healthcare Partners, L.P., WCAS Capital Partners III, L.P., FFT
Partners I, L.P. and FFT Executive Partners I, L.P. and other holders of our

                                       61
<PAGE>
Class A common stock and shares of common stock issuable upon the conversion of
our Class A common stock are entitled under a registration rights agreement with
us to the following registration rights for the shares of Class A common stock
and shares of common stock issuable upon conversion of Class A common stock held
by them:

     o  at any time Welsh, Carson, Anderson & Stowe VII, L.P., on behalf of the
        holders of registrable securities, may require, on two occasions only,
        that we use our best efforts to register registrable securities for
        public resale;

     o  holders of registrable securities under the agreement may require us to
        use our best efforts to register their shares of common stock on a
        Form S-3 registration statement, provided that we are eligible to use
        the form and provided further that we shall not be required to effect
        the registration more than once in any 180 day period; and

     o  if we register any common stock at any time, either for our own account
        or for the account of other security holders, holders of registrable
        securities under the agreement are entitled to include their shares of
        common stock in the registration, subject to the ability of the
        underwriters to limit the number of shares included in the offering in
        view of market conditions.

     We will bear all registration expenses other than underwriting discounts
and commissions in connection with any registration under the registration
rights agreement. All holders of registrable securities have agreed not to
exercise their registration rights during the 180-day period following the date
of this prospectus without the consent of Credit Suisse First Boston
Corporation.

OTHER TRANSACTIONS

     We have loaned money to the following executive officers in exchange for
promissory notes given as partial consideration for the purchase by the
executive officer of our common stock as set forth below:

                          DATE                                    OUTSTANDING
                           OF        PRINCIPAL                   BALANCE AS OF
  EXECUTIVE OFFICER       NOTE        AMOUNT       INTEREST     FEBRUARY 1, 2001
  -----------------     --------    -----------    ---------    ----------------
Sue H. Shelley........   4/30/98     $250,000          7%           $250,000
William H. Wilcox.....  10/31/98      400,000          7             400,000
Jonathan R. Bond......  11/22/99       75,000          7              75,000
John J. Wellik........  11/22/99       26,250          7              26,250
John J. Wellik........   8/15/00       52,500          7              52,500
Mark A. Kopser........    5/1/00      328,125          7             328,125
Brett Brodnax.........   2/15/00       75,000          7              75,000
Brett Brodnax.........   8/15/00       75,000          7              75,000

     Interest on the outstanding balance of the promissory notes is payable
quarterly. The principal amount is due on the fourth anniversary of the note.
The maturity date of the notes will be accelerated upon completion of this
offering to the six-month anniversary of the completion of this offering. Each
promissory note is secured by a pledge of the shares of our common stock or our
Class A common stock purchased with such note.

     On June 1, 1999, we issued a convertible subordinated promissory note to
Baylor Health Care System Foundation in the principal amount of $3,287,234 in
connection with Baylor's contribution of two surgery centers to our joint
venture with Baylor. The conversion price of the convertible subordinated
promissory note is $3.50 per share of common stock. Our contribution and
purchase agreement with Baylor contains an "earn-out" provision under which
Baylor could receive additional convertible promissory notes. Under the earn-out
provision, if earnings before interest, taxes, depreciation, amortization and
management fees of our limited partnership with Baylor exceed stated amounts in
the second and third years of the limited partnership, Baylor would be entitled
to receive additional convertible subordinated notes in an amount equal to 50%
of the excess. The conversion price of any additional convertible promissory
notes will be the greater of $3.50 per share or the fair market value of the
underlying common stock at the time the additional convertible promissory note
is issued. Under the convertible subordinated promissory note, we are required
to repay in full the principal balance of the note and any accrued and unpaid
interest on the note upon completion of this offering.

                                       62
<PAGE>
However, we believe that Baylor will convert the note into shares of our common
stock. Boone Powell, Jr., one of our directors, is the chairman of the board of
directors of Baylor and served as president and chief executive officer from
1980 until 2000. For the nine months ended September 30, 2000, we derived
approximately 6.7% of our revenues from our joint venture with Baylor. For more
information regarding our joint venture with Baylor, see
"Business--Operations--Operations in the United States--Strategic
Relationships."

     On October 12, 2000, we exchanged 1,000,000 shares of our Class B common
stock for the minority interest in our Spanish subsidiary, USPE, and on
September 26, 2000 assumed a recourse promissory note in the principal amount of
$811,093 from HDT, S.C., the minority interest holder and successor of HMT, S.C.
On January 31, 2001, we accepted $45,306 in cash and a recourse promissory note
in the principal amount of $244,655 from HDT, S.C., as consideration for the
purchase of 82,846 shares of our Class B common stock. HDT is a holding company
owned primarily by the management team responsible for our Spanish operations.
Gabriel Masfurroll, president of our Spanish operations, beneficially owns
approximately 37% of HDT. Both promissory notes bear interest at a rate of 5%
per annum, payable at maturity. As of February 1, 2001, the outstanding
principal balances of the notes were $811,093 and $244,655, respectively. The
notes mature on the earlier of six months following the completion of this
offering or September 26, 2004 and January 31, 2005, respectively. The
promissory notes are secured by a pledge of the 1,082,846 shares of our Class B
common stock and are guaranteed by the stockholders of HDT. Upon completion of
the offering, all shares of our Class B common stock will be converted into
shares of common stock based on the factors set forth in our certificate of
incorporation. As of December 31, 2000, our 1,000,000 shares of outstanding
Class B common stock would have converted into 930,000 shares of common stock.

                                       63
<PAGE>
          SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

     The following table sets forth information with respect to the beneficial
ownership of our common stock as of February 12, 2001, after giving effect to
the conversion of all outstanding shares of our Class A common stock, Class B
common stock and Series C convertible preferred stock into shares of our common
stock.

     We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. Unless otherwise indicated, the persons
included in this table have sole voting and investment power with respect to all
the shares of common stock beneficially owned by them, subject to applicable
community property laws. The number of shares beneficially owned by a person
includes shares of common stock that are subject to stock options or warrants
that are either currently exercisable or exercisable within 60 days after
February 12, 2001. These shares are also deemed outstanding for the purpose of
computing the percentage of outstanding shares owned by the person. These shares
are not deemed outstanding, however, for the purpose of computing the percentage
ownership of any other person.

<TABLE>
<CAPTION>
                                                                              PERCENT OF COMMON STOCK
                                                                                BENEFICIALLY OWNED
                                             SHARES OF COMMON        -----------------------------------------
      NAME OF BENEFICIAL OWNER           STOCK BENEFICIALLY OWNED    BEFORE THE OFFERING    AFTER THE OFFERING
-------------------------------------    ------------------------    -------------------    ------------------
<S>                                      <C>                         <C>                    <C>
FFT Partners I, L.P..................            2,739,163(1)                6.72%
  Ferrer Freeman & Thompson
  10 Glenville Street
  Greenwich, CT 06831
WCAS Capital Partners III, L.P.......            1,558,999(2)                3.82%
  320 Park Avenue, Suite 2500
  New York, NY 10022-9500
Welsh, Carson, Anderson & Stowe VII,
  L.P................................           23,060,974(3)               55.49%
  320 Park Avenue, Suite 2500
  New York, NY 10022-9500
HDT, S.C.............................            1,082,846(4)                2.66%
  Paseo de la Castellana, numero 40
  bis, 4a planta
  28046 Madrid, Spain
Donald E. Steen......................            1,573,980(5)                3.82%
William H. Wilcox....................              708,000(6)                1.72%
Mark A. Kopser.......................              125,000                      *
Sue H. Shelley.......................              400,000(7)                   *
Jonathan R. Bond.....................               41,071(8)                   *
Brett Brodnax........................               57,321(9)                   *
Philip J. Parker.....................               17,500(10)                  *
John J. Wellik.......................               40,000(11)                  *
Gabriel Masfurroll...................           --                        --
John Wotherspoon.....................           --                        --
Dave A. Alexander, Jr., M.D..........              198,177(12)                  *
Dale L. Stegall......................               87,202(13)                  *
Mark Garvin..........................               73,750(14)                  *
John C. Garrett, M.D.................              224,284(15)                  *
Carlos A. Ferrer.....................            2,852,497(16)               7.00%
D. Scott Mackesy.....................                8,574(17)                  *
Thomas L. Mills......................                6,250(18)                  *
Boone Powell, Jr.....................           --                        --
Paul B. Queally......................           24,957,761(19)              60.05%
David P. Zarin, M.D..................                6,250(20)                  *
All directors and executive officers
  as a group (20 persons)............           31,378,216(21)              73.10%
</TABLE>
------------
 * Less than one percent (1%).

 (1) Consists of (i) 1,646,177 shares issuable upon conversion of our Class A
     common stock and (ii) 1,092,986 shares issuable upon conversion of our
     Series C convertible preferred stock.

 (2) Includes 1,500,000 shares issuable upon conversion of our Class A common
     stock.

 (3) Includes (i) 15,813,272 shares issuable upon conversion of our Class A
     common stock, (ii) 4,254,480 shares issuable upon conversion of our
     Series C convertible preferred stock and (iii) 800,000 shares issuable upon
     exercise of outstanding warrants.

 (4) Consists of 1,082,846 shares issuable upon conversion of our Class B common
     stock.

 (5) Consists of (i) 1,089,000 shares issuable upon conversion of our Class A
     common stock and (ii) 484,980 shares issuable upon exercise of stock
     options that have already vested or will vest within 60 days.

                                         (FOOTNOTES CONTINUED ON FOLLOWING PAGE)

                                       64
<PAGE>
 (6) Consists of (i) 278,000 shares issuable upon conversion of our Class A
     common stock and (ii) 430,000 shares issuable upon exercise of stock
     options that have already vested or will vest within 60 days.

 (7) Consists of (i) 260,000 shares issuable upon conversion of our Class A
     common stock and (ii) 140,000 shares issuable upon exercise of stock
     options that have already vested or will vest within 60 days.

 (8) Includes 12,500 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

 (9) Includes 3,750 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(10) Consists of 17,500 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(11) Includes 10,000 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(12) Includes 119,652 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(13) Includes 57,702 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(14) Includes 66,670 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(15) Includes 9,440 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(16) Consists of (i) the shares held by FFT Partners I, L.P. as previously
     described in Note (1), (ii) 68,109 shares issuable upon conversion of our
     Class A common stock held of record by FFT Executive Partners I, L.P. and
     (iii) 45,225 shares issuable upon conversion of our Series C convertible
     preferred stock held of record by FFT Executive Partners I, L.P. Mr. Ferrer
     is a member of Ferrer, Freeman & Thompson & Co., LLC, the general partner
     of both FFT Partners I, L.P. and FFT Executive Partners I, L.P.

(17) Consists of (i) 6,753 shares issuable upon conversion of our Class A common
     stock and (ii) 1,821 shares issuable upon conversion of our Series C
     convertible preferred stock.

(18) Consists of 6,250 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(19) Includes (i) the shares held by WCAS Capital Partners III, L.P. as
     previously described in Note (2), (ii) the shares held by Welsh, Carson,
     Anderson & Stowe VII, L.P. as previously described in Note (3),
     (iii) 58,999 shares held of record by WCAS Healthcare Partners, L.P.,
     (iv) 236,347 shares issuable upon conversion of our Class A common stock
     held of record by WCAS Healthcare Partners, L.P., (v) 63,740 shares
     issuable upon conversion of our Series C convertible preferred stock held
     of record by WCAS Healthcare Partners, L.P., (vi) 25,999 shares issuable
     upon conversion of our Class A common stock and (vii) 6,981 shares issuable
     upon conversion of our Series C convertible preferred stock. Mr. Queally is
     a general partner of each of WCAS Capital Partners III, L.P., Welsh,
     Carson, Anderson & Stowe VII, L.P. and WCAS Healthcare Partners, L.P.

(20) Consists of 6,250 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(21) Includes (i) 1,364,694 shares issuable upon exercise of stock options that
     have already vested or will vest within 60 days and (ii) 800,000 shares
     issuable upon exercise of outstanding warrants.

                                       65
<PAGE>
                          DESCRIPTION OF CAPITAL STOCK

     Our authorized capital stock consists of 135,000,000 shares of common
stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par
value $0.01 per share. 87,000,000 shares of our common stock are designated as
common stock, 45,000,000 shares of common stock are designated as Class A common
stock and 3,000,000 shares of common stock are designated as Class B common
stock. 31,200 shares of our preferred stock are designated as Series A
redeemable preferred stock and 20,000 shares of preferred stock are designated
as Series C convertible preferred stock. As of the date of this prospectus,

     o  10,471,877 shares of common stock were issued and outstanding,

     o  23,519,534 shares of Class A common stock were issued and outstanding,

     o  1,082,846 shares of Class B common stock were issued and outstanding,

     o  31,200 shares of Series A redeemable preferred stock were issued and
        outstanding, and

     o  18,750 shares of Series C convertible preferred stock were issued and
        outstanding.

     In addition,

     o  6,000,000 shares of common stock were reserved for issuance under our
        1998 stock option plan,

     o             shares of common stock were reserved for issuance under our
        2001 equity-based compensation plan,

     o             shares of common stock were reserved for issuance under our
        employee stock purchase plan,

     o  900,000 shares of common stock were reserved for issuance upon exercise
        of outstanding warrants, and

     o  30,008,273 shares of common stock were reserved for issuance upon
        conversion of our Class A and Class B common stock and our Series C
        convertible preferred stock.

     All of our outstanding shares of Class A and Class B common stock and
Series C convertible preferred stock will be converted automatically into common
stock upon completion of this offering.

     The following descriptions of our capital stock and provisions of our
certificate of incorporation and bylaws are summaries of all of their material
terms and provisions and are qualified by reference to our certificate of
incorporation and bylaws, copies of which have been filed with the SEC as
exhibits to the registration statement of which this prospectus is a part. The
descriptions of the common stock and preferred stock reflect changes to our
capital structure that will occur upon the closing of this offering in
accordance with the terms of the certificate of incorporation.

COMMON STOCK

     Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any dividends that may be declared by our board of directors,
subject to any preferential dividend rights of outstanding preferred stock. In
the event of our liquidation, dissolution or winding up, holders of common stock
will be entitled to receive proportionately any of our assets remaining after
the payment of liabilities and subject to the prior rights of any outstanding
preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights.

PREFERRED STOCK

     Upon the closing of this offering, (1) all outstanding shares of our Series
A redeemable preferred stock will be redeemed and (2) all outstanding shares of
our Series C convertible preferred stock will be converted into shares of common
stock. Thereafter, our board of directors will have the authority, without
further action by the stockholders, to issue up to 10,000,000 shares of
preferred stock in one

                                       66
<PAGE>
or more series and to designate the rights, preferences, privileges and
restrictions of each series. The issuance of preferred stock could have the
effect of restricting dividends on the common stock, diluting the voting power
of the common stock, impairing the liquidation rights of the common stock or
delaying or preventing our change in control without further action by the
stockholders. We have no present plans to issue any shares of preferred stock
after the completion of this offering.

WARRANTS

     As of the date of this prospectus, there were outstanding warrants to
purchase 900,000 shares of our common stock at a weighted average exercise price
of $0.45 per share. See "Certain Relationships and Related Transactions."

REGISTRATION RIGHTS

     Some of our stockholders are entitled to registration rights under a
registration rights agreement with us for the shares of our common stock held by
them. See "Certain Relationships and Related Transactions -- Registration Rights
Agreement."

DESCRIPTION OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND
DELAWARE LAW

     A number of provisions in our certificate of incorporation and bylaws and
under the Delaware General Corporation Law may make it more difficult to acquire
control of us. These provisions could deprive the stockholders of opportunities
to realize a premium on the shares of common stock owned by them. In addition,
these provisions may adversely affect the prevailing market price of the common
stock. These provisions are intended to:

     o  enhance the likelihood of continuity and stability in the composition of
        our board of directors;

     o  discourage some types of transactions that may involve an actual or
        threatened change in control of us;

     o  discourage various tactics that may be used in proxy fights;

     o  ensure that our board of directors will have sufficient time to act in
        what the board believes to be in the best interest of us and our
        stockholders; and

     o  encourage persons seeking to acquire control of us to consult first with
        our board to negotiate the terms of any proposed business combination or
        offer.

     CLASSIFIED BOARD OF DIRECTORS

     Our bylaws provide that the board of directors shall be divided into three
classes of directors of the same or nearly the same number, with each class
elected for three-year terms expiring in successive years. Section 141 of the
Delaware General Corporation Law provides that, in the case of a corporation
having a staggered board, holders of a majority of the shares then entitled to
vote in an election of directors may remove a director only for cause. Our
certificate of incorporation defines "cause" as (i) a final conviction of a
felony involving moral turpitude or (ii) willful misconduct that is materially
and demonstrably injurious economically to us. No act, or failure to act, by a
director will be considered "willful" unless committed in bad faith and without
a reasonable belief that the act or failure to act was in the best interest of
us or any of our affiliates. "Cause" will not exist unless and until we have
delivered to the director a written notice of the act or failure to act that
constitutes "cause" and the director has not cured the act or omission within 90
days after the delivery of the notice. The effect of this may be to restrict the
ability of stockholders to remove directors from our board of directors. Our
certificate of incorporation also allows the board of directors to fix the
number of directors in the bylaws.

     STOCKHOLDER MEETINGS AND PROPOSALS

     Our bylaws provide that special meetings of stockholders generally can be
called only by the chairman of the board, the chief executive officer, the
president or our board of directors. There are

                                       67
<PAGE>
advance notice procedures for the nomination, other than by or at the direction
of the board of directors, of candidates for election as directors as well as
for other stockholder proposals to be considered at annual stockholder meetings.
In general, notice of intent to nominate a director or raise business at annual
meetings must be received by us not less than 90 nor more than 120 days before
the meeting. The notice must contain specific information concerning the person
to be nominated or the matters to be brought before the meeting and concerning
the stockholder submitting the proposal. These provisions may preclude a
nomination for the election of directors or preclude the conduct of business at
a particular annual meeting if the proper procedures are not followed.
Furthermore, these provisions may discourage or deter a third party from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of the company, even if the conduct of
the solicitation or attempt might be beneficial to us and our stockholders.

     STOCKHOLDER ACTION

     Our certificate of incorporation does not allow stockholders to act by
written consent without a meeting. Our certificate of incorporation requires the
affirmative vote of the holders of not less than eighty percent of our shares
entitled to vote in an election of directors to amend or repeal this prohibition
of stockholder action by written consent. The effect of this provision is to
restrict stockholders ability to circumvent the notice requirements relating to
an annual meeting.

     BUSINESS COMBINATION UNDER DELAWARE LAW

     We are subject to Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless:

     o  the board of directors approved the transaction in which the stockholder
        became an interested stockholder prior to the date the interested
        stockholder attained that status;

     o  upon consummation of the transaction that resulted in the stockholder's
        becoming an interested stockholder, the interested stockholder owned at
        least 85% of the voting stock of the corporation outstanding at the time
        the transaction commenced, excluding shares owned by persons who are
        directors and also officers; or

     o  on or subsequent to that date, the business combination is approved by
        the board of directors and authorized at an annual or special meeting of
        stockholders by the holders of at least two-thirds of our outstanding
        voting stock which is not owned by the interested stockholder.

     LIMITATION OF LIABILITY OF DIRECTORS

     Our certificate of incorporation provides that no director will be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability:

     o  for any breach of the directors duty of loyalty to us or our
        stockholders;

     o  for acts or omissions not in good faith or which involve intentional
        misconduct or a knowing violation of laws;

     o  for unlawful payment of a dividend or an unlawful stock purchase or
        stock redemption; and

     o  for any transaction from which the director derived an improper personal
        benefit.

     The effect of these provisions is to eliminate our rights and the rights of
our stockholders, through stockholder derivative suits on our behalf, to recover
monetary damages against a director for breach of fiduciary duty as a director,
including breaches resulting from grossly negligent behavior, except in the
situations described above.

     AMENDMENTS TO BYLAWS

     Our certificate of incorporation provides that our bylaws may be amended,
altered or repealed by our board of directors or the affirmative vote of the
holders of not less than 80% of our shares

                                       68
<PAGE>
entitled to vote in an election of directors. This provision makes it more
difficult for our stockholders to make changes in our bylaws.

     AMENDMENTS TO CERTIFICATE OF INCORPORATION

     Our certificate of incorporation requires the affirmative vote of the
holders of not less than 80% of our shares entitled to vote in an election of
directors to amend, alter or repeal the following provisions in our certificate
of incorporation:

     o  the classified board provisions;

     o  the prohibition on stockholder actions by written consent;

     o  the prohibition on the right of stockholders to call special meetings of
        stockholders;

     o  the limitation of the power of our stockholders to amend our bylaws; and

     o  the provision requiring the affirmative vote of the holders of not less
        than 80% of our shares to amend the foregoing provisions.

     This requirement makes it more difficult for our stockholders to make
changes to the provisions in our certificate of incorporation that could have
anti-takeover effects.

STOCKHOLDER RIGHTS PLAN

     We anticipate that, immediately upon completion of this offering, our board
of directors will declare, pursuant to a rights agreement, a dividend
distribution of one common share purchase right for each outstanding share of
our common stock. Each right will entitle the registered holder to purchase from
us one thousandth of a share of our Series A junior participating preferred
stock, par value $.01 per share, at a price per share to be determined by our
board with the advice of our financial advisor about the long-term prospects for
our value, subject to adjustment. Each thousandth of a junior preferred share
will be economically equivalent to one share of our common stock. The purchase
price is expected to be significantly higher than the trading price of our
common stock. Therefore, the dividend will have no initial value and no impact
on our financial statements. The following summary of the rights does not
purport to be complete and is qualified in its entirety by reference to the
rights agreement, which is an exhibit to the registration statement of which
this prospectus is a part.

     Initially, the rights will be attached to all certificates representing
shares of our common stock then outstanding, and no separate certificates
representing the rights will be distributed. Subject to extension by a majority
of our directors acting on our behalf, the rights will separate from our common
stock upon the distribution date, which is defined as the earlier of:

     o  ten business days following a public announcement that a person or group
        of affiliated or associated persons (other than Welsh, Carson, Anderson
        & Stowe, for so long as it and its affiliates and associates own 15% or
        more of our outstanding common stock) has acquired, or obtained the
        right to acquire, beneficial ownership of 15% or more of the outstanding
        shares of our common stock, any of the foregoing persons being an
        acquiring person; or

     o  ten business days following the commencement of, or after the date of
        the first public announcement of, a tender offer or exchange offer that
        would result in a person or group (other than Welsh, Carson, Anderson &
        Stowe, for so long as it and its affiliates and associates own 15% or
        more of our outstanding common stock) beneficially owning 15% or more of
        the outstanding shares of our common stock.

                                       69
<PAGE>
     Until the distribution date or earlier redemption or expiration of the
rights:

          o  with respect to any shares of our common stock outstanding on the
             date that we issue the rights, the rights will be evidenced (A)
             with respect to shares of our common stock that are held in
             certificated form, by the certificates representing the shares with
             a copy of a summary of rights attached and (B) with respect to
             shares of our common stock that are held in book-entry form, by a
             notation in the records of the rights agent and the records of our
             transfer agent if different from the rights agent;

          o  the rights will be transferred with and only with shares of common
             stock;

          o  new common stock certificates issued after the date we issue the
             rights, upon transfer or new issuance of shares of the common
             stock, will contain a notation incorporating the rights agreement
             by reference; and

          o  the surrender for transfer (A) of any certificates for common stock
             outstanding as of the date that we issue the rights, even without
             the notation or a copy of a summary of rights being attached
             thereto, and (B) of any shares of our common stock held in
             book-entry form, will also constitute the transfer of the rights
             associated with the common stock represented by the certificate.

     As soon as practicable after the distribution date, separate certificates
evidencing the rights will be mailed to holders of record of our common stock.

     The rights are not exercisable until the distribution date and will expire
ten years after consummation of this offering, unless earlier redeemed by us.

     If a person or group (other than Welsh, Carson, Anderson & Stowe, for so
long as it and its affiliates and associates own 15% or more of our outstanding
common stock) were to acquire 15% or more of the then outstanding shares of our
common stock, each right then outstanding and not owned by an acquiring person
would become a right to buy that number of shares of our common stock, or under
specified circumstances, the equivalent number of one one-thousandths of a
junior preferred share, that at the time of the acquisition would have a market
value of two times the purchase price of the right. For example, at an exercise
price of $100.00 per right, each right not owned by an acquiring person
following an event described above would entitle its holder to purchase from us
$200.00 worth of common stock, or in specified circumstances, the equivalent
number of one one-thousandths of a junior preferred share, for $100.00. Assuming
that our common stock had a current market price per share of $20.00 at that
time, the holder of each valid right would be entitled to purchase ten shares of
common stock for $100.00. Notwithstanding the foregoing, following the
occurrence of any of the events set forth in this paragraph, all rights that
are, or, under circumstances specified in the rights agreement were,
beneficially owned by an acquiring person will be null and void.

     In the event that, at any time following the date that a person has become
an acquiring person, which is referred to as a shares acquisition date,

          o  we are acquired in a merger or other combination transaction in
             which we are not the surviving entity;

          o  we consolidate with or merge with or into any other person pursuant
             to which we are the surviving entity but all or a part of the
             shares of our common stock are changed into or exchanged for stock
             of another person or cash or other property; or

          o  50% or more of our assets or earning power is sold or transferred;

each holder of a right, except rights that previously have been voided as
described above, shall thereafter have the right to receive, upon exercise,
common stock or other securities of the acquiring company having a value equal
to two times the exercise price of the right.

                                       70
<PAGE>
     At any time after the acquisition by a person or group of affiliated or
associated persons (other than Welsh, Carson, Anderson & Stowe, for so long as
it and its affiliates and associates own 15% or more of our outstanding common
stock) of beneficial ownership of 15% or more of the then outstanding shares of
our common stock for whom a different ownership threshold applies, and before
the acquisition by a person or group (other than Welsh, Carson, Anderson &
Stowe, for so long as it and its affiliates and associates own 15% or more of
our outstanding common stock), of 50% or more of the outstanding shares of our
common stock, our board of directors may, at its option, issue shares of common
stock in mandatory redemption of, and in exchange for, all or part of the then
outstanding and exercisable rights, other than rights owned by an acquiring
person. The exchange would be made at an exchange ratio of one share of common
stock for each two shares of common stock for which each right is then
exercisable.

     The purchase price payable and the number of junior preferred shares or
other securities or property issuable upon exercise of the rights are subject to
adjustment from time to time if we at any time after the date of the rights
agreement:

          o  declare a dividend on the junior preferred shares payable in junior
             preferred shares;

          o  subdivide the outstanding junior preferred shares;

          o  combine the outstanding junior preferred shares into a smaller
             number of junior preferred shares; or

          o  issue any shares of our capital stock in a reclassification of the
             junior preferred shares, including any reclassification in
             connection with a consolidation or merger in which we are the
             continuing or surviving corporation.

     With several exceptions, no adjustment to the purchase price will be
required until cumulative adjustments require an adjustment of at least one
percent to the purchase price. Upon the exercise of a right, we will not be
required to issue fractional junior preferred shares or fractional shares of our
common stock, other than fractions in multiples of one one-thousandths of a
junior preferred share, and, in lieu thereof, an adjustment in cash may be made
based on the market price of the junior preferred shares or our common stock on
the last trading date prior to the date of exercise.

     At any time prior to the time any person becomes an acquiring person, our
board of directors may redeem all but not less than all the then outstanding
rights at a price of $0.00001 per right. The redemption of the rights may be
made effective at the time, on the basis and with the conditions as our board of
directors in its sole discretion may establish. Immediately upon the action of
our board of directors ordering redemption of the rights, the right to exercise
the rights will terminate and the only right of the holders of rights will be to
receive the $0.00001 redemption price.

     Until a right is exercised, the holder of the right will have no rights as
a stockholder of ours, including, without limitation, the right to vote or to
receive dividends. While the distribution of the rights will not be taxable to
stockholders or to us, stockholders may, depending upon the circumstances,
recognize taxable income in the event that any of the rights are exercised for
our common stock, or other consideration, or for common stock or other
securities of the acquiring company as set forth above.

     The terms of the rights may be amended by our board of directors without
the consent of the holders of the rights, including an amendment to extend the
expiration date of the rights, and, provided a distribution date has not
occurred, to extend the period during which the rights may be redeemed, except
that after any person becomes an acquiring person, no amendment may materially
and adversely affect the interests of the holders of the rights.

     The rights have several anti-takeover effects. The rights will cause
substantial dilution to any person or group that attempts to acquire us without
conditioning the offer on our redemption of the rights. The rights should not
interfere with any merger or other business combination approved by our board of
directors because the board of directors may, at its option, at any time prior
to the time any

                                       71
<PAGE>
person becomes an acquiring person or ten years after the adoption of the rights
agreement, redeem all, but not less than all, of the then outstanding rights at
$.00001 per right.

LISTING

     We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol "SURG".

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for our common stock is
                           . The transfer agent may act upon the written
directions of any of our officers regarding the issuance of certificates for
shares of common stock.

                                       72
<PAGE>
                        SHARES ELIGIBLE FOR FUTURE SALE

     Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of common stock in the public market
could adversely affect the market price of our common stock. After this offering
is completed, the number of shares available for future sale into the public
markets will be subject to legal and contractual restrictions, some of which are
described below. The lapsing of these restrictions will permit sales of
substantial amounts of our common stock in the public market or could create the
perception that these sales could occur, which could adversely affect the market
price for our common stock. These factors could also make it more difficult to
raise funds through future offerings of common stock.

     After this offering,              shares of common stock will be
outstanding, or              shares if the underwriters' exercise their
over-allotment option in full. Of these shares,

          o  the              shares sold in this offering, plus any shares
             issued upon exercise of the underwriters over-allotment option,
             will be freely tradable without restriction under the Securities
             Act, unless purchased by our "affiliates" as that term is defined
             in Rule 144 under the Securities Act; and

          o  the remaining              shares of common stock that will be
             outstanding after this offering are "restricted securities" within
             the meaning of Rule 144.

     Upon completion of this offering, we intend to file one or more
registration statements under the Securities Act to register the shares of
common stock to be issued under our equity-based compensation plan and our stock
purchase plan and, as a result, all shares of common stock acquired upon
exercise of stock options and other equity-based awards granted under these
plans will also be freely tradable under the Securities Act unless purchased by
our affiliates.

     Restricted securities generally may be sold only if they are registered
under the Securities Act or are sold under an exemption from registration,
including the exemptions provided by Rules 144 and 701 under the Securities Act,
which are summarized below. Subject to the lock-up agreements described in
"Underwriting," shares held by our affiliates that are not restricted securities
may be sold subject to compliance with Rule 144 of the Securities Act without
regard to the prescribed holding period under Rule 144.

     Our officers, directors and other stockholders who together own
shares of our common stock have agreed that they will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any shares of
our common stock or securities convertible into or exchangeable or exercisable
for any shares of our common stock, enter into a transaction that would have the
same effect, or enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of our common
stock, whether any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or publicly disclose the
intention to make any offer, sale, pledge or disposition, or to enter into any
transaction, swap, hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus.

     Following the lock-up period, the number of shares of common stock that
will become eligible for sale in the public market under Rule 144 under the
Securities Act will be as follows:

               o  Beginning 180 days after the date of this prospectus,
                  approximately           shares will be eligible for sale; and

               o  At various times thereafter upon the expiration of the
                  applicable holding periods, approximately           shares
                  will become eligible for sale.

     Some of our securityholders have the right to require us to register shares
of common stock for resale in some circumstances. See "Certain Relationships and
Related Transactions -- Registration Rights Agreement."

                                       73
<PAGE>
     In general, under Rule 144 as currently in effect, any person or persons
whose shares are aggregated, including an affiliate, who has beneficially owned
restricted securities for a period of at least one year is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of:

          o  1% of the then outstanding shares of common stock, which will equal
             approximately           shares immediately after this offering; or

          o  the average weekly trading volume in the common stock on the Nasdaq
             National Market during the four calendar weeks preceding the date
             on which the notice of the sale is filed with the Securities and
             Exchange Commission.

     Sales under Rule 144 are also subject to provisions relating to notice and
manner of sale and the availability of current public information about us.

     Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares for at least two years, including the holding
period of any prior owner other than an "affiliate," is entitled to sell the
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.

     Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 under the Securities Act may be relied upon for the
resale of our common stock originally issued by us before the date of this
prospectus to our employees, directors, officers, consultants or advisers under
written compensatory benefit plans, including our stock option plans, or
contracts relating to the compensation of these persons. Shares of our common
stock issued in reliance on Rule 701 are "restricted securities" and, beginning
90 days after the date of this prospectus, may be sold by non-affiliates subject
only to the manner of sale provisions of Rule 144 and by affiliates under Rule
144 without compliance with the one-year holding period, in each case subject to
the lock-up agreements described in "Underwriting."

                                       74
<PAGE>
                MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
                  TO NON-UNITED STATES HOLDERS OF COMMON STOCK

     The following is a general discussion of the material U.S. federal income
and estate tax considerations with respect to the ownership and disposition of
our common stock applicable to non-U.S. holders. In general, a "Non-U.S. Holder"
is any holder of our common stock other than:

     o  a citizen or individual resident of the United States,

     o  a corporation or other entity created or organized in the United States
        or under the laws of the United States or of any state or political
        subdivision of the United States,

     o  an estate, the income of which is includible in gross income for U.S.
        federal income tax purposes regardless of its source, or

     o  a trust whose administration is subject to the primary supervision of a
        United States court and which has one or more United States persons who
        have the authority to control all substantial decisions of the trust.

     This discussion is based on current provisions of the Internal Revenue
Code, Treasury Regulations promulgated under the Internal Revenue Code, judicial
opinions, published positions of the Internal Revenue Service, and all other
applicable authorities, all of which are subject to change, possibly with
retroactive effect. This discussion does not address all aspects of U.S. federal
income and estate taxation or any aspects of state, local, or non-U.S. taxation,
nor does it consider any specific facts or circumstances that may apply to
particular Non-U.S. Holders that may be subject to special treatment under the
U.S. federal income tax laws, such as insurance companies, tax-exempt
organizations, financial institutions, brokers, dealers in securities, and U.S.
expatriates.

     PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSIDERATIONS OF
ACQUIRING, HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.

DIVIDENDS

     In general, dividends paid to a Non-U.S. Holder will be subject to U.S.
withholding tax at a 30% rate of the gross amount, or a lower rate prescribed by
an applicable income tax treaty, unless the dividends are effectively connected
with a trade or business carried on by the Non-U.S. Holder within the United
States. Dividends that are effectively connected with such a U.S. trade or
business generally will not be subject to U.S. withholding tax if the Non-U.S.
Holder files the required forms, including IRS Form W-8ECI, or any successor
form, with the payor of the dividend, and generally will be subject to U.S.
federal income tax on a net income basis, in the same manner as if the Non-U.S.
Holder were a resident of the United States. A corporate Non-U.S. Holder that
receives effectively connected dividends may be subject to an additional branch
profits tax at a rate of 30%, or at a lower rate as may be specified by an
applicable income tax treaty, on the repatriation from the United States of its
"effectively connected earnings and profits," subject to adjustments.

     Under Treasury Regulations generally effective for payments made after
December 31, 2000, referred to in this prospectus as the "Final Regulations," a
Non-U.S. Holder will be required to satisfy certification requirements, directly
or through an intermediary, in order to claim a reduced rate of withholding
under an applicable income tax treaty. A Non-U.S. Holder generally certifies
entitlement to benefits under a treaty by providing an IRS Form W-8BEN. In
addition, under the Final Regulations, in the case of dividends paid to a
foreign partnership, the certification requirement would generally be applied to
the partners of the partnership, unless the partnership agrees to become a
"withholding foreign partnership," and the partnership would be required to
provide various information, including a United States taxpayer identification
number. The Final Regulations also provide "look-through" rules for tiered
partnerships.

                                       75
<PAGE>
     A Non-U.S. Holder of our common stock that is eligible for a reduced rate
of U.S. federal income tax withholding under a tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.

GAIN ON SALE OR OTHER DISPOSITION OF COMMON STOCK

     In general, a Non-U.S. Holder will not be subject to U.S. federal income
tax on any gain realized upon the sale or other taxable disposition of the
holders shares of common stock unless:

     o  the gain is effectively connected with a trade or business carried on by
        the Non-U.S. Holder within the United States, in which case the branch
        profits tax discussed above may also apply if the Non-U.S. Holder is a
        corporation,

     o  the Non-U.S. Holder is an individual who holds shares of common stock as
        a capital asset and is present in the United States for 183 days or more
        in the taxable year of disposition and various other conditions are met,

     o  the Non-U.S. Holder is subject to tax under the provisions of the
        Internal Revenue Code regarding the taxation of U.S. expatriates, or

     o  we are or have been a "U.S. real property holding corporation" within
        the meaning of Section 897(c)(2) of the Internal Revenue Code at any
        time within the shorter of the five-year period preceding such
        disposition or such holders holding period. We do not believe that we
        are, and do not anticipate becoming, a U.S. real property holding
        corporation.

BACKUP WITHHOLDING AND INFORMATION REPORTING

     Generally, we must report annually to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of tax withheld.
A similar report is sent to the recipient. These information reporting
requirements apply even if withholding was not required because the dividends
were effectively connected dividends or withholding was reduced by an applicable
income tax treaty. Under tax treaties or other agreements, the IRS may make its
reports available to tax authorities in the recipients country of residence.

     Payments made to a Non-U.S. Holder that is not an exempt recipient
generally will be subject to backup withholding at a rate of 31%, rather than
withholding at a 30% rate or lower treaty rate discussed above, unless a
Non-U.S. Holder certifies as to its foreign status, which certification may be
made on IRS Form W-8 BEN.

     Proceeds from the disposition of common stock by a Non-U.S. Holder effected
by or through a United States office of a broker will be subject to information
reporting and to backup withholding at a rate of 31% of the gross proceeds
unless the Non-U.S. Holder certifies to the payor under penalties of perjury as
to, among other things, its address and status as a Non-U.S. Holder or otherwise
establishes an exemption. Generally, United States information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
transaction is effected outside the United States by or through a non-United
States office of a broker. However, if the broker is, for United States federal
income tax purposes, a United States person, a controlled foreign corporation, a
foreign person who derives 50% or more of its gross income for specified periods
from the conduct of a United States trade or business, specified U.S. branches
of foreign banks or insurance companies, or, a foreign partnership with various
connections to the United States, information reporting but not backup
withholding will apply unless:

     o  the broker has documentary evidence in its files that the holder is a
        Non-U.S. Holder and other conditions are met; or

     o  the holder otherwise establishes an exemption.

     Backup withholding is not an additional tax. Rather, the U.S. federal
income tax liability of persons subject to backup withholding will be reduced by
the amount of tax withheld. If backup

                                       76
<PAGE>
withholding results in an overpayment of United States federal income taxes, a
refund may be obtained, provided the required documents are filed with the IRS.

ESTATE TAX

     Our common stock owned or treated as owned by an individual who is not a
citizen or resident, as defined for U.S. federal estate tax purposes, of the
United States at the time of death will be includible in the individuals gross
estate for U.S. federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise.

                                       77
<PAGE>
                                  UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated            , 2001, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, UBS Warburg LLC,
Lehman Brothers Inc. and SG Cowen Securities Corporation are acting as
representatives, the following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
                                                             NUMBER OF
                UNDERWRITER                                   SHARES
                -----------                                 ----------
<S>                                      <C>
Credit Suisse First Boston Corporation....................
UBS Warburg LLC...........................................
Lehman Brothers Inc. .....................................
SG Cowen Securities Corporation...........................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                                             -------
     Total................................................
                                                             =======
</TABLE>

     The underwriting agreement provides that the underwriters are obligated to
purchase all of the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering may be terminated.

     We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to        additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.

     The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a selling concession of $     per share. The
underwriters and selling group members may allow a discount of $     per share
on sales to other broker/dealers. After the initial public offering, the
representatives may change the public offering price and concession and discount
to brokers/dealers.

     The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
                                                      PER SHARE                                 TOTAL
                                         ------------------------------------    ------------------------------------
                                             WITHOUT               WITH              WITHOUT               WITH
                                          OVER-ALLOTMENT      OVER-ALLOTMENT      OVER-ALLOTMENT      OVER-ALLOTMENT
                                         ----------------    ----------------    ----------------    ----------------
<S>                                      <C>                 <C>                 <C>                 <C>
Underwriting Discounts and
  Commissions paid by us.............        $                   $                   $                   $
Expenses payable by us...............        $                   $                   $                   $
</TABLE>

                                       78
<PAGE>
     The representatives have informed us that the underwriters do not expect
discretionary sales to exceed 5% of the shares of common stock being offered.

     We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
the filing of a registration statement on Form S-8 under the Securities Act,
grants of options to purchase shares of common stock under the plans disclosed
in this prospectus and existing on the date of this prospectus or issuances of
shares of common stock pursuant to the exercise of employee stock options
outstanding on the date of this prospectus.

     Our officers, directors and other stockholders who together own
shares of our common stock have agreed that they will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any shares of
our common stock or securities convertible into or exchangeable or exercisable
for any shares of our common stock, enter into a transaction that would have the
same effect, or enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of our common
stock, whether any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or publicly disclose the
intention to make any offer, sale, pledge or disposition, or to enter into any
transaction, swap, hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus.

     The underwriters have reserved for sale, at the initial public offering
price up to       shares of the common stock for employees, directors and other
persons associated with us who have expressed an interest in purchasing common
stock in the offering. The number of shares available for sale to the general
public in the offering will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares not so purchased will be offered by the
underwriters to the general public on the same terms as the other shares.

     We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make in that respect.

     We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "SURG".

     We are in discussions with affiliates of Credit Suisse First Boston
Corporation, UBS Warburg LLC, Lehman Brothers Inc. and SG Cowen Securities
Corporation to provide us with a $75.0 million revolving credit facility to
replace our existing domestic credit facilities upon consummation of this
offering. If we enter into that credit facility, we will pay them customary
fees.

     Prior to this offering, there has been no established market for our common
stock. The initial public offering price for the shares of our common stock
offered by this prospectus will be determined by negotiation between us and the
representatives and may not reflect the market price for our common stock that
may prevail following this offering. The principal factors in determining the
initial public offering price will include:

     o  the information presented in this prospectus and otherwise available to
        the underwriters;

     o  the history of and the prospects for our industry;

     o  the ability of our management;

     o  our past and present operations;

     o  our historical results of operations;

     o  our prospects for future operational results;

                                       79
<PAGE>
     o  the recent market prices of, and the demand for, publicly traded common
        stock of generally comparable companies; and

     o  the general condition of the securities markets at the time of this
        offering.

     We cannot be sure that the initial public offering price will correspond to
the price at which the common stock will trade in the public market following
this offering or that an active trading market for the common stock will develop
and continue after this offering.

     In connection with the offering the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.

     o  Stabilizing transactions permit bids to purchase the underlying security
        so long as the stabilizing bids do not exceed a specified maximum.

     o  Over-allotment involves sales by the underwriters of shares in excess of
        the number of shares the underwriters are obligated to purchase, which
        creates a syndicate short position. The short position may be either a
        covered short position or a naked short position. In a covered short
        position, the number of shares over-allotted by the underwriters is not
        greater than the number of shares that they may purchase in the
        over-allotment option. In a naked short position, the number of shares
        involved is greater than the number of shares in the over-allotment
        option. The underwriters may close out any short position by either
        exercising their over-allotment option, purchasing shares in the open
        market, or both.

     o  Syndicate covering transactions involve purchases of the common stock in
        the open market after the distribution has been completed in order to
        cover syndicate short positions. In determining the source of shares to
        close out the short position, the underwriters will consider, among
        other things, the price of shares available for purchase in the open
        market as compared to the price at which they may purchase shares
        through the over-allotment option. If the underwriters sell more shares
        than could be covered by the over-allotment option--a naked short
        position--the position can only be closed out by buying shares in the
        open market. A naked short position is more likely to be created if the
        underwriters are concerned that there could be downward pressure on the
        price of the shares in the open market after pricing that could
        adversely affect investors who purchase in the offering.

     o  Penalty bids permit the representatives to reclaim a selling concession
        from a syndicate member when the common stock originally sold by the
        syndicate member is purchased in a stabilizing or syndicate covering
        transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may have the effect of raising or maintaining the market price of our common
stock or preventing or retarding a decline in the market price of the common
stock. As a result, the price of our common stock may be higher than the price
that might otherwise exist in the open market. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

     A prospectus in electronic format will be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet distributions on the same
basis as other allocations. Credit Suisse First Boston Corporation may effect an
on-line distribution through its affiliate, CSFBDIRECT Inc., an online
broker/dealer, as a selling group member.

                                       80
<PAGE>
                          NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

     The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are made. Any resale of the common stock in Canada must
be made under applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made under available
statutory exemptions or under a discretionary exemption granted by the
applicable Canadian securities regulatory authority. Purchasers are advised to
seek legal advice prior to any resale of the common stock.

REPRESENTATIONS OF PURCHASERS

     By purchasing common stock in Canada and accepting a purchase confirmation
a purchaser is representing to us and the dealer from whom the purchase
confirmation is received that:

     o  the purchaser is entitled under applicable provincial securities laws to
        purchase the common stock without the benefit of a prospectus qualified
        under those securities laws;

     o  where required by law, that the purchaser is purchasing as principal and
        not as agent; and

     o  the purchaser has reviewed the text above under Resale Restrictions.

RIGHTS OF ACTION (ONTARIO PURCHASERS)

     The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

     All of the issuers directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

     A purchaser of common stock to whom the SECURITIES ACT (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser pursuant to this offering. The report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed for common stock acquired on the same date and under the same
prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

     Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian legislation.

                                       81
<PAGE>
                                 LEGAL MATTERS

     The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Vinson & Elkins L.L.P., Dallas, Texas. Akin, Gump,
Strauss, Hauer & Feld, L.L.P., has acted as counsel for the underwriters with
regard to certain legal matters in connection with the offering.

                                    EXPERTS

     The consolidated financial statements and schedule of United Surgical
Partners International, Inc. as of December 31, 1999 and 1998, and for the year
ended December 31, 1999 and the period from February 27, 1998 (inception)
through December 31, 1998, have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.

     Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of OrthoLink Physicians Corporation at December 31, 1999
and 1998 and for each of the three years in the period ended December 31, 1999
as set forth in their report. The OrthoLink Physicians Corporation consolidated
financial statements are included in this prospectus and elsewhere in this
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

     The consolidated financial statements of Aspen Healthcare Holdings Limited
as of December 31, 1999 and 1998, and for each of the years in the two-year
period ended December 31, 1999 have been included herein and in the registration
statement in reliance upon the report of Arthur Andersen, independent certified
public accountants, appearing elsewhere in this prospectus, and upon the
authority of said firm as experts in accounting and auditing.

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission for the common stock we are offering by this prospectus.
This prospectus is a part of that registration statement. As allowed by SEC
rules, this prospectus does not include all of the information contained in the
registration statement or the exhibits to the registration statement. You should
refer to the registration statement and its exhibits for additional information.

     When we complete this offering, we will be required to file annual,
quarterly and special reports, proxy statements and other information with the
SEC. You can obtain our SEC filings, including the registration statement, over
the Internet at the SEC's website at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, Suite
1300, New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. You may also obtain copies of these
documents at prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0300 for further information on the operation of the public reference
facilities.

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<PAGE>
                     SUMMARY PRO FORMA FINANCIAL STATEMENTS

The unaudited pro forma combined condensed statements of operations data
presents:

     o  our consolidated statement of operations for the year ended December 31,
        1999, combined with the consolidated statement of operations of
        OrthoLink and of Aspen for the year ended December 31, 1999; and

     o  our consolidated statement of operations for the nine months ended
        September 30, 2000, combined with the consolidated statement of
        operations of OrthoLink for the nine months ended September 30, 2000 and
        of Aspen for the three months ended March 31, 2000 prior to its
        acquisition by us on April 1, 2000;

in each case giving effect to our acquisitions of OrthoLink and Aspen as if each
had occurred on January 1, 1999. The acquisitions of Aspen and OrthoLink were
accounted for using the purchase method of accounting.

     Pro forma financial information gives effect to the consummation of the
offering and the application of the net proceeds, as described in "Use of
Proceeds," and the conversion of all of our Series C convertible preferred stock
and of our convertible subordinated note with Baylor Health Care System
Foundation into shares of our common stock as if each of these events had been
completed at the beginning of the period presented.

     The unaudited pro forma combined condensed balance sheet data gives effect
to the acquisition of OrthoLink and the consummation of the offering and the
application of the net proceeds, as described in "Use of Proceeds," and the
conversion of our convertible subordinated note to Baylor Health Care System
Foundation and Series C convertible preferred stock into common stock as if each
had occurred on September 30, 2000.

     The unaudited pro forma combined condensed information is presented for
illustrative purposes. Net losses from discontinued operations of $2.1 million
recognized by OrthoLink in the year ended December 31, 1999 in connection with
the discontinued operations of a subsidiary are not reflected in the unaudited
pro forma combined condensed statements of operations for any period presented.
The pro forma adjustments are preliminary and based on management's estimates of
the value of the tangible and intangible assets acquired. The actual adjustments
may differ materially from those presented in these unaudited pro forma combined
condensed financial statements.

     The unaudited pro forma combined condensed information does not purport to
represent what our results actually would have been if the acquisitions and
other events had occurred at the dates indicated nor does such information
purport to project our results for any future period.

                                      P-1
<PAGE>
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                  ASPEN
                                         USPI      ORTHOLINK    HISTORICAL    PRO FORMA       PRO FORMA   PRO FORMA
                                      HISTORICAL   HISTORICAL      (A)       ADJUSTMENTS      COMBINED    OFFERING     PRO FORMA
                                      ----------   ----------   ----------   -----------      ---------   ---------   -----------
<S>                                   <C>          <C>          <C>          <C>              <C>         <C>         <C>
Revenues............................   $70,413      $114,566     $37,641      $(70,841)(b)    $152,599                 $152,599
                                                                                   820 (c)
Operating expenses, excluding
  depreciation and amortization.....    65,634       104,245      27,921       (67,618)(b)     131,002                  131,002
                                                                                   820 (c)
Depreciation and amortization.......     7,875         3,149       2,840         1,037 (d)      14,901                   14,901
                                       -------      --------     -------      --------        --------     -------     --------
Operating income (loss).............    (3,097)        7,172       6,880        (4,260)          6,695                    6,695
Minority interests in income of
  consolidated entities.............      (118)       --           --                             (118)                    (118)
Interest expense, net...............    (2,816)       (2,798)     (3,601)       (4,296)(e)     (13,511)      4,118 (g)    (9,393)
Other expense.......................      (362)       --           --                             (362)                    (362)
                                       -------      --------     -------      --------        --------     -------     --------
Income (loss) from operations before
  income taxes......................    (6,393)        4,374       3,279        (8,556)         (7,296)      4,118       (3,178)
Income tax expense (benefit)........       451         1,906       1,774        (1,644)(f)       2,487                    2,487
                                       -------      --------     -------      --------        --------     -------     --------
Income (loss) from operations.......    (6,844)        2,468       1,505        (6,912)         (9,783)      4,118       (5,665)
Preferred stock dividends...........    (1,696)       --           --                           (1,696)      1,696 (i)    --
                                       -------      --------     -------      --------        --------     -------     --------
Net income (loss) attributable to
  common stockholders...............   $(8,540)     $  2,468     $ 1,505      $ (6,912)       $(11,479)    $ 5,814     $ (5,665)
                                       =======      ========     =======      ========        ========     =======     ========
Earnings (loss) per common share....   $ (0.39)                                               $  (0.36)
Weighted average shares used in
  earnings per common share
  computations (in thousands).......    21,924                                                  31,885 (h)
</TABLE>

                            See accompanying notes to the
        Unaudited Pro Forma Combined Condensed Statements of Operations.

                                      P-2
<PAGE>
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   ASPEN
                                                                   THREE
                                                                  MONTHS
                                                                   ENDED
                                          USPI      ORTHOLINK    MARCH 31,    PRO FORMA       PRO FORMA   PRO FORMA
                                       HISTORICAL   HISTORICAL     2000      ADJUSTMENTS      COMBINED    OFFERING     PRO FORMA
                                       ----------   ----------   ---------   -----------      ---------   ---------   -----------
<S>                                    <C>          <C>          <C>         <C>              <C>         <C>         <C>
Revenues.............................   $98,770      $ 89,259     $ 9,999     $(64,025)(b)    $135,117                 $135,117
                                                                                 1,114 (c)
Operating expenses, excluding
  depreciation and amortization......    82,392        77,518       6,900      (61,466)(b)     106,458                  106,458
                                                                                 1,114 (c)
Depreciation and amortization........     9,295         4,128         731          237 (d)      14,391                   14,391
                                        -------      --------     -------     --------        --------     -------     --------
Operating income (loss)..............     7,083         7,613       2,368       (2,796)         14,268                   14,268
Minority interests in (income) loss
  of consolidated entities...........    (1,232)            9       --                          (1,223)                  (1,223)
Interest expense, net................    (7,770)       (3,521)       (938)      (1,074)(e)     (13,303)      4,642 (g)    (8,661)
Other expense........................       (50)       --           --                             (50)                     (50)
                                        -------      --------     -------     --------        --------     -------     --------
Income (loss) from operations before
  income taxes.......................    (1,969)        4,101       1,430       (3,870)           (308)      4,642        4,334
Income tax expense (benefit).........     1,059         1,915         524       (1,915)(f)       1,583       1,491        3,074
                                        -------      --------     -------     --------        --------     -------     --------
Income (loss) from operations........    (3,028)        2,186         906       (1,955)         (1,891)      3,151        1,260
Preferred stock dividends............    (5,018)       --           --                          (5,018)      5,018 (j)    --
                                        -------      --------     -------     --------        --------     -------     --------
Net income (loss) attributable to
  common stockholders................   $(8,046)     $  2,186     $   906     $ (1,955)       $ (6,909)    $ 8,169     $  1,260
                                        =======      ========     =======     ========        ========     =======     ========
Earnings (loss) per common share from
  operations.........................   $((0.35)                                              $  (0.21)
Weighted average shares used in
  earnings per common and common
  equivalent share computations (in
  thousands).........................    23,109                                                 33,071 (h)
</TABLE>

                            See accompanying notes to the
        Unaudited Pro Forma Combined Condensed Statements of Operation.

                                      P-3
<PAGE>
NOTES TO UNAUDITED COMBINED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
(DOLLARS AND POUNDS IN THOUSANDS)

  (a) Represents historical Aspen Healthcare Holdings Limited results of
      operations for the year ended December 31, 1999 after the following:

     o  conversion from U.K. GAAP to U.S. GAAP; and

     o  conversion from U.K. pounds to U.S. dollars using the average exchange
        rate for the year.

     The following table reconciles Aspen net income in accordance with U.K.
GAAP to U.S. GAAP:


Net income in accordance with U.K.
GAAP.................................              Pounds  1,050
U.S. GAAP adjustments:
     Deferred income tax.............                       (60)
     Pension expense.................                      (106)
     Capitalization of interest
       expense.......................                        22
     Tax effect of above
       adjustments...................                        26
                                                        -------
Net income in accordance with U.S.
GAAP.................................                Pounds 932
Foreign currency exchange rate.......                    1.6146
                                                        -------
Net income in accordance with U.S.
GAAP.................................                   $ 1,505
                                                        -------

  (b) Adjustments to reflect the restructuring of OrthoLink's service agreements
      with physician practices whereby (i) the service fee is reduced as a
      percentage of practice earnings, (ii) the remaining term of the agreements
      are reduced to 15 years, (iii) the physicians' professional corporations
      hire all direct employees and assume certain leases and operating
      contracts, and (iv) the physicians' professional corporations assume all
      clinical facility expenses of the practices.

  (c) Adjustment to reclassify OrthoLink's equity in earnings of unconsolidated
      entities to revenues as the operations are central to our business
      strategy.

  (d) Adjust amortization expense for the following:

<TABLE>
<CAPTION>
                                                                   NINE MONTHS
                                             YEAR ENDED               ENDED
                                         DECEMBER 31, 1999     SEPTEMBER 30, 2000
                                         ------------------    -------------------
<S>                                      <C>                   <C>
Record amortization, using a 25 year
  period, related to the excess of
  purchase price over fair value of
  net assets acquired:
     OrthoLink.......................         $ 1,541                $ 1,156
     Aspen...........................           2,083                    521
Eliminate historical amortization
  expense:
     OrthoLink.......................          (1,431)                (1,152)
     Aspen...........................          (1,156)                  (288)
                                              -------                -------
                                              $ 1,037                $   237
                                              =======                =======
</TABLE>

  (e) Adjust interest expense for the incremental borrowings related to the
      Aspen acquisition.

  (f) Eliminate U.S. federal tax on portion of OrthoLink income offset by USPI
      losses.

  (g) Adjust interest expense for the following:

<TABLE>
<CAPTION>
                                              FOR THE             FOR THE NINE
                                             YEAR ENDED           MONTHS ENDED
                                         DECEMBER 31, 1999     SEPTEMBER 30, 2000
                                         ------------------    -------------------
<S>                                      <C>                   <C>
Reflect reduction of interest expense
  in connection with the repayment of
  bank debt with proceeds from the
  offering...........................         $(4,020)               $(4,516)
Eliminate interest expense on
  convertible subordinated note to
  Baylor Health Care System
  Foundation due to conversion into
  common stock in connection with the
  offering...........................             (98)                  (126)
                                              -------                -------
     Net reduction in interest
     expense.........................         $(4,118)               $(4,642)
                                              =======                =======
</TABLE>

  (h) Includes impact of 9,961,737 shares of USPI common stock used as
      consideration for the acquisition of OrthoLink.

  (i) Eliminates dividends on Series A redeemable preferred stock.

  (j) Eliminates dividends on Series A redeemable and Series C convertible
      preferred stock.

                                      P-4
<PAGE>
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
             UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
                               SEPTEMBER 30, 2000
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                            USPI       ORTHOLINK      PRO FORMA     PRO FORMA    PRO FORMA
                                         HISTORICAL    HISTORICAL    ADJUSTMENTS    COMBINED     OFFERING        PRO FORMA
                                         ----------    ----------    -----------    ---------    ---------      -----------
<S>                                      <C>           <C>           <C>            <C>          <C>            <C>
ASSETS:
Current assets:
Cash and cash equivalents............     $  6,422      $  5,342       $(1,000)(a)  $ 10,764                     $ 10,764
Accounts receivable, net.............       19,966        42,470                      62,436                       62,436
Inventories..........................        4,096        --                           4,096                        4,096
Other................................        7,525         5,203                      12,728                       12,728
                                          --------      --------       -------      --------                     --------
    Total current assets.............       38,008        53,015        (1,000)       90,023                       90,023
Property and equipment, net..........       95,650        27,178                     122,828                      122,828
Investments in affiliates............        7,278         5,144                      12,422                       12,422
Intangible assets, net...............      139,724        29,664         4,198 (a)   173,586                      173,586
Other................................       12,095         3,276                      15,371                       15,371
                                          --------      --------       -------      --------                     --------
    Total assets.....................     $292,755      $118,277       $ 3,198      $414,230                     $414,230
                                          ========      ========                    ========                     ========
LIABILITIES AND COMMON STOCKHOLDERS'
  EQUITY:
Current liabilities:
Accounts payable.....................     $ 13,138      $  7,126                    $ 20,264                     $ 20,264
Accrued expenses.....................       13,977        13,397                      27,374     $   (674)(b)      26,700
Short-term debt......................        2,178                                     2,178                        2,178
Current portion of long-term debt....        5,514         2,300                       7,814                        7,814
                                          --------      --------                    --------     --------        --------
    Total current liabilities........       34,807        22,823                      57,630         (674)         56,956
Long-term debt.......................      157,346        49,213                     206,559      (77,251)(b)     126,021
                                                                                                   (3,287)(c)
Other liabilities....................        7,291           569                       7,860                        7,860
Minority interests...................       12,500           725                      13,225                       13,225
Redeemable preferred stock...........       32,175        --                          32,175      (32,175)(b)      --
Convertible preferred stock..........       19,421        --                          19,421      (19,421)(c)      --
Common stockholders' equity..........       29,216        44,947         3,198 (a)    77,361      110,100 (b)     210,169
                                                                                                   22,708 (c)
                                          --------      --------       -------      --------                     --------
    Total liabilities and
      stockholders' equity...........     $292,755      $118,277       $ 3,198      $414,230                     $414,230
                                          ========      ========                    ========                     ========
</TABLE>

------------

NOTES TO UNAUDITED COMBINED CONDENSED PRO FORMA BALANCE SHEET
 (DOLLARS IN THOUSANDS)

(a) Adjustment to record the excess of the OrthoLink purchase price over fair
    value of net assets acquired:


Aggregate purchase price.                $49,488
Net assets of OrthoLink at
September 30, 2000...................     45,290
                                         -------
Excess of purchase price over fair
value of net assets acquired.........    $ 4,198
                                         =======

(b) Reflects our sale of       shares of common stock generating $120,000 in
    gross proceeds and the use of the estimated proceeds of $110,100 net of the
    estimated underwriting discount and the offering expenses totaling $9,900,
    to:

  o  redeem in full all outstanding shares of our Series A redeemable preferred
     stock, including the payment of all accrued dividends; and

  o  pay a portion of our senior bank indebtedness including all outstanding
     balances and the accrued interest under our Chase and Bank of America
     credit facilities.

(c) Reflects conversion of our convertible subordinated note to Baylor Health
    Care System Foundation and Series C convertible preferred stock into common
    stock.

                                      P-5
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS


                                         PAGE
                                         ----
UNITED SURGICAL PARTNERS
INTERNATIONAL, INC.
Independent Auditors' Report of KPMG
  LLP................................    F-2
Consolidated Balance Sheets as of
  September 30, 2000 (unaudited),
  December 31, 1999 and 1998.........    F-3
Consolidated Statements of Operations
  for the nine months ended
  September 30, 2000 (unaudited) and
  September 30, 1999 (unaudited), the
  year ended December  31, 1999 and
  the period from February 27, 1998
  (inception) through December 31,
  1998...............................    F-5
Consolidated Statements of
  Comprehensive Loss for the nine
  months ended September 30, 2000
  (unaudited) and September 30, 1999
  (unaudited), the year ended
  December 31, 1999 and the period
  from February 27, 1998 (inception)
  through December 31, 1998..........    F-6
Consolidated Statements of
  Stockholders' Equity for the nine
  months ended September 30, 2000
  (unaudited), the year ended
  December 31, 1999 and the period
  from February 27, 1998 (inception)
  through December  31, 1998.........    F-7
Consolidated Statements of Cash Flows
  for the nine months ended
  September 30, 2000 (unaudited) and
  September 30, 1999 (unaudited), the
  year ended December 31, 1999 and
  the period from February 27, 1998
  (inception) through December 31,
  1998...............................    F-8
Notes to Consolidated Financial
  Statements.........................    F-10
ORTHOLINK PHYSICIANS CORPORATION
Report of Independent Auditors, Ernst
  & Young LLP........................    F-29
Consolidated Balance Sheets as of
  September 30, 2000 (unaudited) and
  December 31, 1999 and 1998.........    F-30
Consolidated Statements of Income for
  the nine months ended September 30,
  2000 (unaudited) and September 30,
  1999 (unaudited) and the three
  years ended December 31, 1999......    F-32
Consolidated Statements of Changes in
  Stockholders' Equity for the nine
  months ended September 30, 2000
  (unaudited) and the three years
  ended December 31, 1999............    F-33
Consolidated Statements of Cash Flows
  for the nine months ended September
  30, 2000 (unaudited) and September
  30, 1999 (unaudited) and the three
  years ended December 31, 1999......    F-34
Notes to Consolidated Financial
  Statements.........................    F-36
ASPEN HEALTHCARE HOLDINGS LIMITED
Report of Independent Public
Accountants, Arthur Andersen.........    F-45
Consolidated Profit and Loss Account
  for the year ended December 31,
  1999 and the ten-month period ended
  December 31, 1998..................    F-46
Consolidated Balance Sheets as of
  December 31, 1999 and 1998.........    F-47
Consolidated Cash Flow Statement for
  the year ended December 31, 1998
  and the ten-month period ended
  December 31, 1998..................    F-48
Reconciliation of Net Cash Flow to
Movement in Net Debt.................    F-48
Statement of Accounting Policies.....    F-49
Notes to Consolidated Financial
  Statements.........................    F-51


                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
United Surgical Partners International, Inc.:

     We have audited the accompanying consolidated balance sheets of United
Surgical Partners International, Inc. and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of operations, comprehensive
loss, stockholders' equity and cash flows for the year ended December 31, 1999
and the period from February 27, 1998 (inception) through December 31, 1998.
These consolidated financial statements are the responsibility of Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of United
Surgical Partners International, Inc. and subsidiaries as of December 31, 1999
and 1998, and the results of their operations and their cash flows for the year
ended December 31, 1999 and the period from February 27, 1998 (inception)
through December 31, 1998, in conformity with accounting principles generally
accepted in the United States of America.

                                               KPMG LLP

Dallas, Texas
April 21, 2000

                                      F-2
<PAGE>
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                         SEPTEMBER 30,    ----------------------------
                                             2000             1999            1998
                                         -------------    ------------    ------------
<S>                                      <C>              <C>             <C>
                                          (UNAUDITED)
               ASSETS
Cash and cash equivalents.               $   6,422,329    $  3,716,334    $  4,964,751
Restricted cash (note 14)............       1,721,045       13,100,000      13,100,000
Patient receivables, net of allowance
  for doubtful accounts of $3,521,313
  at September 30, 2000 (unaudited),
  $2,741,549 at December 31, 1999 and
  $1,430,824 at December 31, 1998....      19,965,638       11,801,006       8,502,544
Other receivables....................       3,020,742        3,331,448       1,343,365
Inventories of supplies..............       4,095,851        2,620,768       1,464,461
Prepaids and other current assets....       2,782,885        3,312,494       4,205,245
                                         ------------     ------------    ------------
          Total current assets.......      38,008,490       37,882,050      33,580,366
                                         ------------     ------------    ------------
Property and equipment, net (note
  4).................................      95,649,851       59,418,082      40,581,311
Investments in affiliates (note 2)...       7,278,166        7,880,526       3,155,826
Intangible assets, net (note 3)......     139,723,697       69,876,974      45,823,407
Other assets.........................      12,095,184        1,645,601       1,651,492
                                         ------------     ------------    ------------
          Total assets...............    $292,755,388     $176,703,233    $124,792,402
                                         ============     ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.                        $  13,137,600    $  9,822,443    $  7,068,460
Accrued salaries and benefits........       3,396,628        1,577,483         842,784
Current portion of long-term debt
  (note 5)...........................       5,514,462        9,390,882       4,437,107
Other accrued expenses...............      12,473,382        6,362,248       2,695,444
Deferred tax liability, net..........         285,000          268,000          47,000
                                         ------------     ------------    ------------
          Total current
             liabilities.............      34,807,072       27,421,056      15,090,795
                                         ------------     ------------    ------------
Long-term debt, less current portion
  (note 5)...........................     157,345,802       63,292,902       7,238,389
Other long-term liabilities..........       2,962,228        3,142,449       3,576,970
Deferred tax liability, net..........       4,328,606        3,317,000       3,439,888
                                         ------------     ------------    ------------
          Total liabilities..........     199,443,708       97,173,407      29,346,042
Minority interests (note 2)..........      12,499,991        6,918,882       8,999,050
Redeemable preferred stock (note 7):
     Series A, $0.01 par value per
       share; 31,200 shares
       authorized, issued and
       outstanding...................      32,175,000       33,131,470      31,571,465
     Series B, $0.01 par value per
       share; 0 shares issued and
       outstanding at September 30,
       2000 and 2,716 shares
       authorized, issued and
       outstanding at December 31,
       1999 and December 31, 1998....         --             2,908,383       2,772,585
Commitments and contingencies (note
  14)................................
</TABLE>

                                                                     (CONTINUED)

            See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                         SEPTEMBER 30,    ----------------------------
                                             2000             1999            1998
                                         -------------    ------------    ------------
<S>                                      <C>              <C>             <C>
                                          (UNAUDITED)

LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity (notes 8 and
15):
     Series C preferred stock, $0.01
       par value; 20,000 shares
       authorized; 18,750 shares
       issued and outstanding at
       September 30, 2000
       (unaudited), and -0- shares
       issued and outstanding at
       December 31, 1999 and December
       31, 1998......................    $ 19,420,594          --              --
     Common stock:
       Class A shares, $0.01 par
          value; 30,000,000 shares
          authorized; 23,519,534
          shares issued at September
          30, 2000 (unaudited),
          22,007,857 shares issued at
          December 31, 1999 and
          21,938,929 at December 31,
          1998.......................         235,196          220,078         219,389
       Other, $0.01 par value;
          40,000,000 shares
          authorized; 510,140 shares
          issued and outstanding at
          September 30, 2000
          (unaudited), 73,570 shares
          issued and outstanding at
          December 31, 1999, and -0-
          shares at December 31,
          1998.......................           5,101              736         --
     Additional paid-in capital......      60,421,587       55,836,719      56,966,454
     Treasury stock, at cost, 162,500
       shares at September 30, 2000
       (unaudited), 162,500 shares at
       December 31, 1999 and -0-
       shares at December 31, 1998...        (343,750)        (343,750)        --
     Receivables from sales of common
       stock.........................      (2,179,434)      (1,103,887)     (1,050,000)
     Accumulated other comprehensive
       loss,
       net of tax....................     (15,122,731)      (7,266,717)       (104,285)
     Accumulated deficit.............     (13,799,874)     (10,772,088)     (3,928,298)
                                         ------------     ------------    ------------
               Total stockholders'
                  equity.............      48,636,689       36,571,091      52,103,260
                                         ------------     ------------    ------------
               Total liabilities and
                  stockholders'
                  equity.............    $292,755,388     $176,703,233    $124,792,402
                                         ============     ============    ============
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                           PERIOD FROM
                                                                                        FEBRUARY 27, 1998
                                         NINE MONTHS     NINE MONTHS                       (INCEPTION)
                                            ENDED           ENDED        YEAR ENDED          THROUGH
                                        SEPTEMBER 30,   SEPTEMBER 30,   DECEMBER 31,      DECEMBER 31,
                                            2000            1999            1999              1998
                                        -------------   -------------   -------------   -----------------
<S>                                     <C>             <C>             <C>             <C>
                                        (UNAUDITED)     (UNAUDITED)
Net patient service revenue..........    $94,759,373     $43,364,992     $63,769,768       $19,116,092
Management and administrative
  services revenue...................      1,552,116       3,848,862       5,111,496           223,011
Equity in earnings (loss) of
  unconsolidated affiliates..........        486,667        (283,675)       (236,874)          (39,822)
Other income.........................      1,972,276       1,303,080       1,768,194         1,272,790
                                         -----------     -----------     -----------       -----------
          Total revenues.............     98,770,432      48,233,259      70,412,584        20,572,071
                                         -----------     -----------     -----------       -----------
Salaries, benefits and other employee
  costs..............................     31,256,191      15,123,472      21,643,193        10,020,124
Supplies.............................     18,294,861       9,398,294      14,024,396         3,675,890
Medical services.....................      5,263,107       6,632,513       8,843,351         3,929,676
Other operating expenses.............     17,829,980       6,173,148       9,450,385         2,893,838
General and administrative...........      8,170,538       7,555,208      10,441,552         2,032,413
Provision for doubtful accounts......      1,577,631         704,606       1,231,396           235,725
Depreciation and amortization........      9,294,691       5,531,742       7,875,448         2,015,123
                                         -----------     -----------     -----------       -----------
          Total operating expenses...     91,686,999      51,118,983      73,509,721        24,802,789
                                         -----------     -----------     -----------       -----------
          Operating income (loss)....      7,083,433      (2,885,724)     (3,097,137)       (4,230,718)
Minority interest in (income) loss of
  consolidated subsidiaries..........     (1,232,493)       (137,325)       (118,453)           23,030
Interest income......................        496,434         252,483         328,769           721,530
Interest expense.....................     (8,266,756)     (1,772,424)     (3,144,479)         (496,874)
Other................................        (49,686)       (123,473)       (361,953)         (246,378)
                                         -----------     -----------     -----------       -----------
          Total other income
             (expense)...............     (9,052,501)     (1,780,739)     (3,296,116)            1,308
                                         -----------     -----------     -----------       -----------
          Loss before income taxes...     (1,969,068)     (4,666,463)     (6,393,253)       (4,229,410)
Income tax (expense) benefit (Note
  10)................................     (1,058,718)       (298,661)       (450,537)          301,112
                                         -----------     -----------     -----------       -----------
          Net loss...................     (3,027,786)     (4,965,124)     (6,843,790)       (3,928,298)
Preferred stock dividends............     (5,018,265)     (1,271,850)     (1,695,803)         (428,050)
                                         -----------     -----------     -----------       -----------
          Net loss attributable to
             common stockholders.....    $(8,046,051)    $(6,236,974)    $(8,539,593)      $(4,356,348)
                                         ===========     ===========     ===========       ===========
Net loss per common share (note
  12)................................    $     (0.35)    $     (0.28)    $     (0.39)      $     (0.43)
Weighted average number of common
  shares
     Basic...........................     23,109,221      21,942,152      21,923,645        10,099,281
     Diluted.........................     23,109,221      21,942,152      21,923,645        10,099,281
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
                                                                                           PERIOD FROM
                                                                                           FEBRUARY 27,
                                                                                               1998
                                          NINE MONTHS      NINE MONTHS                     (INCEPTION)
                                             ENDED            ENDED         YEAR ENDED       THROUGH
                                         SEPTEMBER 30,    SEPTEMBER 30,    DECEMBER 31,    DECEMBER 31,
                                             2000             1999             1999            1998
                                         -------------    -------------    ------------    ------------
<S>                                      <C>              <C>              <C>             <C>
                                         (UNAUDITED)      (UNAUDITED)

Net loss.............................    $ (3,027,786)     $(4,965,124)    $ (6,843,790)   $(3,928,298)
                                         ------------      -----------     ------------    -----------

Other comprehensive loss, before
  taxes:

     Foreign currency translation
       adjustments...................     (12,086,175)      (6,791,723)     (11,019,126)      (160,438)

Income tax benefit related to other
  comprehensive loss.................       4,230,161        2,377,103        3,856,694         56,153
                                         ------------      -----------     ------------    -----------

     Other comprehensive loss........      (7,856,014)      (4,414,620)      (7,162,432)      (104,285)
                                         ------------      -----------     ------------    -----------

     Comprehensive loss..............    $(10,883,800)     $(9,379,744)    $(14,006,222)   $(4,032,583)
                                         ============      ===========     ============    ===========
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                    UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
    FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED), THE YEAR ENDED
                             DECEMBER 31, 1999 AND
    THE PERIOD FROM FEBRUARY 27, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                                SERIES C
                                             PREFERRED STOCK             COMMON STOCK                                  RECEIVABLES
                                        -------------------------   ----------------------   ADDITIONAL                FROM SALES
                                        OUTSTANDING   LIQUIDATION   OUTSTANDING     PAR        PAID-IN     TREASURY     OF COMMON
                                          SHARES         VALUE        SHARES       VALUE       CAPITAL       STOCK        STOCK
                                        -----------   -----------   -----------   --------   -----------   ---------   -----------
<S>                                     <C>           <C>           <C>           <C>        <C>           <C>         <C>
Balance, February 27, 1998
  (inception)........................      --         $   --            --        $  --      $   --        $  --       $   --
Issuance of common stock.............      --             --        21,938,929     219,389    57,394,504      --        (1,050,000)
Accrued dividends on preferred
  stock..............................      --             --            --           --         (428,050)     --           --
Net loss.............................      --             --            --           --          --           --           --
Foreign currency translation
  adjustments, net of taxes..........      --             --            --           --          --           --           --
                                          ------      -----------   ----------    --------   -----------   ---------   -----------
Balance, December 31, 1998...........      --             --        21,938,929     219,389    56,966,454      --        (1,050,000)
Issuance of common stock.............      --             --           142,498       1,425       521,068      --          (253,887)
Issuance of warrants for noncompete
  agreement..........................      --             --            --           --           45,000      --           --
Repurchases of common stock..........      --             --          (162,500)      --          --         (343,750)      200,000
Accrued dividends on preferred
  stock..............................      --             --            --           --       (1,695,803)     --           --
Net loss.............................      --             --            --           --          --           --           --
Foreign currency translation
  adjustments, net of taxes..........      --             --            --           --          --           --           --
                                          ------      -----------   ----------    --------   -----------   ---------   -----------
Balance, December 31, 1999...........      --             --        21,918,927     220,814    55,836,719    (343,750)   (1,103,887)
Issuance of common stock
  (unaudited)........................      --             --         1,948,247      19,483     6,803,133      --        (1,075,547)
Issuance of Series C preferred stock
  (unaudited)........................     18,750      15,950,000        --           --          --           --           --
Issuance of warrants (unaudited).....      --             --            --           --        2,800,000      --           --
Accrued dividends on preferred stock
  (unaudited)........................      --          3,470,594        --           --       (5,018,265)     --           --
Net loss (unaudited).................      --             --            --           --          --           --           --
Foreign currency translation
  adjustments, net of taxes
  (unaudited)........................      --             --            --           --          --           --           --
                                          ------      -----------   ----------    --------   -----------   ---------   -----------
Balance, September 30, 2000
  (unaudited)........................     18,750      $19,420,594   23,867,174    $240,297   $60,421,587   $(343,750)  $(2,179,434)
                                          ======      ===========   ==========    ========   ===========   =========   ===========

</TABLE>

<TABLE>
<CAPTION>
                                        ACCUMULATED
                                           OTHER
                                       COMPREHENSIVE   ACCUMULATED
                                           LOSS          DEFICIT         TOTAL
                                       -------------   ------------   -----------
<S>                                    <C>             <C>            <C>
Balance, February 27, 1998
  (inception)........................   $   --         $   --         $   --
Issuance of common stock.............       --             --          56,563,893
Accrued dividends on preferred
  stock..............................       --             --            (428,050)
Net loss.............................       --          (3,928,298)    (3,928,298)
Foreign currency translation
  adjustments, net of taxes..........      (104,285)       --            (104,285)
                                        -----------    ------------   -----------
Balance, December 31, 1998...........      (104,285)    (3,928,298)    52,103,260
Issuance of common stock.............       --             --             268,606
Issuance of warrants for noncompete
  agreement..........................       --             --              45,000
Repurchases of common stock..........       --             --            (143,750)
Accrued dividends on preferred
  stock..............................       --             --          (1,695,803)
Net loss.............................       --          (6,843,790)    (6,843,790)
Foreign currency translation
  adjustments, net of taxes..........    (7,162,432)       --          (7,162,432)
                                        -----------    ------------   -----------
Balance, December 31, 1999...........    (7,266,717)   (10,772,088)    36,571,091
Issuance of common stock
  (unaudited)........................       --             --           5,747,069
Issuance of Series C preferred stock
  (unaudited)........................       --             --          15,950,000
Issuance of warrants (unaudited).....       --             --           2,800,000
Accrued dividends on preferred stock
  (unaudited)........................       --             --          (1,547,671)
Net loss (unaudited).................       --          (3,027,786)    (3,027,786)
Foreign currency translation
  adjustments, net of taxes
  (unaudited)........................    (7,856,014)       --          (7,856,014)
                                        -----------    ------------   -----------
Balance, September 30, 2000
  (unaudited)........................   $(15,122,731)  $(13,799,874)  $48,636,689
                                        ===========    ============   ===========
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                           PERIOD
                                                                                            FROM
                                                                                        FEBRUARY 27,
                                                                                            1998
                                         NINE MONTHS     NINE MONTHS                     (INCEPTION)
                                            ENDED           ENDED        YEAR ENDED        THROUGH
                                        SEPTEMBER 30,   SEPTEMBER 30,   DECEMBER 31,    DECEMBER 31,
                                            2000            1999            1999            1998
                                        -------------   -------------   -------------   -------------
<S>                                     <C>             <C>             <C>             <C>
                                        (UNAUDITED)     (UNAUDITED)
Cash flows from operating activities:
    Net loss.........................    $(3,027,786)    $(4,965,124)    $(6,843,790)    $(3,928,298)
    Adjustments to reconcile net loss
     to net cash provided by
     operating activities:
         Provision for doubtful
         accounts....................      1,577,631         704,606       1,231,396         235,725
         Depreciation and
         amortization................      9,294,691       5,531,742       7,875,448       2,015,123
         Amortization of discount on
         debt........................        262,500         --              --              --
         Deferred income taxes.......        233,000          73,584          98,112        (301,112)
         Equity in (earnings) loss of
         unconsolidated affiliates...       (486,667)        283,675         236,874          39,822
         Minority interest in income
         (loss) of consolidated
         subsidiaries................      1,232,493         137,325         118,453         (23,030)
         Increases (decreases) in
         cash from changes in
         operating assets and
         liabilities, net of effects
         from purchases of new
         businesses:
             Patient receivables.....     (3,205,190)     (2,737,325)     (2,212,918)        118,590
             Other receivables.......     (1,662,520)     (2,377,628)     (3,548,344)     (1,046,467)
             Inventories of supplies,
             prepaids and other
             assets..................     (5,886,879)        738,375        (132,965)        603,553
             Accounts payable and
             accrued expenses........      3,368,632       6,444,880       9,121,603       1,001,133
             Other long-term
             liabilities.............        413,683        (193,424)     (1,753,915)      1,906,083
                                         -----------     -----------     -----------     -----------
                  Net cash provided
                 by operating
                 activities..........      2,113,588       3,640,686       4,189,954         621,122
                                         -----------     -----------     -----------     -----------
Cash flows from investing activities:
    Purchases of new businesses, net
     of cash received................    (54,759,302)    (34,141,801)    (35,863,123)    (66,216,330)
    Purchases of property and
     equipment.......................    (12,241,142)     (9,292,843)    (12,805,692)     (3,948,751)
    Proceeds from sale of
     investments.....................        --              867,662       1,156,883         424,659
    Cash (placed in) released from
     escrow..........................     11,435,724         --              --          (13,100,000)
                                         -----------     -----------     -----------     -----------
                  Net cash used in
                 investing
                 activities..........    (55,564,720)    (42,566,982)    (47,511,932)    (82,840,422)
                                         -----------     -----------     -----------     -----------
Cash flows from financing activities:
    Proceeds from long-term debt.....     60,374,284      65,112,489      67,821,962       1,493,337
    Payments on long-term debt.......    (24,209,861)    (23,697,068)    (26,176,060)       (245,673)
    Proceeds from issuance of common
     stock...........................      5,747,069         190,000         268,606      54,750,747
    Payments to repurchase common
     stock...........................        --             (143,750)       (143,750)        --
    Proceeds from issuance of
     preferred stock and warrants....     18,750,000         --              --           31,200,000
    Payments of dividends and
     redemption of redeemable
     preferred stock.................     (5,234,593)        --              --              --
    Distributions on investments in
     affiliates......................      1,065,990         170,047         506,407         (50,000)
                                         -----------     -----------     -----------     -----------
                  Net cash provided
                 by financing
                 activities..........     56,492,889      41,631,718      42,277,165      87,148,411
                                         -----------     -----------     -----------     -----------
Effect of exchange rate changes on
  cash...............................       (335,762)        (99,972)       (203,604)         35,640
                                         -----------     -----------     -----------     -----------
Net increase (decrease) in cash and
  cash equivalents...................      2,705,995       2,605,450      (1,248,417)      4,964,751
Cash and cash equivalents at
  beginning of period................      3,716,334       4,964,751       4,964,751         --
                                         -----------     -----------     -----------     -----------
Cash and cash equivalents at end of
  period.............................    $ 6,422,329     $ 7,570,201     $ 3,716,334     $ 4,964,751
                                         ===========     ===========     ===========     ===========
</TABLE>

            See accompanying notes to consolidated financial statements.

                                                                     (CONTINUED)

                                      F-8
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
                                                                                        PERIOD FROM
                                                                                       FEBRUARY 27,
                                                                                           1998
                                        NINE MONTHS     NINE MONTHS                     (INCEPTION)
                                           ENDED           ENDED        YEAR ENDED        THROUGH
                                        SEPTEMBER 30,   SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,
                                            2000           1999            1999            1998
                                         -----------     ----------      ----------       ----------
                                        (UNAUDITED)     (UNAUDITED)
<S>                                     <C>             <C>             <C>            <C>
     Supplemental information:
       Interest paid.................    $ 6,127,536     $1,031,011      $2,263,328       $  473,046
                                         ===========     ==========      ==========       ==========
       Non-cash transactions:
          Debt issued for purchases
           of new business...........    $54,012,058        --              --              --
                                         ===========     ==========      ==========       ==========
          Subordinated debt issued
           for purchases of new
           business..................    $   --           3,287,234       3,287,234         --
                                         ===========     ==========      ==========       ==========
          Sale of common stock for
           notes receivable from
           employees, net............    $ 1,075,547        --               53,887        1,050,000
                                         ===========     ==========      ==========       ==========
          Common stock issued for
           purchases of new
           businesses................    $   --             --              --             1,813,146
                                         ===========     ==========      ==========       ==========
          Preferred stock issued for
           purchase of new
           business..................    $   --             --              --             2,716,000
                                         ===========     ==========      ==========       ==========
          Accrued dividends on
           preferred stock...........    $ 5,018,265      1,271,850       1,695,803          428,050
                                         ===========     ==========      ==========       ==========
          Warrants issued for
           noncompete agreement......    $   --          $  --           $   45,000       $ --
                                         ===========     ==========      ==========       ==========
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-9
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

      (A)  DESCRIPTION OF BUSINESS

           United Surgical Partners International, Inc. and subsidiaries (USPI
           or the Company), a Delaware Company, majority-owned by Welsh, Carson,
           Anderson & Stowe and certain of its affiliates (WCAS) was formed in
           February 1998 for the primary purpose of ownership and operation of
           hospitals, outpatient surgical centers and related businesses in the
           United States and Europe. At December 31, 1999, USPI, headquartered
           in Dallas, Texas, operated twenty surgical centers in the United
           States. Of these twenty centers, USPI consolidates the results of
           nine and owns a minority equity interest in eight which are accounted
           for under the equity method. The Company holds no ownership interest
           in the remaining three centers which are operated by USPI under
           management contracts. In addition, United Surgical Partners Europe,
           S.L. (USPE), a company incorporated in Spain and majority-owned by
           USPI, managed and owned a majority interest in four hospitals and one
           plastic surgery center in Spain at December 31, 1999.

           USPI is subject to changes in government legislation that could
           impact Medicare, Medicaid and foreign government reimbursement levels
           and is also subject to increased levels of managed care penetration
           and changes in payor patterns that may impact the level and timing of
           payments for services rendered.

           USPI maintains its books and records on the accrual basis of
           accounting.

      (B)  UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

           The accompanying unaudited consolidated balance sheet as of September
           30, 2000 and the related unaudited consolidated statements of
           operations, comprehensive loss, and cash flows for the nine months
           ended September 30, 2000 and September 30, 1999, and the statement of
           stockholders' equity for the nine months ended September 30, 2000
           (interim financial statements) have been prepared in accordance with
           generally accepted accounting principles for interim financial
           information and with the instructions to Article 10 of Regulation
           S-X. Accordingly, they do not include all of the information and
           footnotes required by accounting principles generally accepted in the
           United States of America for complete financial statements. In the
           opinion of management, all adjustments (consisting of normal
           recurring adjustments) considered necessary for a fair presentation
           of the interim results have been included.

           The unaudited interim consolidated financial statements should be
           read in conjunction with the audited December 31, 1999 and 1998
           consolidated financial statements appearing herein. The results of
           the nine months ended September 30, 2000 may not be indicative of
           operating results for the full year.

      (C)  TRANSLATION OF FOREIGN CURRENCIES

           The financial statements of foreign subsidiaries are measured in
           local currency and then translated into U.S. dollars. All assets and
           liabilities have been translated using the current rate of exchange
           at the balance sheet date. Results of operations have been translated
           using the average rates prevailing throughout the year. Translation
           gains or losses resulting from the changes in the exchange rates are
           accumulated in a separate component of stockholders' equity.

                                      F-10
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

      (D)  PRINCIPLES OF CONSOLIDATION

           The consolidated financial statements include the financial
           statements of USPI and its wholly-owned and majority-owned
           subsidiaries. Significant investments in other affiliated companies
           are generally accounted for using the equity method. All significant
           intercompany balances and transactions have been eliminated in
           consolidation.

      (E)  USE OF ESTIMATES

           The preparation of financial statements in conformity with accounting
           principles generally accepted in the United States of America
           requires management to make a number of estimates and assumptions
           relating to the reporting of assets and liabilities and the
           disclosure of contingent assets and liabilities at the date of the
           financial statements and reported amounts of revenues and expenses
           during the reporting period. Actual results could differ from those
           estimates.

      (F)  RECLASSIFICATIONS

           Certain prior year amounts have been reclassified to be consistent
           with the current year presentation.

      (G)  CASH EQUIVALENTS AND INVESTMENTS

           For purposes of the consolidated statements of cash flows, USPI
           considers all highly liquid debt instruments with original maturities
           of three months or less to be cash equivalents.

           Investments in unconsolidated companies, owned between 20% and 50%,
           or where the Company otherwise demonstrates that it has significant
           influence over the investee are accounted for using the equity method
           of accounting.

           Investments in companies owned less than 20%, and for which USPI does
           not exercise significant influence, are carried at cost.

      (H)  INVENTORIES OF SUPPLIES

           Inventories of supplies are stated at cost which approximates market.

      (I)  PROPERTY AND EQUIPMENT

           Property and equipment are stated at cost. Depreciation is calculated
           on the straight-line method over the estimated useful lives of the
           assets. Upon retirement or disposal of assets, the asset and
           accumulated depreciation accounts are adjusted accordingly, and any
           gain or loss is reflected in earnings or loss of the respective
           period. Maintenance costs and repairs are expensed as incurred;
           significant renewals and betterments are capitalized.

      (J)  INTANGIBLE ASSETS

           Intangible assets consist of costs in excess of net assets acquired
           (goodwill), costs associated with the purchase of management
           contracts and other intangibles, which consist primarily of
           non-compete contracts. Intangibles, except goodwill, are amortized
           over the life of the associated contracts. Goodwill is amortized on a
           straight-line basis over the expected periods to be benefited,
           generally 25 years.

      (K)  IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
           OF

           Long-lived assets, certain identifiable intangibles, and goodwill are
           reviewed for impairment whenever events or changes in circumstances
           indicate that the carrying amount of an asset, or related groups of
           assets, may not be fully recoverable from estimated future cash
           flows. The assessment of the recoverability of goodwill will be
           impacted if estimated future operating cash flows are not achieved.
           In the event of impairment, measurement of the amount

F-11
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


         of impairment may be based on appraisal, market values of similar
           assets or estimates of future discounted cash flows resulting from
           use and ultimate disposition of the asset.

      (L)  FAIR VALUE OF FINANCIAL INSTRUMENTS

           The carrying amounts of cash and cash equivalents, short-term
           investments, accounts receivable, current portion of long-term debt
           and accounts payable approximate fair value because of the short
           maturity of these instruments. The carrying values of long-term debt
           are based on quoted market prices and are not materially different
           from the estimated fair values of these instruments.

     (M)  REVENUE RECOGNITION

          Revenue consists primarily of net patient service revenues which is
          based on the facilities' established billing rates less allowances and
          discounts, principally for patients covered under contractual
          programs. USPI has entered into agreements with certain majority and
          minority owned surgery centers to provide management services. As
          compensation for these services, USPI charges the surgery centers
          management fees which are either fixed in amount or represent a fixed
          percentage of each centers net revenue less a provision for doubtful
          accounts. Amounts are recognized as services are provided.

      (N)  EQUITY IN EARNINGS (LOSS) OF UNCONSOLIDATED AFFILIATES

           Equity in earnings (loss) of unconsolidated affiliates consists of
           USPI's share of the profits or losses generated from its equity
           investments in eight ambulatory surgery centers. Because these
           operations are central to USPI's business strategy, equity in
           earnings (loss) of unconsolidated affiliates is classified as revenue
           in the accompanying statements of operations.

      (O)  INTEREST RATE SWAPS

           USPI uses interest rate swap agreements to modify its variable rate
           debt obligations to fixed rate obligations, thereby reducing the
           exposure to market rate risk. Amounts currently due to and from
           interest rate swaps agreements are recorded in interest expense in
           the period in which they accrue.

      (P)  INCOME TAXES

           USPI accounts for income taxes under the asset and liability method.
           Deferred tax assets and liabilities are recognized for the future tax
           consequences attributable to differences between the financial
           statement carrying amounts of existing assets and liabilities and
           their respective tax bases and operating loss and tax credit
           carryforwards. Deferred tax assets and liabilities are measured using
           enacted tax rates expected to apply to taxable income in the years in
           which these temporary differences are expected to be recovered or
           settled. The effect on deferred tax assets and liabilities of a
           change in tax rates is recognized in income in the period that
           includes the enactment date. Deferred tax assets are reduced by a
           valuation allowance when, in the opinion of management, it is more
           likely than not that some or all of the deferred tax assets may not
           be realized.

      (Q)  STOCK OPTION PLAN

           USPI applies the intrinsic value-based method of accounting
           prescribed by Accounting Principles Board Opinion No. 25, ACCOUNTING
           FOR STOCK ISSUED TO EMPLOYEES, and related interpretations in
           accounting for its stock option grants to employees. As such, USPI
           does not record compensation expense because USPI issues options
           whereby the option exercise price equals the current market price of
           the underlying stock on the date of grant. SFAS

                                      F-12
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


           No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, established
           accounting and disclosure requirements using a fair value-based
           method of accounting for stock-based employee compensation plans. As
           allowed by SFAS No. 123, the Company has elected to continue to apply
           the intrinsic value-based method of accounting described above, and
           has adopted the disclosure requirements of SFAS No. 123.

           The Company accounts for equity instruments issued to nonemployees in
           accordance with the provisions of SFAS No. 123 and Emerging Issues
           Task Force (EITF) Issue No. 96-18, ACCOUNTING FOR EQUITY INSTRUMENTS
           THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN
           CONJUNCTION WITH SELLING, GOODS OR SERVICES.

      (R)  COMMITMENTS AND CONTINGENCIES

           Liabilities for loss contingencies arising from claims, assessments,
           litigation, fines and penalties, and other sources are recorded when
           it is probable that a liability has been incurred and the amount of
           the assessment can be reasonably estimated.

(2)  ACQUISITIONS AND EQUITY INVESTMENTS

     On April 30, 1998, USPI purchased 100% of the issued and outstanding stock
of Columbia International Holdings, Inc. (CIH), an unrelated Delaware
corporation, for approximately $7.3 million in cash. As a result of the purchase
of CIH, USPI obtained ownership of 79% and 71%, respectively, of the issued and
outstanding stock of Instituto Dexeus, S.A., the owner of a hospital in Spain,
and Diagnosticos y Tratamientos Medicos, S.A., the owner of a group of clinics
in Spain, both Spanish corporations. The total purchase price for the
acquisitions was allocated to the purchased assets and liabilities based on
their estimated fair values and approximated the fair value of the net assets
acquired. Through this acquisition, USPI also obtained equity interests, ranging
from 7% to 15% in five additional Spanish corporations which own healthcare
related operations in Spain. USPI subsequently contributed the Instituto Dexeus
hospital plus $250,000 in cash for a majority ownership stake in USPE. At
December 31, 1999 and 1998, USPI owned approximately 89% and 86%, respectively,
of USPE. The remaining approximate 11% and 14%, respectively, was held by
Hospital Management Team (HMT), a hospital management company incorporated in
Spain.

     On July 29, 1998, USPI acquired 100% of the stock of Health Horizons, Inc.
(HHI), an unrelated Delaware corporation, for approximately $7.5 million
consisting of $3 million in cash, $2.7 million in USPI Series B redeemable
preferred stock and $1.8 million in USPI Class A common stock. As a result of
the acquisition, USPI acquired a 66% interest in an ambulatory surgery center
joint venture located in Decatur, Alabama and interests ranging from 35% to 50%
in three additional ambulatory surgery center joint ventures located in
Nashville, Tennessee; Kansas City, Missouri; and Murfreesboro, Tennessee. The
total purchase price was allocated to the purchased assets and liabilities based
on their estimated fair values and exceeded the fair value of the net assets
acquired by approximately $7.3 million. On June 30, 1999, USPI acquired an
additional 36% interest in the ambulatory surgery center joint venture in
Nashville for $550,000 in cash, bringing its total ownership in the venture to
72%.

     On August 3, 1998, USPI and St. Rose Dominican Hospital, a not-for-profit
hospital located in Henderson, Nevada entered into an operating agreement to
organize a Nevada limited liability company, Parkway Surgery Center, LLC. Each
party contributed assets totaling approximately $1.9 million for a 50% ownership
interest in the Parkway Surgery Center.

     On October 5, 1998, USPE purchased 80% of the issued and outstanding stock
of Clinica Maternal Nuestra Senora de la Esperanza, S.A., a Spanish corporation,
for approximately $2.4 million in cash. The total purchase price was allocated
to the purchased assets and liabilities based on their

                                      F-13
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


estimated fair values and exceeded the fair value of the net assets acquired by
approximately $1.7 million (using the exchange rate in effect at the date of
purchase).

     On October 15, 1998, USPI purchased a 70% interest in the assets used to
operate the University Surgical Center in Winter Park, Florida (Assets) for
approximately $5.7 million in cash and assumed approximately $200,000 of
liabilities of University Surgical Center, Inc. (Seller), an unrelated Florida
corporation. The Assets were then contributed to a newly formed Florida limited
partnership, University Surgery Center, Ltd. (limited partnership) in exchange
for general and limited partnership interests. The Seller contributed the
remaining 30% of assets to the Limited Partnership in exchange for its 30%
limited partnership interest. The total purchase price was allocated to the
purchased assets and liabilities based on their estimated fair values and
exceeded the fair value of the net assets acquired by approximately
$5.2 million.

     On October 16, 1998, USPI purchased, through USPE, 100% of the issued and
outstanding stock of Clinica Sagrado Corazon, S.A., a hospital and Spanish
corporation, and interests ranging from 55% to 100% in ten related companies
providing a variety of medical services, for approximately $27.5 million in
cash. The total purchase price was allocated to the purchased assets and
liabilities based on their estimated fair values and exceeded the fair value of
the net assets acquired by approximately $17.8 million (using the exchange rate
in effect at the date of purchase).

     On November 5, 1998, USPI purchased, through USPE, 62% of the issued and
outstanding stock of Instituto Policlinico Santa Teresa, S.A., a hospital and
Spanish corporation, which also owns 60% of Resonancia Nuclear Magnetica, S.A.,
a Spanish corporation that provides magnetic resonance imaging services. The
total purchase price of approximately $8.8 million was allocated to the
purchased assets and liabilities based on their estimated fair values and
exceeded the fair value of the net assets acquired by approximately
$5.3 million (using the exchange rate in effect at the date of purchase). During
April 1999 and May 1999, USPI made stock purchases totaling $1.9 million in cash
for an additional 26% interest in Instituto Policlinico Santa Teresa, S.A.

     On December 4, 1998, a newly created subsidiary of USPI (Day-Op Consulting)
entered into certain agreements (Day-Op Agreements) with the shareholders of
Day-Op Surgery Center of Long Island, Inc. (Day-Op Center) and Day-Op Management
Company, Inc. (Day-Op Management). As defined in the Day-Op Agreements, Day-Op
Consulting acquired 100% of the outstanding common stock of Day-Op Management
for $300,000 and certain tangible net assets of Day-Op Center for $1.4 million
(the Asset and Stock Purchase). In addition, Day-Op Consulting and the
shareholders of Day-Op Center entered into a Consulting and Administrative
Agreement whereby Day-Op Consulting provides certain administrative and
consulting services to Day-Op Center in exchange for a monthly service fee. The
State of New York did not approve the Day-Op Agreements until December 1999.
However, the Day-Op Agreements provided that they become effective, upon state
approval, retroactive to December 4, 1998. Because of the uncertainty regarding
the state of New York approval process, no amounts or activity with respect to
the Agreements was recognized in the 1998 consolidated financial statements. As
a result, the accompanying 1999 consolidated statement of operations reflects
operating results for the period from December 4, 1998 through December 31, 1999
and the 1999 accompanying consolidated balance sheet includes the acquired
assets of Day-Op Center, the net assets of Day-Op Management, and short-term
debt of $1.7 million representing the cost of the Asset and Stock Purchase.

     The Day-Op Agreements also provided for a note receivable from Day-Op
Consulting to Day-Op Center in the amount of $11.4 million. Accordingly,
$13.1 million of cash, which was escrowed in 1998 and reported as restricted
cash in the accompanying 1999 and 1998 consolidated balance sheets, was released
from escrow on January 4, 2000 and used to settle the $1.7 million of short-term
acquisition debt related to the Asset and Stock Purchase and fund the
$11.4 million note receivable.

                                      F-14
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On December 18, 1998, USPI entered into an asset purchase agreement to
purchase certain management agreements related to the operations of five
ambulatory surgery centers located in the Dallas and Ft. Worth, Texas
metropolitan area (HealthFirst Transaction). In addition, USPI acquired a 20%
interest in two of the five ambulatory surgery centers (Equity Centers). The
total cost of $8.2 million, all paid to unrelated parties, exceeded the fair
value of the identifiable net assets acquired by $7.6 million of which
$5.5 million was allocated to the management agreements and $2.1 million was
allocated to goodwill. USPI is also obligated to offer (the Buyup) to purchase
newly issued partnership units that would increase USPI's ownership interest by
40% in each of the Equity Centers at a price based upon the financial
performance of the centers. Successful completion of any or all of the Buyup
further obligates USPI to make additional payments to the parties who sold USPI
the equity interests. USPI was not obligated to buy any partnership units under
the Buyup at December 31, 1999.

     On February 1, 1999, USPI acquired, for $400,000 in cash, a 50% interest in
Texas Health Ventures Group, L.L.C. (THVG  1), which held ownership interests in
one operational surgery center and three surgery centers under development in
the Dallas/Fort Worth, Texas metropolitan area. THVG is a limited liability
company which facilitates the joint management and development by USPI and
Baylor Health System (Baylor) of ambulatory surgery centers.

     In May 1999, USPI purchased through USPE, a 70% interest in USP
Dermoestetica, S.L. for $1.6  million in cash. The total purchase price was
allocated to the purchased assets and liabilities and exceeded the fair value of
the net assets by approximately $1.1 million.

     On June 1, 1999, USPI entered into an additional ambulatory surgery joint
venture with Baylor by contributing its equity investments and management
agreements acquired in the December 1998 HealthFirst Transaction to a newly
created limited liability company, THVG/HealthFirst, L.L.C. (THVG 2). In
exchange for its contribution to THVG 2, USPI received a 51% ownership interest
in THVG 2. Baylor contributed 100% of the assets of two operational surgery
centers to THVG  1, in exchange for receiving a 49% ownership in THVG 2 as well
as convertible subordinated note payable from USPI in the amount of
$3.3 million. The joint venture agreements for THVG 1 and THVG 2 have
non-compete clauses and provide for shared management services and fees. On
August 1, 1999 and October 1, 1999, USPI invested additional cash of
$2.7 million and $740,400, respectively, in THVG  2, which acquired additional
ownership interests in the two operational surgery centers in which it had
previously invested, increasing THVG 2's ownership interest in the centers from
20% to 40% and 20% to 57%, respectively.

     On June 30, 1999, USPI acquired 100% of the stock of Texas Outpatient
Surgicare Center, Inc. (TOPS GP), a Texas corporation that is the general
partner with a 63% ownership interest in TOPS Specialty Hospital, Ltd. (TOPS), a
Limited Partnership that operates a surgical hospital in Houston, Texas.
Concurrent with its acquisition of TOPS GP, USPI also facilitated the
acquisition by TOPS GP of an additional 31% interest in TOPS. In connection with
the acquisition of the additional limited partner interests, USPI issued
warrants for the purchase of 100,000 shares of its common stock at an exercise
price of $4.00 per share in exchange for non-compete agreements with the selling
limited partners. Subsequent to these transactions, TOPS borrowed $15 million,
guaranteed by USPI. TOPS GP subsequently sold limited partner interests
representing approximately 25% ownership of TOPS. Total net cash consideration
paid by USPI for these acquisition transactions was approximately $11 million.
As a result of these transactions, USPI owns 100% of TOPS GP, which in turn owns
approximately 69% of TOPS. The total purchase price was allocated to the
purchased assets and liabilities and exceeded the fair value of the net assets
by approximately $12.2 million.

     On July 1, 1999, USPI acquired 100% of the assets used to operate Warner
Park Surgery Center in Chandler, Arizona for approximately $5.1 million in cash.
The total purchase price was allocated to

                                      F-15
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


the purchased assets and liabilities and exceeded the fair value of the net
assets by approximately $4.2 million.

     On September 1, 1999, USPI acquired 100% of the assets used to operate two
ambulatory surgery centers in the Houston metropolitan area, for approximately
$12  million in cash. The total purchase price was allocated to the purchased
assets and liabilities and exceeded the fair value of the net assets by
approximately $9.2 million.

     The terms of certain of USPI's acquisition agreements provide for
additional consideration to be paid to or received from the seller based on
certain financial targets for the acquired facilities. The potential for
additional consideration ranges from USPI receiving a return of $1  million of
amounts previously paid to the sellers to an estimated maximum of USPI paying up
to an additional $13.1 million. Additional consideration paid or received, if
any, will be paid or received in cash and will be recorded as an increase or
decrease to goodwill at the time of payment or receipt. There were no payments
made or received under these agreements during December 31, 1999 and 1998.

     The acquisitions of majority interests and step acquisitions referred to
above were accounted for under the purchase method of accounting, and
accordingly, the accompanying statements of operations and comprehensive loss do
not include any revenues or expenses related to these acquisitions prior to the
respective closing dates. The unconsolidated ownership interests acquired are
accounted for under the equity method of accounting. Following are the unaudited
pro forma results for the year ended December 31, 1999 and the period from
February 27, 1998 (inception) through December 31, 1998 as if the consolidated
acquisitions occurred on February  27, 1998 (inception).


                                                             PERIOD FROM
                                                             FEBRUARY 27,
                                                                 1998
                                                             (INCEPTION)
                                          YEAR ENDED           THROUGH
                                         DECEMBER 31,        DECEMBER 31,
                                             1999                1998
                                         -------------       ------------
Net operating revenues...............     $86,670,584        $67,590,931
Income (loss) before income taxes....      (2,840,259)           648,967


These unaudited pro forma results have been prepared for comparative purposes
only. The pro forma results do not purport to be indicative of the results of
operations which would have actually resulted had the acquisitions been in
effect on February 27, 1998, nor are they necessarily indicative of the results
of operations that may be achieved in the future.

(3)  INTANGIBLE ASSETS

     At December 31, intangible assets consisted of the following:

<TABLE>
<CAPTION>
                                          ESTIMATED
                                            USEFUL
                                            LIVES           1999           1998
                                         ------------    -----------    -----------
<S>                                      <C>             <C>            <C>
     Goodwill........................      25 years      $65,601,492    $40,388,455
     Management contracts............    5 - 17 years      6,317,990      5,471,107
     Other...........................      5 years         1,044,783        747,604
                                                         -----------    -----------
                                                          72,964,265     46,607,166
     Less accumulated amortization...                     (3,087,291)      (783,759)
                                                         -----------    -----------
          Net intangible assets......                    $69,876,974    $45,823,407
                                                         ===========    ===========
</TABLE>

                                      F-16
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4)  PROPERTY AND EQUIPMENT

     At December 31, property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                          ESTIMATED
                                            USEFUL
                                            LIVES            1999           1998
                                         ------------    ------------    -----------
<S>                                      <C>             <C>             <C>
     Land and land improvements......         --         $  2,418,669    $   738,000
     Buildings and leasehold
       improvements..................    7 - 50 years      44,205,265     28,612,582
     Equipment.......................    3 - 12 years      34,095,622      9,071,272
     Furniture and fixtures..........    4 - 20 years       9,401,819      3,666,121
     Construction in progress........                       1,646,279         23,138
                                                         ------------    -----------
                                                           91,767,654     42,111,113
     Less accumulated depreciation...                     (32,349,572)    (1,529,802)
                                                         ------------    -----------
          Net property and
             equipment...............                    $ 59,418,082    $40,581,311
                                                         ============    ===========
</TABLE>

(5)  LONG-TERM DEBT

     At December 31, long-term debt consisted of the following:


                                            1999              1998
                                         -----------       -----------
Lines of credit......................    $25,029,151       $ 2,853,000
Senior subordinated notes............     23,407,234         1,493,337
Notes payable to financial
  institution........................     14,623,907           --
Mortgage notes.......................      1,584,447         2,296,000
Loans to former owners of
  subsidiaries.......................      1,116,155         2,103,000
Capital lease obligations............      4,873,743         1,889,851
Other................................      2,049,147         1,040,308
                                         -----------       -----------
          Total long-term debt.......     72,683,784        11,675,496
Less current portion.................     (9,390,882)       (4,437,107)
                                         -----------       -----------
          Long-term debt, less
             current portion.........    $63,292,902       $ 7,238,389
                                         ===========       ===========

     Total borrowings under lines of credit were approximately $25.0 million at
December 31, 1999 including $22.0 million owed to a commercial bank as part of a
credit agreement dated June 29, 1999 (the Credit Agreement), allowing the
Company to borrow up to $25.0 million at an interest rate of LIBOR plus 1%. The
Credit Agreement and any borrowings thereunder mature June 30, 2001; interest
payments are due quarterly. Repayment of amounts borrowed under the Credit
Agreement is guaranteed by WCAS. The other lines of credit, all unsecured, are
held by several of the Company's subsidiaries, mature at various times in 2000
and have variable rates of interest ranging from MIBOR plus 0.25% to MIBOR plus
0.85%. MIBOR was approximately 3.8% at December 31, 1999. Fees paid for the
unused portion of the lines of credit were approximately $16,000 in 1999 and
$-0- in 1998.

     During 1998, the Company entered into a Securities Purchase Agreement which
grants certain stockholders and note holders the right to obtain a specified
amount of senior subordinated notes aggregating not more than $20,120,000 in
principal, all of which had been issued at December 31, 1999. The notes are
subordinated to all senior indebtedness, bear interest at 7% which is payable
annually beginning April 30, 2000, and mature April 30, 2008. The notes are
required to be repaid in the event of a change in control, as defined. In
addition, the Company issued a convertible subordinated note payable in the
amount of $3.3 million with a conversion price of $3.50 per share of common
stock to Baylor in setting up its two joint ventures with Baylor, THVG 1 and
THVG 2. Interest at a rate of 5.07% is payable quarterly on the Baylor note,
with all principal due on the maturity date of June 1, 2007.

                                      F-17
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Notes payable to financial institutions of $14.6 million have principal and
interest due periodically at fixed rates ranging from 8.15% to 9.78% and
variable rates ranging from LIBOR plus 2.25% to LIBOR plus 2.75% through various
maturity dates, the latest of which is in 2009. LIBOR was 6.18% at December 31,
1999. At December 31, 1999, USPI had entered into two interest rate swap
transactions related to these loans as the fixed rate payor with a fixed rate of
6.59% on notional amounts of $3,666,667 and $2,503,000.

     Mortgage notes totaling $1.6 million are owed by two of the company's
subsidiaries and are payable in periodic installments through maturity dates not
later than 2028 and bear interest at rates ranging from 3.75% to 6.25%.

     Amounts totaling $1.1 million are owed to the former owners of companies
acquired by the Company during 1998. Interest, which ranges from MIBOR plus 0.5%
to MIBOR plus 1.5%, and principal payments are due at various dates over the
next three years.

     Capital lease obligations totaling $4.9 million are secured by underlying
equipment and have interest rates ranging from 3.20% to 14.42%.

     The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1999 are as follows: 2000, $9,390,882; 2001,
$25,709,499; 2002, $3,163,374; 2003, $2,900,393; 2004, $2,596,959; thereafter,
$28,922,677.

(6)  LEASES

     USPI leases various office equipment and office space under a number of
operating lease agreements, which expire at various times through the year 2020.
Such leases do not involve contingent rentals, nor do they contain significant
renewal or escalation clauses. Office leases generally require USPI to pay all
executory costs (such as property taxes, maintenance and insurance).

     Minimum future payments under noncancelable leases, with remaining terms in
excess of one year as of December 31, 1999 are as follows:


YEAR ENDING                               CAPITAL            OPERATING
DECEMBER 31,                               LEASES             LEASES
------------                             ----------         -----------
  2000...............................    $1,620,271         $ 2,271,320
  2001...............................     1,449,199           2,211,812
  2002...............................     1,225,298           1,897,733
  2003...............................       628,241           1,733,231
  2004...............................       254,000           1,724,807
  Thereafter.........................       264,077           3,983,842
                                         ----------         -----------
     Total minimum lease payments....    $5,441,086         $13,822,745
                                         ==========         ===========
Amount representing interest.........      (567,343)
                                         ----------
          Present value of minimum
             lease payments..........    $4,873,743
                                         ==========


     Total rent expense under operating leases was $1,815,529 and $538,792 for
the years ended December 31, 1999 and 1998, respectively.

(7)  REDEEMABLE PREFERRED STOCK, SERIES A AND SERIES B

     USPI has authorized 31,200 shares of Series A redeemable preferred stock
with a $.01 par value and authorized 2,716 shares of Series B redeemable
preferred stock with a $.01 par value (collectively Preferred Stock). USPI may
redeem some or all of the outstanding shares of preferred stock at any time for
$1,000 per share plus accrued dividends. USPI has a mandatory requirement to
redeem all Preferred Stock on April 30, 2008 or upon an initial public offering
of its common stock registered under the Securities Act of 1933, as amended.
Additionally, preferred stockholders may choose to

                                      F-18
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


have their shares redeemed in the case of a change in control, as defined.
Shares of redeemed Preferred Stock are deemed retired. Preferred Stock has a
stated liquidation preference of $1,000 plus accrued dividends and is senior to
all common shares. Dividends are cumulative and accrue at an annual rate of $50
per share through April 30, 2000 and $75 per share thereafter. Accumulated
dividends are non-interest bearing and accrue whether or not declared and
whether or not funds are legally available for payment. As of December 31, 1999
and 1998, USPI had issued 31,200 shares of Series A redeemable preferred stock
for $31,200,000 and 2,716 shares of Series B redeemable preferred stock for
$2,716,000. Accrued dividends for Series A and Series B were $1,931,470 and
$192,383, respectively, at December 31, 1999 and $371,465 and $56,585,
respectively, at December 31, 1998.

     The holders of Series B redeemable preferred stock have the right at any
time after the second anniversary of issuance to convert any such shares to
Class A common stock. Each share of Series B redeemable preferred stock is
converted by multiplying by 1,000 with the result divided by the greater of the
base conversion price, currently $2 per share, or the fair market value of the
Class A common stock, as determined by the Board of Directors.

(8)  STOCKHOLDERS' EQUITY

     Employees and certain independent contractors holding common stock in USPI
are bound by a Stockholders Agreement (Agreement), which restricts the ability
to transfer or assign Company common stock under certain circumstances and also
contains certain repurchase rights.

     The Agreement terminates at the earlier of April 30, 2008, an initial
public offering, the consummation of any sale, transfer or other disposition of
substantially all the capital stock or assets of USPI for cash, or with respect
to any stockholder, the date on which such stockholder no longer owns any shares
of capital stock.

     Receivables from sales of stock, primarily resulting from purchases of
common stock by employees, are presented in the consolidated balance sheet as a
deduction from stockholders' equity. Interest of 7% is due quarterly and
principal payments are due May 1, 2002. Payment of the principal shall
accelerate in the event of termination of employment, an initial public offering
of common stock by USPI, or a change in control of USPI, as defined.

REGISTRATION RIGHTS AGREEMENT

     Donald E. Steen, William H. Wilcox, Sue H. Shelley, Paul B. Queally, D.
Scott Mackesy, Dave A. Alexander, Jr., M.D., Dale L. Stegall, Mark Garvin, John
C. Garrett, M.D., Baylor Health Services, Welsh, Carson, Anderson & Stowe VII,
L.P., WCAS Healthcare Partners, L.P., WCAS Capital Partners III, L.P., FFT
Partners I, L.P. and FFT Executive Partners I, L.P. and other holders of the
Company's Class A common stock and shares of common stock issuable upon the
conversion of the Company's Class A common stock are entitled under a
registration rights agreement with the Company to the following registration
rights for the shares of Class A common stock and shares of common stock
issuable upon conversion of Class A common stock held by them:

     o  at any time Welsh, Carson, Anderson & Stowe VII, L.P., on behalf of the
        holders of registrable securities, may require, on two occasions only,
        that the Company use its best efforts to register registrable securities
        for public resale;

     o  holders of registrable securities under the agreement may require the
        Company to use its best efforts to register their shares of common stock
        on a Form S-3 registration statement, provided that the Company is
        eligible to use the form and provided further that the Company shall not
        be required to effect the registration more than once in any 180 day
        period; and

     o  if the Company registers any common stock at any time, either for its
        own account or for the account of other security holders, holders of
        registrable securities under the agreement are

                                      F-19
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


        entitled to include their shares of common stock in the registration,
        subject to the ability of the underwriters to limit the number of shares
        included in the offering in view of market conditions.

     The Company will bear all registration expenses other than underwriting
discounts and commissions in connection with any registration under the
registration rights agreement. All holders of registrable securities have agreed
not to exercise their registration rights during the 180-day period following
the date of this prospectus without the consent of Credit Suisse First Boston
Corporation.

(9)  RELATED PARTY TRANSACTIONS

     Several partners in a law firm that provides legal services to USPI are
also partners in an entity that owns shares of USPI's stock. Legal fees related
to those services were approximately $326,000 and $152,000 for the years ended
December 31, 1999 and 1998, respectively.

     A minority interest owner of HMT provided financial advisory services to
USPE related to acquisitions. Fees related to these services were approximately
$50,000 and $413,000 for the years ended December 31, 1999 and 1998,
respectively.

     USPI has entered into agreements with certain majority and minority owned
surgery centers to provide management services. As compensation for these
services, USPI charges the surgery centers management fees which are either
fixed in amount or represent a fixed percentage of each center's net revenue
less bad debt. The percentages range from 3.8% to 7.0%. Amounts recognized under
these agreements totaled approximately $5,111,000 and $223,000 for the years
ended December 31, 1999 and 1998, respectively.

     USPI held a note receivable from HMT at December 31, 1998 in the amount of
$903,000. In May 1999, HMT settled the note by (1) transferring $510,000 in
equity securities to USPI and (2) paying $393,000 in cash to USPE in exchange
for USPE assuming the remaining $393,000 obligation to USPI.

     USPI has an agreement with HMT to manage its hospitals in Spain. In
initiating this arrangement in 1998, USPI incurred costs of $2,180,874.

(10)  INCOME TAXES

     Income tax expense (benefit) attributable to income consists of:

<TABLE>
<CAPTION>
                                         CURRENT        DEFERRED        TOTAL
                                         --------       --------       --------
<S>                                      <C>            <C>            <C>
Year ended December 31, 1999:
     U.S. federal....................    $  --          $  --          $  --
     State and local.................       --             --             --
     Foreign.........................     352,425         98,112        450,537
                                         --------       --------       --------
          Total tax expense..........    $352,425       $ 98,112       $450,537
                                         ========       ========       ========
</TABLE>

<TABLE>
<CAPTION>
                                         CURRENT        DEFERRED          TOTAL
                                         --------       ---------       ---------
<S>                                      <C>            <C>             <C>
Year ended December 31, 1998:
     U.S. federal....................    $  --          $  --           $  --
     State and local.................       --             --              --
     Foreign.........................       --           (301,112)       (301,112)
                                         --------       ---------       ---------
          Total tax benefit..........    $  --          $(301,112)      $(301,112)
                                         ========       =========       =========
</TABLE>

                                      F-20
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Income tax expense (benefit) differed from the amount computed by applying
the U.S. federal income tax rate of 34% to pretax loss for the years ended
December 31, 1999 and 1998 as follows:


                                           YEARS ENDED DECEMBER 31,
                                         -----------------------------
                                            1999              1998
                                         -----------       -----------
Computed "expected" tax benefit......    $(2,173,706)      $(1,437,999)
Increase (reduction) in income taxes
  resulting from:
     Net operating loss
       carryforwards.................        --                 20,944
     Transactions not deducted for
       tax in Spain..................        664,020           --
     Removal of 1% tax rate
       differential between Spain and
       US............................        (59,830)          (17,022)
     Capitalized professional fees...        --                 47,250
     Goodwill........................       (106,839)           47,131
     Increase in valuation
       allowance.....................      1,743,838           362,166
     Equity investment in foreign
       subsidiary....................        306,189           665,557
     Other...........................         76,865            10,861
                                         -----------       -----------
          Total......................    $   450,537       $  (301,112)
                                         ===========       ===========

     The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities for the years ended
December 31, 1999 and 1998 are presented below.


                                           YEARS ENDED DECEMBER 31,
                                         -----------------------------
                                            1999              1998
                                         -----------       -----------
Deferred tax assets:
     Net operating loss
       carryforwards.................    $ 2,320,529       $   540,458
     Organization costs due to
       difference in amortization
       lives.........................      1,709,000            33,606
     Basis difference in start-up
       costs.........................        148,264           155,383
     Spanish tax credit..............        669,000           518,112
     Other accruals..................         95,410           --
                                         -----------       -----------
          Total deferred tax
             assets..................      4,942,203         1,247,559
Less valuation allowance.............     (2,320,228)         (576,390)
                                         -----------       -----------
          Net deferred tax assets....    $ 2,621,975       $   671,169
                                         ===========       ===========
Deferred tax liabilities:
     Basis difference of
     acquisitions....................    $ 6,018,000       $ 3,886,000
     Capital leases..................         74,000           173,000
     Unrealized gains................         98,975            82,000
     Other...........................         16,000            17,057
                                         -----------       -----------
          Total deferred tax
             liabilities.............    $ 6,206,975       $ 4,158,057
                                         ===========       ===========


     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. At December 31, 1999,
USPI had net operating loss carryforwards for federal income tax purposes of
$6,254,796, which are available to offset future federal taxable income, if any,
through 2018. In addition, USPI has $570,289 of net operating loss
carryforwards, which are only

                                      F-21
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


available to reduce future federal taxable income related to the Health
Horizons, Inc. acquisition. The valuation allowance which primarily reserves the
net operating loss carryforwards, was increased by $1,743,838 during the period.

(11)  STOCK OPTION PLAN

     On April 30, 1998, USPI adopted a stock option plan (the Plan) pursuant to
which USPI's Board of Directors may grant non-qualified or incentive stock
options to selected employees, officers, and directors of USPI. The Plan
authorizes grants of options to purchase up to 4,250,000 shares of par value
$.01 common stock. The Board of Directors or a designated committee shall have
the sole authority to determine which employees receive grants, the type of
grant to be received, vesting period and all other option terms. Incentive stock
options granted have an option price no less than 100% of the fair market value
of the common stock on the date of grant with the term not to exceed ten years.

     At December 31, 1999, there were 1,679,200 shares available for grant under
the Plan. The per share weighted-average fair values at date of grant for stock
options granted for the years ended December 31, 1999 and 1998 were $1.03 and
$0.85, respectively, and were estimated using the Black Scholes option pricing
model, using the following assumptions:


                                                  YEARS ENDED
                                                 DECEMBER 31,
                                               -----------------
                                               1999         1998
                                               ----         ----
      Expected life in years...............    5.0          5.0
      Interest rate........................    6.3%         6.0%
      Dividend yield.......................    0.0%         0.0%
      Volatility...........................    0.0%         0.0%


     USPI applies APB Opinion No. 25 in accounting for its Plan whereby no
compensation expense is recognized when options are granted at a price equal to
the fair market value of the underlying stock on the date of grant. Accordingly,
no compensation cost has been recognized for stock options granted in the
accompanying financial statements. Had USPI determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
USPI's net loss would have resulted in the pro forma amounts indicated below:


                                                  YEARS ENDED DECEMBER 31,
                                               -------------------------------
                                                  1999                1998
                                               -----------         -----------
      Net loss  As reported................    $(6,843,790)        $(3,928,298)
                 Pro forma.................     (7,214,503)         (4,129,306)


                                      F-22
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Stock option activity during 1999 and 1998 was as follows:


                                                               WEIGHTED
                                                               AVERAGE
                                                NUMBER         EXERCISE
                                               OF SHARES       PRICE
                                               ---------        -----
      Balance at February 27, 1998.........       --            $--
           Granted.........................    2,283,300         2.80
           Exercised.......................       --             --
           Forfeited.......................       --             --
           Expired.........................       --             --
                                               ---------        -----
      Balance at December 31, 1998.........    2,282,300         2.80
           Granted.........................      657,500         3.70
           Exercised.......................       --               --
           Forfeited.......................     (370,000)        3.25
           Expired.........................       --               --
                                               ---------        -----
      Balance at December 31, 1999.........    2,570,800        $3.00
                                               =========        =====


     Exercise prices for options outstanding as of December 31, 1999 ranged from
$2.00 to $5.00. The following table provides certain information with respect to
stock options outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                                                                           WEIGHTED
                                                              WEIGHTED      AVERAGE
                                                  STOCK       AVERAGE      REMAINING
                    RANGE OF                     OPTIONS      EXERCISE    CONTRACTUAL
                 EXERCISE PRICES               OUTSTANDING     PRICE         LIFE
                 ---------------               -----------    --------    -----------
      <S>                                      <C>            <C>         <C>
      Under $3.50..........................     1,195,800      $2.00         8.44
      $3.50 - $5.00........................     1,375,000       3.87         9.01
                                                ---------      -----         ----
                                                2,570,800      $3.00         8.74
                                                =========      =====         ====
</TABLE>

     The following table provides certain information with respect to stock
options exercisable at December 31, 1999:

                                                                   WEIGHTED
                                                                   AVERAGE
                    RANGE OF                   STOCK OPTIONS       EXERCISE
                 EXERCISE PRICES                EXERCISABLE         PRICE
                 ---------------               -------------       --------
      Under $3.50..........................       464,445           $2.00
      $3.50 - $5.00........................       244,375            3.88
                                                  -------           -----
                                                  708,820           $2.65
                                                  =======           =====

(12)  LOSS PER SHARE

     Basic and diluted loss per common share are based on the weighted average
number of common shares outstanding. Convertible preferred stock, convertible
debt and outstanding options and warrants to purchase shares have not been
included in the computation of loss per common share because the effect would be
anti-dilutive. Net loss attributable to common stockholders and net loss per
common share include preferred stock dividends for purposes of this computation.

     The potential common stock amounts listed below were not included in the
computation of diluted earnings per share because to do so would have been
antidilutive for the periods presented.

                                      F-23
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                                             PERIOD FROM
                                                                                            FEBRUARY 27,
                                          NINE MONTHS      NINE MONTHS                          1998
                                             ENDED            ENDED                          (INCEPTION)
                                         SEPTEMBER 30,    SEPTEMBER 30,     YEAR ENDED         THROUGH
                                             2000             1999         DECEMBER 31,     DECEMBER 31,
                                          (UNAUDITED)      (UNAUDITED)         1999             1998
                                         -------------    -------------    -------------    -------------
<S>                                      <C>              <C>              <C>              <C>
Stock options........................      3,008,300        2,693,300        2,570,800        2,283,300
Warrants.............................        900,000          100,000          100,000          --
Convertible subordinated debt........        939,210          939,210          939,210          --
Series C preferred stock.............      5,548,741          --               --               --
</TABLE>

(13)  SEGMENT DISCLOSURES

     USPI has adopted Statement of Financial Accounting Standards No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (SFAS 131).
SFAS 131 establishes standards for reporting information about operating
segments in annual financial statements. USPI's business is the operation of
hospitals, outpatient surgical centers and related businesses in the United
States, Spain and the United Kingdom. USPI's chief operating decision maker, as
that term is defined in the accounting standard, regularly reviews financial
information about its hospitals and surgical centers for assessing performance
and allocating resources both domestically and abroad. Accordingly, USPI's
reportable segments consist of (1) U.S. based facilities, (2) Spain based
facilities, and (3) U.K. based facilities (beginning with USPI's acquisition of
Aspen in April 2000, as discussed in Note 15).

<TABLE>
<CAPTION>
          NINE MONTHS ENDED
         SEPTEMBER 30, 2000
             (UNAUDITED)                     U.S.           SPAIN           U.K           TOTAL
         ------------------              ------------    -----------    -----------    ------------
<S>                                      <C>             <C>            <C>            <C>
Net patient service revenue..........    $ 36,363,773    $41,647,709    $16,747,891    $ 94,759,373
Other revenue........................       2,325,756      1,087,784        597,519       4,011,059
                                         ------------    -----------    -----------    ------------
          Total revenues.............    $ 38,689,529    $42,735,493    $17,345,410    $ 98,770,432
                                         ============    ===========    ===========    ============
Depreciation and amortization........    $  3,872,368    $ 3,614,875    $ 1,807,448    $  9,294,691
Operating income.....................       3,566,698      1,054,513      2,462,222       7,083,433
Net interest income (expense)........      (4,150,375)    (1,556,758)    (2,063,189)     (7,770,322)
Total assets.........................     113,398,464     88,472,137     90,884,787     292,755,388
Capital expenditures.................       4,591,470      6,433,549      1,216,123      12,241,142
</TABLE>

<TABLE>
<CAPTION>
          NINE MONTHS ENDED
         SEPTEMBER 30, 1999
             (UNAUDITED)                     U.S.           SPAIN          TOTAL
         ------------------              ------------    -----------    ------------
<S>                                      <C>             <C>            <C>
Net patient service revenue..........    $  9,188,262    $34,176,730    $ 43,364,992
Other revenue........................       3,893,536        974,731       4,868,267
                                         ------------    -----------    ------------
          Total revenues.............    $ 13,081,798    $35,151,461    $ 48,233,259
                                         ============    ===========    ============
Depreciation and amortization........    $  1,611,405    $ 3,920,337    $  5,531,742
Operating income (loss)..............      (3,034,810)       149,086      (2,885,724)
Net interest income (expense)........        (893,573)      (626,368)     (1,519,941)
Total assets.........................     100,151,045     72,083,513     172,234,558
Capital expenditures.................       1,091,993      8,200,850       9,292,843
</TABLE>

                                      F-24
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
          DECEMBER 31, 1999                  U.S.           SPAIN          TOTAL
          -----------------              ------------    -----------    ------------
<S>                                      <C>             <C>            <C>
Net patient service revenue..........    $ 18,050,768    $45,719,000    $ 63,769,768
Other revenue........................       5,322,816      1,320,000       6,642,816
                                         ------------    -----------    ------------
          Total revenues.............    $ 23,373,584    $47,039,000    $ 70,412,584
                                         ============    ===========    ============
Depreciation and amortization........    $  2,701,448    $ 5,174,000    $  7,875,448
Operating income (loss)..............      (3,545,137)       448,000      (3,097,137)
Net interest income (expense)........        (606,710)    (2,209,000)     (2,815,710)
Total assets.........................     100,268,233     76,435,000     176,703,233
Capital expenditures.................       2,913,901      9,891,791      12,805,692
</TABLE>

<TABLE>
<CAPTION>
             PERIOD FROM
          FEBRUARY 27, 1998
         (INCEPTION) THROUGH
          DECEMBER 31, 1998                 U.S.           SPAIN          TOTAL
         -------------------             -----------    -----------    -----------
<S>                                      <C>            <C>            <C>
Net patient service revenue..........    $ 1,719,092    $17,397,000    $19,116,092
Other revenue........................        200,979      1,255,000      1,455,979
                                         -----------    -----------    -----------
          Total revenues.............    $ 1,920,071    $18,652,000    $20,572,071
                                         ===========    ===========    ===========
Depreciation and amortization........    $   315,123    $ 1,700,000    $ 2,015,123
Operating income (loss)..............     (1,849,844)    (2,380,874)    (4,230,718)
Net interest income (expense)........        696,656       (472,000)       224,656
Total assets.........................     43,142,402     81,650,000    124,792,402
Capital expenditures.................        405,055      3,543,696      3,948,751
</TABLE>

(14)  COMMITMENTS AND CONTINGENCIES

      (A)  RESTRICTED CASH

           As discussed in note 2, approximately $13.1 million in cash remained
           in escrow at December 31, 1999 prior to the final consummation of the
           Day-Op transactions, which were approved by the State of New York in
           December 1999. This amount is reported as restricted cash in the
           accompanying consolidated balance sheets.

       (B)  FINANCIAL GUARANTEES

            As of December 31, 1999, USPI had issued guarantees aggregating
            $1.6 million on borrowings of unconsolidated affiliated companies.
            No amount has been accrued for USPI's obligation under these
            guaranty arrangements.

            As of December 31, 1999, USPE had issued guarantees on certain
            acquisitions in the amount of $1.2 million. Short-term investments
            of approximately $1.0 million and other long-term investments of
            approximately $200,000 at December 31, 1999 have been pledged as
            security for these guarantees. USPE has also received guarantees in
            the amount of $2.9 million from the sellers of certain acquisitions
            regarding potential liabilities at the date of acquisition.
            Approximately $2.3 million of these guarantees received by USPE
            remained outstanding at December 31, 1999.

       (C)  GENERAL AND PROFESSIONAL LIABILITY

            In its normal course of business, USPI is subject to claims and
            lawsuits relating to patient treatment. USPI believes that its
            liability for damages resulting from such claims and lawsuits is
            adequately covered by insurance or is adequately provided for in its
            consolidated financial statements.

                                      F-25
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       (D)  SELF INSURANCE

            The Company is self-insured for healthcare for its U.S. employees up
            to predetermined amounts above which third party insurance applies.
            The Company believes that the reserves established at December 31,
            1999, which were estimated based on actual employee health claim
            patterns, adequately provide for any liability under this
            arrangement.

(15)  SUBSEQUENT EVENTS

     Effective March 1, 2000, USPI acquired, for $200,000 in cash, an additional
25% in the ambulatory surgery center joint venture in Kansas City, increasing
its ownership in the center from 50% to 75%.

     In March 2000, USPE reached an agreement with a commercial lender that
provides USPE with the ability to borrow up to 100 million Pounds, equivalent to
$100.7 million at December 31, 1999. Borrowings under the agreement mature in
2007 and are secured by certain assets of USPE and its subsidiaries. During
March 2000, USPE borrowed the equivalent of approximately $19.9 million under
this agreement, primarily to fund its acquisition of a 72% interest in Clinica
San Camilo, S.A., a hospital in Madrid, Spain for $17.6 million in cash, and its
acquisition of 100% of Centro Radiologico, S.L., a radiology center in Madrid,
Spain for $1.6 million in cash.

     In March 2000, the Company received additional funding from its investors
totaling $54,750,000, which consisted of $30,750,000 of 10% senior subordinated
notes due March 27, 2010, $5,250,000 in Class A common stock, and $18,750,000 in
Series C Convertible Preferred Stock including 800,000 detachable warrants. The
Series C Convertible Preferred Stock per share liquidation value is determined
by adding $1,000 per share plus an amount equal to 7% on each $1,000 per share
amount compounded quarterly. Series C shares are converted to common stock by
dividing the liquidation value by $3.50. The detachable warrants are exercisable
at $.01 per warrant into common stock at $3.50 per share. In connection with the
Series C shares and detachable warrants, the $18,750,000 in proceeds was
allocated $15,950,000 to the Series C Convertible Preferred Stock and $2,800,000
to the warrants as reflected in the September 30, 2000 consolidated statement of
stockholders' equity. The $2,800,000 was calculated based on a Black Scholes
valuation model using the following assumptions: expected life in years -- 2,
interest rate 5.12%, dividend yield 0% and volatility 0%. The Company paid no
interest on the 10% senior subordinated notes during the nine months ended
September 30, 2000.

     In April 2000, the Company, through Global Healthcare Partners Limited
(GHPL, a wholly-owned United Kingdom subsidiary), acquired 100% of the
outstanding common stock of Aspen Healthcare Holdings Limited (Aspen) for
approximately $35.2 million in cash and $54.0 million in debt. Aspen owns and
operates two hospitals in England. The debt portion of the acquisition cost was
financed with borrowings under a credit agreement between GHPL and a commercial
bank that provides for total borrowings of up to 42 million British pounds,
equivalent to $68.1 million at December 31, 1999. Borrowings under this
agreement mature in 2010 and are secured by certain assets of GHPL and its
subsidiaries. This acquisition was accounted for as a purchase.

(16)  SUBSEQUENT EVENTS (UNAUDITED)

ORTHOLINK ACQUISITION

     In February 2001, the Company acquired OrthoLink Physicians Corporation
(OrthoLink) by issuing 9,961,737 shares of the Company's common stock for all of
the outstanding capital stock of OrthoLink. In addition, the Company assumed
options to purchase shares of OrthoLink common stock

                                      F-26
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


that the Company converted into options to purchase 1,895,942 shares of USPI
common stock. This acquisition was accounted for as a purchase.

EMPLOYMENT AGREEMENTS

     On November 1, 2000, the Company entered into a four-year employment
agreement with Donald E. Steen that provides that he will serve as the Company's
chairman and chief executive officer. The employment agreement provides for
annual base compensation of $400,000. Mr. Steen is also eligible for a
performance bonus of up to 100% of his annual base salary. During any time when
Mr. Steen is no longer serving as chief executive officer and, therefore, only
serving as chairman, his annual base compensation would be reduced by $100,000.
The employment agreement provides that, at any time after November 1, 2002,
Mr. Steen is entitled to resign and that the Company's board of directors is
entitled to remove Mr. Steen from his position as chief executive officer, but
not as chairman of the board of directors. In the event that the Company
terminates the employment agreement other than for cause, Mr. Steen would be
entitled to receive his annual base salary for the balance of the term of the
employment agreement plus the average annual bonus, if any, awarded to
Mr. Steen for the prior two calendar years until the later of 12 months
following termination or the expiration of the initial four-year term of the
agreement. The employment agreement further provides that all of Mr. Steen's
stock options automatically become fully vested if the Company terminates the
agreement for any reason other than for cause.

     On January 1, 2001, the Company entered into a two-year employment
agreement with William H. Wilcox that provides that he will serve as the
Company's president. The employment agreement provides for annual base
compensation of $350,000. Mr. Wilcox is also eligible for a performance bonus of
up to 100% of his base salary. In the event that the Company terminates the
employment agreement other than for cause, Mr. Wilcox would be entitled to
receive his annual base salary for the balance of the term of the employment
agreement plus the average annual bonus, if any, awarded to Mr. Wilcox for the
prior two calendar years until the later of 12 months following termination or
the expiration of the initial two-year term of the agreement. The employment
agreement further provides that if the Company terminates the agreement for any
reason other than for cause all of Mr. Wilcox's stock options automatically
become fully vested.

STOCK OPTIONS AND RESTRICTED STOCK PURCHASE PLAN

     The Company adopted a 1998 stock option plan on April 30, 1998. This plan
was amended in fiscal 2000 to increase the number of common stock authorized for
issuance under the plan to a total of 6,000,000 shares. The Company does not
intend to grant any additional stock options under this plan after the
completion of an initial public offering. The plan provides for grants of
incentive stock options to the Company's employees, including officers and
employee-directors, and for grants of non-qualified stock options and the right
to purchase restricted stock to the Company's officers, other employees,
directors and consultants and other key persons.

2001 EQUITY-BASED COMPENSATION PLAN

     USPI plans to adopt a 2001 Equity-Based Compensation Plan in 2001. At any
given time the number of shares of common stock issued under the plan plus the
number of shares of common stock issuable upon the exercise of all outstanding
awards under the plan and USPI's 1998 stock option plan may not exceed the
lesser of [      ] shares or 15% of the total number of shares of common stock
then outstanding, assuming the exercise of all outstanding options and warrants.
The plan provides for grants of incentive stock options, within the meaning of
Section 422 of the Internal Revenue Code, to USPI employees, including officers
and employee-directors, and for grants of nonstatutory stock

                                      F-27
<PAGE>
         UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


options, restricted stock awards, stock appreciation rights, phantom stock
awards and annual incentive awards to USPI employees, consultants and
nonemployee directors.

EMPLOYEE STOCK PURCHASE PLAN

     USPI plans to adopt an Employee Stock Purchase Plan in 2001. The plan
provides for the grant of stock options to selected eligible employees. Any
eligible employee may elect to participate in the plan by authorizing USPI's
options and compensation committee to make payroll deductions to pay the
exercise price of an option at the time and in the manner prescribed by USPI's
options and compensation committee. This payroll deduction may be a specific
amount or a designated percentage to be determined by the employee, but the
specific amount may not be less than an amount established by the Company and
the designated percentage may not exceed an amount of eligible compensation
established by the Company from which the deduction is made.

OPTION GRANT

     In December 2000, the Company granted approximately 1,000,000 options to
employees. In connection with this option grant, the Company recorded a
compensation charge in December 2000 for approximately $10,000, representing the
difference between the option exercise price of $4.50 and the estimated fair
value of the options based on the underwriter's share valuation, multiplied by
the options granted and considering the four-year vesting period.

(17)  LIQUIDITY (UNAUDITED)

     The Company has reached the limits of its current financing arrangements.
Additionally, GHPL defaulted on certain of its debt covenants with the Bank of
Scotland. The Company's plans to address its liquidity are as follows:

          o  GHPL received a waiver from the Bank of Scotland as a result of
             USPI and WCAS agreeing to support the operations of GHPL.

          o  Finalized a $10,000,000 increase in its revolving line of credit
             with Chase Bank, which amount is guaranteed by WCAS.

           o  Initiate negotiations for a $75 million credit facility.

          o  Finalize its initial public offering (IPO) for net proceeds of
             $110 million.

     In the event negotiations for the $75 million credit facility and the IPO
are not consummated, the Company will seek additional financing from WCAS.

                                      F-28
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
OrthoLink Physicians Corporation

     We have audited the accompanying consolidated balance sheets of OrthoLink
Physicians Corporation as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of OrthoLink
Physicians Corporation as of December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

                                          /s/  ERNST & YOUNG LLP

Nashville, Tennessee
March 14, 2000

                                      F-29
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                         SEPTEMBER 30,       -----------------------
                                             2000              1999           1998
                                         -------------       --------       --------
<S>                                      <C>                 <C>            <C>
                                         (UNAUDITED)
ASSETS
Current assets:
     Cash and cash equivalents.......      $  5,342          $     46       $  2,704
     Accounts receivable, less
       allowances of $288, $236 and
       $170 at September 30, 2000,
       December 31, 1999 and 1998,
       respectively..................        42,470            42,607         32,225
     Related party receivable........        --                   625            625
     Deferred taxes..................         1,654             1,654            278
     Other current assets............         3,549             1,092            788
                                           --------          --------       --------
Total current assets.................        53,015            46,024         36,620
Leasehold improvements...............         6,218             2,754          2,115
Leased equipment.....................         2,966             2,588          1,783
Furniture and equipment..............        17,902             8,965          7,408
Computer equipment and software......         7,544             5,274          4,004
Construction in progress.............        --                 --               312
                                           --------          --------       --------
                                             34,630            19,581         15,622
Less accumulated depreciation and
  amortization.......................        (7,452)           (4,476)        (2,049)
                                           --------          --------       --------
Leasehold improvements and equipment,
  net................................        27,178            15,105         13,573
Service agreements, net..............        18,970            18,059         15,542
Goodwill, net........................        10,694             7,393         11,295
Investments in joint ventures........         5,144             4,516          3,927
Other assets.........................           332               839            600
Joint venture project costs..........         2,944             8,977            701
                                           --------          --------       --------
     Total assets....................      $118,277          $100,913       $ 82,258
                                           ========          ========       ========
</TABLE>

                                      F-30
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                              DECEMBER 31
                                              SEPTEMBER 30,             -----------------------
                                                   2000                   1999           1998
                                         ------------------------       --------       --------
<S>                                      <C>                            <C>            <C>
                                           (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable...................            $  1,441               $  4,427       $  1,009
  Salaries and benefits payable......               6,368                  4,811          3,765
  Due to physician groups............               5,685                  3,434          4,746
  Deferred revenue...................           --                         1,954          2,254
  Current portion of capital lease
     obligations.....................               2,300                    702            403
  Other accrued expenses.............               7,029                  3,817          2,254
  Net liabilities of discontinued
     operations......................           --                           782          --
                                                 --------               --------       --------
Total current liabilities............              22,823                 19,927         14,431
Line of credit.......................              39,500                 37,000         24,000
Notes payable........................               3,223                  --             --
Deferred taxes.......................                 569                    336            770
Capital lease obligations, less
  current portion....................               6,490                  1,078          1,166
                                                 --------               --------       --------
          Total liabilities..........              72,605                 58,341         40,367
Minority interests...................                 725
Series A Redeemable Preferred Stock,
  $.01 par value, 150 authorized.....           --                         --             --
Stockholders' equity:
  Common stock, $.01 par value,
     30,000 authorized; 10,038, 9,907
     and 9,752 issued and outstanding
     at September 30, 2000,
     December 31, 1999 and 1998,
     respectively....................                 100                     99             98
  Class A common stock, convertible,
     $.01 par value, 10,000
     authorized; 5,898 issued and
     outstanding at September 30,
     2000, December 31, 1999 and
     1998............................                  59                     59             59
  Class B common stock, convertible,
     $.01 par value; 1,000 authorized
     and issued at September 30,
     2000, December 31, 1999 and
     1998, respectively..............                  10                     10             10
  Additional paid-in capital.........              40,968                 40,780         40,470
  Retained earnings..................               3,810                  1,624          1,254
                                                 --------               --------       --------
Total stockholders' equity...........              44,947                 42,572         41,891
                                                 --------               --------       --------
Total liabilities and stockholders'
equity...............................            $118,277               $100,913       $ 82,258
                                                 ========               ========       ========
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-31
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
                       CONSOLIDATED STATEMENTS OF INCOME
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                         NINE MONTHS       NINE MONTHS
                                            ENDED             ENDED           YEAR ENDED DECEMBER 31
                                        SEPTEMBER 30,     SEPTEMBER 30,    ----------------------------
                                             2000             1999           1999      1998      1997
                                        --------------   ---------------   --------   -------   -------
<S>                                     <C>              <C>               <C>        <C>       <C>
                                        (UNAUDITED)      (UNAUDITED)
Net service agreement revenue........      $74,372           $58,214       $ 80,341   $60,709   $31,553
Contract revenue.....................       11,272            26,475         32,091    12,405     --
Other income.........................        3,615             1,326          2,134     1,497       636
                                           -------           -------       --------   -------   -------
Total income.........................       89,259            86,015        114,566    74,611    32,189
Operating expenses:
  Clinic expenses....................       54,560            44,130         58,749    43,371    22,889
  Contract expenses..................        9,428            24,775         29,567    11,896     --
  General and administrative.........        2,316             1,627          1,706     1,215     1,256
  Personnel costs....................        5,605             5,341          6,336     5,090     3,303
  Depreciation and amortization......        4,128             2,447          3,149     1,871       584
  Rent and lease expense.............        6,723             3,468          7,614     6,339     3,093
  Interest expense...................        3,521             1,396          2,798     1,151       229
  Loss on disposal of software.......       --                 1,089          1,093     --        --
  Equity in earnings of
     unconsolidated entities.........       (1,114)             (514)          (820)     (203)    --
  Minority interest in earnings of
     consolidated subsidiaries.......           (9)          --               --        --        --
                                           -------           -------       --------   -------   -------
                                            85,158            83,759        110,192    70,730    31,354
Income from continuing operations
  before income taxes................        4,101             2,256          4,374     3,881       835
Provision for income taxes...........       (1,915)             (736)        (1,906)   (1,061)       (5)
                                           -------           -------       --------   -------   -------
Income from continuing operations....        2,186             1,520          2,468     2,820       830
Discontinued operations:
Loss from operations of OMS, less
  applicable income tax benefit of
  $361 and $333 at December 31, 1999
  and 1998, respectively.............       --               --                 590       544     --
Loss on disposal of OMS, including
  provision of $782 for operating
  losses during phase-out period,
  less applicable income tax benefit
  of $924............................       --               --               1,508     --        --
                                           -------           -------       --------   -------   -------
Net income...........................      $ 2,186           $ 1,520       $    370   $ 2,276   $   830
                                           =======           =======       ========   =======   =======
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-32
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND
                THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                             CLASS A             CLASS B
                                      COMMON STOCK        COMMON STOCK        COMMON STOCK      ADDITIONAL   RETAINED
                                    -----------------   -----------------   -----------------    PAID-IN     EARNINGS
                                    SHARES    AMOUNT    SHARES    AMOUNT    SHARES    AMOUNT     CAPITAL     (DEFICIT)    TOTAL
                                    -------   -------   -------   -------   -------   -------   ----------   ---------   --------
<S>                                 <C>       <C>       <C>       <C>       <C>       <C>       <C>          <C>         <C>
Balance at
  January 1, 1997.................   2,474     $ 25      2,305      $23       --       $--       $12,336      $(1,852)   $ 10,532
  Sale of stock...................    --       --        3,593       36       --       --         18,000        --         18,036
  Stock issued for acquisitions...   6,291       63       --       --         --       --          3,273        --          3,336
  Exercise of stock options.......      40     --         --       --         --       --             16        --             16
  Stock issuance costs............    --       --         --       --         --       --            (95)       --            (95)
  Net income......................    --       --         --       --         --       --          --             830         830
                                    ------     ----      -----      ---      -----     ----      -------      -------    --------
Balance at
  December 31, 1997...............   8,805       88      5,898       59       --       --         33,530       (1,022)     32,655
  Sale of stock...................    --       --         --       --        1,000       10        4,990        --          5,000
  Stock issued for acquisitions...     909        9       --       --         --       --          1,932        --          1,941
  Stock reacquired................     (12)    --         --       --         --       --             (7)       --             (7)
  Exercise of stock options.......      50        1       --       --         --       --             25        --             26
  Net income......................    --       --         --       --         --       --          --           2,276       2,276
                                    ------     ----      -----      ---      -----     ----      -------      -------    --------
Balance at
  December 31, 1998...............   9,752       98      5,898       59      1,000       10       40,470        1,254      41,891
  Stock issued for acquisitions...     151        1       --       --         --       --            397        --            398
  Stock reacquired................     (22)    --         --       --         --       --           (100)       --           (100)
  Exercise of stock options.......      26     --         --       --         --       --             13        --             13
  Net income......................    --       --         --       --         --       --          --             370         370
                                    ------     ----      -----      ---      -----     ----      -------      -------    --------
Balance at
  December 31, 1999...............   9,907       99      5,898       59      1,000       10       40,780        1,624      42,572
  Stock issued for
    acquisitions..................      71        1       --       --         --       --            149        --            150
  Exercise of stock options.......      60     --         --       --         --       --             39        --             39
  Net income......................    --       --         --       --         --       --          --           2,186       2,186
                                    ------     ----      -----      ---      -----     ----      -------      -------    --------
Balance at
  September 30, 2000..............  10,038     $100      5,898      $59      1,000     $ 10      $40,968      $ 3,810    $ 44,947
                                    ======     ====      =====      ===      =====     ====      =======      =======    ========
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-33
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31
                                         NINE MONTHS ENDED    NINE MONTHS ENDED    ------------------------------
                                         SEPTEMBER 30, 2000   SEPTEMBER 30, 1999     1999       1998       1997
                                         ------------------   ------------------   --------   --------   --------
<S>                                      <C>                  <C>                  <C>        <C>        <C>
                                          (UNAUDITED)          (UNAUDITED)
OPERATING ACTIVITIES
Income from continuing operations....        $   2,186            $   1,520        $  2,468   $  2,820   $    830
Adjustments to reconcile net income
  to net cash provided by (used in)
  operating activities:
    Equity in earnings of joint
      ventures.......................           (1,114)                (514)           (820)      (203)        --
    Minority interest in earnings of
      consolidated subsidiaries......               (9)                  --              --         --         --
    Loss on disposal of software.....               --                1,089           1,093         --         --
    Depreciation and amortization....            4,128                2,447           3,149      1,871        584
    Deferred taxes...................              233                   --          (1,810)       492         --
    Changes in operating assets and
      liabilities, net of effects of
      acquisitions:
         Accounts receivable.........              137               (8,836)        (10,157)   (13,636)   (14,298)
         Other current assets........           (2,457)                 413            (338)      (202)      (855)
         Accounts payable, salaries
           and benefits payable and
           other accrued
           liabilities...............            1,540                3,679           8,629       (847)       893
         Due to physician groups.....            2,251                1,422          (1,312)     1,690      2,421
         Deferred revenue............           (1,954)                (300)           (300)     2,254          5
                                             ---------            ---------        --------   --------   --------
  Net cash provided by (used in)
    operating activities.............            4,941                  920             602     (5,761)   (10,420)
INVESTING ACTIVITIES
Cash paid for acquisitions...........           (5,214)              (3,363)         (3,363)   (13,761)    (4,499)
Purchases of leasehold improvements
  and equipment......................          (15,049)              (2,066)         (3,375)    (3,261)    (4,132)
Related party receivable.............              625                   --              --       (625)        --
Distributions from joint venture
  partners...........................              786                  218             459        (78)        --
Investments in joint ventures........             (300)                (278)           (440)    (3,271)        --
Decrease (increase) in joint venture
  project costs......................            6,033               (4,011)         (8,276)      (701)      (375)
Distributable minority interest......              733                   --              --         --
Other assets.........................              508                   34             (72)        (5)        (9)
                                             ---------            ---------        --------   --------   --------
  Net cash used in investing
    activities.......................          (11,878)              (9,466)        (15,067)   (21,702)    (9,015)
FINANCING ACTIVITIES
Proceeds from issuance of stock, net
  of stock reacquired................               --                   --              --      4,994     17,958
Cash paid to repurchase stock........               --                  (49)           (100)        --         --
Proceeds from stock option
  exercises..........................               39                   13              13         25         --
Proceeds from line of credit.........            8,000                8,000          13,000     24,000         --
Payments on line of credit...........           (5,500)                  --              --         --         --
Proceeds from notes payable..........            3,454                   --              --         --         --
Payments on notes payable............             (231)                  --              --     (3,455)        --
Proceeds from capital lease
  obligations........................            9,854                   --              --         --         --
Payments on capital lease
  obligations........................           (2,844)                (137)           (603)      (213)        --
Deferred financing costs.............               --                   --             (55)      (162)      (229)
                                             ---------            ---------        --------   --------   --------
  Net cash provided by financing
    activities.......................           12,772                7,827          12,255     25,189     17,729
DISCONTINUED OPERATIONS
Loss from discontinued operations....             (539)                  --            (448)      (544)        --
                                             ---------            ---------        --------   --------   --------
  Net cash used in discontinued
    operations.......................               --                   --            (448)      (544)        --
Net change in cash and cash
  equivalents........................            5,296                 (719)         (2,658)    (2,818)    (1,706)
Cash and cash equivalents at
  beginning of period................               46                2,704           2,704      5,522      7,228
                                             ---------            ---------        --------   --------   --------
Cash and cash equivalents at end of
  period.............................        $   5,342            $   1,985        $     46   $  2,704   $  5,522
                                             =========            =========        ========   ========   ========
</TABLE>

                                      F-34
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31
                                         NINE MONTHS ENDED     NINE MONTHS ENDED     ----------------------------------
                                         SEPTEMBER 30, 2000    SEPTEMBER 30, 1999     1999         1998          1997
                                         ------------------    ------------------    ------       -------       -------
<S>                                      <C>                   <C>                   <C>          <C>           <C>
                                          (UNAUDITED)           (UNAUDITED)
SUPPLEMENTAL CASH FLOW INFORMATION:
Effects of acquisitions:
  Fair value of assets acquired......        $   7,311             $   3,792         $3,792       $20,876       $11,771
  Fair value of liabilities
  assumed............................           (1,947)                  (31)           (31)       (5,174)       (1,371)
  Notes payable issued for
     acquisitions....................         --                    --                 --           --           (2,565)
  Stock issued for acquisitions......             (150)                 (398)          (398)       (1,941)       (3,336)
                                             ---------             ---------         ------       -------       -------
Cash paid for acquisitions...........        $   5,214             $   3,363         $3,363       $13,761       $ 4,499
                                             =========             =========         ======       =======       =======
Income taxes paid....................        $   1,001             $     248         $  333       $   241       $ --
                                             =========             =========         ======       =======       =======
Interest paid........................        $   2,490             $   1,325         $1,977       $   547       $ --
                                             =========             =========         ======       =======       =======
Assets acquired under capital lease
  obligations........................        $   9,854             $     463         $  814       $ 1,783       $ --
                                             =========             =========         ======       =======       =======
</TABLE>

            See accompanying notes to consolidated financial statements.

                                      F-35
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 1999
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

     OrthoLink Physicians Corporation (the "Company" or "OrthoLink") is a
physician practice management company that develops, in selected geographic
markets, comprehensive and integrated networks of musculoskeletal care systems
that provide high quality care in a cost-effective manner. As of December 31,
1999, the Company operated 16 clinics with 196 physicians in six states and
manages the orthopaedic services of five hospitals. In addition, the Company has
minority interests in joint ventures that provide orthopaedic outpatient
services.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

     The consolidated balance sheet as of September 30, 2000, the consolidated
statement of stockholders' equity for the nine-month period ended September 30,
2000, and the consolidated statements of income and cash flows for the
nine-month periods ended September 30, 2000 and 1999 (the "unaudited interim
consolidated statements") have been prepared by the Company's management in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions of Regulation S-X
and are unaudited. In the opinion of the Company's management, the unaudited
combined financial statements include all adjustments consisting of only normal
recurring adjustments necessary for a fair presentation of the results.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted from the unaudited combined
financial statements. The unaudited interim consolidated financial statements
should be read in conjunction with the audited financial statements appearing
herein.

CASH AND CASH EQUIVALENTS

     Cash equivalents consist of highly-liquid investments with an original
maturity of three months or less when purchased.

ACCOUNTS RECEIVABLE

     Accounts receivable consist of receivables from patients for medical
services which the Company has purchased from physician groups. Such amounts are
purchased net of contractual allowances and estimated bad debts. In addition,
the Company had approximately $1,227 and $1,257 of receivables due from
hospitals as of December 31, 1999 and 1998, respectively, with which the Company
has service agreements. Concentration of credit risk relating to accounts
receivable is limited to some extent by the diversity of the number of patients
and payors and the geographic dispersion of the Company's operations.

LEASEHOLD IMPROVEMENTS AND EQUIPMENT

     Leasehold improvements and equipment are stated at cost and depreciated
using the straight-line method over the estimated useful lives of the assets.
The general range of useful lives is 10  years for equipment, furniture, and
leasehold improvements and 5 years for computer equipment and software.

                                      F-36
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

JOINT VENTURES

     The Company has entered into joint venture agreements with certain of its
affiliated physicians obtaining ownership interests ranging from 15% to 39%.
Earnings from investments in joint ventures, are accounted for under the equity
method. The joint ventures generally provide ancillary services which compliment
the services provided by the Company and its affiliated physicians. The Company
has entered into management agreements with some of the joint ventures for the
provision of non-medical related services in exchange for a fee. Such agreements
are for terms consistent with the term of the joint venture agreements and range
from 5 to 25 years.

INTANGIBLE ASSETS

SERVICE AGREEMENTS

     The Company enters into service agreements with each acquired practicing
physician group for a period of 40  years. Upon acquisition of clinic assets by
OrthoLink, the physician groups maintain their separate corporate entities and
enter into employment and noncompete agreements with the practicing physicians.
Costs of obtaining clinic service agreements are amortized using the
straight-line method over a period of 25  years. Clinic service agreements
represent the exclusive right to operate the Company's clinics in affiliation
with the related physician groups during the term of the agreements. Accumulated
amortization of clinic service agreements amounted to $1,271 and $549 at
December 31, 1999 and 1998, respectively.

     As part of the service agreement, physician groups are required to maintain
medical malpractice insurance which names the Company as an additional insured.
The Company is also required to maintain professional liability insurance naming
the physician groups as additional insureds.

GOODWILL

     Goodwill represents the excess of purchase price over the fair value of net
assets acquired. Goodwill is amortized over 25 years. Accumulated amortization
on goodwill was $631 and $175 at December 31, 1999 and 1998, respectively.

     The Company reviews its intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. The measurement of possible impairment is based upon determining
whether projected undiscounted future cash flows of the acquired business, or
from the use of the asset, over the remaining amortization period is less than
the carrying amount of the asset. The amount of impairment, if any, is measured
based on projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. As of December 31, 1999, in the
opinion of management, there has been no such impairment, other than described
in Note 4.

JOINT VENTURE PROJECT COSTS

     Joint venture costs associated with the acquisition, development and
construction of surgery center projects are capitalized as a cost of that
project. Costs to fund these projects were $8,977 and $701 as of December 31,
1999 and 1998, respectively.

SELF-INSURANCE

     The Company is self-insured with respect to employee health insurance for
claims up to $15  on an individual basis and maintains commercial stop-loss
insurance for individual claims in excess of $100, up to an individual maximum
of $2,000 per participant. The Company has accrued self-insurance reserves of
$482 and $678 at December 31, 1999 and 1998, respectively.

                                      F-37
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFERRED REVENUE

     The Company receives payment for certain of its hospital contracts one
month in advance. Revenue is recognized on such amounts as services are
performed, which is generally within 30 days of receipt of payment.

USE OF ESTIMATES

     Management of the Company has made certain estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts reported in the consolidated balance sheets for cash,
accounts receivable, accounts payable and due to physician groups approximate
fair value. The Company's debt bears interest at variable market rates and
approximates fair value.

RECLASSIFICATIONS

     Certain reclassifications have been made in the 1997 and 1998 financial
statements to conform to the 1999 presentation. These reclassifications had no
effect on the net results of operations as previously reported.

CHANGE IN ACCOUNTING POLICY

     Effective January 1, 1998, the Company changed its policy with respect to
amortization of intangible assets. All existing and future intangible assets
will be amortized over a period not to exceed 25 years from the inception of the
respective intangible assets.

2.  REVENUES AND EXPENSES

NET SERVICE AGREEMENT REVENUE

     Net medical service revenue for orthopaedic clinics is recorded at
established rates, reduced by allowances for doubtful accounts and contractual
adjustments and physician expenses. Contractual adjustments arise due to the
terms of certain reimbursement and managed care contracts. Such adjustments
represent the difference between charges at established rates and estimated
recoverable amounts and are recognized in the period the services are rendered.
Physician expenses consist primarily of salaries and benefits for physicians and
other professional services.

     The allowance for doubtful accounts represents management's estimate of
potential credit issues associated with amounts due from patients, commercial
insurers, and other third-party payors.

     Net service agreement revenue consists of the following amounts:

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                         -----------------------------------------
                                           1999            1998            1997
                                         ---------       ---------       ---------
<S>                                      <C>             <C>             <C>
Medical service revenue..............    $ 314,106       $ 239,411       $ 117,687
Contractual and bad debt
allowances...........................     (162,915)       (114,176)        (56,143)
                                         ---------       ---------       ---------
     Net medical service revenue.....      151,191         125,235          61,544
Physician expenses...................      (70,850)        (64,526)        (29,991)
                                         ---------       ---------       ---------
     Net service agreement revenue...    $  80,341       $  60,709       $  31,553
                                         =========       =========       =========
</TABLE>

                                      F-38
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company's affiliated physician groups derived approximately 20%, 16%
and 17% of their net medical service revenue from services provided under the
Medicare program for the years ended December 31, 1999, 1998 and 1997,
respectively. Other than the Medicare program, the physician groups have no
customers which individually represent more than 10% of net medical service
revenue.

     The following sets forth the net service agreement revenue generated under
management service agreements by clinics who accounted for more than 10% of the
Company's net service agreement revenue:


                                          YEAR ENDED DECEMBER 31,
                                         --------------------------
               CLINIC                    1999       1998       1997
               ------                    ----       ----       ----
Tennessee Orthopaedic Alliance,
Inc. ................................    21.8%      19.7%      41.7%
Resurgens Orthopaedic, P.C. .........    18.6       16.2       23.3
New Mexico Orthopaedics Associates,
P.C. ................................    10.6       10.3        --
Tennessee Orthopaedic Clinic, P.C.       11.2       11.5        --


CONTRACT REVENUE AND EXPENSE

     The Company manages the orthopaedic services of five hospitals with which
it has service agreements. The service agreements are generally for terms of one
year and require the respective hospital to pay the Company a fixed fee on a
monthly basis. The Company is then responsible for the costs of certain
overhead, supplies and personnel required by the service agreement. The excess
of fees received less expenses incurred by the Company is retained by the
Company up to a predetermined limit, at which point such excess is generally
shared in equal proportion between the respective hospital and the Company. The
Company is responsible for any expenses which exceed fees received. Upon
termination of a service agreement, any amounts payable to a hospital are
generally due within 30 days.

3.  ACQUISITIONS

ACQUIRED CLINICS

     The Company acquired four clinics with 14 physicians in 1999, seven clinics
with 32 physicians in 1998 and 12 clinics with 115 physicians in 1997.
Consideration for the clinic acquisitions, including cash, common stock, and
notes payable, was $3,792 in 1999, $8,667 in 1998 and $10,379 in 1997. The
Company exchanged a total of 151, 909 and 6,291 shares of Common Stock in 1999,
1998 and 1997, respectively. The Company also entered into long-term service
agreements with each of the clinics physician groups. Intangible assets of
approximately $3,298 and $7,850 in 1999 and 1998, respectively, were recorded
related to the underlying service agreement rights. The acquisitions were
accounted for as purchases and the accompanying consolidated financial
statements include the results of their operations, as defined in the service
agreements, from the dates of acquisition.

ACQUIRED BUSINESSES

     Effective September 1, 1998, the Company acquired the outstanding common
stock of OrthoExcel, Inc. and related entities ("OrthoExcel") in exchange for
200 shares of the Company's common stock plus $5,100 in cash. OrthoExcel manages
the orthopaedic services of hospitals with which it has contracts. The
transaction was accounted for as a purchase and resulted in goodwill of $10,250.

     Effective January 1, 1998, the Company acquired Occupational Medicine
Services, Inc. and related entities ("OMS"). OMS performs workers compensation
medical case management services and was acquired by the Company for $1,102 in
cash. In addition, the Company issued warrants to

                                      F-39
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


purchase 225 shares of Company Common Stock for $5.00 per share contingent on
OMS meeting certain income levels, which were not achieved. The transaction was
accounted for as a purchase and resulted in goodwill of $1,402. See Note 4.

     The consolidated financial statements of the Company include the results of
operations for OrthoExcel and OMS from their respective dates of acquisition.

4.  DISCONTINUED OPERATIONS

     On March 14, 2000, the Company entered into a formal plan to dispose of
OMS. The Company expects to complete the disposal by June 2000. The operations
of OMS are reflected in the consolidated statements of income as discontinued
operations for both 1999 and 1998. Also, the Company recorded a loss on disposal
of $2,432 related to the write-off of assets expected to be disposed and losses
expected to be incurred during the phase-out period. Based on the allocated debt
balance attributable to those operations, the Company allocated interest expense
of $78. Income taxes have been allocated using the same overall rate incurred by
the Company in each of the years presented.

5.  LEASES

     The Company has entered into operating and capital leases for office space,
office equipment and computer equipment. At December 31, 1999, future minimum
lease payments under noncancelable operating leases and capital lease
obligations are as follows:

<TABLE>
<CAPTION>
                                          ORTHOLINK         CLINIC
                                          OPERATING       OPERATING        CAPITAL
                                            LEASE           LEASE           LEASE
                                         OBLIGATIONS     OBLIGATIONS     OBLIGATIONS      TOTAL
                                         ------------    ------------    ------------    -------
<S>                                      <C>             <C>             <C>             <C>
2000.................................        $358          $ 7,330          $  821         8,509
2001.................................         307            4,857             633         5,797
2002.................................         310            2,637             397         3,344
2003.................................       --               2,148             158         2,306
2004.................................       --               1,455              29         1,484
Thereafter...........................       --               3,423          --             3,423
                                             ----          -------          ------       -------
                                             $975          $21,850          $2,038       $24,863
                                             ====          =======                       =======
Less amounts representing interest...                                         (258)
                                                                            ------
                                                                             1,780
Less current portion.................                                         (702)
                                                                            ------
                                                                            $1,078
                                                                            ======
</TABLE>

     Total rental expense for operating leases (excluding amounts paid to
related parties) was approximately $7,312, $5,117 and $2,908 for the years ended
December 31, 1999, 1998 and 1997, respectively. The Company leases certain
office space and equipment from related parties. Expense incurred related to
transactions under agreements with related parties was $303, $270 and $172 for
the years ended December 31, 1999, 1998 and 1997, respectively. The capital
lease obligations were incurred to purchase equipment for use in clinics with
which the Company has service agreements. Future payments under capital lease
obligations are reimbursable under the service agreements. Accumulated
amortization of equipment under capital lease obligations was $731 and $172 at
December 31, 1999 and 1998, respectively.

                                      F-40
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  LONG-TERM DEBT

     On December 18, 1998, the Company amended its line of credit agreement to
increase the aggregate principal available thereunder to $45,000 and to extend
the maturity date to December 28, 2001. The line is collateralized by the
Company's assets and bears interest at the bank's prime interest rate or LIBOR,
plus 1%-2.25% depending upon the borrowing capacity of the Company as defined in
the line of credit agreement. At December 31, 1999, the Company had $37,000 of
outstanding borrowings under the line of credit, and had available borrowings of
$8,000.

     Effective December 31, 1999, the Company amended its line of credit
agreement that changed the definitions of certain debt covenant ratio terms.
Borrowings available under the agreement are subject to certain financial and
operating convenants, all of which the Company was in compliance with at
December 31, 1999.

7.  STOCKHOLDERS' EQUITY

     The Company has authorized Common Stock, Class A Common Stock and Class B
Common Stock. Holders of Common Stock and Class A Common Stock are both entitled
to one vote per share. Class B Common Stock does not carry with it any voting
privileges but is entitled to a liquidation preference of $5.00 per share and
may be converted to common stock upon the occurrence of certain events. Class A
Common Stock is convertible into Common Stock at any time at the option of the
holder and is entitled to a liquidation preference of $5.00 per share.

     The Company also has authorized 150 shares of Series A Redeemable Preferred
Stock. At December 31, 1999 and 1998 there were no such outstanding shares.

8.  INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities were as follows:

<TABLE>
<CAPTION>
                                              DECEMBER 31
                                         ---------------------
                                          1999          1998
                                         -------       -------
<S>                                      <C>           <C>
Deferred tax assets:
  Amortization.......................    $ --          $   112
  Accrued vacation...................        713           411
  AMT credit.........................        439           259
  Disposal of OMS....................        924         --
  Net operating loss carryforward....      3,952         1,397
  Other..............................         17            17
                                         -------       -------
Total gross deferred tax asset.......      6,045         2,196
Less valuation allowance.............     (2,043)       (1,098)
                                         -------       -------
Net deferred tax asset...............      4,002         1,098
Deferred tax liabilities:
  Tax over book basis of partnership
     investments.....................       (155)        --
  Amortization.......................       (142)        --
  Depreciation.......................     (2,387)       (1,590)
                                         -------       -------
Total gross deferred tax liability...     (2,684)       (1,590)
                                         =======       =======
Net deferred tax asset (liability)...    $ 1,318       $  (492)
                                         =======       =======
</TABLE>

                                      F-41
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At December 31, 1997, the Company had a valuation allowance for its
deferred tax assets in the amount of $398. The allowance related to these assets
was removed during 1998 with a corresponding decrease in the provision for
income taxes. The purchase of OrthoExcel during 1998 included deferred tax
assets subject to a valuation allowance in the amount of $1,098, which remained
on the Company's books at December 31, 1998. In 1999, the valuation allowance
increased to $2,043, the amount of federal net operating losses that the Company
may lose due to the IRC  ss382 limitation on net operating losses. If these
deferred tax assets are subsequently recognized, the related tax benefit will be
allocated to reduce intangible assets acquired in the transaction.

     As of December 31, 1999, the Company had federal and state net operating
loss carry-forwards of approximately $17.8 million expiring from 2012 to 2019.

     Significant components of federal income tax expense were as follows:


                                              YEAR ENDED DECEMBER 31
                                         --------------------------------
                                          1999         1998         1997
                                         ------       ------       ------
Current:
  Federal............................    $ --         $  236       $    5
  State..............................        59         --           --
Deferred
  Federal............................     1,555          696         --
  State..............................       292          129         --
                                         ------       ------       ------
Income tax expense...................    $1,906       $1,061       $    5
                                         ======       ======       ======

     The reconciliation of income tax expense computed at the federal statutory
tax rate to income tax expense is as follows:

                                              YEAR ENDED DECEMBER 31
                                         --------------------------------
                                          1999         1998         1997
                                         ------       ------       ------
Federal income taxes.................    $1,487       $1,320       $  265
State income tax, net of federal
benefit..............................       231           34         --
Change in valuation allowance........      --           (398)        (268)
Goodwill amortization................       136           46         --
Meals and entertainment..............        12           13         --
Other................................        40           46            8
                                         ------       ------       ------
Total income tax expense.............    $1,906       $1,061       $    5
                                         ======       ======       ======

9.  STOCK OPTION PLANS

     The Company has three stock option plans: (1) the 1996 Management Stock
Option Plan (the "Management Plan"), (2) the 1996 Physician's Stock Option Plan
(the "Physician's Plan"), and (3) the 1996 Director's Stock Option Plan (the
"Director's Plan").

     The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation" (FAS 123), requires
use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant no compensation expense is recognized.

                                      F-42
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Pro forma information regarding net income and earnings per share is
required by FAS 123 and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value of options granted during 1999, 1998 and 1997 was estimated at $0.00,
$0.49 and $0.13 per share, respectively, on the date of grant using a minimum
value option pricing model with the following weighted-average assumptions:
risk-free interest rates of 6.0%; dividend yields of 0%; and a weighted average
expected life of the options of approximately five years.

     Option valuation models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

     For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options vesting period. The Company's
pro forma information follows:

                                             YEAR ENDED DECEMBER 31
                                         -------------------------------
                                          1999         1998        1997
                                         ------       ------       -----
Net income...........................    $  370       $2,276       $ 830
Pro forma compensation expense from
stock options, net of taxes..........      (522)        (100)        (27)
                                         ------       ------       -----
Pro forma net (loss) income..........    $ (152)      $2,176       $ 803
                                         ======       ======       =====

     Stock option activity is as follows:

<TABLE>
<CAPTION>
                                                      AVERAGE                    AVERAGE                   AVERAGE
                                        MANAGEMENT    EXERCISE    PHYSICIAN'S    EXERCISE    DIRECTOR'S    EXERCISE
                                           PLAN        PRICE         PLAN         PRICE         PLAN        PRICE      TOTAL
                                        ----------    --------    -----------    --------    ----------    --------    -----
<S>                                     <C>           <C>         <C>            <C>         <C>           <C>         <C>
December 31, 1996....................       730        $ .50           63         $ .50          150        $ .50        943
  Granted............................     1,048          .51          266           .89        --            --        1,314
  Exercised..........................       (40)         .50        --             --          --            --          (40)
                                          -----        -----         ----         -----        -----        -----      -----
December 31, 1997....................     1,738          .51          329           .81          150          .50      2,217
  Granted............................       528         1.81           56          2.51        --            --          584
  Exercised..........................       (51)         .50        --             --          --            --          (51)
  Forfeited..........................      (133)         .51          (21)          .50        --            --         (154)
                                          -----        -----         ----         -----        -----        -----      -----
December 31, 1998....................     2,082          .83          364          1.09          150          .50      2,596
  Granted............................       355         5.00          202          4.76           10         5.00        567
  Exercised..........................       (26)         .51        --             --          --            --          (26)
  Forfeited..........................     --            --             (6)         --          --            --           (6)
                                          -----        -----         ----         -----        -----        -----      -----
December 31, 1999....................     2,411         1.45          560          2.37          160          .78      3,131
Available for grant..................       589         --            440          --             90           --      1,119
Options exercisable..................       859          .67          148           .95           90          .50      1,097
Option price range at                                                                                            $5.00$0.50-
  December 31, 1999..................    $0.50-$5.00               $0.50-$5.00                 $0.50-$5.00
</TABLE>

                                      F-43
<PAGE>
                        ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At December 31, 1999, the weighted-average remaining contractual life of
outstanding options was 8.6 years.

10.  EMPLOYEE BENEFIT PLANS

     The Company has a defined contribution retirement plan (the "OrthoLink
Plan") which covers substantially all employees and is designed to qualify under
Section 401(k) of the Internal Revenue Code of 1986. The OrthoLink Plan includes
a Company matching contribution not to exceed 6% of eligible employee
compensation and a discretionary profit sharing contribution not to exceed 6% of
total compensation. Employer contributions amounted to $1,445, $1,963 and $755
for the years ended December 31, 1999, 1998 and 1997, respectively.

11.  COMMITMENTS AND CONTINGENCIES

     The Company is subject to various claims and legal actions which arise in
the ordinary course of business. The Company has professional liability
insurance to protect against such claims or legal actions. In the opinion of
management, the ultimate resolution of such matters will be adequately covered
by insurance and will not have a material adverse effect on the Company's
financial position or results of operations.

     The Company and its affiliated physician groups are insured with respect to
medical malpractice risks on a claims-made basis. Management is not aware of any
claims against it or its affiliated physician groups which might have a material
impact on the Company's financial position.

     Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential
wrongdoing. While no such regulatory inquiries have been made, compliance with
such laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties, and exclusion from the Medicare and Medicaid programs.

     The Company has acquired and will likely continue to acquire entities with
prior operating histories. Acquired entities may have unknown or contingent
liabilities for failure to comply with healthcare laws and regulations, such as
billing and reimbursement, fraud and abuse and similar anti-referral laws.
Although the Company attempts to assure itself that no such liabilities exist
and obtains indemnification from prospective sellers covering such matters,
there can be no assurance that any such matter will be covered by
indemnification or, if covered, that the liability sustained will not exceed
contractual limits or the financial capacity of the indemnifying party.

12.  IMPACT OF YEAR 2000

     In late 1999, the Company completed its remediation and testing of systems.
As a result of those planning and implementation efforts, the Company
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company is not aware of
any material problems resulting from Year 2000 issues. The Company will continue
to monitor its mission critical computer applications and those of its suppliers
and vendors throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.

                                      F-44
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF
ASPEN HEALTHCARE HOLDINGS LIMITED:

We have audited the consolidated financial statements of Aspen Healthcare
Holdings Limited and subsidiaries (the "company") on pages 2 to 20 which have
been prepared under the historical cost convention and the accounting policies
set out on pages 5 to 6. As explained in the accounting policies, the financial
statements have not been prepared for the purposes of Section 226 of the
Companies Act 1985.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The directors are responsible for preparing the financial statements in
accordance with applicable United Kingdom law and accounting standards. Our
responsibilities, as independent auditors, are established in the United Kingdom
by the Auditing Practices Board and by our profession's ethical guidance. It is
our responsibility to report our opinion to you as to whether the financial
statements give a true and fair view.

BASIS OF AUDIT OPINION

We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board and with generally accepted auditing standards in the
United States. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements and of whether the
accounting policies are appropriate to the circumstances of the company,
consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregulatory or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.

OPINION

In our opinion the financial statements give a true and fair view of the state
of affairs of the company as at 31 December 1999 and 31 December 1998 and of the
company's income and cash flows for the year ended 31 December 1999 and the
period ended 31 December 1998 in conformity with generally accepted accounting
principles in the United Kingdom.

RECONCILIATION TO US GAAP

Accounting practices used by the company in preparing the accompanying financial
statements confirm with generally accepted accounting principles in the United
Kingdom, but do not conform with accounting principles generally accepted in the
United States. A description of these differences and a complete reconciliation
of consolidated net income and shareholders' equity to generally accepted
accounting principles in the United States is set forth in note 22.

ARTHUR ANDERSEN
CHARTERED ACCOUNTANTS

London, England

3 April 2000 (except with respect to
the matters discussed in note 22, as
to which the date is 12 February 2001).

                                      F-45
<PAGE>
CONSOLIDATED PROFIT AND LOSS ACCOUNT

<TABLE>
<CAPTION>
                                                     YEAR ENDED          PERIOD ENDED
                                                  31 DECEMBER 1999     31 DECEMBER 1998
                                         NOTES         Pounds                 Pounds
                                         -----    -----------------    -----------------
<S>                                      <C>      <C>                  <C>
TURNOVER.............................       1         23,312,597           18,739,552
Operating expenses...................                (18,945,502)         (14,697,766)
                                                     -----------          -----------
OPERATING PROFIT.....................                  4,367,095            4,041,786
Investment income....................       2             25,433               67,591
Interest payable and similar
charges..............................       3         (2,277,128)          (1,837,731)
                                                     -----------          -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE
TAXATION.............................       4          2,115,400            2,271,646
Tax on profit on ordinary
  activities.........................       7         (1,065,000)            (703,000)
                                                     -----------          -----------
PROFIT FOR THE FINANCIAL PERIOD
  TRANSFERRED TO RESERVES............      17          1,050,400            1,568,646
                                                     ===========          ===========
</TABLE>

     There were no recognised gains or losses in the year and the prior period
     other than those disclosed.

     The accompanying notes are an integral part of this consolidated profit and
loss account.

                                      F-46
<PAGE>
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                         AT                   AT
                                                  31 DECEMBER 1999     31 DECEMBER 1998
                                         NOTES           Pounds             Pounds
                                         -----    -----------------    -----------------
<S>                                      <C>      <C>                  <C>
FIXED ASSETS
Intangible assets....................       8         13,012,262           13,728,533
Tangible assets......................       9         25,688,943           22,227,323
                                                     -----------          -----------
                                                      38,701,205           35,955,856
CURRENT ASSETS
Stocks...............................      10            462,895              389,941
Debtors..............................      11          2,438,685            2,182,201
Cash at bank and in hand.............                      1,869              889,349
                                                     -----------          -----------
                                                       2,903,449            3,461,491
CREDITORS: Amounts falling due within
one year.............................      12         (8,850,865)          (5,888,712)
                                         ----        -----------          -----------
NET CURRENT LIABILITIES..............                 (5,947,416)          (2,427,221)
                                         ----        -----------          -----------
TOTAL ASSETS LESS CURRENT
  LIABILITIES........................                 32,753,789           33,528,635
CREDITORS: Amounts falling due after
  more than one year.................      13        (29,197,743)         (31,127,989)
PROVISIONS FOR LIABILITIES AND
  CHARGES............................      14           (532,000)            (427,000)
                                         ----        -----------          -----------
NET ASSETS...........................                  3,024,046            1,973,646
                                                     -----------          -----------
CAPITAL AND RESERVES
Called-up equity share capital.......      15             40,500               40,500
Share premium account................      16            364,500              364,500
Profit and loss account..............      16          2,619,046            1,568,646
                                         ----        -----------          -----------
TOTAL EQUITY SHAREHOLDERS' FUNDS.....      17          3,024,046            1,973,646
                                                     ===========          ===========
</TABLE>

The accompanying notes are an integral part of these balance sheets.

                                      F-47
<PAGE>
CONSOLIDATED CASH FLOW STATEMENT

<TABLE>
<CAPTION>
                                                     YEAR ENDED          PERIOD ENDED
                                                  31 DECEMBER 1999     31 DECEMBER 1998
                                         NOTES           Pounds              Pounds
                                         -----    -----------------    -----------------
<S>                                      <C>      <C>                  <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES...........................      18          5,964,511            5,773,310
Returns on investments and servicing
  of finance.........................      19         (1,975,866)          (1,403,337)
Taxation.............................      19         (1,072,954)          (1,289,730)
Capital expenditure and financial
investment...........................      19         (4,521,950)            (778,518)
Acquisition..........................      19           --                (24,423,425)
CASH OUTFLOW BEFORE MANAGEMENT OF
  LIQUID RESOURCES AND FINANCING
Financing............................      19            496,826           23,011,049
                                                     -----------          -----------
(Decrease) increase in cash in the
  period.............................      20         (1,109,433)             889,349
                                                     -----------          -----------
RECONCILIATION OF NET CASH FLOW TO
  MOVEMENT IN NET DEBT
                                                         1999                 1998
                                                        Pounds               Pounds
                                                     -----------          -----------

(Decrease) Increase in cash in the
period...............................      20         (1,109,433)             889,349
Cash inflow from loan financing......      20        (12,535,070)         (24,056,336)
Cash outflow on bank loans...........      20          1,500,000              750,000
Cash outflow on finance leases.......      20            591,310              827,522
Repayment of loan notes..............      20         10,000,000
Net borrowings acquired with
  acquisition........................      20           --                (11,006,393)
Non cash movements...................      20            (24,375)             (14,220)
                                                     -----------          -----------
Change in net debt...................                 (1,577,568)         (32,610,078)
Net debt at beginning of year........                (32,610,078)            --
                                                     -----------          -----------
Net debt at end of year..............      20        (34,187,646)         (32,610,078)
                                                     ===========          ===========
</TABLE>

                                      F-48
<PAGE>
                        STATEMENT OF ACCOUNTING POLICIES

BASIS OF PREPARATION

     The consolidated financial statements have been prepared under the
historical cost convention and in accordance with applicable accounting
standards.

     The consolidated financial statements have not been prepared for the
purposes of section 226 of the Companies Act 1985 (the "Act"), and therefore do
not constitute statutory accounts within the context of the Act. However, the
consolidated financial statements include all disclosures required under the
Companies Act with the exception of a directors' report, which is not required
in order for the financial statements to give a true and fair view of the state
of affairs at any point in time. Accordingly, the consolidated financial
statements comply with accounting principles generally accepted in the United
Kingdom (UK GAAP).

     UK GAAP and accounting principles adopted by the Company differ in certain
respects from accounting principles generally accepted in the United States (US
GAAP). See Note [ ] for a discussion of the principal differences that would
affect the company's consolidated net income and shareholders' equity if US GAAP
had been applied instead of UK GAAP in the preparation of the consolidated
financial statements.

BASIS OF CONSOLIDATION

     The group financial statements consolidate the financial statements of the
company and all its subsidiary undertakings drawn up to 31 December 1999 and 31
December 1998.

     The principles of acquisition accounting have been adopted in respect of
the acquisitions of subsidiaries. Under this method, the results of the
subsidiary undertakings are included in the consolidated profit and loss account
from the date of acquisition. Goodwill arising on consolidation (representing
the excess of the consideration given over the fair value of the separable net
assets acquired) is capitalised in the Group's balance sheet and amortised over
its estimated economic life of 20 years.

TANGIBLE FIXED ASSETS

     Tangible fixed assets are stated at cost, net of depreciation. Depreciation
is provided at rates calculated to write off the cost less estimated residual
value of each asset on a straight-line basis over its expected useful life, as
follows:


Freehold buildings.                      50 years
Short leasehold properties...........    Over the shorter life of
                                         the lease or useful life
Plant and machinery..................    5-10 years
Fixtures and fittings................    8-10 years
Computers............................    4 years

     Freehold land is not depreciated.

     Residual value is calculated on prices prevailing at the date of
acquisition or revaluation.

TAXATION

     Corporation tax payable is provided on taxable profits at the current rate.

     Deferred taxation is provided using the liability method on all timing
differences only to the extent that they are expected to reverse in the future
without being replaced, except that the deferred tax effects of timing
differences arising from pensions and other post-retirement benefits are always
recognised in full.

                                      F-49
<PAGE>
                STATEMENT OF ACCOUNTING POLICIES -- (CONTINUED)

STOCKS

     Stocks of drugs and medical consumables have been valued at the lower of
cost and net realisable value.

PENSIONS COSTS AND OTHER POST-RETIREMENT BENEFITS

     For defined benefit schemes the amount charged to the profit and loss
account in respect of pension costs and other post-retirement benefits is the
estimated regular cost of providing the benefits accrued in the year, adjusted
to reflect variations from that cost. The regular cost is calculated so that it
represents a substantially level percentage of current and future payroll.
Variations from regular cost are charged or credited to the profit and loss
account as a constant percentage of payroll over the estimated average remaining
working life of scheme members. Defined benefit schemes are either externally
funded, with the assets of the scheme held separately from those of the group in
separate trustee administered funds. Differences between amounts charged to the
profit and loss account and amounts funded or paid directly to members of
unfunded schemes are shown as either provisions or prepayments in the balance
sheet.

     For defined contributions schemes the amount charged to the profit and loss
account in respect of pension costs and other post-retirement benefits is the
contributions payable in the year. Differences between contributions payable in
the year and contributions actually paid are shown as either accruals or
prepayments in the balance sheet.

DEBT

     Debt is initially stated at the amount of the net proceeds after deduction
of issue costs. The carrying amount is increased by the finance cost in respect
of the accounting period and reduced by payments made in the period.

FINANCE COSTS

     Finance costs (principally interest and arrangement fees) of debt are
recognised in the profit and loss account over the term of such instruments at a
constant rate on the carrying amount.

LEASES

     Assets held under finance leases and other similar contracts, which confer
rights and obligations similar to those attached to owned assets, are
capitalised as tangible fixed assets and are depreciated over the shorter of the
lease terms or their useful lives. The capital elements of future lease
obligations are recorded as liabilities, while the interest elements are charged
to the profit and loss account over the period of the leases to produce a
constant rate of charge on the balance of capital repayments outstanding. Hire
purchase transactions are dealt with similarly, except that assets are
depreciated over their useful lives.

     Rentals under operating leases are charged on a straight-line basis over
the lease term, even if the payments are not made on such a basis.

                                      F-50
<PAGE>
                         NOTES TO FINANCIAL STATEMENTS

1.  TURNOVER

     Turnover represents the invoiced value of medical and ancillary services
rendered to patients in the United Kingdom exclusive of VAT and net of trade
discounts.

2.  INVESTMENT INCOME

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                            Pounds          Pounds
                                         ------------    ------------
Other interest receivable and similar
  income.............................        25,433          67,591
                                           ========        ========

3.  INTEREST PAYABLE AND SIMILAR CHARGES

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                            Pounds           Pounds
                                         ------------    ------------
Bank loans and overdrafts............     1,820,981       1,122,456
Finance Leases.......................        53,066          93,671
Other interest payable...............       403,081         621,604
                                           --------        --------
                                          2,277,128       1,837,731
                                           ========        ========

4.  PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

     Profit on ordinary activities before taxation is stated after charging:

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                            Pounds           Pounds
                                         ------------    ------------
Depreciation and amounts written off
tangible fixed assets
     -- owned........................       693,216         556,446
     -- held under hire purchase
     agreements......................       350,136         327,988
Amortisation of goodwill.............       716,271         596,893
Operating lease rentals
     -- plant and machinery..........        44,752          79,298
     -- land and buildings...........        40,465          47,637
Auditors' remuneration for audit
services.............................        38,911          34,687
                                           ========        ========

     Amounts payable to Arthur Andersen and their associates in respect of non
audit services were Pounds 22,446 (1998 _ Pounds 706,417). Of this amount,
Pounds nil (1998 _ Pounds 685,786) relates to the acquisition of the group and
has been included as part of the cost of that acquisition.

                                      F-51
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5.  STAFF COSTS

     The average monthly number of employees (including executive directors)
was:

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                              Pounds         Pounds
                                         ------------    ------------
Medical..............................           215             201
Other................................           153             156
                                           --------        --------
                                                368             357
                                           ========        ========

     Their aggregate remuneration comprised:

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                            Pounds           Pounds
                                         ------------    ------------
Wages and salaries...................      6,460,215       5,356,228
Social security costs................        493,772         389,109
Other pension costs..................        310,896         207,008
                                          ----------      ----------
                                           7,264,883       5,952,345
                                          ==========      ==========

6.  DIRECTOR'S REMUNERATION AND TRANSACTIONS

DIRECTORS' REMUNERATION

<TABLE>
<CAPTION>
                                         SALARY                                        SALARY
                                       (INCLUDING                      YEAR ENDED    (INCLUDING                     PERIOD ENDED
                                        BENEFITS        PENSION       31 DECEMBER     BENEFITS        PENSION       31 DECEMBER
                                        IN KIND)     CONTRIBUTIONS        1999        IN KIND)     CONTRIBUTIONS        1998
          NAME OF DIRECTOR               Pounds         Pounds           Pounds         Pounds        Pounds           Pounds
          ----------------             -----------   --------------   ------------   -----------   --------------   ------------
<S>                                    <C>           <C>              <C>            <C>           <C>              <C>
John Wotherspoon.....................    165,404         27,459         192,863        150,096         27,973         178,069
Michael Broke (Chairman).............     25,000         --              25,000         16,667         --              16,667
                                         -------         ------         -------        -------         ------         -------
                                         190,404         27,459         217,863        166,763         27,973         194,736
                                         =======         ======         =======        =======         ======         =======
</TABLE>

     During the year, Pounds 17,907 (1998 _ Pounds 14,494) was paid to
ElectraFleming Limited in respect of services provided to the group by David
Symondson.

7.  TAX ON PROFIT ON ORDINARY ACTIVITIES

     The tax charge is based on the profit for the year/period and comprises:

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                           Pounds          Pounds
                                         ------------    ------------
Corporation tax charge at 30.5% (1998
-31%)................................       960,000         811,000
Deferred taxation (see note 14)......       105,000        (108,000)
                                          ---------       ---------
                                          1,065,000         703,000
                                          =========       =========

                                      F-52
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8.  INTANGIBLE FIXED ASSETS -- GOODWILL

                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                           Pounds          Pounds
                                         ------------    ------------
COSTS
At 31 December 1998..................     14,325,426         --
Additions............................        --           14,325,426
                                          ----------      ----------
At 31 December 1999..................     14,325,426      14,325,426
                                          ==========      ==========
AMORTISATION
At 31 December 1998..................        596,893         --
Charge for the year/period...........        716,271         596,893
                                          ----------      ----------
At 31 December 1999..................      1,313,164         596,893
                                          ==========      ==========
NET BOOK VALUE
At 31 December 1998..................     13,728,533         --
                                          ----------      ----------
At 31 December 1999..................     13,012,262      13,728,533
                                          ==========      ==========

9.  TANGIBLE FIXED ASSETS

<TABLE>
<CAPTION>
                                          LAND AND     PLANT AND     FIXTURES AND                     MOTOR
                                         BUILDINGS     MACHINERY       FITTINGS       COMPUTERS     VEHICLES       TOTAL
                                           Pounds        Pounds        Pounds           Pounds        Pounds       Pounds
                                         ----------    ----------    -------------    ----------    ---------    ----------
<S>                                      <C>           <C>           <C>              <C>           <C>          <C>
COST
At 31 December 1998..................    19,426,977    3,058,193        267,406         186,471      125,515     23,064,562
Additions............................     3,916,129      560,562         83,304          44,168       17,673      4,621,836
Disposals............................      (139,614)     (83,933)        --             (35,042)     (12,850)      (271,439)
                                         ----------    ---------        -------        --------      -------     ----------
At 31 December 1999..................    23,203,492    3,534,822        350,710         195,597      130,338     27,414,959
                                         ==========    =========        =======        ========      =======     ==========
DEPRECIATION
At 31 December 1998..................       306,979      415,727         42,099          60,907       11,527        837,239
Charge for the year..................       373,157      515,198         50,347          76,038       28,609      1,043,349
Disposals............................       (39,425)     (73,143)        --             (31,938)     (10,066)      (154,572)
                                         ----------    ---------        -------        --------      -------     ----------
At 31 December 1999..................       640,711      857,782         92,446         105,007       30,070      1,726,016
                                         ==========    =========        =======        ========      =======     ==========
NET BOOK VALUE
At 31 December 1998..................    19,119,998    2,642,466        225,307         125,564      113,988     22,227,323
                                         ----------    ---------        -------        --------      -------     ----------
At 31 December 1999..................    22,562,781    2,677,040        258,264          90,590      100,268     25,688,943
                                         ==========    =========        =======        ========      =======     ==========
</TABLE>

     The net book value of fixed assets for the group includes the following
amounts in respect of obligations under hire purchase agreements:

                                                       COMPUTERS,
                                      FIXTURES AND     PLANT AND       MOTOR
                                        FITTINGS       EQUIPMENT     VEHICLES
                                         Pounds          Pounds       Pounds
                                      -------------    ----------    ---------
NET BOOK VALUE......................      55,199        1,464,254      22,980
                                         -------       ----------     -------
Depreciation charged in the year....      11,206          329,798       9,132
                                         =======       ==========     =======

     The net book value of land and buildings comprises freehold property of
 Pounds 22,496,194 (1998 _  Pounds 18,890,000) and short leasehold property of
 Pounds 43,256 (1998 _  Pounds 152,000).

     Freehold land amounting to Pounds 6,900,000 (1998 _ Pounds 6,900,000) has
not been depreciated.

                                      F-53
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10.  STOCKS

                                           1999        1998
                                         --------    --------
                                          Pounds      Pounds
Drugs................................     184,206     138,586
Medical consumables..................     278,689     251,355
                                         --------    --------
                                          462,895     389,941
                                         ========    ========

     There is no material difference between the balance sheet value of stocks
and their replacement cost.

11.  DEBTORS

                                            1999          1998
                                         ----------    ----------
                                           Pounds        Pounds
Amounts falling due within one year:
Trade debtors........................     1,774,938     1,826,581
Other debtors........................       426,135       130,458
Prepayments and accrued income.......       237,612       225,162
                                         ----------    ----------
                                          2,438,685     2,182,201
                                         ----------    ----------

12.  CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

                                            1999          1998
                                         ----------    ----------
                                           Pounds        Pounds
Bank loans and overdrafts............     4,634,493     1,866,180
Obligations under hire purchase
  contracts..........................       357,279       505,258
Trade creditors......................     1,627,513     1,523,778
Amounts owed to other group
  undertakings.......................        --            --
Corporation tax......................       908,177       811,000
Other taxation and social security...       168,851       146,902
Other creditors......................        87,325        70,868
Accruals and deferred income.........     1,067,227       964,726
                                         ----------    ----------
                                          8,850,865     5,888,712
                                         ==========    ==========


                                      F-54
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

13.  CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR


                                            1999          1998
                                         ----------    ----------
                                           Pounds        Pounds
Obligations under hire purchase
  contracts..........................       130,536       496,358
Bank loans...........................    24,067,207    15,631,631
Loan notes...........................     5,000,000    15,000,000
                                         ----------    ----------
                                         29,197,743    31,127,989
                                         ==========    ==========

     Bank loans are repayable half yearly in equal instalments with a final
balloon payment of Pounds 2 million falling due in March 2011. Interest is
accrued on these loans at LIBOR + 1.5%.

     Additionally, at 31 December 1999, the group had an undrawn guarantee
facility for  Pounds 1 million which expires in March 2000.

     Bank loans are secured on the property and assets of the group.

     The stepped coupon subordinated Loan Notes 2008 are fully repayable in 2008
although they can be repaid earlier at the discretion of the directors with no
financial penalty to the group. Interest accrues on the Loan Notes as follows:

     --  5% per annum until March 2000

     --  7% per annum until March 2001

     --  10% per annum until the earlier of the redemption in March 2008 or
repurchase of the Loan Notes by the group

     At 31 December 1999 unamortised loan issue costs amounted to Pounds 182,793
(1998- Pounds 105,224).

     The maturity profile of the groups borrowings at 31 December 1999 were as
follows:

                                            1999             1998
                                         ----------       ----------
                                            Pounds          Pounds
LOAN NOTES
After five years.....................     5,000,000       15,000,000
                                         ----------       ----------
BANK LOANS
Between one and two years............     1,500,000        1,500,000
Between two and five years...........     5,750,000        7,250,000
After five years.....................    16,817,207        6,881,631
                                         ----------       ----------
                                         24,067,207       15,631,631
Due within one year..................     4,412,540        1,866,180
                                         ----------       ----------
                                         28,479,747       17,497,811
                                         ----------       ----------
HIRE PURCHASE AGREEMENTS
Between one and two years............       130,536          496,358
                                         ----------       ----------
Due within one year..................       357,279          505,258
                                         ----------       ----------
                                            487,815        1,001,616
                                         ----------       ----------
TOTAL BORROWINGS INCLUDING FINANCE
  LEASES
Between one and two years............     1,630,536        1,996,358
Between two and five years...........     5,750,000        7,250,000
After five years.....................    21,817,207       21,881,631
                                         ----------       ----------
                                         29,197,743       31,127,989
Due within one year..................     4,769,819        2,371,438
                                         ----------       ----------
                                         33,967,562       33,499,427
                                         ==========       ==========

                                      F-55
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

14.  PROVISIONS FOR LIABILITIES AND CHARGES

     Deferred taxation -- accelerated capital allowances

                                             1999            1998
                                           DEFERRED        DEFERRED
                                           TAXATION        TAXATION
                                         ------------    ------------
GROUP                                       Pounds          Pounds
At beginning of year/period..........       427,000          --
Acquisition of businesses............        --             535,000
Released to profit and loss
  account............................        --            (108,000)
Charged to profit and loss account...       105,000          --
                                           --------        --------
At end of year/period................       532,000         427,000
                                           ========        ========

     Deferred taxation of Pounds 1,200,000 has not been provided on the freehold
properties as the directors currently have no intention of disposing of these
properties in the foreseeable future.

15.  CALLED-UP EQUITY SHARE CAPITAL


                                             1999            1998
                                         ------------    ------------
                                            Pounds          Pounds
AUTHORISED
450,000 ordinary shares of 10 pence
  each...............................        45,000          45,000
                                           --------        --------
ALLOTTED, CALLED-UP AND FULLY PAID...
405,000 ordinary shares of 10 pence
  each...............................        40,500          40,500
                                           --------        --------

16.  RESERVES

                                          SHARE        PROFIT
                                         PREMIUM      AND LOSS
                                         ACCOUNT      ACCOUNT        TOTAL
                                         --------    ----------    ----------
                                          Pounds       Pounds        Pounds
At beginning of year.................     364,500     1,568,646     1,933,146
Retained profit for the year.........       --        1,050,400     1,050,400
                                         --------    ----------    ----------
At end of year.......................     364,500     2,619,046     2,983,546
                                         ========    ==========    ==========

     Of the above reserves, only the profit and loss account is regarded as
distributable.

17.  RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

                                            1999           1998
                                           Pounds         Pounds
                                         -----------    -----------
Profit for the financial
year/period..........................      1,050,400      1,568,646
New shares issued....................        --             405,000
                                         -----------    -----------
Net increase in shareholders'
  funds..............................      1,050,400      1,973,646
Opening shareholders' funds..........      1,973,646        --
                                         -----------    -----------
Closing shareholders' funds..........      3,024,046      1,973,646
                                         ===========    ===========

                                      F-56
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

18.  RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES

                                            1999           1998
                                           Pounds         Pounds
                                         -----------    -----------
Operating profit.....................      4,367,095      4,041,786

Depreciation charges.................      1,043,349        884,434

Amortisation charges.................        716,271        596,893

Increase in stocks...................        (72,955)           (40)

Increase in debtors..................       (256,483)      (114,355)

Increase in creditors................        167,234        364,592
                                         -----------    -----------

NET CASH INFLOW FROM OPERATING
  ACTIVITIES.........................      5,964,511      5,773,310
                                         -----------    -----------

19.  ANALYSIS OF CASH FLOWS

                                            1999           1998
                                           Pounds         Pounds
                                         -----------    -----------
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received....................         25,433         67,591
Interest paid on bank loans..........     (1,364,261)      (996,304)
Interest paid on Loan Notes..........       (583,972)      (347,389)
Interest paid on hire purchase
  contracts..........................        (53,066)      (127,235)
                                         -----------    -----------
NET CASH OUTFLOW.....................     (1,975,866)    (1,403,337)
                                         -----------    -----------
TAXATION
Tax paid.............................     (1,072,954)    (1,289,730)
                                         -----------    -----------
NET CASH OUTFLOW.....................     (1,072,954)    (1,289,730)
                                         -----------    -----------
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Purchase of tangible fixed assets....     (4,621,836)      (799,818)
Sale of tangible fixed assets........         99,886         21,300
                                         -----------    -----------
NET CASH OUTFLOW.....................     (4,521,950)      (778,518)
                                         ===========    ===========

<TABLE>
<CAPTION>
                                                                          1999           1998
                                                                         Pounds         Pounds
                                                                       -----------    -----------
<S>                                      <C>            <C>            <C>            <C>
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings................................        --         (24,855,445)
Net cash acquired with subsidiary undertakings.....................        --             432,020
                                                                       -----------    -----------
NET CASH OUTFLOW...................................................        --         (24,423,425)
                                                                       -----------    -----------
FINANCING
Issue of ordinary share capital....................................        --             405,000
Repayment of secured loan..........................................     (1,500,000)      (750,000)
New secured bank loans (net of issue costs)........................     12,535,070      9,056,336
New unsecured and secured loans other than from banks..............        --          15,000,000
Repaid capital element of hire purchase contracts..................       (538,244)      (700,287)
Repayment of loan notes............................................    (10,000,000)       --
                                                                       -----------    -----------
NET CASH INFLOW....................................................        496,826     23,011,049
                                                                       ===========    ===========
</TABLE>

                                      F-57
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

20.  RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

<TABLE>
<CAPTION>
                                          31 DECEMBER                    NON CASH      31 DECEMBER
                                             1999          CASHFLOW     MOVEMENTS         1999
                                            Pounds          Pounds        Pounds         Pounds
                                         -------------    ----------    ----------    -------------
<S>                                      <C>              <C>           <C>           <C>
Cash at bank and in hand.............         889,349       (887,480)      --                1,869
Overdraft............................         --            (221,953)      --             (221,953)
                                          -----------     ----------     -------       -----------
                                              889,349     (1,109,433)      --             (220,084)
Debt due within one year.............      (2,371,438)    (2,398,381)      --           (4,769,819)
Debt due after more than one year....     (31,127,989)     1,954,621     (24,375)      (29,197,743)
                                          -----------     ----------     -------       -----------
Net debt.............................     (32,610,078)    (1,553,193)    (24,375)      (34,187,646)
                                          ===========     ==========     =======       ===========
</TABLE>

21.  GUARANTEES AND OTHER FINANCIAL COMMITMENTS

A)  LEASE COMMITMENTS

     The minimum annual commitment under operating leases is as follows:

<TABLE>
<CAPTION>
                                                        OTHER                      OTHER
                                         LAND AND     OPERATING     LAND AND     OPERATING
                                         BUILDINGS      LEASES      BUILDINGS      LEASES
                                           1999          1999         1998          1998
                                          Pounds        Pounds       Pounds        Pounds
                                         ---------    ----------    ---------    ----------
<S>                                      <C>          <C>           <C>          <C>
Operating leases expiring:
  -- within 1 year...................      39,710       52,189        43,243       35,342
  -- between 1-5 years...............     129,058       96,215       168,768       85,690
                                          -------      -------       -------      -------
                                          168,768      148,404       212,011      121,032
                                          =======      =======       =======      =======
</TABLE>

B)  PENSION ARRANGEMENTS

     The group operates a defined benefit pension scheme for all employees,
although this scheme has been closed to new entrants since 1 January 1999. The
assets of the scheme are held separately from those of the group in an
independently administered fund. Contributions to the scheme are charged to the
profit and loss account so as to spread the cost of pensions over the employees'
working lives with the group. The contributions to the scheme are determined
with the advice of independent qualified actuaries on the basis of triennial
valuations.

     The most recent valuation was conducted as at 1 June 1999 using both the
Minimum Funding Requirement and Projected Unit methods.

     The valuation using the Minimum Funding Requirement showed that the market
value of the scheme's assets were  Pounds 2,787,000, representing 97% of the
benefits due to members (a deficit of  Pounds 89,000). The assumptions used in
performing the Minimum Funding Requirement valuation are governed by the
Pensions Act 1995 and guidance issued by the Institute and Faculty of Actuaries.

     The valuation using the Projected Unit method showed that the actuarial
value of the scheme's assets were  Pounds 2,011,000, representing 82% of the
benefits due to members (a deficit of  Pounds 432,000). The principal long-term
actuarial assumptions used under the Projected Unit method were that investment
returns would be 8.5% per annum and that the increase in pensionable earnings
would be 7% per annum.

                                      F-58
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The Trustees and the Directors have considered the deficits arising under
both valuations, and they consider that the Minimum Funding Requirement
valuation is the most appropriate basis for determining the level of future
contributions that will be required. Accordingly, the employer's contribution
rates have remained unchanged as follows:


Staff                        12.2% per annum
Management                   13.0% per annum
Senior Management            17.7% per annum

     The Group is amortising the deficit arising under the Projected Unit basis
over the estimated service lives of the employees. Consequently, the pension
charge for the year was Pounds 310,896 (1998 _ Pounds 260,198) which included a
regular charge of Pounds 284,896 (1998 _ Pounds 260,198)

C)  CAPITAL COMMITMENTS

     At 31 December 1999 the capital commitments of the group were:


                                          1999       1998
                                         Pounds     Pounds
                                         -------    -------
Amounts contracted for but not
provided for.........................    111,016    107,000
                                         =======    =======


22.  SUMMARY OF RELEVANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

     The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the UK (UK GAAP)
which differ in certain significant respects from those generally accepted in
the United States (US GAAP). Set forth below is a summary of certain significant
differences between US and UK GAAP which management believe are relevant to the
group.

DEFERRED INCOME TAX

     Under UK GAAP, deferred taxation is calculated under the liability method
to the extent that it is probable that the liabilities will crystallise in the
foreseeable future. Under US GAAP, deferred taxation is provided for all
temporary differences using the asset and liability method. Valuation allowances
are provided for to the extent that the realisation of deferred tax assets is
not more likely than not. An adjustment to record a deferred tax liability of
Pounds 1,200,000 in respect of future capital gains taxation has been made in
the opening balance sheet of the Group at 4 March 1998. Accordingly under US
GAAP this resulted in a corresponding increase in goodwill arising on
acquisition of Pounds 1,200,000.

PENSION COSTS

     Under UK GAAP, pension costs are accounted for in accordance with Statement
of Standard Accounting Practice  24. As a result, such costs are charged against
profit over employees' working lives. Under US GAAP, pension costs are
determined in accordance with the requirements of Statement of Financial
Accounting Standards No. 87. Differences between the UK and US GAAP figures
arise from the requirement to use different actuarial methods and assumptions
and a different method of amortising surpluses or deficits.

CAPITALISATION OF INTEREST

     Under UK GAAP, interest on external financing of assets in the course of
construction is charged to income as incurred. US GAAP requires the
capitalisation of interest assets if certain conditions are met in respect of
assets in the course of construction. This relates to the acquisition and
development of a new cancer centre at 49 Parkside during the year.

                                      F-59
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DEBT

     Under UK GAAP, debt is initially stated at the amount of the net proceeds
after deduction of issue costs. These unamortised issue costs amount to
 Pounds 182,793 at 31 December 1999. US GAAP requires debt issue costs to be
separately classified within current assets.

CASH FLOW STATEMENT

     Under UK GAAP, the consolidated cash flow statements are presented in
accordance with UK Financial Reporting Standard No. 1 (FRS 1). The statements
prepared under FRS  1 present substantially the same information as that
required under SFAS No.  95. Under US GAAP, however, there are certain
differences from UK GAAP with regard to classification of items within the cash
flow statement and with regard to the definition of cash.

     Under FRS  1, cash flows are presented separately for operating activities;
returns on investments and servicing of finance; taxation; capital expenditure
and financial investments; acquisitions and disposals; dividends paid to the
company's shareholders; management of liquid resources and financing. SFAS
No. 95 cash flows are reported as resulting from operating, investing and
financing activities.

     Under SFAS No. 95 cash and cash equivalents include cash and short-term
investments with original maturities of three months or less. Under FRS  1 cash
comprises cash in hand and at bank and overnight deposits, net of bank
overdrafts. The presentation of cash flows provided by (used in) operating,
investing and financing activities in accordance with US GAAP would be as
follows:

                                          YEAR ENDED
                                         DECEMBER 31,
                                             1999
                                            Pounds
                                         ------------
Net cash provided by operating
activities...........................      2,915,691
Net cash used in investing
activities...........................     (4,521,950)
Net cash provided by financing
activities...........................        718,779
Net decrease in cash and cash
equivalents..........................       (887,480)
Cash and cash equivalents under US
  GAAP at beginning of year..........        889,349
                                          ----------
Cash and cash equivalents under US
  GAAP at end of year................          1,869
                                          ==========

RECONCILIATION TO US ACCOUNTING PRINCIPLES

     The following is a summary of the adjustments to net income and
shareholders' equity which would have been required if US GAAP had been applied
instead of UK GAAP.

PROFIT ATTRIBUTABLE TO SHAREHOLDERS

                                          YEAR ENDED
                                         DECEMBER 31,
                                             1999
                                            Pounds
                                         ------------
Profit attributable to shareholders
  as reported in the consolidated
  profit and loss account............      1,050,400
Adjustments
     -- deferred income tax..........        (60,000)
     -- pension costs................       (106,104)
     -- capitalisation of interest...         21,853
     -- tax effect of the above
     adjustments.....................         25,696
                                          ----------
Net income under US GAAP.............        931,845
                                          ==========

                                      F-60
<PAGE>
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

                                              AT
                                         DECEMBER 31,
                                             1999
                                            Pounds
                                         ------------
SHAREHOLDERS' EQUITY
Shareholders' funds as reported in
  the consolidated balance sheet.....      3,024,046
Adjustments
     -- deferred income tax..........       (110,000)
     -- pensions costs...............       (805,104)
     -- capitalisation of interest...         21,853
     -- tax effect of the above
     adjustments.....................        245,557
                                          ----------
Shareholders' equity under US GAAP...      2,376,352
                                          ==========


                                      F-61
<PAGE>



                                     [LOGO]



<PAGE>
                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by United Surgical Partners
International, Inc. in connection with the issuance and distribution of common
stock being registered. All amounts are estimates except the SEC registration
fee and the NASD filing fee.


SEC registration fee.................    $ 34,500
NASD filing fee......................       *
Nasdaq National Market Listing Fee...       *
Printing and engraving costs.........       *
Legal fees and expenses..............       *
Accounting fees and expenses.........       *
Transfer Agent and Registrar fees....       *
Miscellaneous expenses...............       *
                                         --------
     Total...........................    $  *
                                         ========

------------

* To be supplied by amendment.

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees)), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.

     The Company's Amended and Restated Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permitted by the
DGCL. In addition, as permitted by

                                      II-1
<PAGE>
the DGCL, the Amended and Restated Certificate of Incorporation provides that
directors of the Company shall have no personal liability to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except (1) for any breach of the director's duty of loyalty to the Company or
its stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (3) under Section 174 of the
DGCL or (4) for any transaction from which a director derived an improper
personal benefit.

     The Company's Amended and Restated Certificate of Incorporation provides
for the indemnification of all current and former directors and all current or
former officers to the fullest extent permitted by the DGCL.

     The Company has entered into indemnification agreements with its directors
and executive officers, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     The following information relates to all securities issued or sold by the
Company in the last three years and not registered under the Securities Act.
Each of the transactions described below was conducted in reliance upon the
exemptions from registration provided in Sections 3(b) and 4(2) of the
Securities Act and the rules and regulations promulgated thereunder. Each of the
certificates representing the Company's securities issued in connection with
such transaction contains a restrictive legend.

     On March 2, 1998, United Surgical Partners International, Inc. sold 415,391
shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII, L.P. for
a purchase price of $830,782.

     On March 2, 1998, United Surgical Partners International, Inc. sold 6,208
shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a purchase
price of $12,416.

     On March 2, 1998, United Surgical Partners International, Inc. sold 5,064
shares of Class A Common Stock to Patrick J. Welsh for a purchase price of
$10,128.

     On March 2, 1998, United Surgical Partners International, Inc. sold 5,064
shares of Class A Common Stock to Russell L. Carson for a purchase price of
$10,128.

     On March 2, 1998, United Surgical Partners International, Inc. sold 5,064
shares of Class A Common Stock to Bruce K. Anderson for a purchase price of
$10,128.

     On March 2, 1998, United Surgical Partners International, Inc. sold 887
shares of Class A Common Stock to Richard H. Stowe for a purchase price of
$1,774.

     On March 2, 1998, United Surgical Partners International, Inc. sold 887
shares of Class A Common Stock to Andrew M. Paul for a purchase price of $1,774.

     On March 2, 1998, United Surgical Partners International, Inc. sold 2,661
shares of Class A Common Stock to Thomas E. McInerney for a purchase price of
$5,322.

     On March 2, 1998, United Surgical Partners International, Inc. sold 45
shares of Class A Common Stock to Laura VanBuren for a purchase price of $90.

     On March 2, 1998, United Surgical Partners International, Inc. sold 887
shares of Class A Common Stock to Robert A. Minicucci for a purchase price of
$1,774.

     On March 2, 1998, United Surgical Partners International, Inc. sold 310
shares of Class A Common Stock to Anthony deNicola for a purchase price of $620.

     On March 2, 1998, United Surgical Partners International, Inc. sold 133
shares of Class A Common Stock to Rudolph E. Rupert for a purchase price of
$266.

     On March 2, 1998, United Surgical Partners International, Inc. sold 683
shares of Class A Common Stock to Paul B. Queally for a purchase price of
$1,366.

                                      II-2
<PAGE>
     On March 2, 1998, United Surgical Partners International, Inc. sold 177
shares of Class A Common Stock to D. Scott Mackesy for a purchase price of $354.

     On March 2, 1998, United Surgical Partners International, Inc. sold 56,539
shares of Class A Common Stock to Donald Steen for a purchase price of $113,078.

     On April 30, 1998, United Surgical Partners International, Inc. sold
6,067,274 shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII,
L.P. for a purchase price of $12,134,548.

     On April 30, 1998, United Surgical Partners International, Inc. sold 90,682
shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a purchase
price of $181,364.

     On April 30, 1998, United Surgical Partners International, Inc. sold 73,971
shares of Class A Common Stock to Patrick J. Welsh for a purchase price of
$147,942.

     On April 30, 1998, United Surgical Partners International, Inc. sold 73,971
shares of Class A Common Stock to Russell L. Carson for a purchase price of
$147,942.

     On April 30, 1998, United Surgical Partners International, Inc. sold 73,971
shares of Class A Common Stock to Bruce K. Anderson for a purchase price of
$147,942.

     On April 30, 1998, United Surgical Partners International, Inc. sold 12,955
shares of Class A Common Stock to Richard H. Stowe for a purchase price of
$25,910.

     On April 30, 1998, United Surgical Partners International, Inc. sold 12,955
shares of Class A Common Stock to Andrew M. Paul for a purchase price of
$25,910.

     On April 30, 1998, United Surgical Partners International, Inc. sold 38,864
shares of Class A Common Stock to Thomas E. McInerney for a purchase price of
$77,728.

     On April 30, 1998, United Surgical Partners International, Inc. sold 648
shares of Class A Common Stock to Laura VanBuren for a purchase price of $1,296.

     On April 30, 1998, United Surgical Partners International, Inc. sold 12,955
shares of Class A Common Stock to Robert A. Minicucci for a purchase price of
$25,910.

     On April 30, 1998, United Surgical Partners International, Inc. sold 4,534
shares of Class A Common Stock to Anthony deNicola for a purchase price of
$9,068.

     On April 30, 1998, United Surgical Partners International, Inc. sold 1,943
shares of Class A Common Stock to Rudolph E. Rupert for a purchase price of
$3,886.

     On April 30, 1998, United Surgical Partners International, Inc. sold 9,975
shares of Class A Common Stock to Paul B. Queally for a purchase price of
$19,950.

     On April 30, 1998, United Surgical Partners International, Inc. sold 2,591
shares of Class A Common Stock to D. Scott Mackesy for a purchase price of
$5,182.

     On April 30, 1998, United Surgical Partners International, Inc. sold 10,500
shares of Class A Common Stock to Kenneth Melkus for a purchase price of
$21,000.

     On April 30, 1998, United Surgical Partners International, Inc. sold
599,711 shares of Class A Common Stock to Donald Steen for a purchase price of
$1,199,422.

     On April 30, 1998, United Surgical Partners International, Inc. sold
187,500 shares of Class A Common Stock to Sue Shelley for a purchase price of
$375,000.

     On April 30, 1998, United Surgical Partners International, Inc. sold 37,500
shares of Class A Common Stock to Laurie Hogue for a purchase price of $75,000.

     On April 30, 1998, United Surgical Partners International, Inc. sold 75,000
shares of Class A Common Stock to Michael Crews for a purchase price of
$150,000.

     On April 30, 1998, United Surgical Partners International, Inc. sold 37,500
shares of Class A Common Stock to Suzan Nelson for a purchase price of $75,000.

                                      II-3
<PAGE>
     On April 30, 1998, United Surgical Partners International, Inc. sold 75,000
shares of Class A Common Stock to David McDonald for a purchase price of
$150,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to M. Robert Knapp Trust for a purchase price of
$40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to M. Robert Knapp Trust for a
purchase price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 40,000
shares of Class A Common Stock to Calver Fund, Inc. for a purchase price of
$80,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 120
shares of Series A Redeemable Preferred Stock to Calver Fund, Inc. for a
purchase price of $120,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 40,000
shares of Class A Common Stock to James Ken Newman for a purchase price of
$80,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 120
shares of Series A Redeemable Preferred Stock to James Ken Newman for a purchase
price of $120,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 40,000
shares of Class A Common Stock to NGKE/USPI Partners for a purchase price of
$80,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 120
shares of Series A Redeemable Preferred Stock to NGKE/USPI for a purchase price
of $120,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to L&W Co. for a purchase price of $40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to L&W Co. for a purchase price of
$60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30,000
shares of Class A Common Stock to Norman Brownstein for a purchase price of
$60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 90
shares of Series A Redeemable Preferred Stock to Norman Brownstein for a
purchase price of $90,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to William Wilcox for a purchase price of
$40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to William Wilcox for a purchase
price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 40,000
shares of Class A Common Stock to Paul Whitman for a purchase price of $80,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 120
shares of Series A Redeemable Preferred Stock to Paul Whitman for a purchase
price of $120,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30,000
shares of Class A Common Stock to Rivid LLC for a purchase price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 90
shares of Series A Redeemable Preferred Stock to Rivid LLC for a purchase price
of $90,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 25,500
shares of Class A Common Stock to CGJR II, L.P. for a purchase price of $51,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 77
shares of Series A Redeemable Preferred Stock to CGJR II, L.P. for a purchase
price of $77,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 14,500
shares of Class A Common Stock to CGJR/MF III, L.P. for a purchase price of
$29,000.

                                      II-4
<PAGE>
     On June 26, 1998, United Surgical Partners International, Inc. sold 43
shares of Series A Redeemable Preferred Stock to CGJR/MF III, L.P. for a
purchase price of $43,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to Patrick McMullan for a purchase price of
$40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to Patrick McMullan for a purchase
price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to Craig Callen for a purchase price of $40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to Craig Callen for a purchase
price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 10,000
shares of Class A Common Stock to Lawrence Lavine for a purchase price of
$20,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to Lawrence Lavine for a purchase
price of $30,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 10,000
shares of Class A Common Stock to David Dennis for a purchase price of $20,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to David Dennis for a purchase
price of $30,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 10,000
shares of Class A Common Stock to Michael R. & Jane L. Nicolais for a purchase
price of $20,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to Michael R. & Jane L. Nicolais
for a purchase price of $30,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 10,000
shares of Class A Common Stock to Tom C. Davis for a purchase price of $20,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to Tom C. Davis for a purchase
price of $30,000.

     On July 31, 1998, United Surgical Partners International, Inc. sold 473,581
shares of Class A Common Stock to Edward W. Karrels for a purchase price of
$947,162.

     On July 31, 1998, United Surgical Partners International, Inc. sold 327,031
shares of Class A Common Stock to Michael W. Barton for a purchase price of
$654,062.

     On July 31, 1998, United Surgical Partners International, Inc. sold 65,587
shares of Class A Common Stock to Jeffrey L. Stockard for a purchase price of
$131,174.

     On July 31, 1998, United Surgical Partners International, Inc. sold 2,677
shares of Class A Common Stock to Alice J. Charron for a purchase price of
$5,354.

     On July 31, 1998, United Surgical Partners International, Inc. sold 14,261
shares of Class A Common Stock to Charles Morton for a purchase price of
$28,522.

     On July 31, 1998, United Surgical Partners International, Inc. sold 27,975
shares of Class A Common Stock to David Gaw for a purchase price of $55,950.

     On July 31, 1998, United Surgical Partners International, Inc. sold 7,138
shares of Class A Common Stock to Sandra Holshouser for a purchase price of
$14,276.

     On July 31, 1998, United Surgical Partners International, Inc. issued 2,716
shares of Series  B Convertible Preferred Stock to shareholders of Health
Horizons, Inc. in connection with the merger of Health Horizons, Inc. with and
into United Surgical Partners International, Inc.

                                      II-5
<PAGE>
     On September 28, 1998, United Surgical Partners International, Inc. sold
2,917,115 shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII,
L.P. for a purchase price of $5,834,230.

     On September 28, 1998, United Surgical Partners International, Inc. sold
4,722 shares of Series A Redeemable Preferred Stock to Welsh, Carson, Anderson &
Stowe VII, L.P. for a purchase price of $4,722,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
43,600 shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a
purchase price of $87,200.

     On September 28, 1998, United Surgical Partners International, Inc. sold 71
shares of Series A Redeemable Preferred Stock to WCAS Healthcare Partners, L.P.
for a purchase price of $71,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
35,565 shares of Class A Common Stock to Patrick J. Welsh for a purchase price
of $71,130.

     On September 28, 1998, United Surgical Partners International, Inc. sold 57
shares of Series A Redeemable Preferred Stock to Patrick J. Welsh for a purchase
price of $57,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
35,565 shares of Class A Common Stock to Russell L. Carson for a purchase price
of $71,130.

     On September 28, 1998, United Surgical Partners International, Inc. sold 57
shares of Series A Redeemable Preferred Stock to Russell L. Carson for a
purchase price of $57,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
35,565 shares of Class A Common Stock to Bruce K. Anderson for a purchase price
of $71,130.

     On September 28, 1998, United Surgical Partners International, Inc. sold 57
shares of Series A Redeemable Preferred Stock to Bruce K. Anderson for a
purchase price of $57,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
6,229 shares of Class A Common Stock to Richard H. Stowe for a purchase price of
$12,458.

     On September 28, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Richard H. Stowe for a purchase
price of $10,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
6,229 shares of Class A Common Stock to Andrew M. Paul for a purchase price of
$12,458.

     On September 28, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Andrew M. Paul for a purchase
price of $10,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
18,686 shares of Class A Common Stock to Thomas E. McInerney for a purchase
price of $37,372.

     On September 28, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to Thomas E. McInerney for a
purchase price of $30,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
311 shares of Class A Common Stock to Laura VanBuren for a purchase price of
$622.

     On September 28, 1998, United Surgical Partners International, Inc. sold 2
shares of Series A Redeemable Preferred Stock to Laura VanBuren for a purchase
price of $2,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
6,229 shares of Class A Common Stock to Robert A. Minicucci for a purchase price
of $12,458.

     On September 28, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Robert A. Minicucci for a
purchase price of $10,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
2,180 shares of Class A Common Stock to Anthony deNicola for a purchase price of
$4,360.

                                      II-6
<PAGE>
     On September 28, 1998, United Surgical Partners International, Inc. sold 4
shares of Series A Redeemable Preferred Stock to Anthony deNicola for a purchase
price of $4,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
4,796 shares of Class A Common Stock to Paul B. Queally for a purchase price of
$9,592.

     On September 28, 1998, United Surgical Partners International, Inc. sold 8
shares of Series A Redeemable Preferred Stock to Paul B. Queally for a purchase
price of $8,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
934 shares of Class A Common Stock to Rudolph E. Rupert for a purchase price of
$1,868.

     On September 28, 1998, United Surgical Partners International, Inc. sold 2
shares of Series A Redeemable Preferred Stock to Rudolph E. Rupert for a
purchase price of $2,000

     On September 28, 1998, United Surgical Partners International, Inc. sold
1,246 shares of Class A Common Stock to D. Scott Mackesy for a purchase price of
$2,492.

     On September 28, 1998, United Surgical Partners International, Inc. sold 2
shares of Series A Redeemable Preferred Stock to D. Scott Mackesy for a purchase
price of $2,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
4,500 shares of Class A Common Stock to Kenneth Melkus for a purchase price of
$9,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold 8
shares of Series A Redeemable Preferred Stock to Kenneth Melkus for a purchase
price of $8,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
218,750 shares of Class A Common Stock to Donald Steen for a purchase price of
$437,500.

     On September 28, 1998, United Surgical Partners International, Inc. sold
62,500 shares of Class A Common Stock to Sue Shelley for a purchase price of
$125,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
12,500 shares of Class A Common Stock to Laurie Hogue for a purchase price of
$25,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
25,000 shares of Class A Common Stock to Michael Crews for a purchase price of
$50,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
12,500 shares of Class A Common Stock to Suzan Nelson for a purchase price of
$25,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
25,000 shares of Class A Common Stock to David McDonald for a purchase price of
$50,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold
23,328 shares of Series A Redeemable Preferred Stock to Welsh, Carson, Anderson
& Stowe VII, L.P. for a purchase price of $23,328,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 351
shares of Series A Redeemable Preferred Stock to WCAS Healthcare Partners, L.P.
for a purchase price of $351,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 282
shares of Series A Redeemable Preferred Stock to Patrick J. Welsh for a purchase
price of $282,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 282
shares of Series A Redeemable Preferred Stock to Russell L. Carson for a
purchase price of $282,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 282
shares of Series A Redeemable Preferred Stock to Bruce K. Anderson for a
purchase price of $282,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 49
shares of Series A Redeemable Preferred Stock to Richard H. Stowe for a purchase
price of $49,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 49
shares of Series A Redeemable Preferred Stock to Andrew M. Paul for a purchase
price of $49,000.

                                      II-7
<PAGE>
     On October 9, 1998, United Surgical Partners International, Inc. sold 148
shares of Series A Redeemable Preferred Stock to Thomas E. McInerney for a
purchase price of $148,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Laura VanBuren for a purchase
price of $10,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 49
shares of Series A Redeemable Preferred Stock to Robert A. Minicucci for a
purchase price of $49,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 20
shares of Series A Redeemable Preferred Stock to Anthony deNicola for a purchase
price of $20,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 40
shares of Series A Redeemable Preferred Stock to Paul B. Queally for a purchase
price of $40,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Rudolph E. Rupert for a
purchase price of $10,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to D. Scott Mackesy for a purchase
price of $10,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 40
shares of Series A Redeemable Preferred Stock to Kenneth Melkus for a purchase
price of $40,000.

     On October 26, 1998, United Surgical Partners International, Inc. sold
4,711,273 shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII,
L.P. for a purchase price of $16,489.455.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
70,415 shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a
purchase price of $246,452.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
57,439 shares of Class A Common Stock to Patrick J. Welsh for a purchase price
of $201,036.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
57,439 shares of Class A Common Stock to Russell L. Carson for a purchase price
of $201,036.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
57,439 shares of Class A Common Stock to Bruce K. Anderson for a purchase price
of $201,036.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
10,060 shares of Class A Common Stock to Richard H. Stowe for a purchase price
of $35,210.

     On October 26, 1998, United Surgical Partners International, Inc. sold
10,060 shares of Class A Common Stock to Richard H. Stowe for a purchase price
of $35,210.

     On October 26, 1998, United Surgical Partners International, Inc. sold
30,178 shares of Class A Common Stock to Thomas E. McInerney for a purchase
price of $105,623.

     On October 26, 1998, United Surgical Partners International, Inc. sold 503
shares of Class A Common Stock to Laura VanBuren for a purchase price of
$1,760.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
10,060 shares of Class A Common Stock to Robert A. Minicucci for a purchase
price of $35,210.

     On October 26, 1998, United Surgical Partners International, Inc. sold
3,521 shares of Class A Common Stock to Anthony deNicola for a purchase price of
$12,323.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
1,509 shares of Class A Common Stock to Rudolph E. Rupert for a purchase price
of $5,281.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
7,746 shares of Class A Common Stock to Paul B. Queally for a purchase price of
$27,111.

     On October 26, 1998, United Surgical Partners International, Inc. sold
2,012 shares of Class A Common Stock to D. Scott Mackesy for a purchase price of
$7,042.

                                      II-8
<PAGE>
     On October 26, 1998, United Surgical Partners International, Inc. sold
7,518 shares of Class A Common Stock to Lauren Melkus for a purchase price of
$26,313.

     On October 26, 1998, United Surgical Partners International, Inc. sold
12,593 shares of Class A Common Stock to Tucker Taylor for a purchase price of
$44,075.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
12,593 shares of Class A Common Stock to Alyce Craddock for a purchase price of
$44,075.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
6,296 shares of Class A Common Stock to Greg Koonsman for a purchase price of
$22,036.

     On October 26, 1998, United Surgical Partners International, Inc. sold
6,296 shares of Class A Common Stock to Jon O'Sullivan for a purchase price of
$22,036.

     On October 26, 1998, United Surgical Partners International, Inc. sold
1,209,261 shares of Class A Common Stock to Health Care Capital Partners, L.P.
for a purchase price of $4,232,413.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
50,032 shares of Class A Common Stock to Health Care Executive Partners, L.P.
for a purchase price of $175,112.

     On October 26, 1998, United Surgical Partners International, Inc. sold
157,202 shares of Class A Common Stock to Donald Steen for a purchase price of
$550,207.

     On October 26, 1998, United Surgical Partners International, Inc. sold
189,524 shares of Class A Common Stock to William Wilcox for a purchase price of
$663,334.

     On October 26, 1998, United Surgical Partners International, Inc. sold
7,346 shares of Class A Common Stock to Sue Shelley for a purchase price of
$25,711.

     On October 26, 1998, United Surgical Partners International, Inc. sold
14,692 shares of Class A Common Stock to Jeffrey Stockard for a purchase price
of $51,422.

     On October 26, 1998, United Surgical Partners International, Inc. sold
3,673 shares of Class A Common Stock to Laurie Hogue for a purchase price of
$12,855.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
11,019 shares of Class A Common Stock to Michael Crews for a purchase price of
$38,566.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
5,509 shares of Class A Common Stock to David McDonald FBO Tracy McDonald for a
purchase price of $19,281.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
3,673 shares of Class A Common Stock to James Branon for a purchase price of
$12,855.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,702,219 shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII,
L.P. for a purchase price of $5,957,766.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,110,355 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Welsh, Carson, Anderson & Stowe VII, L.P. for consideration
of $1,110,355.

     On November 18, 1998, United Surgical Partners International, Inc. sold
25,442 shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a
purchase price of $89,047.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$16,700 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to WCAS Healthcare Partners, L.P. for consideration of $16,700.

     On November 18, 1998, United Surgical Partners International, Inc. sold
20,753 shares of Class A Common Stock to Patrick J. Welsh for a purchase price
of $72,635.50.

                                      II-9
<PAGE>
     On November 18, 1998, United Surgical Partners International, Inc. sold
$13,434 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Patrick J. Welsh for consideration of $13,434.

     On November 18, 1998, United Surgical Partners International, Inc. sold
20,753 shares of Class A Common Stock to Russell L. Carson for a purchase price
of $72,635.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$13,434 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Russell L. Carson for consideration of $13,434.

     On November 18, 1998, United Surgical Partners International, Inc. sold
20,753 shares of Class A Common Stock to Bruce K. Anderson for a purchase price
of $72,635.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$13,434 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Bruce K. Anderson for consideration of $13,434.

     On November 18, 1998, United Surgical Partners International, Inc. sold
3,635 shares of Class A Common Stock to Richard H. Stowe for a purchase price of
$12,722.50

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,375 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Richard H. Stowe for consideration of $2,375.

     On November 18, 1998, United Surgical Partners International, Inc. sold
3,635 shares of Class A Common Stock to Andrew M. Paul for a purchase price of
$12,722.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,375 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Andrew M. Paul for consideration of $2,375.

     On November 18, 1998, United Surgical Partners International, Inc. sold
10,904 shares of Class A Common Stock to Thomas E. McInerney for a purchase
price of $38,164.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$7,051 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Thomas E. McInerney for consideration of $7,051.

     On November 18, 1998, United Surgical Partners International, Inc. sold 182
shares of Class A Common Stock to Laura VanBuren for a purchase price of $637.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$445 aggregate principal amount of 7.0% Senior Subordinated Notes due April 30,
2008, to Laura VanBuren for consideration of $445.

     On November 18, 1998, United Surgical Partners International, Inc. sold
3,635 shares of Class A Common Stock to Robert A. Minicucci for a purchase price
of $12,722.50

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,375 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Robert A. Minicucci for consideration of $2,375.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,272 shares of Class A Common Stock to Anthony deNicola for a purchase price of
$4,452.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$965 aggregate principal amount of 7.0% Senior Subordinated Notes due April 30,
2008, to Anthony deNicola for consideration of $965.

     On November 18, 1998, United Surgical Partners International, Inc. sold 545
shares of Class A Common Stock to Rudolph E. Rupert for a purchase price of
$1,907.50.

                                     II-10
<PAGE>
     On November 18, 1998, United Surgical Partners International, Inc. sold
$445 aggregate principal amount of 7.0% Senior Subordinated Notes due April 30,
2008, to Rudolph E. Rupert for consideration of $445.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,799 shares of Class A Common Stock to Paul B. Queally for a purchase price of
$9,796.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,856 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Paul B. Queally for consideration of $1,856.

     On November 18, 1998, United Surgical Partners International, Inc. sold 727
shares of Class A Common Stock to D. Scott Mackesy for a purchase price of
$2,544.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$445 aggregate principal amount of 7.0% Senior Subordinated Notes due April 30,
2008, to D. Scott Mackesy for consideration of $445.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,716 shares of Class A Common Stock to Lauren Melkus for a purchase price of
$9,506.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,856 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Lauren Melkus for consideration of $1,856.

     On November 18, 1998, United Surgical Partners International, Inc. sold
4,550 shares of Class A Common Stock to Tucker Taylor for a purchase price of
$15,925.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,969 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Tucker Taylor for consideration of $2,969.

     On November 18, 1998, United Surgical Partners International, Inc. sold
4,550 shares of Class A Common Stock to Alyce Craddock for a purchase price of
$15,925.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,969 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Alyce Craddock for consideration of $2,969.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,275 shares of Class A Common Stock to Greg Koonsman for a purchase price of
$7,962.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,484 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Greg Koonsman for consideration of $1,484.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,275 shares of Class A Common Stock to Jon O'Sullivan for a purchase price of
$7,962.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,484 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Jon O'Sullivan for consideration of $1,484.

     On November 18, 1998, United Surgical Partners International, Inc. sold
436,916 shares of Class A Common Stock to Health Care Capital Partners, L.P. for
a purchase price of $1,529,206.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$285,085 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Health Care Capital Partners, L.P. for consideration of
$285,085.

     On November 18, 1998, United Surgical Partners International, Inc. sold
18,077 shares of Class A Common Stock to Health Care Executive Partners, L.P.
for a purchase price of $63,269.50.

                                     II-11
<PAGE>
     On November 18, 1998, United Surgical Partners International, Inc. sold
$11,801 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Health Care Executive Partners, L.P. for consideration of
$11,801.

     On November 18, 1998, United Surgical Partners International, Inc. sold
56,798 shares of Class A Common Stock to Donald Steen for a purchase price of
$198,793.

     On November 18, 1998, United Surgical Partners International, Inc. sold
68,476 shares of Class A Common Stock to William Wilcox for a purchase price of
$239,666.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,654 shares of Class A Common Stock to Sue Shelley for a purchase price of
$9,289.

     On November 18, 1998, United Surgical Partners International, Inc. sold
5,308 shares of Class A Common Stock to Jeffrey L. Stockard for a purchase price
of $18,578.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,327 shares of Class A Common Stock to Laurie Hogue for a purchase price of
$4,644.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
3,981 shares of Class A Common Stock to Michael Crews for a purchase price of
$13,933.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,991 shares of Class A Common Stock to David McDonald FBO Tracy McDonald for a
purchase price of $6,968.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,327 shares of Class A Common Stock to James Branon for a purchase price of
$4,644.50.

     On January 27, 1999 United Surgical Partners International, Inc. sold 7,500
shares of Class A Common Stock to W. Glenn Bradham, M.D. for a purchase price of
$30,000.

     On January 27, 1999 United Surgical Partners International, Inc. sold
15,000 shares of Class A Common Stock to Maria I. Perales, M.D. for a purchase
price of $60,000.

     On January 27, 1999 United Surgical Partners International, Inc. sold
25,000 shares of Class A Common Stock to Eddie Joe Reddick for a purchase price
of $100,000.

     On April 2, 1999, United Surgical Partners International, Inc. sold
$6,691,851 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Welsh, Carson, Anderson & Stowe VII, L.P. for consideration
of $6,691,851.

     On April 2, 1999, United Surgical Partners International, Inc. sold
$100,646 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to WCAS Healthcare Partners, L.P. for consideration of $100,646.

     On April 2, 1999, United Surgical Partners International, Inc. sold $80,963
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Patrick J. Welsh for consideration of $80,963.

     On April 2, 1999, United Surgical Partners International, Inc. sold $80,963
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Russell L. Carson for consideration of $80,963.

     On April 2, 1999, United Surgical Partners International, Inc. sold $80,963
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Bruce K. Anderson for consideration of $80,963.

     On April 2, 1999, United Surgical Partners International, Inc. sold $14,314
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Richard H. Stowe for consideration of $14,314.

     On April 2, 1999, United Surgical Partners International, Inc. sold $14,314
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Andrew M. Paul for consideration of $14,314.

                                     II-12
<PAGE>
     On April 2, 1999, United Surgical Partners International, Inc. sold $42,495
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Thomas E. McInerney for consideration of $42,495.

     On April 2, 1999, United Surgical Partners International, Inc. sold $2,684
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Laura VanBuren for consideration of $2,684.

     On April 2, 1999, United Surgical Partners International, Inc. sold $14,314
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Robert A. Minicucci for consideration of $14,314.

     On April 2, 1999, United Surgical Partners International, Inc. sold $5,814
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Anthony deNicola for consideration of $5,814.

     On April 2, 1999, United Surgical Partners International, Inc. sold $2,684
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Rudolph E. Rupert for consideration of $2,684.

     On April 2, 1999, United Surgical Partners International, Inc. sold $11,183
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Paul B. Queally for consideration of $11,183.

     On April 2, 1999, United Surgical Partners International, Inc. sold $2,684
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to D. Scott Mackesy for consideration of $2,684.

     On April 2, 1999, United Surgical Partners International, Inc. sold $11,183
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Lauren Melkus for consideration of $11,183.

     On April 2, 1999, United Surgical Partners International, Inc. sold $17,893
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Tucker Taylor for consideration of $17,893.

     On April 2, 1999, United Surgical Partners International, Inc. sold $17,893
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Alyce Craddock for consideration of $17,893.

     On April 2, 1999, United Surgical Partners International, Inc. sold $8,947
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Greg Koonsman for consideration of $8,947.

     On April 2, 1999, United Surgical Partners International, Inc. sold $8,947
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Jon O'Sullivan for consideration of $8,947.

     On April 2, 1999, United Surgical Partners International, Inc. sold
$1,718,142 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Health Care Capital Partners, L.P. for consideration of
$1,718,142.

     On April 2, 1999, United Surgical Partners International, Inc. sold $71,123
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Health Care Executive Partners, L.P. for consideration of $71,123.

     On June 1, 1999, United Surgical Partners International, Inc. issued to
Baylor Health Care System Foundation a convertible subordinated promissory note
in the principal amount of $3,287,284, with a conversion price of $3.50 per
share of common stock.

     On July 1, 1999, United Surgical Partners International, Inc. issued to
Giasurg, LLP a warrant to purchase 100,000 shares of Common Stock at an exercise
price of $4.00 per share.

                                     II-13
<PAGE>
     On November 1, 1999, United Surgical Partners International, Inc. sold
21,428 shares of Class A Common Stock to Dr. William O. Kirkpatrick for a
purchase price of $74,998.

     On November 22, 1999, United Surgical Partners International, Inc. sold
10,000 shares of Common Stock to John J. Wellik for a purchase price of $35,000.

     On November 22, 1999, United Surgical Partners International, Inc. sold
28,571 shares of Common Stock to Jonathan R. Bond for a purchase price of
$99,998.50.

     On November 22, 1999, United Surgical Partners International, Inc. sold
17,142 shares of Common Stock to LuAnn Brown for a purchase price of $59,997.

     On November 22, 1999, United Surgical Partners International, Inc. sold
3,571 shares of Common Stock to Alex Bennett for a purchase price of $12,498.50.

     On December 1, 1999, United Surgical Partners International, Inc. sold
14,286 shares of Common Stock to Earl Reed, III for a purchase price of $50,001.

     On January 15, 2000, United Surgical Partners International, Inc. sold
6,250 shares of Common Stock to Margaret Orman for a purchase price of $25,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
25,000 shares of Common Stock to Brett Brodnax for a purchase price of $100,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
2,500 shares of Common Stock to Bob Thunberg for a purchase price of $10,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
12,500 shares of Common Stock to Wesley Chick for a purchase price of $50,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
3,750 shares of Common Stock to Laura Koonsman for a purchase price of $15,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
2,500 shares of Common Stock to James Jackson for a purchase price of $10,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 14,017
shares of Series C Convertible Preferred Stock to Welsh, Carson, Anderson &
Stowe VII, L.P. for a purchase price of $14,017,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 210
shares of Series C Convertible Preferred Stock to WCAS Healthcare Partners, L.P.
for a purchase price of $210,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 170
shares of Series C Convertible Preferred Stock to Patrick J. Welsh for a
purchase price of $170,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 170
shares of Series C Convertible Preferred Stock to Russell L. Carson for a
purchase price of $170,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 170
shares of Series C Convertible Preferred Stock to Bruce K. Anderson for a
purchase price of $170,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 30
shares of Series C Convertible Preferred Stock to Richard H. Stowe for a
purchase price of $30,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 30
shares of Series C Convertible Preferred Stock to Andrew M. Paul for a purchase
price of $30,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 89
shares of Series C Convertible Preferred Stock to Thomas E. McInerney for a
purchase price of $89,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 4
shares of Series C Convertible Preferred Stock to Laura VanBuren for a purchase
price of $4,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 30
shares of Series C Convertible Preferred Stock to Robert A. Minicucci for a
purchase price of $30,000.

                                     II-14
<PAGE>
     On March 27, 2000, United Surgical Partners International, Inc. sold 11
shares of Series C Convertible Preferred Stock to Anthony deNicola for a
purchase price of $11,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 23
shares of Series C Convertible Preferred Stock to Paul B. Queally for a purchase
price of $23,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 5
shares of Series C Convertible Preferred Stock to Rudolph E. Rupert for a
purchase price of $5,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 6
shares of Series C Convertible Preferred Stock to D. Scott Mackesy for a
purchase price of $6,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 23
shares of Series C Convertible Preferred Stock to Lauren Melkus for a purchase
price of $23,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 5
shares of Series C Convertible Preferred Stock to Sanjay Swani for a purchase
price of $5,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 5
shares of Series C Convertible Preferred Stock to Jonathan Rather for a purchase
price of $5,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 2
shares of Series C Convertible Preferred Stock to Sean Traynor for a purchase
price of $2,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 3,601
shares of Series C Convertible Preferred Stock to FFT Partners I, L.P. for a
purchase price of $3,601,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 149
shares of Series C Convertible Preferred Stock to FFT Executive Partners I, L.P.
for a purchase price of $149,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold
1,500,000 shares of Class A Common Stock and $36,000,000 aggregate principal
amount of 10.0% Senior Subordinated Notes due March 27, 2010, to WCAS Capital
Partners III, L.P. for consideration of $36,000,000.

     On March 27, 2000, United Surgical Partners International, Inc. issued to
Welsh, Carson, Anderson & Stowe VII, L.P. a warrant to purchase 800,000 shares
of Class A Common Stock at an exercise price of $.01 per share.

     On March 27, 2000, United Surgical Partners International, Inc. sold
125,000 shares of Common Stock to Mark A. Kopser for a purchase price of
$437,500.

     On August 11, 2000, United Surgical Partners International, Inc. sold
15,000 shares of Common Stock to Jeff Stockard for a purchase price of
$30,000.00.

     On August 15, 2000, United Surgical Partners International, Inc. sold
10,714 shares of Common Stock to Alex Bennett for a purchase price of $37,499.

     On August 15, 2000, United Surgical Partners International, Inc. sold
28,571 shares of Common Stock to Brett Brodnax for a purchase price of
$99,998.50.

     On August 15, 2000, United Surgical Partners International, Inc. sold
14,285 shares of Common Stock to Kelly L. Byrd for a purchase price of
$49,997.50.

     On August 15, 2000, United Surgical Partners International, Inc. sold
20,000 shares of Common Stock to Rosa Byrum for a purchase price of $70,000.

     On August 15, 2000, United Surgical Partners International, Inc. sold
27,500 shares of Common Stock to Wesley Chick for a purchase price of $96,250.

     On August 15, 2000, United Surgical Partners International, Inc. sold 6,000
shares of Common Stock to Monica Cintado for a purchase price of $21,000.

     On August 15, 2000, United Surgical Partners International, Inc. sold
100,000 shares of Common Stock to Nick Hilger for a purchase price of $350,000.

                                     II-15
<PAGE>
     On August 15, 2000, United Surgical Partners International, Inc. sold 6,000
shares of Common Stock to Laura Koonsman for a purchase price of $21,000.

     On August 15, 2000, United Surgical Partners International, Inc. sold 3,000
shares of Common Stock to Jonathan Saunders for a purchase price of $10,500.

     On August 15, 2000, United Surgical Partners International, Inc. sold 3,000
shares of Common Stock to Richard Schriefer for a purchase price of $10,500.

     On August 15, 2000, United Surgical Partners International, Inc. sold
20,000 shares of Common Stock to John J. Wellik for a purchase price of $70,000.

     On August 15, 2000, United Surgical Partners International, Inc. sold 5,000
shares of Common Stock to Lori Yarbrough for a purchase price of $17,500.

     On September 26, 2000, United Surgical Partners International, Inc. issued
to HDT, S.C. a promissory note in the principal amount of $811,093.

     On October 12, 2000, United Surgical Partners International, Inc. exchanged
1,000,000 shares of Class B Common Stock to HDT, S.C. for the remaining minority
interest in USPE.

     On February 12, 2001 United Surgical Partners International, Inc. issued
9,961,737 shares of Common Stock to the shareholders of OrthoLink Physicians
Corporation in connection with our acquisition of OrthoLink Physicians
Corporation.

     From April 30, 1998 through December  1, 2000, United Surgical Partners
International, Inc. issued stock options to various employees to purchase
3,270,300 shares of Common Stock of United Surgical Partners International,
Inc., with exercise prices ranging from $2.00 per share to $4.50 per share.

     No underwriters were engaged in connection with the issuance of securities
in any of the foregoing transactions. All of the foregoing sales of securities
were made in reliance upon the exemption from registration set forth in
Section 4(2) of the Securities Act as transactions not involving any public
offering. Issuances of options to employees, officers and directors of the
registrant were made pursuant to Rule 701 under the Securities Act.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 (A)  EXHIBITS

<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
<C>                      <S>
           1.1+     --   Form of Underwriting Agreement
           2.1*      --  Agreement and Plan of Merger, dated as of December 6, 2000,
                         among United Surgical Partners International, Inc., OPC
                         Acquisition Corporation and OrthoLink Physicians Corporation
           3.1*      --  Form of Second Amended and Restated Certificate of
                         Incorporation
           3.2*      --  Form of Amended and Restated Bylaws
           4.1+     --   Form of Common Stock Certificate
           4.2*      --  Third Amended and Restated Stockholders' Agreement, dated
                         March 27, 2000, by and among United Surgical Partners
                         International, Inc. and the security holders named therein
           4.3.1*    --  Amended and Restated Registration Rights Agreement, dated
                         April 30, 1998, by and among United Surgical Partners
                         International, Inc. and the security holders named therein
                         (the "Registration Rights Agreement")
           4.3.2*    --  Amendment No. 1 to the Registration Rights Agreement, dated
                         as of June 26, 1998, by and among United Surgical Partners
                         International, Inc. and the security holders named therein
</TABLE>

                                     II-16
<PAGE>
<TABLE>
<CAPTION>
  EXHIBIT
   NUMBER                                            DESCRIPTION

<C>                      <S>
           4.3.3*    --  Amendment No. 2 to the Registration Rights Agreement, dated as of July 31, 1998,
                         by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.4*    --  Amendment No. 3 to the Registration Rights Agreement, dated as of October 26,
                         1998, by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.5*    --  Amendment No. 4 to the Registration Rights Agreement, dated as of December 22,
                         1998, by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.6*    --  Amendment No. 5 to the Registration Rights Agreement, dated as of June 1, 1999,
                         by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.7*    --  Amendment No. 6 to the Registration Rights Agreement, dated as of March 27,
                         2000, by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.8+   --   Amendment No. 7 to the Registration Rights Agreement, dated as of             ,
                         by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.4+     --   Form of Rights Agreement between United Surgical Partners International, Inc.
                         and Rights Agent
           5.1+     --   Opinion of Vinson & Elkins L.L.P.
          10.1*      --  Revolving Credit Agreement, dated as of June 29, 1999, by and among United
                         Surgical Partners International, Inc., the lenders from time to time party
                         thereto and Chase Bank of Texas, National Association as Administrative Agent
          10.2+     --   Amended and Restated Credit Agreement, dated January   , 2001, by and among
                         OrthoLink Physicians Corporation and Bank of America, N.A.
          10.3*      --  Credit Agreement, dated April 6, 2000, by and among Global Healthcare Partners
                         Limited and the Governor and Company of the Bank of Scotland
          10.4*      --  Senior Term Facility Agreement, dated March 3, 2000, between United Surgical
                         Partners Europe, S.L. Societe Generale and the lenders from time to time party
                         thereto
          10.5*      --  Term Credit Agreement, dated as of July 1, 1999, by and among TOPS Specialty
                         Hospital, Ltd., the lenders from time to time party thereto and Chase Bank of
                         Texas, National Association, as Administrative Agent
          10.6*      --  Stock Purchase Agreement, dated as of March 2, 1998, among United Surgical
                         Partners International, Inc. and the several purchasers named therein
          10.7*      --  Securities Purchase Agreement, dated as of April 30, 1998, among United Surgical
                         Partners International, Inc., Welsh, Carson, Anderson & Stowe VII, L.P. and the
                         several other purchasers named therein
          10.8*      --  Securities Purchase Agreement, dated as of June 26, 1998, among United Surgical
                         Partners International, Inc. and the several purchasers named therein
          10.9*      --  Securities Purchase Agreement, dated as of October 26, 1998, among United
                         Surgical Partners International, Inc., Welsh, Carson, Anderson & Stowe VII,
                         L.P., Health Care Capital Partners, L.P. and the several other purchasers named
                         therein
          10.10*    --   Securities Purchase Agreement, dated as of March 27, 2000, among United Surgical
                         Partners International, Inc., Welsh, Carson, Anderson & Stowe VII, L.P., WCAS
                         Capital Partners III, L.P., FFT Partners I, L.P. and the several other
                         purchasers named therein
          10.11*    --   Contribution and Purchase Agreement, dated as of May 11, 1999, by and among USP
                         North Texas, Inc., Baylor Health Services, Texas Health Ventures Group LLC and
                         THVG/Health First L.L.C.
          10.12*    --   Form of 7% Senior Subordinated Note due April 30, 2008
          10.13*    --   Form of 10% Senior Subordinated Note due March 27, 2010
</TABLE>

                                     II-17
<PAGE>
<TABLE>
<CAPTION>
  EXHIBIT
   NUMBER                                            DESCRIPTION

<C>                      <S>
          10.14*    --   Convertible Subordinated Promissory Note due June 1, 2007
          10.15*    --   Common Stock Purchase Warrant, dated July 1, 1999
          10.16*    --   Stock Purchase Warrant, dated March 27, 2000
          10.17*    --   Employment Agreement, dated as of November 1, 2000, by and between United
                         Surgical Partners International, Inc. and Donald E. Steen
          10.18*    --   Employment Agreement, dated as of March 1, 1999, by and between United Surgical
                         Partners International, Inc. and William H. Wilcox
          10.19*    --   United Surgical Partners International, Inc. Stock Option and Restricted Stock
                         Purchase Plan
          10.20+    --   2001 Equity-Based Compensation Plan
          10.21+    --   Employee Stock Purchase Plan
          10.22+    --   Form of Indemnification Agreement between United Surgical Partners
                         International, Inc. and its directors and officers
          10.23*    --   Stockholders Agreement, dated as of September 26, 2000, by and among HDT, S.C.,
                         United Surgical Partners International, Inc. and United Surgical Partners
                         Europe, S.L.
          21.1*      --  Subsidiaries of United Surgical Partners International, Inc.
          23.1*      --  Consent of KPMG LLP
          23.2*      --  Consent of Ernst & Young LLP
          23.3*      --  Consent of Arthur Andersen
          23.4+     --   Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
          24.1*      --  Power of Attorney (included in signature page)
</TABLE>

------------

* Filed herewith

+ To be filed by amendment

 (B)  FINANCIAL STATEMENT SCHEDULES

     Schedule II -- United Surgical Partners International, Inc. Valuation and
Qualifying Accounts

ITEM 17.  UNDERTAKINGS

     The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

     The undersigned Registrant hereby undertakes that:

     (1)   For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

     (2)   For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

                                     II-18
<PAGE>
                                   SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS, STATE OF TEXAS,
ON THE 12TH DAY OF FEBRUARY, 2001.

                                               UNITED SURGICAL PARTNERS
                                               INTERNATIONAL, INC.

                                               By: /s/ DONALD E. STEEN
                                                       DONALD E. STEEN
                                                       CHIEF EXECUTIVE OFFICER
                                                       AND CHAIRMAN OF THE BOARD

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Donald E. Steen, William H. Wilcox, Mark A.
Kopser and John J. Wellik and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including pre- and post-effective
amendments) to this Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and to file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:

<TABLE>
<CAPTION>
                      SIGNATURE                                          TITLE                          DATE
                      ---------                                          -----                          ----
<C>                                                      <S>                                      <C>
                 /s/ DONALD E. STEEN                     Chief Executive Officer and Chairman     February 12, 2001
                   DONALD E. STEEN                         of the Board

                /s/ WILLIAM H. WILCOX                    President and Director                   February 12, 2001
                  WILLIAM H. WILCOX

                  /s/ MARK A. KOPSER                     Senior Vice President and Chief          February 12, 2001
                   MARK A. KOPSER                          Financial Officer
                                                           (Principal Financial Officer)

                  /s/ JOHN J. WELLIK                     Vice President, Controller and           February 12, 2001
                   JOHN J. WELLIK                          Compliance Officer
                                                           (Principal Accounting Officer)


                                                         Director                                 February 12, 2001
            DAVE A. ALEXANDER, JR., M.D.
</TABLE>

                                     II-19
<PAGE>

<TABLE>
<CAPTION>
                      SIGNATURE                                          TITLE                          DATE
                      ---------                                          -----                          ----
                                                         Director                                 February 12, 2001
<C>                                                      <S>                                      <C>
                JOHN C. GARRETT, M.D.

                 /s/ CARLOS A. FERRER                    Director                                 February 12, 2001
                  CARLOS A. FERRER

                 /s/ D. SCOTT MACKESY                    Director                                 February 12, 2001
                  D. SCOTT MACKESY

                 /s/ THOMAS L. MILLS                     Director                                 February 12, 2001
                   THOMAS L. MILLS

                /s/ BOONE POWELL, JR.                    Director                                 February 12, 2001
                  BOONE POWELL, JR.

                 /s/ PAUL B. QUEALLY                     Director                                 February 12, 2001
                   PAUL B. QUEALLY

               /s/ DAVID P. ZARIN, M.D.                  Director                                 February 12, 2001
                DAVID P. ZARIN, M.D.
</TABLE>

                                     II-20
[{"type": "S-1", "sequence": "1", "filename": "0001.txt", "secsgml_size_bytes": 658238}]
{"company-data": {"conformed-name": "UNITED SURGICAL PARTNERS INTERNATIONAL INC", "cik": "0001101723", "assigned-sic": "", "irs-number": "752749762", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-55442", "film-number": "1534916"}, "business-address": {"street1": "17103 PRESTON RD", "street2": "SUITE 200", "city": "N DALLAS", "state": "TX", "zip": "75248"}, "mail-address": {"street1": "17103 PRESTON ROAD 200 N", "city": "DALLAS", "state": "TX", "zip": "75248"}}
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 12, 2001
                                                       REGISTRATION NO. 333-
================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               ------------------
                                    FORM S-1
                             REGISTRATION STATEMENT
                                    UNDER THE
                             SECURITIES ACT OF 1933
                               ------------------
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE                          8062                    75-2749762
(STATE OR OTHER JURISDICTION OF   (PRIMARY STANDARD INDUSTRIAL    (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)     CLASSIFICATION CODE NUMBER    IDENTIFICATION NO.)
DONALD E. STEEN
                                                           CHAIRMAN
                                           UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
        17103 PRESTON ROAD                            17103 PRESTON ROAD
         SUITE 200 NORTH                               SUITE 200 NORTH
       DALLAS, TEXAS 75248                           DALLAS, TEXAS 75248
         (972) 713-3500                                 (972) 713-3500
 (ADDRESS, INCLUDING ZIP CODE, AND          (NAME, ADDRESS, INCLUDING ZIP CODE, AND
    TELEPHONE NUMBER, INCLUDING                        TELEPHONE NUMBER,
AREA CODE, OF REGISTRANTS PRINCIPAL        INCLUDING AREA CODE, OF AGENT FOR SERVICE)
        EXECUTIVE OFFICES)
COPIES OF ALL COMMUNICATIONS TO:
ROBERT D. MOSHER                    SETH R. MOLAY, P.C.
   JEFFREY A. CHAPMAN               NOSSAMAN, GUTHNER, KNOX &           AKIN, GUMP, STRAUSS, HAUER &
  VINSON & ELKINS L.L.P.                   ELLIOTT, LLP                         FELD, L.L.P.
    2001 ROSS AVENUE                   THIRTY-FIRST FLOOR                  1700 PACIFIC AVENUE
        SUITE 3700                  445 SOUTH FIGUEROA STREET                    SUITE 4100
   DALLAS, TEXAS 75201            LOS ANGELES, CALIFORNIA 90071             DALLAS, TEXAS 75201
TELEPHONE: (214) 220-7700           TELEPHONE: (213) 612-7800            TELEPHONE: (214) 969-2800
FACSIMILE: (214) 220-7716           FACSIMILE: (213) 612-7801            FACSIMILE: (214) 969-4343
------------------
        Approximate date of commencement of proposed sale to the public:
   As soon as practicable after this Registration Statement becomes effective.
                               ------------------

     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

     If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

                               ------------------

                         CALCULATION OF REGISTRATION FEE

==================================================================================================================
                                                             PROPOSED
                                                              MAXIMUM                         AMOUNT OF
       TITLE OF EACH CLASS OF SECURITIES                AGGREGATE OFFERING                  REGISTRATION
                TO BE REGISTERED                             PRICE(1)                            FEE
------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value per share..........           $138,000,000                        $34,500
==================================================================================================================
(1)   Estimated solely for purposes of calculating the registration fee pursuant
      to Rule 457(o) under the Securities Act of 1933.

                               ------------------

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

                 SUBJECT TO COMPLETION, DATED FEBRUARY 12, 2001

                                              Shares
                                     [LOGO]
                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                  Common Stock

                               ------------------

     Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $      and $      per share. We have applied to list our common stock on
The Nasdaq Stock Market's National Market under the symbol "SURG".

     The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.

     INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON
PAGE 7.
UNDERWRITING     PROCEEDS TO UNITED
                                           PRICE TO       DISCOUNTS AND     SURGICAL PARTNERS
                                            PUBLIC         COMMISSIONS     INTERNATIONAL, INC.
                                         -------------    -------------    -------------------
Per Share............................    $                $                $
Total................................    $                $                $
Delivery of the shares of common stock will be made on or about
             , 2001.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

                               ------------------

CREDIT SUISSE FIRST BOSTON                                       UBS WARBURG LLC

                                         LEHMAN BROTHERS

                                                                        SG COWEN

                 The date of this prospectus is              , 2001.
[Photographs of surgery centers and private surgical hospitals]
TABLE OF CONTENTS

                                      PAGE
Prospectus Summary...................   1
Risk Factors.........................   7
Special Note Regarding Forward
  Looking Statements.................  19
Use of Proceeds......................  20
Dividend Policy......................  21
Dilution.............................  22
Capitalization.......................  24
Selected Consolidated Financial and
  Other Data.........................  26
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations......................  27
Business.............................  33
Management...........................  52

                                       PAGE
Certain Relationships and Related
  Transactions.......................   60
Security Ownership of Principal
  Stockholders and Management........   64
Description of Capital Stock.........   66
Shares Eligible for Future Sale......   73
Material United States Federal Tax
  Consequences to Non-United States
  Holders of Common Stock............   75
Underwriting.........................   78
Notice to Canadian Residents.........   81
Legal Matters........................   82
Experts..............................   82
Where You Can Find More
  Information........................   82
Summary Pro Forma Financial
  Statements.........................  P-1
Index to Financial Statements........  F-1

                               ------------------

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

                     DEALER PROSPECTUS DELIVERY OBLIGATION

     UNTIL                               , 2001 (25 DAYS AFTER THE COMMENCEMENT
OF THE OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.

                                       i
PROSPECTUS SUMMARY

     THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS
BUT DOES NOT CONTAIN ALL INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD
READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS AND THE
CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN THIS PROSPECTUS,
BEFORE YOU DECIDE WHETHER TO INVEST IN OUR COMMON STOCK. REFERENCES TO "WE,"
"OUR" OR "US" REFER TO UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

OUR BUSINESS

     We own and operate surgery centers and private surgical hospitals in the
United States, Spain and the United Kingdom. We generally seek to acquire and
develop our facilities through the formation of strategic relationships with
physicians and healthcare systems to access and serve better the communities in
our markets. Our efficient, scalable and portable operating model allows us to
focus on meeting the needs of patients, physicians and payors. Our operating
model is designed to (1) provide an enhanced quality of care and overall
healthcare experience to patients, (2) attract physicians by providing
significant administrative, clinical and economic benefits and (3) offer an
efficient, low cost alternative to payors.

     Since surgeons and other physicians provide and influence the direction of
healthcare worldwide, we have developed our operating model to encourage
surgeons and physicians to affiliate with us and to use our facilities. We have
designed our facilities, structured our strategic relationships and adopted
staffing, scheduling and clinical systems and protocols to increase physician
productivity. We believe that our focus on physician satisfaction, combined with
our model of providing high quality healthcare in a friendly and convenient
environment for patients, will continue to increase the number of procedures
performed at our facilities each year.

     We have ownership interests in 28 surgery centers and one private surgical
hospital, and manage five additional surgery centers in the United States. Also
in the United States, we own interests in and will operate five surgery centers
and one private surgical hospital that are currently under construction and have
identified five additional markets for possible acquisition or development
projects. In Spain, we own and operate six private surgical hospitals, two
surgery centers and one diagnostic facility. In the United Kingdom, we own and
operate two private surgical hospitals and are developing a cancer center.

     Our revenues increased 105% to $98.8 million for the nine months ended
September 30, 2000 from $48.2 million for the nine months ended September 30,
1999. Our EBITDA less minority interest increased 504% to $15.1 million for the
nine months ended September 30, 2000 from $2.5 million for the nine months ended
September 30, 1999. Pro forma revenues and EBITDA less minority interest for the
nine months ended September 30, 2000 were $135.1 million and $27.4 million,
respectively.

     We expect to continue to grow internally, through increasing patient
volumes and reimbursement rates, and through the acquisition and development of
surgical facilities in existing and selected new markets. We believe our
acquisition strategy and operating model position us to capitalize on the
increasing demand for our services in each of our markets. The demand for
outpatient surgery has grown rapidly in the United States. Outpatient surgeries
performed in freestanding surgery centers in the United States increased 191%
from 2.3 million in 1990 to 6.7 million in 2000. Outpatient surgical procedures
represented approximately 15% of all surgical procedures performed in the United
States in 1980 compared to approximately 70% in 2000. In addition, private
healthcare and private health insurance are also emerging in many Western
European countries, including those with government funded

                                       1
public healthcare systems. We believe the waiting lists for many surgeries and
procedures and restrictions on elective surgeries have created opportunities to
establish successful local networks of private healthcare facilities in selected
national markets in Western Europe.

OUR BUSINESS STRATEGY

     We believe our business strategy will help us maintain growth and increase
market share in each of our markets. The key elements of our strategy are to:

        o  ATTRACT AND RETAIN TOP QUALITY SURGEONS AND OTHER
           PHYSICIANS. Recognizing the importance of physician satisfaction, we
           have designed our facilities and our operating model to encourage
           physicians to choose our facilities. We have identified and seek to
           accommodate the key factors in a physician's decision-making process,
           which we believe include quality of care, patient comfort,
           streamlined administrative processes, efficient operations and
           overall opportunity for increased physician productivity.

        o  GROW THROUGH SELECTIVE ACQUISITIONS AND DEVELOPMENT OF SURGICAL
           FACILITIES. We typically target the acquisition or development of
           multi-specialty centers that perform high volume, non-emergency,
           lower risk procedures requiring lower capital and operating costs
           than hospitals. In addition, we will also consider the acquisition of
           multi-facility companies that fit our overall acquisition profile.

        o  PURSUE STRATEGIC RELATIONSHIPS WITH HEALTHCARE SYSTEMS. We believe
           that developing strategic relationships with nonprofit healthcare
           systems benefits both the healthcare system and us. Our freestanding
           surgical facilities provide healthcare systems with a way to
           accommodate the needs of their doctors and patients without requiring
           significant amounts of their capital or administrative resources. In
           return, we receive the access to and credibility in new local markets
           that we need to appeal to physicians, patients and payors and to
           further our access to potential acquisitions.

        o  EXPAND SELECTIVELY IN WESTERN EUROPE. We intend to leverage our
           presence in Spain and the United Kingdom to expand selectively in
           these countries and to enter one or two additional national markets
           in Western Europe. We intend to continue to acquire and develop
           private surgical hospitals and surgery centers to meet the growing
           demand for private healthcare in that region.

        o  ENHANCE OPERATING EFFICIENCIES. We use systems and protocols
           including our proprietary measurement and monitoring system, USPI's
           EDGE, to enhance operating efficiencies at both existing and newly
           acquired or developed facilities. We believe that this focus on
           efficient operations increases our own profitability and encourages
           physicians to use our facilities by increasing their productivity. In
           addition, efficient operations are critical to our lower cost model
           and our competitive advantage in attracting and negotiating with
           payors.

     We were incorporated under the laws of the State of Delaware and began
operations on February 27, 1998. Our executive offices are located at 17103
Preston Road, Suite 200 North, Dallas, Texas 75248, and our telephone number is
(972) 713-3500. Our website address is WWW.UNITEDSURGICAL.COM. Information
contained on our website does not constitute part of this prospectus.

                                       2
THE OFFERING
Common stock offered by us...........................    shares

Common stock to be outstanding after this offering...    shares

Use of proceeds......................................    We estimate that our net proceeds from
                                                         this offering will be approximately
                                                         $110.1 million. We intend to:

                                                          o use a portion of these net proceeds to
                                                            redeem for $32.2 million, all
                                                            outstanding shares of our Series A
                                                            redeemable preferred stock, plus
                                                            accrued and unpaid dividends; and

                                                          o use the remaining proceeds to repay a
                                                            portion of our outstanding
                                                            indebtedness.

Proposed Nasdaq Stock Market National Market
  symbol.............................................    "SURG"
Unless we indicate otherwise, all information in this prospectus:

     o  assumes no exercise of the over-allotment option granted to the
        underwriters;

     o  assumes the conversion into our common stock of each outstanding share
        of our Class A and Class B common stock and Series C convertible
        preferred stock and of our convertible subordinated note with Baylor
        Health Care System Foundation; and

     o  does not give effect to a one-for-     reverse stock split of our
        outstanding shares of common stock to be effected prior to the
        completion of this offering.

Unless we indicate otherwise, all information in this prospectus excludes:

     o  5,920,242 shares of common stock issuable upon the exercise of
        outstanding stock options granted by us with exercise prices ranging
        from $0.85 to $8.47 per share and a weighted average exercise price of
        $3.56 per share;

     o  900,000 shares of common stock issuable upon the exercise of outstanding
        warrants issued by us with exercise prices ranging from $0.01 to $4.00
        per share and a weighted average exercise price of $0.45 per share; and

     o  6,000,000 shares reserved for issuance under our stock option plans and
        employee stock purchase plan.

If the over-allotment option is exercised in full, we will sell an additional
               shares in this offering.

                                       3
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

     The following table summarizes the consolidated statement of operations and
consolidated balance sheet data for our business. The historical results
presented below are not necessarily indicative of the results to be expected for
any future period. The comparability of the financial and other data included in
the table is affected by the acquisition of Aspen Healthcare Holdings Limited on
April 1, 2000 and other acquisitions completed since our inception. For a more
detailed explanation of this financial data, see "Selected Consolidated
Financial and Other Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Summary Pro Forma Financial Statements"
and the consolidated financial statements and related notes included elsewhere
in this prospectus.

     The unaudited pro forma consolidated statement of operations data and the
unaudited pro forma consolidated balance sheet data give effect to:

          o  our acquisitions of OrthoLink Physicians Corporation, completed on
             February 12, 2001, and Aspen Healthcare Holdings Limited completed
             on April 1, 2000, as if these events had occurred on January 1,
             1999, for the statement of operations data and, as if our
             acquisition of OrthoLink had occurred on September 30, 2000 for the
             balance sheet data;

          o  the conversion of all of our Series C convertible preferred stock
             and of our convertible subordinated note with Baylor into shares of
             our common stock; and

          o  the sale of          shares of common stock in this offering at an
             assumed initial public offering price of $     per share, the
             midpoint of the price range set forth on the cover page of this
             prospectus, after deducting the estimated underwriting discount and
             our estimated offering expenses and the application of a portion of
             the net proceeds to repay outstanding indebtedness and to redeem
             each outstanding share of our Series A redeemable preferred stock.

See "Summary Pro Forma Financial Statements." For an explanation of the number
of shares used to compute basic and diluted net income (loss) per share, see
note 12 of the notes to our consolidated financial statements included in this
prospectus.

     When we use the term "EBITDA," we are referring to earnings before
interest, taxes, depreciation and amortization. EBITDA should not be considered
in isolation or as a substitute for net income (loss), operating income (loss),
cash flow provided by operating activities or any other measure of operating
performance calculated in accordance with generally accepted accounting
principles. EBITDA is widely used by financial analysts as a measure of
financial performance. Our calculation of EBITDA may not be comparable to
similarly titled measures reported by other companies.

                                       4
PERIOD
                                           FROM
                                       FEBRUARY 27,
                                           1998
                                       (INCEPTION)                       NINE MONTHS ENDED SEPTEMBER 30,
                                         THROUGH       YEAR ENDED    ----------------------------------------
                                       DECEMBER 31,   DECEMBER 31,                                PRO FORMA
                                           1998           1999          1999          2000           2000
                                       ------------   ------------   -----------   -----------   ------------
(UNAUDITED)   (UNAUDITED)   (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues.........................       $20,572        $ 70,413       $48,233       $98,770       $135,117
Operating expenses excluding depreciation
  and amortization.....................        22,788          65,634        45,587        82,392        106,458
Depreciation and amortization..........         2,015           7,875         5,532         9,295         14,391
                                              -------        --------       -------       -------       --------
Operating income (loss)................        (4,231)         (3,097)       (2,886)        7,083         14,268
Other income (expense):
    Interest income....................           722             329           252           496            595
    Interest expense...................          (497)         (3,144)       (1,772)       (8,267)        (9,256)
    Other expense......................          (246)           (362)         (123)          (50)           (50)
                                              -------        --------       -------       -------       --------
Income (loss) before minority interest...      (4,252)         (6,275)       (4,529)         (737)         5,557
Minority interest in (income) loss of
  consolidated subsidiaries............            23            (118)         (137)       (1,232)        (1,223)
Net income (loss)......................       $(3,928)       $ (6,844)      $(4,965)      $(3,028)      $  1,260
Net income (loss) attributable to common
  shareholders(a)......................        (4,356)         (8,540)       (6,237)       (8,046)         1,260
Net income (loss) per share attributable
  to common shareholders:
    Basic..............................       $ (0.43)       $  (0.39)      $ (0.28)      $ (0.35)
    Diluted............................         (0.43)          (0.39)        (0.28)        (0.35)
Weighted average number of common shares
  outstanding and common equivalent
  shares:
    Basic..............................        10,099          21,924        21,942        23,109
    Diluted............................        10,999          21,924        21,942        23,109
OTHER DATA:
EBITDA.................................       $(2,216)       $  4,778       $ 2,646       $16,378       $ 28,659
EBITDA as a % of revenue...............         (10.8)%           6.8%          5.5%         16.6%          21.2%
EBITDA less minority interest..........       $(2,193)       $  4,660       $ 2,509       $15,146       $ 27,436
EBITDA less minority interest as a % of
  revenue..............................         (10.7)%           6.6%          5.2%         15.3%          20.3%
Number of facilities operated as of the
  end of period........................            17              28            28            33             42
------------
(a) Includes preferred stock dividends of $428,050, $1,695,803, $1,271,850 and
    $5,018,265 for the period from February 27, 1998 (inception) through
    December 31, 1998, the year ended December 31, 1999 and the nine months
    ended September 30, 1999 and September 30, 2000.

                                       5
AS OF SEPTEMBER 30, 2000
                                         -------------------------------
                                          ACTUAL            PRO FORMA
                                         --------         --------------
                                         (UNAUDITED)      (UNAUDITED)
                                                 (IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Working capital......................    $  3,201            $ 33,068
Total assets.........................     292,755             414,230
Total long-term debt.................     162,860             133,835
Redeemable preferred stock...........      32,175             --
Total stockholders' equity...........      48,637             210,169
6
RISK FACTORS

     THE VALUE OF AN INVESTMENT IN UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
WILL BE SUBJECT TO THE SIGNIFICANT RISKS INHERENT IN OUR BUSINESS. YOU SHOULD
CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND OTHER
INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK. IF
ANY OF THE EVENTS DESCRIBED BELOW OCCUR, OUR BUSINESS AND FINANCIAL RESULTS
COULD BE ADVERSELY AFFECTED IN A MATERIAL WAY. THIS COULD CAUSE THE TRADING
PRICE OF OUR COMMON STOCK TO DECLINE, PERHAPS SIGNIFICANTLY. ADDITIONAL RISKS
AND UNCERTAINTIES, INCLUDING THOSE THAT ARE NOT YET IDENTIFIED OR THAT WE
CURRENTLY BELIEVE ARE IMMATERIAL, MAY ALSO ADVERSELY AFFECT OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

RISKS RELATING TO OUR BUSINESS

WE DEPEND ON PAYMENTS FROM THIRD-PARTY PAYORS, INCLUDING GOVERNMENT HEALTHCARE
PROGRAMS, AND THESE PAYMENTS MAY BE REDUCED WHILE OUR COSTS ARE INCREASING.

     We are dependent upon private and governmental third-party sources of
payment for the services provided to patients in our surgery centers and private
surgical hospitals. The amount of payment a surgery center or private surgical
hospital receives for its services may be adversely affected by market and cost
factors as well as other factors over which we have no control, including
Medicare and Medicaid regulations and the cost containment and utilization
decisions of third-party payors. We derived approximately 19% and 18% of our
domestic revenues in 1999 and the nine months ended September 30, 2000,
respectively, from U.S. government healthcare programs, including Medicare and
Medicaid. For the nine months ended September 30, 2000, we derived approximately
2% and 12% of our revenues from governmental payors in the United Kingdom and
Spain, respectively. This revenue is a result of referrals of patients to our
hospitals by the national health system. We have no control over the number of
patients that are referred to the private sector annually. We can give you no
assurances that fixed fee schedules, capitation payment arrangements, exclusion
from participation in managed care programs or other factors affecting payments
for healthcare services over which we have no control will not have a material
adverse effect on us.

IF WE ARE UNABLE TO ACQUIRE AND DEVELOP ADDITIONAL SURGERY CENTERS OR PRIVATE
SURGICAL HOSPITALS ON FAVORABLE TERMS, WE MAY BE UNABLE TO EXECUTE OUR
ACQUISITION AND DEVELOPMENT STRATEGY.

     Our strategy is to increase our revenues and earnings by continuing to
acquire surgical facility companies, groups of surgical facilities and
individual surgical facilities and to develop additional surgical facilities.
Our efforts to execute our acquisition and development strategy may be affected
by our ability to identify suitable candidates and negotiate and close
acquisition and development transactions. We are currently evaluating potential
acquisitions and development projects and expect to continue to evaluate
acquisitions and development projects in the foreseeable future. The surgical
facilities we develop typically incur losses during the initial months of
operation and, unless and until their case loads grow, they generally experience
lower total revenues and operating margins than established surgical facilities.
Further, while we seek indemnification from prospective sellers covering unknown
or contingent liabilities, we may nevertheless acquire companies and surgical
facilities that have material liabilities for failure to comply with healthcare
laws and regulations or other past activities. We can give you no assurances
that we will be successful in acquiring other companies or additional surgical
facilities, developing surgical facilities or achieving satisfactory operating
results at acquired or newly developed facilities. We can give you no assurances
that the companies or assets we acquire in the future will ultimately produce
returns that justify our related investment.

                                       7
IF WE DO NOT HAVE SUFFICIENT CAPITAL RESOURCES FOR OUR ACQUISITION AND
DEVELOPMENT STRATEGY, OUR GROWTH COULD BE LIMITED.

     We will need capital to acquire other companies and to acquire, develop,
integrate, operate and expand surgery centers and private surgical hospitals. We
may finance future acquisition and development projects through debt or equity
financings and may use shares of our capital stock for all or a portion of the
consideration to be paid in acquisitions. To the extent that we undertake these
financings or use capital stock as consideration, our stockholders may
experience future ownership dilution. In the event that our common stock does
not maintain a sufficient valuation, or potential acquisition candidates are
unwilling to accept our common stock as all or part of the consideration, we may
be required to use more of our cash resources, if available, or to rely solely
on additional financing arrangements to pursue our acquisition and development
strategy. In such an instance, if we do not have sufficient capital resources,
our growth could be limited and our operations impaired. We can give you no
assurances that we will be able to obtain financing necessary for our
acquisition and development strategy or that, if available, the financing will
be on terms acceptable to us.

IF WE ARE UNABLE TO MANAGE GROWTH, WE MAY BE UNABLE TO ACHIEVE OUR GROWTH
STRATEGY.

     Our rapid growth has placed, and will continue to place, increased demands
on our management, operational and financial information systems and other
resources. Further expansion of our operations will require substantial
financial resources and management attention. To accommodate our past and
anticipated future growth, and to compete effectively, we will need to continue
to implement and improve our management, operational and financial information
systems and to expand, train, manage and motivate our workforce. We can give you
no assurances that our personnel, systems, procedures or controls will be
adequate to support our operations in the future or that focusing our financial
resources and management attention on the expansion of our operations will not
adversely affect our financial results. Any failure to implement and improve our
management, operational and financial information systems, or to expand, train,
manage or motivate our workforce, could have a material adverse effect on us.

WE DEPEND ON OUR RELATIONSHIPS WITH THE HEALTHCARE SYSTEMS WITH WHICH WE HAVE
STRATEGIC ALLIANCES.

     Our domestic business depends upon the efforts and success of the
healthcare systems with which we have strategic alliances and the strength of
our alliances with these healthcare systems. Our business could be adversely
affected by the impairment of our relationships with these healthcare systems or
any damage to the reputation of these healthcare systems. We can give you no
assurances that we will be able to maintain or renew our existing alliance
agreements with these healthcare systems on terms and conditions favorable to
us. We also cannot assure you that we will be able to enter into alliances with
additional healthcare systems. If we are unable to maintain and renew our
existing alliance agreements on terms favorable to us or enter into alliances
with additional healthcare systems, we may be unable to implement our business
strategies successfully and our business could be adversely affected.

WE DEPEND ON OUR RELATIONSHIPS WITH THE PHYSICIANS WHO USE OUR FACILITIES.

     Our business depends upon the efforts and success of the physicians who
provide medical services at our domestic and Western European facilities and the
strength of our relationships with these physicians. Our business could be
adversely affected by:

     o  the loss of our relationship with, or a reduction in use of our
        facilities by, a key physician or group of physicians;

     o  any failure of these physicians to maintain the quality of medical care
        provided or to otherwise adhere to professional guidelines at our
        surgical facilities; or

     o  any damage to the reputation of a key physician or group of physicians.

                                       8
OUR EUROPEAN OPERATIONS, WHICH WE PLAN TO EXPAND, ARE SUBJECT TO UNIQUE RISKS.
IF ANY OF THESE EVENTS ACTUALLY OCCUR, OUR FINANCIAL RESULTS COULD BE ADVERSELY
AFFECTED.

     Our international operations are located in Spain and the United Kingdom.
For the nine months ended September 30, 2000, approximately 43% of our revenues
were generated from operations in Spain, 39% from the United States and 18% from
the United Kingdom. For 1999 and 1998, respectively, these percentages were 67%
and 91% for Spain and 33% and 9% for the United States. We did not have
operations in the United Kingdom before April 1, 2000. We expect that revenue
from European operations will continue to account for a significant percentage
of our total revenue, and we may pursue additional acquisitions in Spain, the
United Kingdom and other countries in Western Europe. Expansion of our European
operations will require substantial financial resources and management
attention. This focus of financial resources and management attention could have
an adverse effect on our financial results. Our European operations are subject,
and as they continue to develop may become increasingly subject, to risks such
as:

     o  competition with government-sponsored healthcare systems;

     o  unforeseen changes in foreign regulatory requirements or domestic
        regulatory requirements affecting our foreign operations;

     o  identifying, attracting, retaining and working successfully with
        qualified local management;

     o  difficulties in staffing and managing geographically and culturally
        diverse, multinational operations;

     o  currency fluctuations;

     o  potentially adverse tax consequences; and

     o  the possibility of an economic downturn in the Western European
        countries in which we operate, which could adversely affect the ability
        or willingness of employers and individuals in these countries to
        purchase private health insurance.

We can give you no assurances that these or other factors will not have a
material adverse effect on our ability to successfully operate in Europe.

WE MAY ENCOUNTER DIFFICULTIES IN OUR INTEGRATION OF ORTHOLINK.

     Our recent acquisition of OrthoLink requires the integration of two
companies that previously operated independently. We can give you no assurances
that we will not encounter difficulties in integrating the operations of
OrthoLink with our own or that the expected benefits of the acquisition will be
realized. If we are not able to integrate the two companies' operations and
personnel in a timely and efficient manner, then the potential benefits of the
transaction may not be achieved. Further, any delays or unexpected costs
incurred in connection with the integration could have a material adverse effect
on us. In particular, if the operations and personnel of the two companies are
not compatible, if we experience the loss of key personnel or if the effort
devoted to the integration of the two companies diverts significant management
or other resources from other operational activities, our business may be
adversely affected.

OUR SIGNIFICANT INDEBTEDNESS COULD LIMIT OUR FLEXIBILITY.

     We are substantially leveraged and will continue to have significant
indebtedness following this offering. As of September 30, 2000, on a pro forma
basis after giving effect to the OrthoLink acquisition and the use of the
estimated net proceeds of this offering, we would have had total long term debt
of approximately $133.8 million, or approximately 39% of our total
capitalization. Our acquisition and development program requires substantial
capital resources, and the operation of our existing surgical facilities
requires ongoing capital expenditures. We may need to incur additional
indebtedness to fund these acquisitions, developments and operational
expenditures. However, we may be unable to

                                       9
obtain sufficient financing on terms satisfactory to us, or at all. As a result,
our acquisition and development activities would have to be curtailed or
eliminated and our financial results would be adversely affected.

     The degree to which we are leveraged could have other important
consequences to you, including the following:

     o  we must dedicate a substantial portion of our cash flow from operations
        to the payment of principal and interest on our indebtedness, reducing
        the funds available for our operations;

     o  a portion of our borrowings are at variable rates of interest, making us
        vulnerable to increases in interest rates;

     o  we may be more highly leveraged than some of our competitors, which
        could place us at a competitive disadvantage;

     o  our degree of leverage may make us more vulnerable to a downturn in our
        business or the economy generally; and

     o  the terms of our credit arrangements contain numerous financial and
        other restrictive covenants, including restrictions on paying dividends,
        incurring additional indebtedness and selling assets.

OUR REVENUES MAY BE ADVERSELY AFFECTED BY PENDING CHANGES IN THE SYSTEM OF
PAYING FOR OUTPATIENT SURGICAL PROCEDURES UNDER THE MEDICARE PROGRAM.

     Medicare's system of paying for covered procedures performed in a surgery
center is scheduled to change in the near future. On June 12, 1998, The
Department of Health and Human Services, or DHHS, proposed major revisions to
the surgery center payment methodology. The proposed rule would increase the
number of surgical procedure payment groups from eight to 105 and the number of
procedures covered by the Medicare program from 2,280 to 2,499. All of the
procedures that are paid at a particular rate would constitute a payment group.
Therefore, each of the 2,499 procedures would be paid at one of the 105
prospectively determined payment rates. The recently enacted Medicare, Medicaid
and SCHIP Benefits and Improvement and Protection Act of 2000 prohibits DHHS
from implementing the proposed surgery center methodology before January 1,
2002.

     Under the proposed revisions to the payment methodology, the payment rate
for virtually every covered procedure performed in a surgery center would
change, with some procedures receiving a lower rate and others receiving a
higher rate than they do currently. This change could affect the Medicare
revenues of our surgery centers, depending on such factors as patient volume,
case mix and the types of procedures performed. For that reason, the potential
impact of this new classification system cannot be predicted with certainty. We
can give you no assurances that our revenues will not be adversely affected
under the proposed payment system.

IF WE ARE UNABLE TO NEGOTIATE CONTRACTS AND MAINTAIN SATISFACTORY RELATIONSHIPS
WITH MANAGED CARE ORGANIZATIONS OR OTHER THIRD-PARTY PAYORS, OUR REVENUES MAY
DECREASE.

     Our competitive position has been, and will continue to be, affected by
initiatives undertaken during the past several years by major domestic
purchasers of healthcare services, including federal and state governments,
insurance companies and employers, to revise payment methods and monitor
healthcare expenditures in an effort to contain healthcare costs. As a result of
these initiatives, managed care companies such as health maintenance and
preferred provider organizations, which offer prepaid and discounted medical
service packages, represent a growing segment of healthcare payors, the effect
of which has been to reduce domestic healthcare facility revenue growth.
Similarly, in the United Kingdom, most patients at private surgical hospitals
have private healthcare insurance, either paid for by the patient or received as
part of their employment compensation. The majority of our

                                       10
revenues in the United Kingdom are attributable to patients with private
insurance. Our private surgical hospitals in the United Kingdom contract with
healthcare insurers on an annual basis to provide services to insured patients.

     In Spain, the majority of our revenues are attributable to patients with
private insurance. Our private surgical hospitals in Spain contract with
healthcare insurers on an annual basis to provide services to insured patients.
In addition, our Spanish hospitals contract with the Spanish Public Healthcare
System, which awards contracts based on a hospital's satisfaction of specified
criteria. The Spanish Public Healthcare System has the right to give priority to
hospitals owned by nonprofit entities if the efficiency, quality and cost
conditions of these entities are comparable to those of for profit hospitals.
Our contracts with the Spanish Public Healthcare System are short-term and
renewable at the sole discretion of the Spanish Public Healthcare System. As the
majority of our revenues in Spain are derived from private insurance companies,
the annual negotiation of price increases is very important to the profitability
of our hospitals. Any termination of an existing third-party contract could
result in a significant loss of revenues and could have a material adverse
effect on us.

     As an increasing percentage of domestic patients become subject to
healthcare coverage arrangements with managed care payors, we believe that our
success will continue to depend upon our ability to negotiate favorable
contracts on behalf of our facilities with managed care organizations, employer
groups and other private third-party payors. If we are unable to enter into
these arrangements on satisfactory terms in the future we could be adversely
affected. Many of these payors already have existing provider structures in
place and may not be able or willing to change their provider networks. We can
give you no assurances that we will be able to maintain existing relationships
or establish or maintain satisfactory new relationships with managed care
organizations or other third-party payors. Similarly, if we fail to negotiate
contracts with healthcare insurers in the United Kingdom and Spain on favorable
terms, or if we fail to remain on insurers' networks of approved hospitals, it
could have a material adverse effect on us. Any significant loss of revenue as a
result of the termination of existing third-party payor contracts or otherwise
could have a material adverse effect on us.

EFFORTS TO REGULATE THE CONSTRUCTION, ACQUISITION OR EXPANSION OF HEALTHCARE
FACILITIES COULD PREVENT US FROM ACQUIRING ADDITIONAL SURGERY CENTERS OR PRIVATE
SURGICAL HOSPITALS, RENOVATING OUR EXISTING FACILITIES OR EXPANDING THE BREADTH
OF SERVICES WE OFFER.

     Some states in the United States require prior approval for the
construction, acquisition or expansion of healthcare facilities or expansion of
the services they offer. In giving approval, these states consider the need for
additional or expanded healthcare facilities or services. In some states in
which we operate, we are required to obtain certificates of need, known as CONs,
for capital expenditures exceeding a prescribed amount, changes in bed capacity
or services offered and various other matters. Other states in which we now or
may in the future operate may adopt similar legislation. Spain also requires
prior approval of the construction or expansion of healthcare facilities. In
addition, private surgical hospitals in Spain must obtain a number of licenses,
including a license to operate a pharmacy or to perform tests using radioactive
materials. We may not be able to obtain the CONs or other required approvals for
additional or expanded facilities or services in the future. In addition, at the
time we acquire a facility, we may agree to replace or expand the acquired
facility. If we are unable to obtain required approvals, we may not be able to
acquire additional surgery centers or private surgical hospitals, expand
healthcare services we provide at these facilities or replace or expand acquired
facilities.

NEW FEDERAL AND STATE LEGISLATIVE AND REGULATORY INITIATIVES RELATING TO PATIENT
PRIVACY COULD REQUIRE US TO EXPEND SUBSTANTIAL SUMS ACQUIRING AND IMPLEMENTING
NEW INFORMATION SYSTEMS, WHICH COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS.

     There are currently numerous legislative and regulatory initiatives at the
U.S. state and federal levels addressing patient privacy concerns. In
particular, the Health Insurance Portability and Accountability Act of 1996
contains provisions that may require us to acquire and implement expensive new

                                       11
computer systems and to adopt business procedures designed to protect the
privacy of each of our patient's individual health information. On December 28,
2000, DHHS released the final health privacy regulations, which generally
require compliance within two years. These regulations are expected to have a
financial impact on the health care industry because they impose extensive new
requirements and restrictions on the use and disclosure of identifiable patient
information. Although we cannot predict the total financial or other impact of
these regulations on our business, compliance with these regulations could
require us to spend substantial sums, which could negatively impact our
financial results. Additionally, if we fail to comply with these regulations, we
could suffer civil penalties up to $25,000 per calendar year for each violation
and criminal penalties with fines up to $250,000.

IF WE FAIL TO COMPLY WITH APPLICABLE LAWS AND REGULATIONS, WE COULD SUFFER
PENALTIES OR BE REQUIRED TO MAKE SIGNIFICANT CHANGES TO OUR OPERATIONS.

     We are subject to many laws and regulations at the federal, state and local
government levels in the domestic and European jurisdictions in which we
operate. These laws and regulations require that our healthcare facilities meet
various licensing, certification and other requirements, including those
relating to:

     o  physician ownership of our domestic facilities;

     o  the adequacy of medical care, equipment, personnel, operating policies
        and procedures;

     o  maintenance and protection of records; and

     o  environmental protection.

     If we fail to comply with applicable laws and regulations, we could suffer
civil or criminal penalties, including the loss of our licenses to operate and
our ability to participate in Medicare, Medicaid and other government sponsored
and other healthcare programs. A number of initiatives have been proposed during
the past several years to reform various aspects of the healthcare system, both
domestically and in the European jurisdictions in which we operate. In the
future, different interpretations or enforcement of existing or new laws and
regulations could subject our current practices to allegations of impropriety or
illegality, or could require us to make changes in our facilities, equipment,
personnel, services, capital expenditure programs and operating expenses. We can
give you no assurances that current or future legislative initiatives or
government regulation will not have a material adverse effect on us or reduce
the demand for our services.

     In pursuing our growth strategy, we may expand our presence into new
geographic markets, including additional foreign countries. In entering a new
geographic market, we will be required to comply with laws and regulations of
jurisdictions that may differ from those applicable to our current operations.
We can give you no assurances that we will be able to comply with these legal
requirements in a cost-effective manner.

IF A FEDERAL OR STATE AGENCY ASSERTS A DIFFERENT POSITION OR ENACTS NEW LAWS OR
REGULATIONS REGARDING ILLEGAL REMUNERATION UNDER THE MEDICARE OR MEDICAID
PROGRAMS, WE MAY BE ADVERSELY AFFECTED.

     The federal Anti-Kickback Statute prohibits the offer, payment,
solicitation or receipt of any form of remuneration in return for referring
items or services payable by Medicare, Medicaid, or any other federal healthcare
program. Additionally, the Anti-Kickback Statute prohibits any form of
remuneration in return for purchasing, leasing, or ordering or arranging for or
recommending the purchasing, leasing or ordering of items or services payable by
Medicare, Medicaid or any other federal healthcare program. The Anti-Kickback
Statute is very broad in scope and many of its provisions have not been
uniformly or definitively interpreted by existing case law or regulations.
Violations of the Anti-Kickback Statute may result in substantial civil or
criminal penalties, including criminal fines of up to $25,000 and civil
penalties of up to $50,000 for each violation, plus three times the amount
claimed and exclusion from participation in the Medicare and Medicaid programs.
The exclusion, if applied to

                                       12
our surgery centers or private surgical hospitals, could result in significant
reductions in revenue and could have a material adverse effect on our business.

     In July 1991, DHHS issued final regulations defining various "safe
harbors." Two of the safe harbors issued in 1991 apply to business arrangements
similar to those used in connection with our surgery centers and private
surgical hospitals, the "investment interest" safe harbor and the "personal
services and management contracts" safe harbor. However, the structure of the
limited partnerships and limited liability companies operating our surgery
centers and private surgical hospitals, as well as our various business
arrangements involving physician group practices, do not satisfy all of the
requirements of either safe harbor. Therefore, our business arrangements with
our surgery centers, private surgical hospitals and physician groups do not
qualify for "safe harbor" protection from government review or prosecution under
the Anti-Kickback Statute. Since there is no legal requirement that transactions
with referral sources fit within a safe harbor, a business arrangement that does
not substantially comply with the relevant safe harbor is not necessarily
illegal under the Anti-Kickback Statute.

     On November 19, 1999, DHHS promulgated final regulations creating
additional safe harbor provisions, including a safe harbor that applies to
physician ownership of or investment interests in surgery centers. The surgery
center safe harbor protects four types of investment arrangements: (1)
surgeon-owned surgery centers; (2) single-specialty surgery centers; (3)
multi-specialty surgery centers; and (4) hospital/physician surgery centers.
Each category has its own requirements with regard to what type of physician may
be an investor in the surgery center. In addition to the physician investor, the
categories permit an "unrelated" investor, who is a person or entity that is not
in a position to provide items or services related to the surgery center or its
investors. Our business arrangements with our surgery centers typically consist
of one of our subsidiaries being an investor in each limited partnership or
limited liability company that owns the surgery center, in addition to providing
management and other services to the surgery center. As a result, these business
arrangements do not comply with all the requirements of the surgery center safe
harbor, and, therefore, are not immune from government review or prosecution.

     Although we believe that our business arrangements do not violate the
Anti-Kickback Statute, we can give you no assurances that a government agency or
a private party will not assert a contrary position. Additionally, we can give
you no assurances that new domestic federal or state laws will not be enacted
that would cause our relationships with the physician investors to become
illegal or result in the imposition of penalties against us or our facilities.
If any of our business arrangements with physician investors were deemed to
violate the Anti-Kickback Statute or similar laws, or if new domestic federal or
state laws were enacted rendering these arrangements illegal, our business could
be adversely affected.

IF PHYSICIAN SELF-REFERRAL LAWS ARE INTERPRETED DIFFERENTLY OR IF OTHER
LEGISLATIVE RESTRICTIONS ARE ISSUED, WE COULD INCUR A SIGNIFICANT LOSS OF
REIMBURSEMENT.

     The U.S. federal physician self-referral law, commonly referred to as the
Stark Law, prohibits a physician from making a referral for a designated health
service to an entity if the physician or a member of the physician's immediate
family has a financial relationship with the entity. The original Stark Law only
addressed referrals involving clinical laboratory services. However, in 1995
additional legislation, commonly known as Stark II, expanded the ban on
self-referrals by adding the following services to the definition of "designated
health services": physical therapy services; occupational therapy services;
radiology services; radiation therapy services and supplies; durable medical
equipment and supplies; parenteral and enteral nutrients, equipment and
supplies; prosthetics, orthotics, and prosthetic devices and supplies; home
health services; outpatient prescription drugs; and inpatient and outpatient
hospital services.

     DHHS issued a final rule on January 4, 2001, which was divided into Phase I
and Phase II, with Phase I regulations taking effect on January 4, 2002. Phase
II of the final rule, which DHHS says that

                                       13
it intends to publish "shortly," will address services furnished in a surgery
center. Under Phase I, services that would otherwise constitute a designated
health service, but that are paid by Medicare as part of the surgery center
payment rate, are not a designated health service for the purposes of the Stark
Law. Therefore, we believe the Stark Law generally does not prohibit physician
ownership or investment interests in surgery centers to which they refer
patients.

     In addition, we believe that physician ownership of surgery centers is not
prohibited by similar self-referral statutes enacted at the state level.
However, the Stark Law and similar state statutes are subject to different
interpretations with respect to many important provisions. Violations of these
self-referral laws may result in substantial civil or criminal penalties,
including large civil monetary penalties and exclusion from participation in the
Medicare and Medicaid programs. Exclusion of our surgery centers or private
surgical hospitals from these programs could result in significant loss of
revenues and could have a material adverse effect on us. We can give you no
assurances that further judicial or agency interpretation of existing laws or
further legislative restrictions on physician ownership or investment in health
care entities will not be issued that could have a material adverse effect on
us.

     In Spain, there is legislation which prohibits physicians who have
contracted with the Spanish Public Healthcare System on an exclusive basis from
rendering services in a private hospital. Spanish legislation also prohibits
physicians rendering services within the Public Healthcare System on a non-
exclusive basis from rendering services to Spanish Public Healthcare System
patients in private hospitals such as ours that have alliances with the Spanish
Public Healthcare System. Violations of these laws could result in
administrative fines or termination of the alliance with the Spanish Public
Healthcare System. If the physicians who use our Spanish facilites violate these
regulations and their or our contracts are terminated with the Spanish Public
Healthcare System, preventing them from continuing to use our facilities, our
business in Spain could be materially adversely affected.

IF LAWS GOVERNING THE CORPORATE PRACTICE OF MEDICINE CHANGE, WE MAY BE REQUIRED
TO RESTRUCTURE SOME OF OUR DOMESTIC RELATIONSHIPS.

     The laws of various domestic jurisdictions in which we operate or may
operate in the future do not permit business corporations to practice medicine,
exercise control over physicians who practice medicine or engage in various
business practices, such as fee-splitting with physicians. The interpretation
and enforcement of these laws vary significantly from state to state. We are not
required to obtain a license to practice medicine in any jurisdiction in which
we own or operate a surgery center or private surgical hospital because our
facilities are not engaged in the practice of medicine. The physicians who
utilize our facilities are individually licensed to practice medicine. In most
instances, the physicians and physician group practices are not affiliated with
us other than through the physicians ownership interests in the partnerships or
limited liability companies that own and operate our facilities and the service
agreements we have with some physicians.

     As a result of our acquisition of OrthoLink, we provide management services
to a number of physicians and physician group practices affiliated with
OrthoLink. Although we believe that our arrangements with these and other
physicians and physician group practices comply with applicable laws, we can
give you no assurances that a government agency charged with enforcement of
these laws, or a private party, might not assert a contrary position. If our
arrangements with these physicians and physician group practices were deemed to
violate state corporate practice of medicine, fee-splitting or similar laws, or
if new laws were enacted rendering these arrangements illegal, our business
could be materially adversely affected.

NEW YORK LAW RESTRICTS OUR OWNERSHIP OF FACILITIES IN NEW YORK.

     Under New York law, only individuals approved by the New York Department of
Health can own licensed healthcare facilities. Accordingly, we may not be able
to own interests in a partnership

                                       14
or limited liability company that owns an interest in a New York healthcare
facility unless our designees are approved by the New York Department of Health.
New York law also prohibits any unauthorized delegation of management authority
by a licensed healthcare facility. The law does permit a licensed facility to
obtain various services from non-licensed entities; however, it is not clear
what types of delegation constitute a violation. Although we believe that our
operations or relationships in New York are in compliance with these New York
laws, we can give you no assurance that a third party will not assert a contrary
position.

IF DOMESTIC REGULATIONS CHANGE, WE MAY BE OBLIGATED TO PURCHASE SOME OR ALL OF
THE OWNERSHIP INTERESTS OF THE PHYSICIANS ASSOCIATED WITH US.

     Upon the occurrence of various fundamental domestic regulatory changes, we
will be obligated to purchase some or all of the ownership interests of the
physicians affiliated with us in the limited partnerships or limited liability
companies that own and operate our surgery centers and private surgical
hospitals. The regulatory changes that could create this obligation include
changes that:

     o  make illegal the referral of Medicare or other patients to our surgical
        facilities by physicians affiliated with us;

     o  create the substantial likelihood that cash distributions from the
        limited partnerships or limited liability companies through which we
        operate our surgical facilities to physicians affiliated with us will be
        illegal; or

     o  make illegal the ownership by the physicians affiliated with us of
        interests in the partnerships or limited liability companies through
        which we own and operate our surgical facilities.

Typically, our limited partnership and limited liability company agreements
allow us to use shares of our common stock as consideration for the purchase of
a physicians ownership interest. The use of shares of our common stock for that
purpose would dilute your ownership. In the event that we are required to
purchase a physicians ownership interest and our common stock does not maintain
a sufficient valuation, we could be required to use our cash resources for the
acquisition. We can give you no assurances that our existing capital resources
would be sufficient for us to meet this obligation. The creation of these
obligations and the possible termination of our affiliation with these
physicians could have a material adverse effect on us.

IF WE BECOME SUBJECT TO SIGNIFICANT LEGAL ACTIONS, WE COULD BE SUBJECT TO
SUBSTANTIAL UNINSURED LIABILITIES.

     In recent years, physicians, hospitals and other healthcare providers have
become subject to an increasing number of legal actions alleging malpractice,
product liability or related legal theories. Many of these actions involve large
monetary claims and significant defense costs. To protect us from the cost of
these claims, we maintain professional malpractice liability insurance and
general liability insurance coverage in amounts and with deductibles that we
believe to be appropriate for our operations. However, our insurance coverage
may not cover all claims against us or continue to be available at a cost
allowing us to maintain adequate levels of insurance. If one or more successful
claims against us were not covered by or exceeded the coverage of our insurance,
we could be adversely affected.

IF WE ARE UNABLE TO EFFECTIVELY COMPETE FOR PHYSICIANS, STRATEGIC RELATIONSHIPS,
ACQUISITIONS AND MANAGED CARE CONTRACTS, OUR BUSINESS COULD BE ADVERSELY
AFFECTED.

     The healthcare business is highly competitive. We compete with other
healthcare providers, primarily hospitals, in recruiting physicians and
contracting with managed care payors in each of our markets. In Spain and the
United Kingdom, we also compete with these countries' national health systems in
our recruitment of healthcare professionals. There are major unaffiliated
hospitals in each market in which we operate. These hospitals have established
relationships with physicians and payors.

                                       15
In addition, other companies either are currently in the same or similar
business of developing, acquiring and operating surgery centers and private
surgical hospitals or may decide to enter our business. Many of these companies
have greater financial, research, marketing and staff resources than we do. We
may also compete with some of these companies for entry into strategic
relationships with healthcare systems and healthcare professionals. We can give
you no assurances that we can compete effectively with any of these entities.

WE ARE HIGHLY DEPENDENT ON OUR KEY MANAGEMENT PERSONNEL.

     We are highly dependent on our senior management, including Donald E.
Steen, our chairman and chief executive officer, William H. Wilcox, our
president and chief operating officer, and Gabriel Masfurroll, president of our
Spanish operations. We do not maintain "key man" life insurance policies on any
of our officers. The loss of key management personnel or our inability to
attract, retain and motivate sufficient numbers of qualified management
personnel could have a material adverse effect on us.

WE MAY OWE FIDUCIARY DUTIES TO THE HOLDERS OF OWNERSHIP INTERESTS IN THE
ENTITIES THROUGH WHICH WE OWN SURGICAL FACILITIES, AND THOSE DUTIES MAY PREVENT
US FROM ACTING SOLELY IN OUR OWN BEST INTERESTS.

     Our ownership interests in surgery centers and private surgical hospitals
generally are held through limited partnerships or limited liability companies.
We typically maintain an interest in a limited partnership or limited liability
company in which physicians or physician practice groups hold limited
partnership or membership interests. As general partner, manager or owner of the
majority interest in these entities, we may owe fiduciary duties to the other
interest holders and may encounter conflicts between our interests and those of
such holders. In these cases, we are obligated to exercise reasonable, good
faith judgment to resolve the conflicts and may not be free to act solely in our
own best interests. Disputes may arise between us and our affiliated physicians
with respect to a particular business decision or regarding the interpretation
of the provisions of the applicable limited partnership agreement or limited
liability company agreement. We can give you no assurances that any dispute will
be resolved or that any dispute resolution will be on terms favorable or
satisfactory to us.

WE DO NOT HAVE EXCLUSIVE CONTROL OVER THE DISTRIBUTION OF REVENUES FROM SOME OF
OUR OPERATING ENTITIES AND MAY BE UNABLE TO CAUSE ALL OR A PORTION OF THE
REVENUES OF THESE ENTITIES TO BE DISTRIBUTED.

     Our limited partnership and limited liability company agreements typically
provide for the quarterly distribution of net revenues from operations, less
amounts used for expenses and working capital. We generally control the entities
that function as the general partner of the limited partnerships or the managing
member of the limited liability companies through which we conduct operations.
In some instances, we share control of these general partner or managing member
entities with one of the healthcare systems with which we have a strategic
alliance. As a result, we do not have exclusive control in these instances over
the amount of net revenues distributed from some of our operating entities. If
we are unable to cause sufficient revenues to be distributed from one or more of
these entities, our relationships with the physicians who have an interest in
these entities may be damaged and we could be adversely affected. We may not be
able to resolve favorably any dispute regarding revenue distribution or other
matters with a healthcare system with which we share control of one of these
entities. Further, the failure to resolve a dispute with these healthcare
systems could cause the entity we jointly control to be dissolved. In addition,
our credit agreements in Europe prohibit the distribution of revenues out of the
country in which they were generated.

RISKS RELATING TO THIS OFFERING

BECAUSE WELSH, CARSON, ANDERSON & STOWE AND OUR MANAGEMENT CONTROL US, THEY WILL
TOGETHER BE ABLE TO DETERMINE THE OUTCOME OF ALL MATTERS SUBMITTED TO OUR
STOCKHOLDERS FOR APPROVAL, REGARDLESS OF THE PREFERENCES OF OUR OTHER
STOCKHOLDERS.

                                       16
Following the offering, Welsh, Carson, Anderson & Stowe and our management
will own       % of our outstanding common stock. Accordingly they will together
be able to:

     o  elect our entire board of directors;

     o  control our management and policies; and

     o  determine, without the consent of our other stockholders, the outcome of
        any corporate transaction or other matter submitted to our stockholders
        for approval, including mergers, consolidations and the sale of all or
        substantially all of our assets.

Welsh, Carson, Anderson & Stowe and our management will also be able to prevent
or cause a change in control of our company and will be able to amend our
certificate of incorporation and bylaws at any time. Their interests may
conflict with the interests of other holders of common stock and they may take
action affecting us with which you disagree.

OUR STOCK PRICE MAY FLUCTUATE AFTER THIS OFFERING. AS A RESULT, INVESTORS IN OUR
COMMON STOCK MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THE INITIAL
PUBLIC OFFERING PRICE.

     Prior to this offering, there has been no public market for shares of our
common stock. An active market may not develop following completion of this
offering or, if developed, may not be maintained. We will negotiate the initial
public offering price with the underwriters. The initial public offering price
may not be indicative of the price at which our common stock will trade
following completion of this offering. Healthcare provider companies with a
limited operating history like ours have been especially subject to sharp
fluctuations in the market price of their publicly traded securities. The market
price of our common stock may also be influenced by other factors, some of which
are beyond our control, including:

     o  changes in prevailing reimbursement rates;

     o  changes in governmental regulations or their interpretations;

     o  variations in quarterly operating results;

     o  changes in financial estimates by securities analysts;

     o  announcements by us or our competitors of significant contracts,
        acquisitions, strategic relationships, joint ventures or capital
        commitments;

     o  future sales of our common stock;

     o  investor perceptions of us and the healthcare industry; and

     o  general economic conditions.

     As a result, investors in our common stock may not be able to resell their
shares at or above the initial public offering price. In addition, the stock
market in general, and the Nasdaq National Market in particular, have
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of healthcare provider
companies. These broad market and industry factors may materially reduce the
market price of our common stock, regardless of our operating performance.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

     After this offering, we will have outstanding        shares of common stock
of which        shares are held by existing officers, directors and existing
stockholders. Sales of a substantial number of these shares of common stock in
the public market following this offering, or the perception that these sales
may occur, could substantially decrease the market price of our common stock. In
addition, the sale of these shares could impair our ability to raise capital
through the sale of additional common or preferred stock. All of the shares sold
in this offering will be freely tradeable, other than those shares sold in this
offering to any of our affiliates. Of the        shares held by existing holders
of our common stock,        shares are subject to the lockup agreements
described in "Underwriting."

                                       17
In addition, Welsh, Carson, Anderson & Stowe and other of our stockholders
have the right to require us to register their shares for resale. All of our
stockholders with registration rights have agreed not to exercise their
registration rights during the 180-day period following the date of this
prospectus without the consent of Credit Suisse First Boston Corporation.

INVESTORS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.

     The initial public offering price will be substantially higher than the pro
forma book value per share of our common stock. Purchasers of common stock in
this offering will experience immediate and substantial dilution in the pro
forma net tangible book value of their stock of $       per share, assuming an
initial public offering price for our common stock of $       per share. This
dilution is due in large part to the fact that prior investors paid an average
price of $       per share when they purchased their shares of common stock,
which is substantially less than the assumed initial public offering price of
$       per share.

WE HAVE NOT PAID DIVIDENDS AND DO NOT ANTICIPATE PAYING DIVIDENDS ON OUR COMMON
STOCK IN THE FORESEEABLE FUTURE.

     We currently anticipate that we will retain all future earnings, if any, to
finance the growth and development of our business and do not anticipate paying
cash dividends on our common stock in the foreseeable future. Any payment of
cash dividends will depend upon our financial condition, capital requirements,
earnings and other factors deemed relevant by our board of directors. Under the
terms of our credit agreements, we are restricted from paying cash dividends and
making other distributions to our stockholders.

PROVISIONS OF OUR CHARTER DOCUMENTS, OUR STOCKHOLDER RIGHTS PLAN AND DELAWARE
LAW COULD DISCOURAGE A TAKEOVER YOU MAY CONSIDER FAVORABLE.

     Some provisions of our certificate of incorporation and bylaws may
discourage, delay or prevent a merger or acquisition that you may consider
favorable. These provisions:

     o  authorize the issuance of "blank check" preferred stock;

     o  provide for a classified board of directors with staggered, three-year
        terms;

     o  prohibit cumulative voting in the election of directors;

     o  prohibit our stockholders, at any time after Welsh, Carson, Anderson &
        Stowe and its affiliates own less than 25.0% of our common stock, from
        acting by written consent without the approval of our board of
        directors;

     o  limit the persons who may call special meetings of stockholders; and

     o  establish advance notice requirements for nominations for election to
        the board of directors or for proposing matters to be approved by
        stockholders at stockholder meetings.

     In addition, our certificate of incorporation prohibits the amendment of
many of these provisions in our certificate of incorporation by our stockholders
unless the amendment is approved by the holders of at least 80% of our shares of
common stock.

     Delaware law may also discourage, delay or prevent someone from acquiring
or merging with us. In addition, purchase rights distributed under our
stockholder rights plan will cause substantial dilution to any person or group
attempting to acquire us without conditioning the offer on our redemption of the
rights. As a result, our stock price may decrease and you might not receive a
change of control premium over the then-current market price of the common
stock.

                                       18
SPECIAL NOTE REGARDING
                           FORWARD-LOOKING STATEMENTS

     Our disclosure and analysis in this prospectus include some forward-looking
statements. Forward-looking statements give our current expectations of
forecasts of future events. All statements other than statements of current or
historical fact contained in this prospectus, including statements regarding our
future financial position, business strategy, budgets, projected costs and plans
and objectives of management for future operations, are forward-looking
statements. The words "anticipate," "believe," "continue," "estimate," "expect,"
"intend," "may," "plan," "will," and similar expressions, as they relate to us,
are intended to identify forward-looking statements. In particular, these
include, among other things, statements relating to:

      o  our ability to attract and retain top quality physicians;

      o  our ability to grow through selective acquisitions and development;

      o  our ability to pursue strategic relationships with healthcare systems;

      o  our ability to expand selectively in Western Europe;

      o  our ability to enhance operating efficiencies; and

      o  changes in healthcare regulation that adversely affect our business.

     Any or all of our forward-looking statements in this prospectus may turn
out to be wrong. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends
that we believe may affect our financial condition, results of operations,
business strategy and financial needs. They can be affected by inaccurate
assumptions we might make or by known or unknown risks, uncertainties and
assumptions, including the risks, uncertainties and assumptions described in
"Risk Factors." In light of these risks, uncertainties and assumptions, the
forward-looking events and circumstances discussed in this prospectus may not
occur and actual results could differ materially from those anticipated or
implied in the forward-looking statements. When you consider these
forward-looking statements, you should keep in mind these risk factors and other
cautionary statements in this prospectus.

     Our forward-looking statements speak only as of the date made. We undertake
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

                                       19
USE OF PROCEEDS

     We expect to receive approximately $110.1 million in net proceeds from the
sale of shares of common stock in this offering at an assumed initial public
offering price of $     per share, or approximately $126.7 if the underwriters'
over-allotment option is exercised in full, after deducting underwriting
discounts and commissions and estimated offering expenses, which we expect to be
approximately $9.9 million, or approximately $11.3 million if the underwriters'
over-allotment option is exercised in full.

     We intend to:

     o  use a portion of the net proceeds of this offering to redeem in full,
        for an estimated cash payment of $32.2 million, all outstanding shares
        of our Series A redeemable preferred stock, plus accrued and unpaid
        dividends; and

     o  use the balance of the proceeds to repay a portion of the outstanding
        principal balance, plus accrued and unpaid interest, of our domestic
        credit facilities with Bank of America, N.A., and Chase Bank of Texas,
        N.A.

     Our certificate of incorporation establishes the terms of the Series A
redeemable preferred stock and provides for mandatory redemption of the
Series A redeemable preferred stock upon the consummation of this offering at a
redemption price equal to $1,000 per share, plus all accrued and unpaid
dividends from the date of issuance of the shares of Series A redeemable
preferred stock to the redemption date. Dividends on the Series A redeemable
preferred stock are payable at an annual rate of 7.50%.

     Welsh, Carson, Anderson & Stowe and its affiliates collectively own 30,000
of the 31,200 outstanding shares of Series A redeemable preferred stock as well
as some of our other securities. Upon completion of the offering, Welsh, Carson,
Anderson & Stowe and its affiliates will collectively own      % of our
outstanding common stock.

     Our credit agreement with Bank of America was originally entered into by
OrthoLink, which we acquired on February 12, 2001. It is a $45.0 million
revolving line of credit bearing interest at fluctuating rates ranging from
1.00% to 2.25% above the London Interbank Offering Rate, or LIBOR, with a
maturity date of December 28, 2001. As of February 8, 2001, the interest rate
under this credit agreement was 7.15%.

     Our revolving credit agreement with Chase is a $35.0 million revolving line
of credit bearing interest at fluctuating rates equal to 1.00% above LIBOR, with
a maturity date of June 30, 2002. As of February 8, 2001, the interest rate
under this revolving credit agreement was 6.65%.

     We are in negotiations with lenders to enter into a $75.0 million credit
facility to replace our Chase and Bank of America credit facilities. To the
extent that our net proceeds from this offering are not sufficient to repay all
such debt described above, we intend to borrow the additional amounts needed
under our new domestic credit facility to repay in full our Bank of America and
Chase credit facilities. Based on our assumed initial offering price of $ per
share, we would be required to borrow approximately $ million under this new
facility.

                                       20
DIVIDEND POLICY

     We have never declared or paid any dividends on our common stock, and we do
not anticipate declaring or paying any dividends on our common stock in the
foreseeable future. We currently intend to retain all future earnings to fund
the development and growth of our business. The payment of any future dividends
will be at the discretion of our board of directors and will depend on:

      o  any applicable contractual restrictions limiting our ability to pay
dividends;

      o  our results of operations;

      o  our then current and anticipated cash needs;

      o  our financial condition;

      o  our plans for expansion;

      o  our ability to fund our capital requirements;

      o  regulatory considerations; and

      o  other factors our board deems relevant.

     Our existing credit agreements prohibit our payment of dividends, and we
expect that our new credit facility will also prohibit our payment of dividends.

                                       21
DILUTION

     If you invest in our common stock, your interest will be diluted to the
extent of the difference between the initial public offering price per share of
our common stock and the pro forma net tangible book value per share of our
common stock after this offering.

     Pro forma net tangible book value per share represents the amount of total
tangible assets less total liabilities, divided by the pro forma number of
shares of common stock then outstanding. Our pro forma net tangible book value
at September 30, 2000, would have been $(87.8) million, or $      per share of
common stock, after giving effect to the conversion of our shares of Class A
common stock and Series C convertible preferred stock and of our convertible
subordinated note with Baylor into shares of common stock upon completion of
this offering. After giving further effect to the sale of the        shares of
common stock in this offering at an assumed initial public offering price of
$           per share, and after deducting estimated underwriting discounts and
commissions and estimated offering expenses, our pro forma net tangible book
value at September 30, 2000, would have been $22.3 million, or $      per share.
This represents an immediate increase in pro forma net tangible book value of
$           per share to existing stockholders and an immediate dilution of
$           per share to new investors purchasing common stock in this offering.
The following table illustrates this per share dilution:

                                         PER SHARE
                                         ---------
Assumed initial public offering price.................................   $
     Actual net tangible book value at September 30, 2000.............
     Decrease attributable to common and preferred stock conversion...
     Pro forma net tangible book value before this offering...........
     Increase attributable to new investors...........................
Pro forma net tangible book value after this offering.................
                                                                         -------
Dilution in pro forma net tangible book value to new investors (1)....   $
------------
(1) If the underwriters' over-allotment option is exercised in full, dilution
    per share to new investors will be $       .

     If the acquisition of OrthoLink Physicians Corporation had occurred as of
September 30, 2000, our pro forma net tangible book value at that date would
have been $(73.5) million, or $               per share. After giving effect to
the receipt of the estimated net proceeds of this offering, our pro forma net
tangible book value would be approximately $36.6 million, or $      per share.
This would represent an immediate increase in pro forma net tangible book value
of $      per share to existing stockholders and an immediate dilution in net
tangible book value of $           per share to new investors.

                                       22
The following table summarizes as of September 30, 2000, on the pro forma
basis described above, the total number of shares of common stock purchased from
us, the total consideration paid to us, and the average price per share paid by
existing stockholders and by new investors purchasing shares of common stock
from us in this offering at an assumed initial public offering price of $
per share and before deducting underwriting discounts and commissions and
estimated offering expenses:
SHARES PURCHASED        TOTAL CONSIDERATION
                                         -------------------      -------------------      AVERAGE PRICE
                                          NUMBER     PERCENT       AMOUNT     PERCENT        PER SHARE
                                         --------    -------      --------    -------      -------------
                                               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Existing common stockholders.........                      %      $                 %
Existing stockholders --                                                                     $
     conversion of preferred stock...
New investors (1)....................
                                         --------     -----       --------     -----
Total................................                 100.0%      $            100.0%
                                         ========     =====       ========     =====
------------
(1) If the underwriters' over-allotment option is exercised in full, we will
    sell an additional        shares.

     The foregoing discussion and tables assume no exercise of outstanding stock
options or warrants. As of September 30, 2000, there were options outstanding to
purchase a total of 3,008,300 shares of our common stock at a weighted average
exercise price of $3.21 per share, warrants outstanding to purchase a total of
900,000 shares of our common stock at a weighted average exercise price of $0.45
per share and 6,000,000 shares reserved for future grants under our stock option
plans and employee stock purchase plan. Subsequent to September 30, 2000 and
through January 31, 2001, we

       o  granted options to purchase 1,016,000 shares of our common stock under
          our 1998 stock option and restricted stock purchase plan, referred to
          as our 1998 stock option plan, at a weighted average exercise price of
          $4.50 per share, and

       o  cancelled 35,000 options to purchase shares of our common stock under
          our 1998 stock option plan.

     In February 2001, in connection with our acquisition of OrthoLink
Physicians Corporation, we issued 9,961,737 shares of our common stock for all
of the outstanding capital stock of OrthoLink in a transaction accounted for as
a purchase. In addition, we assumed options to purchase shares of OrthoLink
common stock that we converted into options to purchase 1,895,942 shares of our
common stock. To the extent that any of these stock options or warrants are
exercised, there will be further dilution to new investors. See
"Capitalization," "Management -- Stock Option and Restricted Stock Purchase
Plan," "Management -- 2001 Equity-Based Compensation Plan," "Management --
Employee Stock Purchase Plan" and notes 11 and 16 to our consolidated financial
statements included elsewhere in this prospectus.

                                       23
CAPITALIZATION

     The following table sets forth our cash and cash equivalents and
capitalization as of September 30, 2000:

     o  on an actual basis; and

     o  on a pro forma basis to give effect to:

          o  the issuance of 9,961,737 shares of our common stock in connection
             with our acquisition of OrthoLink Physicians Corporation in
             February 2001;

          o  the conversion of all of our Class A common stock and Series C
             convertible preferred stock and of our convertible subordinated
             note with Baylor into shares of common stock upon the completion of
             this offering;

          o  the sale of             shares of common stock in this offering at
             an assumed initial public offering price of $     per share; and

          o  the application of the net proceeds to repay a portion of our
             outstanding indebtedness and to redeem all outstanding shares of
             our Series A redeemable preferred stock as set forth under "Use of
             Proceeds."

                                       24
You should read this table together with "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes appearing elsewhere in
this prospectus.

                                                        AS OF SEPTEMBER 30, 2000
                                                         ----------------------
                                                          ACTUAL      PRO FORMA
                                                         ---------    ---------
                                                             (IN THOUSANDS)
Cash and cash equivalents .............................  $   6,422    $  10,764
                                                         =========    =========
Current portion of long-term debt .....................  $   5,514    $   7,814
Long-term debt:
  Senior debt .........................................     91,410       53,658
  Subordinated debt ...................................     54,420       51,133
  Other long-term debt ................................     11,515       21,229
                                                         ---------    ---------
       Total long-term debt ...........................    157,346      126,021
                                                         ---------    ---------
Series A redeemable preferred stock $.01 par value;
  31,200 shares authorized, issued and outstanding,
  actual; no shares authorized, issued or
  outstanding, pro forma ..............................     32,175         --
Stockholders' equity:
  Series C convertible preferred stock $.01 par value;
     18,750 shares authorized, issued and outstanding,
     actual; no shares authorized, issued or
     outstanding, pro forma ...........................     19,421         --
  Class A common stock $.01 par value; 30,000,000
     shares authorized, 23,519,534 shares issued and
     outstanding, actual; no shares authorized, issued
     or outstanding, pro forma ........................        235
  Class B common stock $.01 par value; 3,000,000 shares
     authorized, no shares issued and outstanding,
     actual; no shares authorized, issued or
     outstanding, pro forma ...........................       --
  Common stock $.01 par value; 40,000,000 shares
     authorized, 510,140 shares issued and outstanding,
     actual; shares authorized, shares issued and
     outstanding, pro forma ...........................          5
  Additional paid-in capital ..........................     60,422
  Treasury stock ......................................       (344)
  Receivables from sales of common stock ..............     (2,179)
  Accumulated other comprehensive loss, net of tax ....    (15,123)
  Accumulated deficit .................................    (13,800)
                                                         ---------    ---------
     Total stockholders' equity .......................     48,637      210,169
                                                         ---------    ---------
       Total capitalization ...........................  $ 243,672    $ 344,003
                                                         =========    =========

                                       25
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

     The selected consolidated statement of operations data set forth below for
the period from February 27, 1998 (inception) through December 31, 1998 and the
year ended December 31, 1999, and the consolidated balance sheet data at
December 31, 1998 and 1999, are derived from our consolidated financial
statements. These financial statements, which have been audited by KPMG LLP, are
included elsewhere in this prospectus, and are qualified by this reference to
them. The selected consolidated statement of operations data for the nine months
ended September 30, 1999 and 2000, and the consolidated balance sheet data at
September 30, 2000, are derived from unaudited financial statements included
elsewhere in this prospectus. We have prepared the unaudited information on the
same basis as the audited consolidated financial statements and have included
all adjustments, consisting only of normal recurring adjustments, that we
consider necessary for a fair presentation of our consolidated financial
position at that date and our consolidated operating results for this period.

     The historical results presented below are not necessarily indicative of
the results to be expected for any future period. You should read the selected
financial information set forth below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our consolidated financial statements and related notes appearing elsewhere in
this prospectus.

     When we use the term "EBITDA," we are referring to earnings before
interest, taxes, depreciation and amortization. EBITDA should not be considered
in isolation or as a substitute for net income (loss), operating income (loss),
cash flow provided by operating activities or any other measure of operating
performance calculated in accordance with generally accepted accounting
principles. EBITDA is widely used by financial analysts as a measure of
financial performance. Our calculation of EBITDA may not be comparable to
similarly titled measures reported by other companies.
PERIOD FROM
                                           FEBRUARY 27,
                                         1998 (INCEPTION)                            NINE MONTHS ENDED
                                              THROUGH          YEAR ENDED              SEPTEMBER 30,
                                           DECEMBER 31,       DECEMBER 31,    --------------------------------
                                               1998               1999             1999              2000
                                         -----------------    ------------    --------------    --------------
                                                                              (UNAUDITED)       (UNAUDITED)
                                                            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Total revenues.........................            $20,572           $70,413          $48,233           $98,770
Operating expenses excluding depreciation
  and amortization.....................             22,788            65,634           45,587            82,392
Depreciation and amortization..........              2,015             7,875            5,532             9,295
                                                   -------           -------          -------           -------
Operating income (loss)................             (4,231)           (3,097)          (2,886)            7,083
Other income (expense):
    Interest income....................                722               329              252               496
    Interest expense...................               (497)           (3,144)          (1,772)           (8,267)
    Other expense......................               (246)             (362)            (123)              (50)
                                                   -------           -------          -------           -------
Loss before minority interest..........             (4,252)           (6,275)          (4,529)             (737)
Minority interest in (income) loss of
  consolidated subsidiaries............                 23              (118)            (137)           (1,232)
Net loss...............................            $(3,928)          $(6,844)         $(4,965)          $(3,028)
Net loss attributable to common
  shareholders(a)......................             (4,356)           (8,540)          (6,237)           (8,046)
Net loss per share attributable to common
  shareholders:
    Basic..............................            $ (0.43)          $ (0.39)         $ (0.28)          $ (0.35)
    Diluted............................              (0.43)            (0.39)           (0.28)            (0.35)
Weighted average number of common shares
  outstanding and common equivalent
  shares:
    Basic..............................             10,099            21,924           21,942            23,109
    Diluted............................             10,099            21,924           21,942            23,109
OTHER DATA:
EBITDA.................................            $(2,216)          $ 4,778          $ 2,646           $16,378
EBITDA as a % of revenue...............              (10.8)%             6.8%             5.5%             16.6%
EBITDA less minority interest..........            $(2,193)          $ 4,660          $ 2,509           $15,146
EBITDA less minority interest as a % of
  revenue..............................              (10.7)%             6.6%             5.2%             15.3%
(a) Includes preferred stock dividends of $428,050, $1,695,803, $1,271,850 and
    $5,018,265 for the period from February 27, 1998 (inception) through
    December 31, 1998, the year ended December 31, 1999 and the nine months
    ended September 30, 1999 and 2000.

                                          AS OF DECEMBER 31,         AS OF
                                         --------------------    SEPTEMBER 30,
                                           1998        1999           2000
                                         --------    --------    --------------
                                                                 (UNAUDITED)
                                                     (IN THOUSANDS)
BALANCE SHEET DATA:
Working capital......................    $ 18,490    $ 10,461       $  3,201
Total assets.........................     124,792     176,703        292,755
Total long-term debt.................      11,675      72,684        162,860
Redeemable preferred stock...........      34,344      36,040         32,175
Total stockholders' equity...........      52,103      36,571         48,637

                                       26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

     The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with "Selected Consolidated
Financial and Other Data" and our consolidated financial statements and related
notes included elsewhere in this prospectus.

OVERVIEW

     We were organized in February 1998 and we operate surgery centers and
private surgical hospitals in the United States, Spain and the United Kingdom.
We began operations on February 27, 1998, and our first acquisition was one
hospital and a group of clinics located in Barcelona, Spain in April 1998. We
have grown through the acquisition of additional facilities in Spain, the United
States and the United Kingdom as well as the development of new facilities in
the United States. We have ownership interests in 28 surgery centers and one
private surgical hospital and manage five additional surgery centers in the
United States. Also in the United States, we own interests in and will operate
five surgery centers and one private surgical hospital that are currently under
construction and have identified five additional markets for possible
acquisition or development projects. In Spain, we own and operate six private
surgical hospitals, two surgery centers and a diagnostic facility. In the United
Kingdom, we own and operate two private surgical hospitals and are developing a
cancer center. For the year ended December 31, 1999, our first full year in
operation, we generated $70.4 million of revenues and $4.7 million of EBITDA
less minority interest. For the nine months ended September 30, 2000, our
revenues had grown to $98.8 million and our EBITDA less minority interest had
grown to $15.1 million.

ACQUISITIONS, EQUITY INVESTMENTS AND DEVELOPMENT PROJECTS

     On February 12, 2001, we completed a merger with OrthoLink Physicians
Corporation effective February 1, 2001. The transaction was funded through the
issuance of 9,961,737 shares of our common stock to OrthoLink stockholders.
OrthoLink was incorporated in 1996 and, as of February 1, 2001, held a direct or
indirect ownership interest in eight surgery centers, one of which we also held
an ownership interest in and managed. OrthoLink managed six of the eight surgery
centers in which it held an ownership interest and managed two additional
surgery centers in which it had no ownership interest. OrthoLink also provides
specialized management services for hospitals. In addition. OrthoLink has
service agreements with 14 physician groups in six states. For the nine months
ended September 30, 2000, OrthoLink had pro forma revenues of $26.3 million.

     During the first quarter of 2000, we acquired a majority interest in a
hospital and a radiology center in Madrid, Spain through two separate
transactions. We paid approximately $19.2 million for these two acquisitions,
which we borrowed under a credit agreement denominated in Euros with a
commercial lender. Also, during the first quarter of 2000, we opened two newly
developed surgery centers in the United States. We have management contracts
with and a minority ownership interest in each of these two centers. In April
2000, we acquired 100% of the outstanding common stock of a holding company
incorporated in England and Wales that owns and operates two private surgical
hospitals in England. We paid approximately $89.2 million in cash for that
acquisition, approximately $54.0 million of which we borrowed under a credit
agreement denominated in British pounds with a commercial lender.

     During 1999, we acquired interests in seven surgery centers in the United
States and opened three additional newly developed surgery centers. We have
management agreements with all of these centers and have ownership interests in
nine of the ten, ranging from 10% to 100%. Our total investment related to these
centers was approximately $42.1 million, $3.3 million of which we financed
through convertible subordinated notes issued to a seller and the remaining
$38.8 million of which we paid in cash. Additionally during 1999, we acquired a
majority interest in a surgery center in Spain for approximately $1.6 million in
cash.

                                       27
During 1998, we acquired four hospitals and a diagnostic center in Spain
for total consideration of approximately $46.3 million. Also during 1998, we
acquired ownership interests, ranging from 30% to 100%, in nine existing surgery
centers in the United States and a project then under development of a surgery
center in the United States, which opened during 1999. We entered into
management contracts for these ten centers as well as management contracts with
two additional surgery centers in the United States during 1998. Our investment
in these United States centers totaled approximately $36.6 million in 1998, $4.5
million of which we funded with our capital stock and the remaining $32.1
million of which we paid in cash.

SOURCES OF REVENUE

     Revenues include:

     o  net patient services revenues for the facilities that we consolidate for
        financial reporting purposes, which are typically those in which we have
        ownership interests of greater than 50%, and

     o  management fees earned from, and our share of net income of, the
        non-consolidated facilities that we account for under the equity method
        of accounting. These amounts are included in revenues as these
        operations are central to our business strategy.

For the nine months ended September 30, 2000, revenue from net patient services
represented approximately 96% of our total revenues and management fees from,
and our share of net income of, the non-consolidated facilities accounted for
under the equity method of accounting together with other income represented
approximately 4% of our total revenues. For 1999, revenue from net patient
services represented approximately 91% of our total revenues and management fees
from, and our share of net income of, the non-consolidated facilities accounted
for under the equity method of accounting together with other income represented
approximately 9% of our total revenues. For the 1998 fiscal period, revenue from
net patient services represented approximately 93% of our total revenues and
management fees from, and our share of net income of, the non-consolidated
facilities accounted for under the equity method of accounting together with
other income represented approximately 7% of our total revenues.

     For the nine months ended September 30, 2000, approximately 43% of our
revenues were generated from operations in Spain, 39% from the United States and
18% from the United Kingdom. For 1999 and 1998, respectively, these percentages
were 67% and 91% for Spain and 33% and 9% for the United States. We did not
operate in the United Kingdom before April 1, 2000.

RESULTS OF OPERATIONS

     The following table summarizes certain statements of operations items
expressed as a percentage of revenues for the periods indicated:
NINE MONTHS
                                                                                          ENDED
                                          FEBRUARY 27, 1998                           SEPTEMBER 30,
                                         (INCEPTION) THROUGH       YEAR ENDED        ----------------
                                          DECEMBER 31, 1998     DECEMBER 31, 1999    1999       2000
                                         -------------------    -----------------    -----      -----
Total revenues.......................           100.0%                100.0%         100.0%     100.0%
Total operating expenses, excluding
  depreciation and amortization......           110.8                  93.2           94.5       83.4
                                                -----                 -----          -----      -----
EBITDA...............................           (10.8)                  6.8            5.5       16.6
Minority interest in (income) loss of
  consolidated subsidiaries..........            (0.1)                  0.2            0.3        1.2
                                                -----                 -----          -----      -----
EBITDA less minority interest........           (10.7)                  6.6            5.2       15.3
Depreciation and amortization........             9.8                  11.2           11.5        9.4
Interest and other expense (income),
  net................................            (0.1)                  4.5            3.4        7.9
                                                -----                 -----          -----      -----
Loss before income taxes.............           (20.6)                 (9.1)          (9.7)      (2.0)
Income tax (expense) benefit.........            (1.5)                  0.6            0.6        1.1
                                                -----                 -----          -----      -----
Net loss.............................           (19.1)%                (9.7)%        (10.3)%     (3.1)%
                                                =====                 =====          =====      =====
28
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999

     Revenues increased by $50.5 million, or 105%, to $98.8 million for the nine
months ended September 30, 2000 from $48.2 million for the nine months ended
September 30, 1999. Of this increase in revenues, $25.9 million was contributed
by facilities we acquired during 2000, of which $17.3 million was generated by
the two hospitals we acquired in the United Kingdom on April 1, 2000 and
$7.5 million was generated by two facilities we acquired in Spain in March 2000
and November 2000. The exchange rate of the Euro to the U.S. dollar declined
during the first nine months of 2000, resulting in a negative impact of
$4.4 million on same store revenues for the facilities in Spain relative to
1999. Excluding this foreign exchange impact, same store facilities in Spain
contributed $39.6 million to consolidated revenues in the first nine months of
2000, an increase of $4.4 million over the same period in 1999. The remaining
increase in revenues was contributed by same store U.S. facilities, which
increased 188% to $38.7 million for the nine months ended September 30, 2000
versus $13.4 million for the nine months ended September 30, 1999.

     Operating expenses, excluding depreciation and amortization, increased by
$36.8 million, or 81%, to $82.4 million for the nine months ended September 30,
2000 from $45.6 million for the nine months ended September 30, 1999. Operating
expenses as a percentage of revenues decreased to 83.4% for the nine months
ended September 30, 2000 from 94.5% for the nine months ended September 30,
1999, primarily as a result of leveraging our corporate overhead expenses over
the increased revenue contributed by our facilities.

     EBITDA less minority interest increased $12.6 million, or 504%, to
$15.1 million for the nine months ended September 30, 2000 from $2.5 million for
the nine months ended September 30, 1999. EBITDA less minority interest, as a
percentage of revenues, increased to 15.3% for the nine months ended
September 30, 2000 from 5.2% for the nine months ended September 30, 1999,
primarily as a result of leveraging our corporate overhead expenses over the
increased revenue contributed by our facilities.

     Depreciation and amortization increased to $9.3 million, or 68%, for the
nine months ended September 30, 2000 from $5.5 million for the nine months ended
September 30, 1999. The $3.8 million increase resulted from the amortization of
goodwill and the depreciation of property and equipment we acquired during 1999
and 2000.

     Interest expense, net of interest income, increased 411% to $7.8 million
for the nine months ended September 30, 2000 from $1.5 million for the nine
months ended September 30, 1999. Of the $6.3 million increase, approximately
$2.1 million related to borrowings to finance acquisitions in Spain and the
United Kingdom and the remainder of the increase was incurred in the U.S. as a
result of the additional subordinated and commercial long-term debt incurred to
finance acquisitions.

     Provision for income taxes increased 254% to $1.1 million for the nine
months ended September 30, 2000 from $0.3 million for the nine months ended
September 30, 1999. The $0.8 million increase resulted from taxable income in
certain of our subsidiaries. Income tax regulations in Spain do not allow pretax
losses from one legal entity to offset pretax income in other entities until
common ownership at certain levels exists for a specified period of time.
Additionally, in some instances, state income tax regulations in the U.S.
prevent this type of offsetting for state income tax purposes. Accordingly, we
have incurred income tax expense in spite of our consolidated operating losses.

     Net loss decreased by $1.9 million, or 39%, to $3.0 million for the nine
months ended September 30, 2000 from $5.0 million for the nine months ended
September 30, 1999 primarily as a result of the factors discussed above.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE PERIOD FROM FEBRUARY 27, 1998
(INCEPTION) THROUGH DECEMBER 31, 1998

     We do not believe that our results for the year ended December 31, 1999 are
comparable to the period from February 27, 1998 through December 31, 1998, which
we refer to as the "1998 fiscal

                                       29
period," because in the 1998 fiscal period we had fifty-seven fewer days of
operations than we did in 1999.

     Revenues increased by $49.8 million, or 242%, to $70.4 million for the year
ended December 31, 1999 from $20.6 million for the 1998 fiscal period. Our
Spanish facilities contributed $28.3 million of this increase in revenues and
our U.S. facilities contributed the remaining $21.5 million. We completed our
initial acquisition of an operating entity, which owned a hospital and a group
of clinics in Barcelona, Spain, in April 1998. We completed our acquisition of
our initial U.S. operating entity in July 1998. Accordingly, all of our
facilities contributing to our 1999 revenue were not owned or were not
operational (in the case of development projects that opened during 1999) for a
significant portion of the 1998 fiscal period.

     Operating expenses, excluding depreciation and amortization, increased by
$42.8 million, or 188%, to $65.6 million in 1999 from $22.8 million in the 1998
fiscal period. This increase was primarily the result of our acquisitions and
the development of facilities in 1998 and 1999 that we did not own or operate
for a significant portion of the 1998 fiscal period. Operating expenses as a
percentage of revenues decreased to 93.2% in 1999 from 110.8% for the 1998
fiscal period.

     EBITDA less minority interest increased $6.9 million to $4.7 million for
the year ended December 31, 1999 from $(2.2) million for the 1998 fiscal period.
EBITDA less minority interest, as a percentage of revenues, increased to 6.6%
for the year ended December 31, 1999 from (10.7)% for the 1998 fiscal period, as
a result of our leveraging of expenses.

     Depreciation and amortization increased 291% to $7.9 million for the year
ended December 31, 1999 from $2.0 million for the 1998 fiscal period. The
$5.9 million increase was a result of amortization of the goodwill and
depreciation of the property and equipment associated with the acquisitions
completed during these periods.

     For the year ended December 31, 1999, interest expense, net of interest
income was $2.8 million, as we borrowed funds from commercial lenders and issued
subordinated notes to finance acquisitions. Interest income, net of interest
expense, was $0.2 million for the 1998 fiscal period as a result of investing
proceeds from our initial equity fundings prior to use of those funds for
acquisitions.

     Provision for income taxes increased to $0.5 million for the year ended
December 31, 1999 from an income tax benefit of $0.3 million for the 1998 fiscal
period. The increase was a result of tax regulations restricting the offsetting
of taxable income of legal entities with taxable losses at other legal entities.
The income tax benefit of $0.3 million recognized for the 1998 fiscal period was
a result of net operating loss carryforwards for some of our Spanish
subsidiaries that were deemed realizable under U.S. generally accepted
accounting principles.

     Net loss increased by $2.9 million, or 74%, to $6.8 million for the year
ended December 31, 1999 from $3.9 million for the 1998 fiscal period primarily
as a result of the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

     We have used capital principally to acquire and develop surgery centers and
private surgical hospitals. Our cash flows from operations decreased by
$1.5 million to $2.1 million for the nine months ended September 30, 2000 from
flows from operations of $3.6 million for the nine months ended September 30,
1999. Our cash flows from operations increased by $3.6 million, or 575%, for the
year ended December 31, 1999 to $4.2 million from $0.6 million for the 1998
fiscal period. For the period from inception, February 27, 1998, through
September 30, 2000, our cash requirements for acquisitions and purchases of
property and equipment totaled $185.8 million, which we funded with a
combination of $105.3 million we raised from the issuance of capital stock, $6.9
million of cash flows from operations and net borrowings of $79.1 million.

     At September 30, 2000, we had working capital of $3.2 million. We have
credit agreements with commercial lenders in each of the three countries in
which we operate. Our credit agreement in Spain

                                       30
provides for total borrowings of up to 100 million Euros (approximately
$88.0 million as of September 30, 2000) with borrowing availability calculated
quarterly based on trailing EBITDA, including historical EBITDA of acquired
entities. Borrowings under this agreement may be used for acquisitions of
healthcare facilities in Spain or Portugal and working capital purposes, bear
interest at rates ranging from 0.75% to 1.75% over Euribor and mature on
December 31, 2007. At September 30, 2000, approximately $19.7 million was
outstanding under this agreement, representing the entire amount available for
borrowing at that date.

     The credit agreement in the United Kingdom provides for total borrowings of
Pounds 42.0 million (approximately $62.0 million as of September 30, 2000) under
three separate facilities. In April 2000, we borrowed approximately $54.0
million under the term facility of this agreement to fund a portion of the
purchase price of the acquisition of two hospitals in London. At September 30,
2000, total outstanding borrowings under this term facility were approximately
$50.0 million. Of the remaining approximately $12.0 million available for
borrowings under this agreement, we intend to use approximately $10.0 million to
fund a portion of the estimated $13.0 million cost of constructing a cancer
center near Parkside Hospital in southwest London and the remaining $2.0 million
for working capital purposes in the United Kingdom. See "Business -- Operations
in United Kingdom." Borrowings under this agreement bear interest at rates of
1.50% to 2.00% over LIBOR and mature in April 2010. We were not in compliance
with the cash flow and loan to EBITDA covenants under our term facility at
December 31, 2000 and the lender has waived our compliance with such covenants.
Following the completion of this offering, we believe we will be in compliance
with all of our covenants under this facility. In the event this offering is not
consummated the Company will seek additional financing from Welsh, Carson,
Anderson & Stowe.

     Our revolving credit agreement with Chase provides for borrowings of up to
$35.0 million to be utilized for general corporate purposes. Borrowings under
this agreement bear interest at a rate of 1.00% over LIBOR and mature on
June 30, 2001. At September 30, 2000, $20.0 million was outstanding under this
agreement.

     Our Bank of America credit agreement provides for borrowing of up to $45.0
million to be utilized for general corporate purposes. Borrowings under this
agreement bear interest at rates of 1.75% to 3.25% over LIBOR and mature on
December 28, 2001.

     We intend to use the net proceeds of this offering together with the
proceeds of a new credit facility to repay in full the outstanding principal
balance under our Chase and Bank of America credit facilities, plus accrued and
unpaid interest.

     We are in negotiations with lenders to enter into a $75.0 million credit
facility to replace our Chase and Bank of America credit facilities. To the
extent that our net proceeds from this offering are not sufficient to repay in
full all outstanding debt under the revolving credit agreement with Chase and
the revolving credit agreement with Bank of America, we intend to borrow the
additional amounts needed under our new domestic credit facility. Based on our
assumed initial offering price of $      per share, we would be required to
borrow approximately $      million under this new facility.

     Currently, we have (1) five surgery centers and one private surgical
hospital that are under construction in the United States, (2) one cancer center
under development in the United Kingdom and (3) a non-binding letter of intent
to purchase an additional center in the United States. A typical surgery center
costs five to six million dollars to construct and fit out with equipment. These
costs vary depending on the range of specialties that will be undertaken at the
facility. We typically fund development costs with approximately 50% debt at the
facility level with the remainder provided as equity from the owners of the
facility. Our ownership interests range from 10% to 100%, although we anticipate
that our ownership interest in future facilities will range from 30% to 60%.

     We expect that cash flows from operations, existing funds and borrowings
under our credit facilities will be sufficient to fund our operations and our
identified capital requirements for the year following this offering. However,
we may need to increase our borrowings or obtain additional capital,

                                       31
possibly by issuing additional equity or debt securities, to complete future
acquisitions after that year. We may also use our securities to complete
acquisitions. We cannot assure you that needed capital will be available on
terms acceptable to us, if at all. If we are unable to obtain funds when needed
or on terms acceptable to us, we will be required to curtail our acquisition and
development programs.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We have exposure to interest rate risk related to our financing, investing
and cash management activities. Our financing arrangements with banks are based
on the spread over LIBOR or Euribor. Our financing arrangements with private
equity firms are based on fixed rates. Inflation and changing prices have not
significantly affected our operating results or the markets in which we perform
services.

     We currently have an interest rate swap transaction agreement for a
notional amount of $4.0 million under which we pay a fixed rate of interest
hedging against the variable interest rates charged under our financing
arrangements with banks. The interest rate swap expires in the year 2009 which
coincides with the maturity date on the related loan.

     Our international revenues are a growing portion of our total revenues; we
are exposed to risks associated with operating internationally, including the
following:

      o  foreign currency exchange risk; and

      o  taxes and regulatory changes.

     Historically, we have not held or issued derivative financial instruments.
We do not use derivative financial instruments for speculative purposes. Our
international operations in some instances operate in a natural hedge because
both operating expenses and revenues are denominated in local currency.

NEW ACCOUNTING PRONOUNCEMENTS

     In 2001, we plan to adopt Statement of Financial Accounting Standards
No. 133, "Accounting for Derivatives Instruments and Hedging Activities," as
amended by SFAS 137. This standard will require us to recognize all derivative
financial instruments on our balance sheet at fair value with changes in fair
value recorded to the statement of operations or comprehensive income, depending
on the nature of the investment. Because our interest rate swap agreement is our
only derivative financial instrument, we do not expect the adoption of the
standard to have a material effect on our consolidated financial statements.

                                       32
BUSINESS

OVERVIEW

     We own and operate surgery centers and private surgical hospitals in the
United States, Spain and the United Kingdom. We focus on providing high quality
surgical facilities that meet the needs of patients, physicians and payors
better than hospital-based and other outpatient surgical facilities. We believe
that our facilities (1) enhance the quality of care and the healthcare
experience of patients, (2) offer significant administrative, clinical and
economic benefits to physicians and (3) offer an efficient and low cost
alternative to payors. We acquire and develop our facilities through the
formation of strategic relationships with physicians and healthcare systems to
better access and serve the communities in our markets. Our operating model is
efficient, scalable and portable and we have adapted it to each of our national
markets. We believe that our acquisition and development strategy and operating
model enable us to continue to grow by taking advantage of highly-fragmented
markets and an increasing demand for outpatient surgery.

     Since physicians provide and influence the direction of healthcare
worldwide, we have developed our operating model to encourage physicians to
affiliate with us and to use our facilities. We have designed our facilities,
structured our strategic relationships and adopted staffing, scheduling and
clinical systems and protocols to increase physician productivity. We believe
that our focus on physician satisfaction, combined with providing high quality
healthcare in a friendly and convenient environment for patients, will continue
to increase the number of procedures performed at our facilities each year.

     Donald E. Steen, our chairman and chief executive officer, and Welsh,
Carson, Anderson & Stowe formed United Surgical Partners International in
February 1998. We have ownership interests in 28 surgery centers and one private
surgical hospital and manage five additional surgery centers in the United
States. Also in the United States, we own interests in and will operate five
surgery centers and one private surgical hospital that are currently under
construction and have identified five additional markets for possible
acquisition or development projects. In Spain, we own and operate six private
surgical hospitals, two surgery centers and a diagnostic facility. In the United
Kingdom, we own and operate two private surgical hospitals and are developing a
cancer center. Our revenues increased 105% to $98.8 million in the first nine
months of 2000 from $48.2 million in the first nine months of 1999. Our EBITDA
less minority interest increased 504% to $15.1 million in the first nine months
of 2000 from $2.5 million in the first nine months of 1999. Pro forma revenues
and EBITDA less minority interest for the first nine months of 2000 were $135.1
million and $27.4 million, respectively.

INDUSTRY BACKGROUND

     We believe many physicians prefer surgery centers and private surgical
hospitals to general acute care hospitals because surgery centers and private
surgical hospitals enhance physicians' productivity, which increases the number
of surgeries they can perform in a given amount of time. In addition, these
facilities usually provide physicians with greater scheduling flexibility, more
consistent nurse staffing and faster turnaround time between cases. While
surgery centers and private surgical hospitals generally perform scheduled
surgeries, private acute care hospitals and national health service facilities
generally provide a broad range of services, including high priority and
emergency procedures. Medical emergencies often demand the unplanned use of
operating rooms and result in the postponement or delay of scheduled surgeries,
disrupting physicians' practices and inconveniencing patients. Surgery centers
and private surgical hospitals in both the United States and Western Europe are
designed to improve physician work environments and improve physician
efficiency. In Western Europe, our surgery centers are also designed to provide
an opportunity to physicians to supplement their incomes. In addition, many
physicians choose to perform surgery in facilities like ours because their
patients prefer the comfort of a less institutional atmosphere, and the
convenience of simplified admissions and discharge procedures.

     UNITED STATES

     According to SMG Marketing Group Inc.'s Freestanding Outpatient Surgery
Center Directory, the number of outpatient surgery cases performed in
freestanding surgery centers increased 191% from

                                       33
2.3 million in 1990 to 6.7 million in 2000. Outpatient surgical procedures
represented approximately 15% of all surgical procedures performed in the United
States in 1980 compared to approximately 70% in 2000. New surgical techniques
and technology, as well as advances in anesthesia, have significantly expanded
the types of surgical procedures that are being performed in surgery centers and
have helped drive the growth in outpatient surgery. Lasers, arthroscopy,
enhanced endoscopic techniques and fiber optics have reduced the trauma and
recovery time associated with many surgical procedures. Improved anesthesia has
shortened recovery time by minimizing post-operative side effects such as nausea
and drowsiness, thereby avoiding the need for overnight hospitalization in many
cases. In addition, some states in the United States now permit surgery centers
to keep a patient for up to 23 hours. This allows more complex surgeries,
previously only performed in an inpatient setting, to be performed in a surgery
center.

     In addition to these technological and other clinical advancements, a
changing payor environment has contributed to the rapid growth in outpatient
surgery in recent years. Government programs, private insurance companies,
managed care organizations and self-insured employers have implemented cost
containment measures to limit increases in healthcare expenditures, including
procedure reimbursement. These cost containment measures have greatly
contributed to the significant shift in the delivery of healthcare services away
from traditional inpatient hospitals to more cost-effective alternate sites,
including surgery centers. We believe that surgery performed at a surgery center
is generally less expensive than hospital-based outpatient surgery because of
lower facility development costs, more efficient staffing and space utilization
and a specialized operating environment focused on cost containment.

     Today, large healthcare systems in the United States generally offer both
inpatient and outpatient surgery on site. In addition, a number of nonprofit
healthcare systems have begun to expand their portfolios of facilities and
services by entering into strategic relationships with specialty operators of
surgery centers. These strategic relationships enable nonprofit healthcare
systems to offer patients, physicians and payors the cost advantages,
convenience and other benefits of outpatient surgery in a freestanding facility.
Further, these relationships allow the nonprofit healthcare systems to focus
their attention and resources on their core business without the challenge of
acquiring, developing and operating these facilities. According to SMG Marketing
Group, as of June 30, 2000, there were 3,191 freestanding surgery centers in the
United States, of which 3% were owned by healthcare systems and 27% were owned
by corporate entities. The remaining 70% were independently owned, primarily by
physicians.

     WESTERN EUROPE

     Most countries in Western Europe provide their populations with some level
of government funded healthcare. Despite the success of these public programs,
the practical limitations of these systems have resulted in delays or rationing
of elective surgeries and certain other procedures. In many of these countries,
funding and capacity constraints of public healthcare systems have created an
opportunity for private healthcare systems to develop.

     While Spain's national health service covers substantially all of the
country's population, a private healthcare industry has emerged that currently
serves the 17.2% of Spain's population that maintains private insurance and
another growing portion of the population that pays for elective procedures from
personal funds. Total healthcare expenditures in Spain grew from 5.9% of gross
domestic product, or GDP, in 1997 to 7.6% in 1998. In addition, Spain's GDP and
wages have experienced compound annual growth of 1.9% and 2.6%, respectively,
from 1975 to 1998. We believe that these increases support our view that the
number of privately insured citizens, the amount of private healthcare
expenditures and the resulting demand for private networks such as ours will
continue to grow. We also believe that the growth in Spain's private healthcare
industry has been driven in large part by an increase in the number of employers
offering private insurance as a benefit to their employees. Like their U.S.
counterparts, private insurance companies in Spain typically offer comprehensive
health coverage. Since only 57 of the 347 private surgical hospitals in Spain
are owned by multi-facility systems, we believe an opportunity exists to build a
private hospital network that will enable us to negotiate more effectively with
the country's large health insurance companies. Our facilities also supplement
the national health service as public hospitals sometimes refer overload cases
to our facilities.

                                       34
We are able to accept or reject these cases based on the available capacity of
our facilities and the profitability of the cases. As of September 30, 2000, we
derived approximately 65.0% of our revenues in Spain from private insurance and
approximately 22.0% of our revenues in Spain from private pay.

     The United Kingdom also provides government funded healthcare to all of its
residents through a national health service. It, however, is also subject to
funding and capacity limitations. Since the demand for healthcare services
exceeds the public system's capacity, U.K. residents may encounter waiting lists
for elective surgery of up to 18 months as well as delays in obtaining cancer
biopsies and other diagnostic procedures. The World Health Organization reports
that 25,000 people die unnecessarily of cancer in Britain each year due to
underfinanced and poorly managed cancer programs. In response to these
shortfalls, private healthcare networks and private insurance companies have
developed in the United Kingdom. Approximately 11.0% of the U.K. population has
private insurance to cover elective surgical procedures, and another rapidly
growing segment of the population pays for elective procedures from personal
funds. As of September 30, 2000, in the United Kingdom, we derived approximately
58.0% of our revenues from private insurance and approximately 31.0% of our
revenues from private pay patients.

OUR BUSINESS STRATEGY

     Our goal is to steadily increase our revenues and cash flows by becoming a
leading operator of surgery centers and private surgical hospitals in the United
States and selected nations in Western Europe. The key elements of our business
strategy are to:

     o  attract and retain top quality surgeons and other physicians,

     o  grow through selective acquisitions and development of surgery centers
        and private surgical hospitals,

     o  pursue strategic relationships with healthcare systems,

     o  expand selectively in Western Europe, and

     o  enhance operating efficiencies.

     ATTRACT AND RETAIN TOP QUALITY SURGEONS AND OTHER PHYSICIANS

     Since physicians provide and influence the direction of healthcare
worldwide, we have developed our operating model to encourage physicians to
affiliate with us and to use our facilities. We believe we attract physicians
because we design our facilities, structure our strategic relationships and
adopt staffing, scheduling and clinical systems and protocols to increase
physician productivity and promote their professional and financial success. We
believe this focus on physicians, combined with providing high quality
healthcare in a friendly and convenient environment for patients, will continue
to increase case volumes at our facilities. In addition, in the United States,
we generally offer physicians the opportunity to purchase equity interests in
the facilities they use. We believe this opportunity attracts quality physicians
to our facilities and ownership increases the physicians' involvement in
facility operations, enhancing quality of patient care, increasing productivity
and reducing costs. In addition, we believe our recent acquisition of OrthoLink
will strengthen our ability to attract leading physicians in the profitable
field of orthopedics.

     GROW THROUGH SELECTIVE ACQUISITIONS AND DEVELOPMENT

     We intend to continue to enter targeted markets by acquiring and developing
surgical facilities. In the United States, we expect to do this primarily in
conjunction with a local healthcare system or hospital. We typically target the
acquisition or development of multi-specialty centers that perform high volume,
non-emergency, lower risk procedures requiring lower capital and operating costs
than hospitals. In addition, we will also consider the acquisition of
multi-facility companies. Since inception, we have successfully acquired and
integrated facilities, generating average EBITDA less minority interest growth
of 19.0% over the twelve months following acquisition.

                                       35
In determining whether to enter a new market, we examine numerous criteria,
including:

     o  the potential to achieve strong increases in revenues and cash flows;

     o  the size of the market;

     o  the number of surgical facilities in the market;

     o  the number and nature of outpatient surgical procedures performed in the
        market;

     o  the case mix of the facilities to be acquired;

     o  whether the physicians, healthcare systems and payors in the market are
        receptive to surgery centers;

     o  whether the facility is well-positioned to negotiate agreements with
        insurers, other payors and suppliers; and

     o  licensing and other regulatory considerations.

     Upon identifying a target facility, we conduct financial, legal,
engineering, operational, technology and systems audits of the facility and
conduct interviews with the facility's management, affiliated physicians and
staff. Once we acquire or develop a facility, we focus on upgrading systems and
protocols, including implementing USPI's EDGE, to increase case volume and
improve operating efficiencies.

     PURSUE STRATEGIC RELATIONSHIPS WITH HEALTHCARE SYSTEMS

     Through strategic relationships with us, healthcare systems can leverage
our operating expertise and create a new cash flow opportunity with limited
capital expenditures. We believe that these relationships also allow nonprofit
healthcare systems in particular to attract and retain physicians and improve
their hospital operations by focusing on their core business. We also believe
that strategic relationships with these healthcare systems help us to develop
more quickly relationships with physicians, communities, suppliers and payors.
Generally, the healthcare systems with which we develop relationships have
strong local market positions and excellent reputations that we use in branding
our facilities. In addition, our relationships with healthcare systems enhance
our acquisition and development efforts by (1) providing opportunities to
acquire facilities the systems may own, (2) providing access to physicians
already affiliated with the systems, (3) attracting additional physicians to
affiliate with newly developed facilities and (4) encouraging physicians who own
facilities to consider a strategic relationship with us.

     EXPAND SELECTIVELY IN WESTERN EUROPE

     We are well-positioned in Western Europe to take advantage of the demand
for privately provided surgery and cancer treatment. To this end, we intend to
continue to acquire private surgical hospitals in existing markets and selected
new countries. We own two private surgical hospitals in the United Kingdom and
six private surgical hospitals, two surgery centers and a diagnostic facility in
Spain. We enter new national markets through the acquisition of anchor hospitals
in or near major cities. In accordance with this acquisition strategy, we
established our presence in the United Kingdom and Spain through the
acquisitions of Parkside Hospital outside London and Instituto Universitario
Dexeus in Barcelona. We intend to continue to execute our acquisition strategy
in Western Europe by continuing to develop local networks of private healthcare
facilities in major population centers of the United Kingdom and Spain and by
entering one or two additional national markets. As we enter a new country, we
intend to establish a local management team with in-depth knowledge of the
culture and complexities of that country's delivery system. While our operating
model is designed to be applied consistently in different countries, it is
flexible enough to allow local management to help us capitalize on
country-specific opportunities, work more efficiently with local physicians,
surgeons, patients and payors and adapt more effectively to local customs. We
also seek to establish a brand name in selected markets to heighten awareness of
our facilities.

                                       36
ENHANCE OPERATING EFFICIENCIES

     Once we acquire a new facility, we integrate it into our existing network
by implementing a specific action plan to support the local management team, and
incorporate the new facility into our group purchasing contracts. We also
implement our systems and protocols to improve operating efficiencies and
contain costs. Our most important operational tool is USPI's EDGE. This
proprietary measurement system allows us to track our clinical, service and
financial performance, best practices and key indicators in each of our
facilities. Our goal is to use USPI's EDGE to ensure that we provide each of the
patients using our facilities with high quality healthcare, offer physicians a
superior work environment and eliminate inefficiencies. Using USPI's EDGE, we
track and monitor our performance in clinical care areas such as: (1) providing
surgeons the equipment, supplies and surgical support they need; (2) starting
cases on time; (3) minimizing turnover time between cases; and (4) providing
efficient schedules. USPI's EDGE compiles and organizes the specified
information on a daily basis and is easily accessed over the Internet by our
facilities on a secure basis. The information provided by USPI's EDGE enables
our employees, facility administrators and management to analyze trends over
time and share processes and best practices among our facilities. In addition,
the information is used as an evaluative tool by our administrators and a
budgeting and planning tool by our management. USPI's EDGE is now fully deployed
in all our U.S. facilities, except for the facilities we acquired in the
OrthoLink transaction. We have begun deployment of USPI's EDGE in the United
Kingdom and anticipate introducing it in Spain in the fourth quarter of 2001.

OPERATIONS

     OPERATIONS IN THE UNITED STATES

     Our operations in the United States consist primarily of our ownership and
management of surgery centers. We have ownership interests in 28 surgery centers
and one private surgical hospital and manage five additional surgery centers. In
addition, we own interests in and will operate five surgery centers and one
private surgical hospital that are currently under construction and have
identified five additional markets for possible acquisition or development
projects. Over 2,000 physicians have access privileges to use our facilities.
Our surgery centers are licensed outpatient surgery centers and are generally
equipped and staffed for multiple surgical specialties and located in
freestanding buildings or medical office buildings. Our average surgery center
has approximately 15,000 square feet of space with four or five operating rooms,
as well as ancillary areas for preparation, recovery, reception and
administration. Our surgery center facilities range from a 6,700 square foot,
two operating room facility to a 17,000 square foot, six operating room
facility. Our surgery centers are normally open weekdays from 7:00 a.m. to
approximately 5:00 p.m. or until the last patient is discharged. We estimate
that a surgery center with four operating rooms can accommodate up to 6,000
procedures per year.

     Our surgery center support staff typically consists of registered nurses,
operating room technicians, an administrator who supervises the day-to-day
activities of the surgery center, a receptionist and a small number of office
staff. Each center also has a medical director, who is typically an
anesthesiologist and responsible for and supervises the quality of medical care
provided at the center. Use of our surgery centers is limited to licensed
physicians, podiatrists and oral surgeons who are also on the medical staff of a
local accredited hospital. Each center maintains a peer review committee
consisting of physicians who use our facilities and who review the professional
credentials of physicians applying for surgical privileges.

     All of our surgery centers eligible for accreditation are accredited by the
Joint Commission on Accreditation of Healthcare Organizations or by the
Accreditation Association for Ambulatory Healthcare. We believe that
accreditation is the quality benchmark for managed care organizations. Many
managed care organizations will not contract with a facility until it is
accredited. We believe that our historical performance in the accreditation
process reflects our commitment to providing high quality care in our surgery
centers.

                                       37
Our ownership interests in surgery centers are generally held through
limited partnerships or limited liability companies in which ownership interests
are also held by local physicians who are on the medical staff of the centers.
Our ownership interests in the centers range from 10% to 100%. Our partnership
and limited liability company agreements typically provide for the quarterly pro
rata distribution of net revenues from operations, less amounts held in reserve
for expenses and working capital. We also have a management agreement with each
of the centers under which we provide day-to-day management services for a
management fee that is a percentage of the net revenues of the center.

     Our partnership and limited liability company agreements typically provide
that if various regulatory changes take place we will be obligated to purchase
some or all of the ownership interests of the physicians in the partnerships or
limited liability companies that own and operate the applicable surgery centers.
The regulatory changes that could trigger such an obligation include changes
that:

     o  make the referral of Medicare and other patients to our surgery centers
        by physicians affiliated with us illegal;

     o  create the substantial likelihood that cash distributions from the
        partnership or limited liability company to the physicians associated
        therewith will be illegal; or

     o  cause physician ownership interests in the partnerships or limited
        liability companies to be illegal.

Typically, our partnership and limited liability company agreements allow us to
use shares of our common stock as consideration for the purchase of a
physician's interest should we be required to purchase these interests. In the
event we are required to purchase these interests and our common stock does not
maintain a sufficient valuation, we may be required to use cash for the
acquisition of a physician's interest. As a result, the triggering of these
obligations and the possible termination of our affiliation with these
physicians could have a material adverse effect on us. See "Risk Factors" and
" -- Government Regulation."

     STRATEGIC RELATIONSHIPS

     We have entered into strategic relationships with established healthcare
systems and hospitals in the United States. Our largest joint venture is with
the Baylor Health Care System in Dallas, Texas. This venture owns an outpatient
surgery network that serves the approximately four million persons located in
the Dallas/Fort Worth area. The Baylor joint venture currently has ownership
interests, or management agreements with options to purchase an ownership
interest, in ten operational surgery centers. The Baylor joint venture is
developing two private surgical hospitals and two surgery centers. We also have
a joint venture with the Meridian Health System in Wall, New Jersey. This joint
venture currently operates one surgery center and is developing two additional
surgery centers.

     A key element of our business strategy is to pursue additional strategic
relationships with healthcare providers in selected markets. To this end, we
have signed an agreement for a strategic relationship with Mt. Sinai Health
System in New York City through which we would develop a surgery center in
Manhattan. However, this transaction is subject to approval from New York
regulatory authorities. We can give no assurance that this transaction will be
consummated. In addition, we have also entered into preliminary discussions and
a non-binding letter of intent with St. Thomas Health System in Nashville,
Tennessee. We intend to structure our future joint ventures with service
providers in a manner similar to our joint venture with Baylor.

     OPERATIONS IN SPAIN

     We believe our operations in Spain comprise one of the largest private
hospital networks in this highly fragmented market. We own and operate six
private surgical hospitals, two surgery centers and a diagnostic facility in
Spain and over 700 physicians use our facilities. These facilities, located
primarily in Barcelona, Madrid and Seville, range in size from 19 beds to 133
beds with an average of 92 beds. In this market, we focus primarily on five
specialties: obstetrics/gynecology, orthopedic surgery, general surgery,
internal medicine and plastic surgery.

                                       38
In addition, we are developing our brand name, "USPE," in all of our
markets in Spain in an effort to attract top quality physicians and a greater
number of patients. We are developing this brand by leveraging the reputation of
our more prominent physicians and facilities, particularly Instituto
Universitario Dexeus in Barcelona. Dexeus is one of only two private teaching
hospitals in Spain. We believe Dexeus' affiliation with the University of
Barcelona, which has nationally renowned physicians, makes it one of Spain's
most respected private hospitals and that it greatly enhances the USPE brand
image.

     OPERATIONS IN UNITED KINGDOM

     We acquired Parkside Hospital in Wimbledon, a suburb southwest of London,
and Holly House Hospital in a suburb northeast of London near Essex in
April 2000. Parkside Hospital is our flagship hospital due to its strong market
position and its proximity to several other leading hospitals. Parkside has 69
registered acute care beds, including four high dependency beds, on three
floors. The hospital has four operating theatres, including a dedicated
endoscopy suite that opened in 1998. Parkside also has its own on-site pathology
laboratory, pharmacy and a diagnostic suite with an MRI scanner, two X-ray
screening rooms and a color Doppler ultrasound machine. Approximately 270
surgeons and physicians, all of whom have or have held consulting positions in
NHS hospitals, have admitting privileges to the hospital. Parkside has
established practices including orthopedics, gynecology and general surgery, as
well as neurosurgery and endoscopic procedures. Parkside also intends to expand
its outpatient department from 12 to 15 physicians' offices, which are referred
to as consulting rooms.

     We are in the process of developing a comprehensive cancer center, the
Parkside Clinic, near Parkside Hospital. Our development of Parkside Clinic has
the support of a number of oncologists at Parkside Hospital and the center has
already contracted with the BUPA Group, Britain's largest insurance company. We
anticipate that the center will provide superior inpatient and outpatient
services. We anticipate that Parkside Clinic will be fully operational in 2002
and will provide radiotherapy, chemotherapy and nuclear medicine facilities on
an outpatient basis with inpatient cancer services being provided at Parkside
Hospital. Parkside Clinic also will provide additional space for expansion of
other specialties and programs at Parkside Hospital.

     Holly House Hospital has been an acute care hospital for 20 years and has
56 registered acute care beds on two floors, including three high dependency
beds. The hospital has three operating theatres built in 1988 and its own
on-site pathology laboratory and pharmacy with cytotoxic reconstitution
facilities to serve its expanding oncology program. A diagnostic suite houses
MRI and CT scanners and two X-ray screening rooms together with a color Doppler
ultrasound machine. Over 100 surgeons and physicians have admitting privileges
at the hospital. The hospital has established orthopedic and general surgery
practices and is developing oncology and plastic surgery programs.

                                       39
CASE MIX

     The following table sets forth the percentage of our revenues generated in
the first nine months of 2000 for our company as a whole and by country from
each of the following specialties:

              SPECIALTY         TOTAL         U.S.          SPAIN         U.K.
              ---------        -------       -------       -------       -------
Orthopedic.................     25 %          30 %          18 %          23 %
Obstetrics/gynecology......     14             5 (1)        23 (2)        19 (3)
General surgery............     10             7            10            15
Ear, nose and throat.......      8            12             3             5
Pain management............      8            16            --            --
Gastrointestinal...........      7             9             7             4
Plastic surgery............      6             6             7             4
Ophthalmology..............      5             9             1             4
Other......................     17             6            31            26
                               --- ---       --- ---       --- ---       --- ---
     Total.................    100 %         100 %         100 %         100 %
                               === ===       === ===       === ===       ===
------------
  (1) Includes gynecology only

  (2) Includes obstetrics and gynecology

  (3) Includes gynecology and in vitro fertilization

     PAYOR MIX

     The following table sets forth the percentage of our revenues generated in
the first nine months of 2000 for our company as a whole and by country from
each of the following payors:

                PAYOR             TOTAL         U.S.         SPAIN         U.K.
                -----             -----         ----         -----         ----
Private insurance.............     67%           72%          65%           58%
Self-pay......................      15             3           22            31
Government....................      13            18           12             2
Other.........................       5             7            1             9
                                  ----          ----         ----          ----
     Total....................    100%          100%         100%          100%
                                  ====          ====         ====          ====

                                       40
FACILITIES

     SURGERY CENTERS

     The following table sets forth information relating to the surgery centers
that we operate:
DATE OF
                                         ACQUISITION        NUMBER OF        PERCENTAGE
                                              OR            OPERATING         OWNED BY
              FACILITY                   AFFILIATION          ROOMS             USPI
              --------                   ------------       ----------       -----------
UNITED STATES
Decatur Surgery Center, Decatur,
  Alabama (1)........................       7/31/98              2                66%
Decatur GI Center, Decatur,
  Georgia............................       7/31/98              2                34
Warner Park Surgery Center, Chandler,
  Arizona (1)........................        7/1/99              4               100
University Surgical Center, Winter
  Park, Florida......................       10/1/98              3                70
Atlanta East West, Austell,
  Georgia............................        9/1/00 (4)          3               100
Resurgens Surgery Center, Atlanta,
  Georgia............................       10/1/98 (4)          4                15
Creekwood Surgery Center, Kansas
  City, Missouri (1).................       7/31/98              3                75
Parkway Surgery Center, Henderson,
  Nevada.............................       11/1/98              5                50
Shrewsbury Ambulatory Surgery Center,
  Shrewsbury, New Jersey.............        3/1/00              4                35
New Mexico Orthopaedic Surgery
  Center, Albuquerque, New Mexico....        4/1/00 (4)          6                51
Las Cruces Surgery Center, Las
  Cruces, New Mexico (1).............        2/1/01              3                50
Day-Op Center of Long Island,
  Mineola, New York..................       12/1/98              4               100
Eastside Surgery Center, Columbus,
  Ohio (2)...........................       3/20/00 (4)          4                 0
Riverside Outpatient Surgery Center,
  Columbus, Ohio (2).................       3/20/00 (4)          6                 0
Mountain Empire Surgery Center,
  Johnson City, Tennessee............        4/1/00 (4)          3                20
Baptist Ambulatory Surgery Center,
  Nashville, Tennessee...............        3/1/98 (4)          6                19
Centennial, Nashville, Tennessee.....        6/1/98 (4)          6                11
Middle Tennessee Ambulatory Surgery
  Center, Murfreesboro, Tennessee....       7/31/98              4                37
Physicians Pavilion Surgery Center,
  Nashville, Tennessee (1)...........       7/31/98              4                71
Arlington Surgery Center, Arlington,
  Texas (1)..........................        2/1/99              3                10
Baylor Medical Center Garland
  Outpatient Department, Garland,
  Texas (2)..........................
Baylor Surgicare, Dallas, Texas(1)...        6/1/99              6                48
Denton Surgicare, Denton,
  Texas (1)..........................        2/1/99              4                29
Doctors Surgery Center (Houston),
  Pasadena, Texas (1)................        9/1/99              4                91
Irving Surgery Center, Irving,
  Texas (1)(3).......................       12/1/98              4                 0
Medical Centre Surgicare, Fort Worth,
  Texas (1)(3).......................       12/1/98              5                 0
Metroplex Surgery Center, Bedford,
  Texas (1)..........................       12/1/98              4                37
North Texas Surgery Center, Dallas,
  Texas (1)..........................       12/1/98              4                39
Physicians Day Surgery Center,
  Dallas, Texas......................      10/15/00              4                44
Premier Ambulatory Surgery Center of
  Garland, Garland, Texas............        2/1/99              2                15
Texas Surgery Center, Dallas,
  Texas (1)..........................        6/1/99              4                48
United Surgery Center -- Southeast,
  Houston, Texas (1).................        9/1/99              3               100
Valley View Surgery Center, Dallas,
  Texas (1)(3).......................       12/1/98              4                 0
Teton Outpatient Services, Jackson
  Hole, Wyoming......................        8/1/98 (4)          2                39
SPAIN
Centro de Cirugia Ambulatario,
  Barcelona..........................        3/1/99              3               100
USP Dermoestetica, S.L. Madrid.......        4/1/99              2                70
(FOOTNOTES ON FOLLOWING PAGE)

                                       41
------------
(1) Licensed and equipped to accommodate 23-hour stays.

(2) Management agreement only.

(3) Management agreement only. We have an option to acquire an ownership
    interest.

(4) Indicates date of acquisition by OrthoLink. We acquired OrthoLink in
    February 2001.

     PRIVATE SURGICAL HOSPITALS

     The following table sets forth information relating to the private surgical
hospitals that we operate:
DATE OF
                                         ACQUISITION      NUMBER OF                       PERCENTAGE
                                             OR           OPERATING       NUMBER OF        OWNED BY
              FACILITY                   AFFILIATION        ROOMS           BEDS             USPI
              --------                   -----------      ---------      -----------      ----------
UNITED STATES
TOPS Specialty Hospital, Houston,
  Texas (1)..........................       7/1/99            7                2              100%
SPAIN
Instituto Universitario Dexeus,
  Barcelona..........................       4/1/98           12              106               79
Hospital Santa Teresa, La Coruna.....      11/1/98            5              133               95
Hospital Sagrado Corazon, Seville....     10/16/98            9               95              100
Clinica Nuestra Senora de la
  Esperanza, Vitoria.................      10/1/98            3               19              100
Clinica San Camilo, Madrid...........      4/30/00            8              130               96
Clinica San Jose, Madrid.............      11/1/00            7               72              100
Juan XXIII, Madrid (2)...............       2/1/00         --              --                 100
UNITED KINGDOM
Parkside Hospital, Wimbledon.........      4/30/00            4               69              100
Holly House Hospital, Essex..........      4/30/00            3               59              100
------------

  (1) Also licensed and equipped to accommodate stays of up to 72 hours.

  (2) Imaging center only.

     We own the buildings and property of four of our surgery centers and lease
all other facilities where our various surgery centers and private surgical
hospitals conduct their operations. Our leases have initial terms ranging from
one to twenty years and most of the leases contain options to extend the lease
period for up to ten additional years.

     Our corporate headquarters are located in Dallas, Texas. We currently lease
approximately 11,000 square feet of space at 17103 Preston Road, Suite 200
North, Dallas, Texas. The lease expires in 2001.

     Our office in the United Kingdom is located in London. We currently lease
1,900 square feet. The lease expires in February 2004.

     Our Spanish offices are located in Madrid and Barcelona. We currently lease
2,600 square feet of space in Madrid. The lease expires in December 2001.
Additionally, we lease 2,800 square feet of space in Barcelona. The lease
expires in December 2002.

     We also have a lease of 13,504 square feet of space in Brentwood,
Tennessee. The lease expires in November 2002.

                                       42
DEVELOPMENT

     The following table sets forth information relating to facilities that are
currently under construction:
NUMBER OF
                                                               EXPECTED     OPERATING ROOMS,
                                                                OPENING        PROCEDURE
              FACILITY                          TYPE             DATE        ROOMS OR BEDS
              --------                          ----           ---------    ----------------
Lawrenceville Surgery Center,
  Lawrenceville, Georgia.............    Surgery Center         3Q 2001          2 OR's
Toms River Surgery Center, Toms
  River,
  New Jersey.........................    Surgery Center         1Q 2002          4 OR's
Knoxville Surgery Center, Knoxville,
  Tennessee..........................    Surgery Center         2Q 2001          5 OR's
Frisco Surgical Hospital, Frisco,
  Texas..............................    Surgical Hospital      4Q 2001      6 OR's/8 beds
Grapevine Surgery Center, Grapevine,
  Texas..............................    Surgery Center         4Q 2001          4 OR's
Lewisville Surgicare, Lewisville,
  Texas..............................    Surgery Center         1Q 2002          4 OR's
Cancer Center adjacent to Parkside
  Hospital, Wimbledon, United
  Kingdom............................    Cancer Center          1Q 2002            --
In addition, we have identified the following markets for possible future
acquisition and development projects. Any acquisition or development in these or
other markets must meet our acquisition and development criteria. We cannot
assure you that we will be successful in developing facilities in any of the
following markets:

      o  Vail, Colorado

      o  Brick, New Jersey

      o  Manhattan, New York

      o  Nashville, Tennessee

      o  Fort Worth, Texas

     In February 2001, we acquired OrthoLink Physicians Corporation. In total,
we acquired ownership interests in seven additional surgery centers, six of
which OrthoLink manages. OrthoLink also manages two additional surgery centers
in which it has no ownership interests and provides specialized management
services for hospitals. Prior to the transaction, OrthoLink managed the
practices of 207 physicians in eight markets working at 64 facilities in
Colorado, Georgia, New Mexico, Ohio, Tennessee and Wyoming. We did not acquire
all of OrthoLink's historical management services obligations. As a condition to
our completing the OrthoLink acquisition, we required that the affiliated
physician groups assume from OrthoLink various employment agreements, office
leases and other agreements previously held by OrthoLink in connection with the
performance of its management services. While we may enter into additional
management services agreements with physician groups, we do not intend to
purchase the assets of any of these groups.

MARKETING

     Our sales and marketing efforts are directed primarily at physicians, which
are principally responsible for referring patients to our facilities. We market
our facilities to physicians by emphasizing the higher level of patient
satisfaction with our surgery centers compared to hospitals, the quality and
responsiveness of our services and the practice efficiencies provided by our
facilities. In those U.S. markets in which we have established a strategic
alliance with a healthcare system, we coordinate the marketing effort with the
healthcare system and generally benefit from this managed care strategy. We also
directly negotiate agreements with third-party payors, which generally focus on
the pricing, number of facilities in the market and affiliation with physician
groups in a particular market. Maintaining access to physicians and patients
through third-party payor contracting is essential for the economic viability of
most of our facilities.

                                       43
COMPETITION

     In all of our markets, we compete with other providers, including major
acute care hospitals. Hospitals have various competitive advantages over us,
including their established managed care contracts, community position,
physician loyalty and geographical convenience for physicians' in-patient and
out-patient practices. However, we believe that, in comparison to hospitals with
which we compete for managed care contracts, our surgery centers and private
surgical hospitals compete favorably on the basis of cost, quality, efficiency
and responsiveness to physician needs in a more comfortable environment for the
patient.

     We compete with other providers in each of our markets for patients and for
contracts with insurers or managed care payors. Competition for managed care
contracts with other providers is focused on the pricing, number of facilities
in the market and affiliation with key physician groups in a particular market.
We also encounter competition with other companies for acquisition and
development of facilities and in the U.S. for strategic relationships with
healthcare systems and physicians.

     There are several large, publicly-held companies, or divisions or
subsidiaries of large publicly-held companies, that acquire and develop
freestanding multi-specialty surgery centers and private surgical hospitals.
Some of these competitors have greater resources than we do. The principal
competitive factors that affect our ability and the ability of our competitors
to acquire surgery centers and private surgical hospitals are price, experience
and reputation and access to capital. Further, in the U.S. some physician groups
develop surgery centers without a corporate partner. It is generally difficult,
however, for a single practice to create effectively the efficient operations
and marketing programs necessary to compete with other provider networks and
companies. As a result, and also due to the financial investment necessary to
develop surgery centers and private surgical hospitals, many healthcare systems
and physician groups are attracted to corporate partners such as us.

     In the United Kingdom, we face competition from both the national health
service, or NHS, and other privately operated hospitals. Across the United
Kingdom, a large number of private hospitals are owned by the four largest
hospital operators. In addition, the two largest payors account for over half of
the privately insured market. We believe our hospitals can effectively compete
in this market due to location and specialty mix of our facilities. Our
hospitals also have a higher portion of self pay business than the overall
market. Self pay business is not influenced by the private insurers.

     In Spain, there are several privately held independent hospitals and a few
networks of hospitals that are owned by insurance companies. Insurance companies
that own hospitals have the benefit of a captured market of their insured. These
insurance companies compete with us in acquisitions of strategically placed
hospitals in major cities. Other hospital networks are attempting to replicate
our model and have begun to compete with us in the acquisition of hospitals. The
acquisition of hospitals in Spain is greatly affected by price. In our
experience, sellers are typically the physicians that have built the hospitals,
and most physicians prefer an independent position in a market rather than
becoming a provider for an insurance company. We focus our efforts on partnering
with physicians and assisting them in growing their business and medical
practices by encouraging group rather than practices.

     Our hospitals compete with other providers in the Spanish market, including
other private hospitals and NHS hospitals. The national health coverage makes
these NHS hospitals accessible to the entire Spanish population. In contrast,
private hospitals such as ours must negotiate agreements with third-party
payors, which focus on services available to their members as well as pricing.
We plan to leverage our size in Spain with the insurance companies.

EMPLOYEES

     We employ approximately 2,400 persons, 2,100 of whom are full-time
employees and 300 of whom are part-time employees. Of these employees, we employ
approximately 600 in the United States, 600 in the United Kingdom and 1,200 in
Spain, respectively.

                                       44
LEGAL PROCEEDINGS AND INSURANCE

     From time to time, we may be named a party to legal claims and proceedings
in the ordinary course of business. We are not aware of any claims or
proceedings against us or our partnerships that might have a material impact on
us.

     We maintain professional liability insurance that provides coverage on a
claims made basis of $1.0 million per incident and $3.0 million in annual
aggregate amount per location. We also maintain general liability insurance
coverage of $1.0 million per occurrence and $2.0 million in annual aggregate
amount per location, as well as business interruption insurance and property
damage insurance. In addition, we maintain umbrella liability insurance in the
aggregate amount of $10.0 million.

GOVERNMENT REGULATION

     UNITED STATES

     The healthcare industry is subject to extensive regulation by federal,
state and local governments. Government regulation affects our business by
controlling growth, requiring licensure or certification of facilities,
regulating how facilities are used, and controlling payment for services
provided. Further, the regulatory environment in which we operate may not change
significantly in the future. While we believe we have structured our agreements
and operations in material compliance with applicable law, there can be no
assurance that we will be able to successfully address changes in the regulatory
environment.

     Every state imposes licensing and other requirements on healthcare
facilities. In addition, many states require regulatory approval, including
certificates of need, before establishing or expanding various types of
healthcare facilities, including surgery centers and private surgical hospitals,
offering services or making capital expenditures in excess of statutory
thresholds for healthcare equipment, facilities or programs. In connection with
expanding existing operations and entering into new markets, we may become
subject to additional burdensome regulations.

     In addition to extensive existing government healthcare regulation, there
have been numerous initiatives on the federal and state levels for comprehensive
reforms affecting the payment for and availability of healthcare services. We
believe that these healthcare reform initiatives will continue during the
foreseeable future. If adopted, some aspects of previously proposed reforms,
such as further reductions in Medicare or Medicaid payments, or additional
prohibitions on physicians' financial relationships with facilities to which
they refer patients, could adversely affect us.

     We believe that our business operations materially comply with applicable
law. However, we have not received a legal opinion from counsel or from any
federal or state judicial or regulatory authority to this effect, and many
aspects of our business operations have not been the subject of state or federal
regulatory scrutiny or interpretation. Some of the laws applicable to our
company are subject to limited or evolving interpretations; therefore, a review
of our operations by a court or law enforcement or regulatory authority might
result in a determination that could have a material adverse effect on us.
Furthermore, the laws applicable to us may be amended in a manner that could
have a material adverse effect on us. Our ability to conduct our business and to
operate profitably will depend in part upon obtaining and maintaining all
necessary licenses, certificates of need and other approvals, and complying with
applicable healthcare regulations.

     LICENSURE AND CERTIFICATE OF NEED REGULATIONS

     Capital expenditures for the construction of new facilities, the addition
of beds or the acquisition of existing facilities may be reviewable by state
regulators under statutory schemes that are sometimes referred to as certificate
of need laws. States with certificate of need laws place limits on the
construction and acquisition of healthcare facilities and the expansion of
existing facilities and services. In these states, approvals are required for
capital expenditures exceeding amounts that involve certain facilities or
services, including surgery centers and private surgical hospitals.

                                       45
State certificate of need laws generally provide that, prior to the
addition of new beds, the construction of new facilities or the introduction of
new services, a designated state health planning agency must determine that a
need exists for those beds, facilities or services. The certificate of need
process is intended to promote comprehensive healthcare planning, assist in
providing high quality healthcare at the lowest possible cost and avoid
unnecessary duplication by ensuring that only those healthcare facilities that
are needed will be built.

     Typically, the provider of services submits an application to the
appropriate agency with information concerning the area and population to be
served, the anticipated demand for the facility or service to be provided, the
amount of capital expenditure, the estimated annual operating costs, the
relationship of the proposed facility or service to the overall state health
plan and the cost per patient day for the type of care contemplated. The
issuance of a certificate of need is based upon a finding of need by the agency
in accordance with criteria set forth in certificate of need laws and state and
regional health facilities plans. If the proposed facility or service is found
to be necessary and the applicant to be the appropriate provider, the agency
will issue a certificate of need containing a maximum amount of expenditure and
a specific time period for the holder of the certificate of need to implement
the approved project.

     Our healthcare facilities are also subject to state and local licensing
regulations ranging from the adequacy of medical care to compliance with
building codes and environmental protection laws. To assure continued compliance
with these regulations, governmental and other authorities periodically inspect
our facilities. The failure to comply with these regulations could result in the
suspension or revocation of a healthcare facility's license.

     Our healthcare facilities receive accreditation from the Joint Commission
on Accreditation of Healthcare Organizations or the Accreditation Association
for Ambulatory Health Care, Inc., nationwide commissions which establish
standards relating to the physical plant, administration, quality of patient
care and operation of medical staffs of various types of healthcare facilities.
Generally, our healthcare facilities have to be in operation for at least six
months before they are eligible for accreditation. As of December 31, 2000, all
but our four most recently opened healthcare facilities had been accredited by
either the Joint Commission on Accreditation of Healthcare Organizations or the
Accreditation Association for Ambulatory Health Care, Inc. Many managed care
companies and third-party payors require our facilities to be accredited in
order to be considered a participating provider under their health plans.

     MEDICARE PARTICIPATION IN SURGERY CENTERS

     Medicare is a federally funded and administered health insurance program,
primarily for individuals entitled to social security benefits who are 65 or
older or who are disabled. Medicare payments for procedures performed at surgery
centers are not based on costs or reasonable charges. Instead, Medicare
prospectively determines fixed payment amounts for procedures performed at
surgery centers. These amounts are adjusted for regional wage variations. A
portion of our revenues are attributable to payments received from the Medicare
and Medicaid programs. 19% and 18% of our total revenues for 1999 and the nine
months ended September 30, 2000, respectively, were attributable to Medicare and
Medicaid payments.

     To participate in the Medicare program and receive Medicare payment, our
facilities must comply with regulations promulgated by the United States
Department of Health and Human Services, referred to in this prospectus as
"DHHS." Among other things, these regulations, known as "conditions of
participation," relate to the type of facility, its equipment, its personnel and
its standards of medical care, as well as compliance with state and local laws
and regulations. All of our surgery centers and private surgical hospitals in
the United States are certified or awaiting certification to participate in the
Medicare program. These facilities are subject to annual on-site surveys to
maintain their certification. Failure to comply with Medicare's conditions of
participation may result in loss of program payment

                                       46
or other governmental sanctions. We have established ongoing quality assurance
activities to monitor and ensure our facilities' compliance with these
conditions of participation.

     As with most government programs, the Medicare and Medicaid programs are
subject to statutory and regulatory changes, possible retroactive and
prospective rate adjustments, administrative rulings, freezes and funding
reductions, all of which may adversely affect the level of payments to our
surgery centers. Reductions or changes in Medicare or Medicaid funding could
significantly affect our results of operations. We cannot predict at this time
whether additional healthcare reform initiatives will be implemented or whether
there will be other changes in the administration of government healthcare
programs or the interpretation of government policies that would adversely
affect our business.

     FEDERAL ANTI-KICKBACK AND PHYSICIAN SELF-REFERRAL LAWS

     State and federal laws regulate relationships among providers of healthcare
services, including employment or service contracts and investment
relationships. These restrictions include a federal criminal law, referred to in
this prospectus as the Anti-Kickback Statute, that prohibits:

     o  offering, paying, soliciting, or receiving any form of remuneration in
        return for referring patients for services or items payable under a
        federal healthcare program, including Medicare or Medicaid, or

     o  purchasing, leasing, or ordering, or arranging for or recommending
        purchasing, leasing, or ordering any good, facility, service, or item
        for which payment may be made in whole or in part by a federal
        healthcare program.

A violation of the Anti-Kickback Statute constitutes a felony. Potential
sanctions include imprisonment of up to five years, criminal fines of up to
$25,000, civil money penalties of up to $50,000 per act plus three times the
remuneration offered or three times the amount claimed and/or exclusion from all
federally funded healthcare programs, including the Medicare and Medicaid
programs. The applicability of these provisions to many business transactions in
the healthcare industry has not yet been subject to judicial and regulatory
interpretation.

     Pursuant to the Anti-Kickback Statute, and in an effort to reduce potential
fraud and abuse relating to federal health care programs, the federal government
has announced a policy of increased scrutiny of joint ventures and other
transactions among healthcare providers. The Office of the Inspector General of
DHHS, referred to in this prospectus as the "OIG," closely scrutinizes
healthcare joint ventures involving physicians and other referral sources. In
1989, the OIG published a fraud alert that outlined questionable features of
"suspect" joint ventures, and the OIG has continued to rely on fraud alerts in
later pronouncements. Our partnerships and limited liability companies that are
providers of services under the Medicare program, and their respective limited
partners and members, are subject to the Anti-Kickback Statute. A number of the
relationships that we have established with physicians and other healthcare
providers do not fit within any of the safe harbor regulations promulgated by
the DHHS. These safe harbor regulations, if fully complied with, assure
participants in particular types of arrangements that the OIG will not treat
their participation as a criminal offense under the Anti-Kickback Statute. The
safe harbor regulations do not expand the scope of activities that the Anti-
Kickback Statute prohibits, nor do they provide that failure to satisfy the
terms of a safe harbor constitutes a violation of the Anti-Kickback Statute.
However, the OIG has indicated that failure to satisfy the terms of a safe
harbor may subject an arrangement to increased scrutiny.

     Our partnerships and limited liability companies that are providers of
services under the Medicare program, and their respective limited partners and
members, are subject to the Anti-Kickback Statute. A number of the relationships
that we have established with physicians and other healthcare providers do not
fit within any of the safe harbor regulations issued by the OIG. Of our 33
surgical facilities in the United States, 28 are owned by partnerships or
limited liability companies, which include as partners or members physicians who
perform surgical or other procedures at the centers and hospitals. Our private
surgical hospital in the United States does not have any physician owners.

                                       47
On November 19, 1999, the OIG promulgated rules setting forth additional
safe harbors under the Anti-Kickback Statute. The new safe harbors include a
safe harbor applicable to surgery centers, referred to in this prospectus as the
"ASC safe harbor." The ASC safe harbor generally protects ownership or
investment interests in a center by physicians who are in a position to refer
patients directly to the center and perform procedures at the center on referred
patients, if certain conditions are met. More specifically, the ASC safe harbor
protects any payment that is a return on an ownership or investment interest to
an investor if certain standards are met in one of four categories of ambulatory
surgery centers: (1) surgeon-owned surgery centers; (2) single-specialty surgery
centers; (3) multi-specialty surgery centers; and (4) hospital/physician surgery
centers.

     For multi-specialty ambulatory surgery centers, for example, the following
standards, among others, apply:

     (1)  All of the investors must be:

          o  physicians who are in a position to refer patients directly to the
             center and perform procedures on such referred patients,

          o  group practices composed exclusively of such physicians, or

          o  investors who are not employed by the entity or by any of its
             investors, are not in a position to provide items or services to
             the entity or any of its investors, and are not in a position to
             make or influence referrals directly or indirectly to the entity or
             any of its investors;

     (2)  At least one-third of each physician investor's medical practice
income from all sources for the previous fiscal year or twelve-month period must
be derived from performing procedures that require a surgery center or private
specialty hospital setting in accordance with Medicare reimbursement rules; and

     (3)  At least one third of the Medicare-eligible surgery procedures
performed by each physician investor for the previous fiscal year or previous
twelve-month period must be performed at the surgery center in which the
investment is made.

     Similar standards apply to each of the remaining four categories of surgery
centers set forth in the regulations. In particular, each of the four categories
includes a requirement that no ownership interests be held by a non-physician or
non-hospital investor if that investor is employed by the center or another
investor, is in a position to provide items or services to the center or any of
its other investors, or is in a position to make or influence referrals directly
or indirectly to the center or any of its investors.

     Since one of our subsidiaries is an investor in each partnership or limited
liability company that owns one of our surgery centers, and since this
subsidiary provides management and other services to the surgery center, our
arrangements with physician investors do not fit within the specific terms of
the 1999 safe harbor or any other safe harbor.

     In addition, because we do not control the medical practices of our
physician investors or control where they perform surgical procedures, it is
possible that the quantitative tests described above will not be met, or that
other conditions of the ASC safe harbor will not be met. Accordingly, while the
ASC safe harbor is helpful in establishing that a physician's investment in a
surgery center should be considered an extension of the physician's practice and
not as a prohibited financial relationship, we can give you no assurances that
these ownership interests will not be challenged under the Anti-Kickback
Statute. However, we believe, that our arrangements involving physician
ownership interests in our surgery centers and private surgical hospital
facilities should not fall within the activities prohibited by the Anti-Kickback
Statute.

     While several federal court decisions have aggressively applied the
restrictions of the Anti-Kickback Statute, they provide little guidance
regarding the application of the Anti-Kickback Statute to our partnerships and
limited liability companies. We believe that our operations mutually comply with
the

                                       48
requirements of federal and state law, but can give you no assurances that a
federal or state agency charged with enforcement of the Anti-Kickback Statute or
similar laws might not assert a contrary position or that new federal or state
laws, or new interpretations of existing laws, might not adversely affect
relationships we have established with physicians or other healthcare providers
or result in the imposition of penalties on us or some of our facilities. Even
the assertion of a violation could have a material adverse effect upon us.

     A federal law known as the Stark Law prohibits a physician (or immediate
family member) who has a financial relationship with an entity from making a
referral to the entity for the furnishing of designated health services for
which payment may be made under the Medicare or Medicaid programs. These
prohibitions, contained in the Omnibus Budget Reconciliation Act of 1993,
commonly known as "Stark II," amended prior physician self-referral Medicare
legislation known as "Stark I" by dramatically enlarging the scope of services
to which the referral prohibitions apply. The Stark Law also prohibits Medicare
or Medicaid payment for any designated health services resulting from a
prohibited referral. Additional penalties for violating the Stark Law include
civil penalties of as much as $15,000 for each bill or claim submitted in
violation of the Stark Law and $100,000 for participation in a "circumvention
scheme" and exclusion from Medicare and Medicaid. Ambulatory surgery is not
identified as a "designated health service" under Stark II, and we do not
believe the statute is intended to cover ambulatory surgery services. In
addition, the Stark Law includes a specific exception for services furnished at
surgery center payment rates.

     FALSE AND OTHER IMPROPER CLAIMS

     The federal government is authorized to impose criminal, civil and
administrative penalties on any person or entity that files a false claim for
payment from Medicare or Medicaid. Claims filed with private insurers can also
lead to criminal and civil penalties, including, but not limited to, penalties
relating to violations of federal mail and wire fraud statutes. While the
criminal statutes are generally reserved for instances of fraudulent intent, the
government is applying its criminal, civil, and administrative penalty statutes
in an ever-expanding range of circumstances. For example, the government has
taken the position that a pattern of claiming reimbursement for unnecessary
services violates these statutes if the claimant merely should have known the
services were unnecessary, even if the government cannot demonstrate actual
knowledge. The government has also taken the position that claiming payment for
low-quality services is a violation of these statutes if the claimant should
have known that the care was substandard.

     Over the past several years, the government has accused an increasing
number of healthcare providers of violating the federal False Claims Act. The
False Claims Act prohibits a person from knowingly presenting, or causing to be
presented, a false or fraudulent claim to the United States government. The
statute defines "knowingly" to include not only actual knowledge of a claims
falsity, but also reckless disregard for or intentional ignorance of the truth
or falsity of a claim. Because our facilities perform hundreds of similar
procedures a year for which they are paid by Medicare, and there is a relatively
long statute of limitations, a billing error or cost reporting error could
result in significant civil or criminal penalties.

     Under the "qui tam," or whistleblower, provisions of the False Claims Act,
private parties may bring actions on behalf of the federal government. Such
private parties, often referred to as relators, are entitled to share in any
amounts recovered by the government through trial or settlement. Both direct
enforcement activity by the government and whistleblower lawsuits have increased
significantly in recent years and have increased the risk that a healthcare
company, like us, will have to defend a false claims action, pay fines or be
excluded from the Medicare and Medicaid programs as a result of an investigation
resulting from a whistleblower case. Although we believe that our operations
materially comply with federal and state laws, they may nevertheless be the
subject of a whistleblower lawsuit, or otherwise challenged or scrutinized by
governmental authorities. A determination that we have violated these laws could
have a material adverse effect on us.

                                       49
STATE ANTI-KICKBACK AND PHYSICIAN SELF-REFERRAL LAWS

     Many states, including those in which we do or expect to do business, have
laws that prohibit payment of kickbacks or other remuneration in return for the
referral of patients. Some of these laws apply only to services reimbursable
under state Medicaid programs. However, a number of these laws apply to all
healthcare services in the state, regardless of the source of payment for the
service. Based on court and administrative interpretations of the federal
Anti-Kickback Statute, we believe that the Anti-Kickback Statute prohibits
payments only if they are intended to induce referrals. However, the laws in
most states regarding kickbacks have been subjected to limited judicial and
regulatory interpretation than federal law. Therefore, we can give you no
assurances that our activities will be found to be in compliance with these
laws. Noncompliance with these laws could subject us to penalties and sanctions
and have a material adverse effect upon us.

     A number of states, including those in which we do or expect to do
business, have enacted physician self-referral laws that are similar in purpose
to the Stark Law but which impose different restrictions. Some states, for
example, only prohibit referrals when the physician's financial relationship
with a healthcare provider is based upon an investment interest. Other state
laws apply only to a limited number of designated health services. Some states
do not prohibit referrals, but require that a patient be informed of the
financial relationship before the referral is made. We believe that our
operations are in material compliance with the physician self-referral laws of
the states in which our facilities are located.

     HEALTH INFORMATION PRACTICES

     The Health Insurance Portability and Accountability Act of 1996, commonly
referred to as "HIPAA," contains, among other measures, provisions that may
require many organizations, including us, to implement very significant,
potentially expensive new computer systems and business procedures designed to
protect each patients individual healthcare information. HIPAA requires the DHHS
to issue rules to define and implement patient privacy standards. Among the
standards that the DHHS will adopt pursuant to HIPAA are standards for the
following:

     o  electronic transactions and code sets;

     o  unique identifiers for providers, employers, health plans and
        individuals;

     o  security and electronic signatures;

     o  privacy; and

     o  enforcement.

     On August 12, 1998, the Secretary of the DHHS issued a proposed rule that
establishes, in part, standards for the security of health information by health
plans, healthcare clearinghouses and healthcare providers that maintain or
transmit any health information in electronic form, regardless of format. Under
the proposed rule we would be an affected entity. These security standards
require affected entities to establish and maintain reasonable and appropriate
administrative, technical and physical safeguards to ensure integrity,
confidentiality and the availability of the information. The security standards
were designed to protect the health information against reasonably anticipated
threats or hazards to the security or integrity of the information and to
protect the information against unauthorized use or disclosure. Although the
security standards do not reference or advocate a specific technology, and
affected entities have the flexibility to choose their own technical solutions,
we expect that the security standards will require us to implement significant
systems.

     On November 3, 1999, the Secretary of the DHHS issued a proposed rule
establishing standards for the privacy of individually identifiable health
information. These privacy standards would apply to all health plans, all
healthcare clearinghouses and many healthcare providers, including healthcare
providers that transmit health information in an electronic form in connection
with certain standard transactions. We would be a covered entity under the
proposed rule. The privacy standards apply to protect individually identifiable
health information that is or has been electronically transmitted or maintained
by a covered entity, including information when it is non-electronic form or
discussed orally. As proposed, these standards not only require our compliance
with rules governing the use and

                                       50
disclosure of protected health information, but they also require us to impose
those rules, by contract, on any business partner to whom such information is
disclosed. Under the proposed privacy standards, patients would be required to
be made third-party beneficiaries of our contracts with business partners, which
would, in many states, entitle them to sue either us or the business partner for
improper uses or disclosures of their protected health information.

     The DHHS finalized the new transaction standards on August 17, 2000, and we
will be required to comply with them by October 16, 2002. The DHHS finalized the
new privacy regulations on December 28, 2000, and we will generally be required
to comply with them by February 26, 2003. The security regulations under HIPAA
were scheduled to be finalized by the DHHS prior to the end of the year 2000,
but have not yet been finalized. Once these security regulations are issued in
final form, we will have approximately two years to be fully compliant.
Sanctions for failing to comply with HIPAA privacy standards include criminal
penalties and civil sanctions.

     We expect that compliance with these standards will require significant
commitment and action by us. We have appointed members of our management team to
direct our compliance with these standards. Although we and other covered
entities generally are not required to be in compliance with these standards
until two years following the effective date of the final rules issued or to be
issued by the Secretary of the DHHS, implementation will require us to conduct
extensive preparation and make significant expenditures. Because the security
standards are proposed regulations, we cannot predict the total financial impact
of the regulations on our operations.

     SPAIN

     Under the Spanish General Health Act and related regulations, private
hospitals must report periodically to the applicable health authorities. These
reports, which describe a hospital's activities, provide a method to identify
and control epidemics. Private hospitals in Spain must obtain a number of
licenses, permits and authorizations, including those required to begin
operating the facility and to dispense drugs. In addition, private hospitals are
subject to regular inspections by the health and administrative authorities to
ensure compliance with applicable regulations. Private hospitals must register
their personal databases with the Data Protection Agency. The Law of Personal
Data Protection provides specific protection for the health information portion
of this personal data. Private hospitals must adopt the necessary measures to
ensure the safety of the personal data. Violations of these regulations could
subject the hospital to administrative fines and civil and criminal liability.
Administrative fines range from 500,000 Pesetas (approximately $3,000) to
100,000,000 Pesetas (approximately $560,000), or five times the value of the
products and services that are the subject of the violation, depending on the
seriousness of the violation. Health authorities may also close a private
hospital for up to five years for serious violations. A violation that endangers
the public health is a criminal offense. We believe that our operations in Spain
are in material compliance with the laws referred to in this paragraph.

     UNITED KINGDOM

     While there is no specific anti-kickback legislation in the United Kingdom
that is unique to the medical profession, general criminal legislation prohibits
bribery and corruption. Our private surgical hospitals in the United Kingdom do
not pay commissions to or share profits with referring physicians, who invoice
patients or insurers directly for fees relating to the provisions of their
services. Private surgical hospitals in the United Kingdom are required to
register with the local Social Services Authority pursuant to the Registered
Homes Act 1984 which provides for regular inspections of the facility by the
registering authority. The operation of a private surgical hospital without
registration is a criminal offense. Under the Misuse of Drugs Act 1971, the
supply, possession or production of controlled drugs without a license from the
Secretary of State is a criminal offense. The Data Protection Act 1998 requires
private surgical hospitals to register as "data controllers." The processing of
personal data, such as patient information and medical records, without prior
registration is a criminal offense. We believe that our operations in the United
Kingdom are in material compliance with the laws referred to in this paragraph.

                                       51
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

     The following table sets forth information with respect to our executive
officers and directors:

NAME                              AGE                    POSITION
------------------------------    --       -------------------------------------
Donald E. Steen...............    54       Chief Executive Officer and Chairman
                                           of the Board
William H. Wilcox.............    49       President and Director
Sue H. Shelley................    46       Executive Vice President
Mark A. Kopser................    36       Senior Vice President and Chief
                                           Financial Officer
Jonathan R. Bond..............    42       Senior Vice President, Operations
Mark Garvin...................    36       Senior Vice President, Operations
Brett Brodnax.................    36       Senior Vice President, Development
Philip J. Parker..............    41       Vice President and Chief Information
                                           Officer
John J. Wellik................    39       Vice President, Controller and
                                           Compliance Officer and Secretary
Gabriel Masfurroll............    47       President of Spanish operations
John M. Wotherspoon...........    58       Managing Director of United Kingdom
                                           operations
Dave A. Alexander, Jr., M.D...    49       President of OrthoLink and Director
Dale L. Stegall...............    54       Chief Administrative Officer of
                                           OrthoLink
John C. Garrett, M.D..........    58       Director
Carlos A. Ferrer(1)...........    47       Director
D. Scott Mackesy(2)...........    32       Director
Thomas L. Mills(1)............    53       Director
Boone Powell, Jr.(1)..........    63       Director
Paul B. Queally(2)............    36       Director
David P. Zarin, M.D...........    52       Director
------------
(1) Member of Audit Committee.

(2) Member of Options and Compensation Committee.

                                       52
DONALD E. STEEN founded our company in February 1998 and has been our chief
executive officer and chairman since that time. Mr. Steen served as president of
the International Group of HCA -- The Healthcare Company, formerly known as
Columbia/HCA Healthcare Corporation, from 1995 until 1997 and as president of
the Western Group of HCA from 1994 until 1995. Mr. Steen founded Medical Care
International, Inc., a pioneer in the surgery center business, in 1988. Mr.
Steen is also a member of the board of directors of Horizon Health Corporation
and Kinetic Concepts, Inc.

     WILLIAM H. WILCOX joined us as our president and a director in
September 1998. Mr. Wilcox served as president and chief executive officer of
United Dental Care, Inc. from 1996 until joining us. Mr. Wilcox served as
president of the Surgery Group of HCA and president and chief executive officer
of the Ambulatory Surgery Division of HCA from 1994 until 1996.

     SUE H. SHELLEY is a founder of our company and has been our executive vice
president since September 1999. Ms. Shelley served as our senior vice president
from February 1998 until September 1999 and as one of our directors from October
1998 until May 1999. Ms. Shelley served as a private healthcare consultant from
August 1995 until February 1998. Ms. Shelley also served as vice president,
Strategic Operations and Development for the Western Group of HCA from 1994
until 1995.

     MARK A. KOPSER joined us as our senior vice president and chief financial
officer in May 2000. Prior to that time, Mr. Kopser served as chief financial
officer for the International Division of HCA from 1997 until 2000 and as chief
financial officer for the London Division of HCA from 1992 until 1996.

     JONATHAN R. BOND joined us as our senior vice president, operations in
April 1999. Prior to that time, Mr. Bond served as senior vice president for the
Surgery Division of Physician Resource Group, Inc. from November 1995 until
April 1999.

     BRETT BRODNAX is our senior vice president, development. Prior to joining
us in December 1999, Mr. Brodnax was an assistant vice president for Baylor
Healthcare System from May 1990 until December 1999.

     PHILIP J. PARKER joined us as our vice president and chief information
officer in February 1999. Prior to that time, Mr. Parker served as director of
information services at United Dental Care, Inc. from March 1997 until January
1999. From March 1996 until March 1997, Mr. Parker was a consultant with
Ensemble Systems Consulting. Mr. Parker held various positions with Blue Cross
and Blue Shield of Texas, Inc from July 1992 until March 1996.

     JOHN J. WELLIK is our vice president, controller, chief compliance officer
and secretary. Prior to joining us in April 1999, Mr. Wellik served as vice
president and controller for Dynamex, Inc., a transportation services company,
from November 1997 until February 1999. Mr. Wellik also served as an assistant
controller for American Pad & Paper Company from May 1997 until November 1997.
Mr. Wellik served in various accounting management positions, including director
of financial accounting, for Avnet, Inc., an electronics distributor, from July
1993 until February 1997.

     GABRIEL MASFURROLL has been the president of United Surgical Partners
Europe, S.L., our wholly owned Spanish subsidiary through which he conducts our
operations in Spain, since April 1998. From 1996 to 1998, Mr. Masfurroll was
president and chief executive officer of HCA's Spanish subsidiary. From 1994 to
1996, Mr. Masfurroll served as a director of the hospital division of Sanitas,
S.A., the second largest Spanish health insurance company and an affiliate of
the BUPA Group, Britain's largest insurance company. From 1991 to 1993, Mr.
Masfurroll was a healthcare consultant with GESGRUP.

     JOHN M. WOTHERSPOON is the managing director of Aspen Healthcare Holdings
Limited in London and manages our facilities in the United Kingdom. We acquired
Aspen in April 2000. Mr. Wotherspoon joined Aspen in 1987 as financial director,
a post he held until September 1997 when he was promoted to managing director.
In April 1998, Mr. Wotherspoon led the management buyout of Aspen backed by
Electra Fleming. Mr. Wotherspoon has been qualified as a chartered accountant
since 1966.

     DAVE A. ALEXANDER, JR., M.D. joined us as a director and the president of
OrthoLink in February 2001. Prior to joining us, Dr. Alexander was the chairman
and a director of OrthoLink since it was founded in July 1996. From 1992 to
1996, Dr. Alexander served as president of Tennessee Orthopedic

                                       53
Alliance. Dr. Alexander has been in private practice of orthopedics in
Nashville, Tennessee since 1982. Dr. Alexander is a Fellow of the American
Academy of Orthopedic Surgeons and holds a Surgery Certificate of Added
Qualification in Surgery of the Hand.

     DALE L. STEGALL joined us as the chief administrative officer of OrthoLink
in February 2001. Mr. Stegall is a founder of OrthoLink and has been serving as
OrthoLink's senior vice president, general counsel and secretary since its
inception in 1996. From 1973 to 1996, Mr. Stegall was in the private practice of
law and a healthcare consultant in Nashville, Tennessee.

     MARK GARVIN joined us as our senior vice president, operations, in February
2001. Mr. Garvin joined OrthoLink in 1996, serving in various senior management
positions until 1999, when he became OrthoLink's senior vice president, surgical
operations. From 1992 to 1996, Mr. Garvin was vice president, operations, with
the surgery division of HealthSouth Corporation.

     JOHN C. GARRETT, M.D. joined us as a director in February 2001. Mr. Garrett
had been a director of OrthoLink since July 1997. Dr. Garrett founded Resurgens,
P.C. in 1986, where he continues his specialized orthopedics practice in
arthroscopic and reconstructive knee surgery. He is a Fellow of the American
Academy of Orthopedic Surgeons.

     CARLOS A. FERRER has served as one of our directors since October 1998. In
1995 Mr. Ferrer co-founded Ferrer, Freeman, Thompson & Co., which manages
private equity funds dedicated exclusively to the healthcare industry and is a
member of Ferrer, Freeman & Thompson & Co., LLC, the general partner of both FFT
Partners I, L.P. and FFT Executive Partners I, L.P., which are investment
partnerships. Previously he was a managing director at Credit Suisse First
Boston Corporation.

     D. SCOTT MACKESY has served as one of our directors since our inception in
February 1998. Mr. Mackesy has been a principal with Welsh, Carson, Anderson &
Stowe since January 1998. Prior to joining Welsh, Carson, Anderson & Stowe, Mr.
Mackesy was senior research analyst and vice president in the Investment
Research Department at Morgan Stanley Dean Witter from January 1996 to January
1998.

     THOMAS L. MILLS has served as one of our directors since September 1999.
Mr. Mills is the chairman of our audit committee. Mr. Mills has been a partner
in the law firm of Winston & Strawn since 1995, specializing in health law.

     BOONE POWELL, JR. has served as one of our directors since June 1999. Mr.
Powell is the chairman of Baylor Health Care System and served as its president
and chief executive officer from 1980 until 2000.

     PAUL B. QUEALLY has served as one of our directors since our inception in
February 1998. Mr. Queally has been a general partner at Welsh, Carson, Anderson
& Stowe since January 1996. Prior to joining Walsh, Carson, Anderson & Stowe,
Mr. Queally was a general partner at The Sprout Group, which was the private
equity group of Donaldson, Lufkin & Jenrette Securities Corporation.

     DAVID P. ZARIN, M.D. has served as one of our directors since February
2000. Dr. Zarin has practiced otolaryngology in Houston, Texas since 1979. Dr.
Zarin was a founding partner and serves as vice president of Texas ENT
Specialists, PA, formed in 1997. Dr. Zarin was also a founding partner and a
director of TOPS Surgical Specialty Hospital which we acquired in July 1999. Dr.
Zarin has served as chairman and president of the medical staff of TOPS
Specialty Hospital since 1999.

BOARD OF DIRECTORS

     Upon completion of this offering, our board of directors will be divided
into three classes serving staggered three-year terms. Each year, the directors
of one class will stand for election as their terms of office expire. Messrs.
Ferrer, Garrett, Mills and Wilcox have been designated as Class I directors with
their terms of office expiring in 2002; Messrs. Alexander, Mackesy and Zarin
have been designated as Class II directors with their terms of office expiring
in 2003; and Messrs. Powell, Queally and Steen have been designated as Class III
directors with their terms of office expiring in 2004.

                                       54
BOARD COMPENSATION

     Directors who are also our officers or employees do not receive
compensation for their services as directors. Each non-employee director who has
not previously been granted options to purchase our common stock is entitled to
an award of stock options to purchase up to 25,000 shares of our common stock
when he becomes a non-employee director, at an exercise price equal to the fair
market value of our common stock on the date of grant. In each case, the stock
options granted to the non-employee directors will have a three-year vesting
schedule. Directors are entitled to a $1,000 fee for attendance at board
meetings and reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to and attendance at meetings of the board of
directors or committees thereof.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

     We have entered into agreements to indemnify our directors and executive
officers. Under these agreements, we are obligated to indemnify our directors
and officers to the fullest extent permitted under the Delaware General
Corporate Law for expenses, including attorney's fees, judgments, fines and
settlement amounts incurred by them in any action or proceeding arising out of
their services as a director or officer. We believe that these agreements are
helpful in attracting and retaining qualified directors and officers.

COMPENSATION OF EXECUTIVE OFFICERS

     The following table contains summary information concerning the total
compensation paid to or earned for the fiscal year ended December 31, 2000 by
our chief executive officer and by our four other most highly compensated
executive officers serving in this capacity as of December 31, 2000, whose total
annual salary and bonus exceeded $100,000 for that fiscal year. We refer to
these persons as our "named executive officers."

                           SUMMARY COMPENSATION TABLE
LONG-TERM
                                         ANNUAL COMPENSATION     COMPENSATION
                                         -------------------    --------------
                                                                  SECURITIES
                                                                  UNDERLYING          ALL OTHER
                                          SALARY      BONUS      OPTIONS (1)       COMPENSATION(1)
     NAME AND PRINCIPAL POSITION           ($)         ($)           (#)                 ($)
     ---------------------------         --------    -------    --------------    -----------------
Donald E. Steen......................    300,000       --           --                  1,708
     Chief Executive Officer
       and Chairman of the Board
William H. Wilcox....................    300,000       --           --                  1,500
     President
Sue H. Shelley.......................    155,000       --           --                  1,375
     Executive Vice President
Jonathan R. Bond.....................    158,125       --           50,000            --
     Senior Vice President,
       Operations
Gabriel Masfurroll...................    228,000      52,000        --                  9,600
     President of Spanish Operations
------------
  (1) Consists of contributions to the named executive officer's 401(k) plan
      account.

                                       55
The following table provides information regarding stock options granted to
our named executive officers in 2000.

                             OPTION GRANTS IN 2000
POTENTIAL REALIZABLE
                                                                       INDIVIDUAL GRANTS               VALUES AT ASSUMED
                     ----------------------------------------------------------------------------       ANNUAL RATES OF
                         NUMBER OF                                                                        STOCK PRICE
                        SECURITIES          PERCENT OF TOTAL         EXERCISE                           APPRECIATION FOR
                        UNDERLYING         OPTIONS GRANTED TO          PRICE                              OPTION TERM
                      OPTIONS GRANTED         EMPLOYEES IN         OR BASE PRICE      EXPIRATION     --------------------
       NAME                  (#)               FISCAL YEAR            ($/SHARE)           DATE         5%           10%
       ----          -----------------    --------------------    ---------------    ------------    -------      -------
Donald E. Steen.....      500,000(1)             34.7%                 4.50            12/01/10         --           --
William H. Wilcox...      150,000(1)             10.4%                 4.50            12/01/10         --           --
Sue H. Shelley......      --                   --                    --                  --             --           --
Jonathan R. Bond....       25,000(2)              1.7%                 4.00             8/01/10         --           --
                           25,000(1)              1.7%                 4.50            12/01/10         --           --
Gabriel Masfurroll..      --                   --                    --                  --             --           --
------------
(1) 25% of the stock options become exercisable on December 1 in each of 2001,
    2002, 2003 and 2004.

(2) 25% of the stock options become exercisable on August 1 in each of 2001,
    2002, 2003 and 2004.

     The following table provides summary information with respect to stock
options held by our named executive officers as of December 31, 2000. The value
of unexercised in-the-money options is based on an assumed initial public
offering price of $      , less the exercise price payable for the shares.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

                                                                      NUMBER OF SECURITIES          VALUE OF THE UNEXERCISED
                                                                       UNDERLYING OPTIONS             IN-THE-MONEY OPTIONS
                                         SHARES                        AT FISCAL YEAR-END              AT FISCAL YEAR-END
                                         ACQUIRED                             (#)                             ($)
                                           ON          VALUE      ----------------------------    ----------------------------
                NAME                     EXERCISE (#)   REALIZED ($)  EXERCISABLE UNEXERCISABLE   EXERCISABLE    UNEXERCISABLE
-------------------------------------    --------    ---------    -----------    -------------    -----------    -------------
Donald E. Steen......................      --           --          484,980         873,320
William H. Wilcox....................      --           --          430,000         520,000
Sue H. Shelley.......................      --           --          140,000         110,000
Jonathan R. Bond.....................      --           --           12,500          87,500
Gabriel Masfurroll...................      --           --           --              --
COMMITTEES OF THE BOARD

     Our board of directors has established an audit committee and an options
and compensation committee.

     AUDIT COMMITTEE.  The audit committee is comprised of Messrs. Ferrer, Mills
and Powell. The audit committee reports on its activities to the board of
directors and is responsible for reviewing:

     o  the recommendation to our board of directors of the appointment of our
        independent auditors;

     o  the independence of our outside auditors;

     o  the scope, timing and results of the audit and non-audit services
        performed by our independent auditors;

     o  the audit committee charter on an annual basis;

     o  the appropriateness of our accounting policies;

                                       56
o  the adequacy of our accounting and financial controls;

     o  compliance with our accounting policies and accounting and financial
        controls;

     o  the reliability of the financial information that we report to the
        public; and

     o  the proxy statement disclosures required by the audit committee.

     OPTIONS AND COMPENSATION COMMITTEE.  The options and compensation committee
is comprised of Messrs. Mackesy and Queally. The primary functions of the
options and compensation committee are to:

     o  review and recommend the compensation arrangements for our directors and
        officers; and

     o  monitor and administer our stock option plans.

EMPLOYMENT AGREEMENTS

     DONALD E. STEEN.  On November 1, 2000, we entered into a four-year
employment agreement with Donald E. Steen that provides that he will serve as
our chairman and chief executive officer. The employment agreement provides for
annual base compensation of $400,000. Mr. Steen is also eligible for a
performance bonus of up to 100% of his annual base salary. During any time when
Mr. Steen is no longer serving as chief executive officer and, therefore, only
serving as chairman, his annual base compensation would be reduced by $100,000.
The employment agreement provides that, at any time after November 1, 2002, Mr.
Steen is entitled to resign and that our board of directors is entitled to
remove Mr. Steen from his position as chief executive officer, but not as
chairman of the board of directors. In the event that we terminate the
employment agreement other than for cause, Mr. Steen would be entitled to
receive his annual base salary for the balance of the term of the employment
agreement plus the average annual bonus, if any, awarded to Mr. Steen for the
prior two calendar years until the later of 12 months following termination or
the expiration of the initial four-year term of the agreement. The employment
agreement further provides that all of Mr. Steen's stock options automatically
become fully vested if we terminate the agreement for any reason other than for
cause.

     WILLIAM H. WILCOX.  On January 1, 2001, we entered into a two-year
employment agreement with William H. Wilcox that provides that he will serve as
our president. The employment agreement provides for annual base compensation of
$350,000. Mr. Wilcox is also eligible for a performance bonus of up to 100% of
his base salary. In the event that we terminate the employment agreement other
than for cause, Mr. Wilcox would be entitled to receive his annual base salary
for the balance of the term of the employment agreement plus the average annual
bonus, if any, awarded to Mr. Wilcox for the prior two calendar years until the
later of 12 months following termination or the expiration of the initial
two-year term of the agreement. The employment agreement further provides that
if we terminate the agreement for any reason other than for cause all of Mr.
Wilcox's stock options automatically become fully vested.

STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN

     We adopted our 1998 stock option plan on April 30, 1998. A total of
6,000,000 shares of common stock are authorized for issuance under the plan. We
do not intend to grant any additional stock options under this plan after the
completion of this offering. The plan provides for grants of incentive stock
options to our employees, including officers and employee-directors, and for
grants of non-qualified stock options and the right to purchase restricted stock
to our officers, other employees, directors and consultants and other key
persons. The purposes of the plan are to:

     o  promote our interests and the interests of our stockholders by providing
        an opportunity to selected employees, officers, directors and other
        persons to purchase our common stock; and

     o  attract, retain and motivate our employees and other persons and to
        encourage our employees and other persons to devote their best efforts
        to our business and financial success.

     Our options and compensation committee administers the plan. Our options
and compensation committee designates the individuals to receive options or
stock purchase awards, the number of

                                       57
shares subject to options or stock purchase awards, and the terms and conditions
of each option or stock purchase award granted under the plan.

     While our options and compensation committee determines the terms of
options or stock purchase awards granted under the plan, the term of any
incentive stock option cannot exceed ten years from the date of the grant and
any incentive stock option granted to an employee who possesses more than ten
percent of the total combined voting power of all classes of our shares within
the meaning of Section 422(b)(6) of the Internal Revenue Code of 1986 cannot be
exercisable after the expiration of five years from the date of grant.

     The plan is not subject to the Employee Retirement Income Security Act of
1974; however, the plan is designed to allow for awards that constitute
performance-based awards as provided for in Section 162(m) of the Internal
Revenue Code of 1986. Therefore, awards may be exempt from the limitations on
the deductibility of compensation that exceeds $1 million.

     Our options and compensation committee determines the exercise price of
options granted under the plan. Incentive stock options must be granted at the
fair market value of the underlying stock at the time the option is granted.
Further, the exercise price of any incentive stock option granted to an employee
who possesses more than ten percent of the total combined voting power of all
classes of our shares within the meaning of Section 422(b)(6) of the Internal
Revenue Code of 1986 must be at least 110% of the fair market value of the
underlying stock at the time the option is granted. The exercise price of
options granted under the plan will be paid in full in a manner prescribed by
our options and compensation committee.

     Our options and compensation committee determines the purchase price for
shares of our common stock sold pursuant to stock purchase awards. The purchase
price need not be equal to the fair market value of our common stock. The
purchase price is payable in cash or, at the discretion of the committee, with
the grantee's promissory note, secured by the stock subject to the award, or any
other consideration approved by the committee.

2001 EQUITY-BASED COMPENSATION PLAN

     We adopted our 2001 Equity-Based Compensation Plan on
                        , 2001. At any given time, the number of shares of
common stock issued under the plan plus the number of shares of common stock
issuable upon the exercise of all outstanding awards under the plan and our 1998
stock option plan may not exceed the lesser of       shares or 15% of the total
number of shares of common stock then outstanding, assuming the exercise of all
outstanding options and warrants. The plan provides for grants of incentive
stock options, within the meaning of Section 422 of the Internal Revenue Code,
to our employees, including officers and employee-directors, and for grants of
nonstatutory stock options, restricted stock awards, stock appreciation rights,
phantom stock awards and annual incentive awards to our employees, consultants
and nonemployee directors. The purposes of the plan are:

     o  to attract and retain the best available personnel for positions of
        substantial responsibility;

     o  to provide additional incentives to our employees and consultants; and

     o  to promote the success of our business.

     Our options and compensation committee administers the plan and at all
times will be comprised of two or more individuals that constitute "outside
directors" for purposes of Section 162 of the Internal Revenue Code of 1986 and
"nonemployee directors" for purposes of Rule 16b-3 under the Securities Exchange
Act of 1934. Our options and compensation committee will designate the
individuals to receive awards, the number of shares subject to the awards and
the terms and conditions of each award, subject to the terms of the plan.

     While our options and compensation committee determines the terms of awards
granted under the plan, the term of any incentive stock option cannot exceed ten
years from the date of grant. Further, any incentive stock option granted to an
employee who possesses more than ten percent of the total combined voting power
of all classes of our shares within the meaning of Section 422(b)(6) of the

                                       58
Internal Revenue Code of 1986 cannot be exercisable after the expiration of five
years from the date of grant.

     While our options and compensation committee determines the exercise price
of options granted under the plan, the exercise price of any incentive stock
option granted to an employee who possesses more than ten percent of the total
combined voting power of all classes of our shares within the meaning of Section
422(b)(6) of the Internal Revenue Code of 1986 must be at least 110% of the fair
market value of the underlying share at the time the option is granted. The
exercise price of options granted under the plan will be paid in full in a
manner prescribed by our options and compensation committee.

     The plan is not subject to the Employee Retirement Income Security Act of
1974; however, the plan is designed to allow for awards that constitute
performance-based awards as provided for in Section 162(m) of the Internal
Revenue Code of 1986. Therefore, awards may be exempt from the limitations on
the deductibility of compensation that exceeds $1 million.

EMPLOYEE STOCK PURCHASE PLAN

     We adopted our Employee Stock Purchase Plan on                         ,
2001. A total of                   shares of common stock are authorized for
issuance under the plan. The plan provides for the grant of stock options to
selected eligible employees. The purpose of the plan is to provide eligible
employees with an incentive to advance our interests by providing an opportunity
to purchase stock of the company at a favorable price. The plan is administered
by our options and compensation committee.

     Any eligible employee may elect to participate in the plan by authorizing
our options and compensation committee to make payroll deductions to pay the
exercise price of an option at the time and in the manner prescribed by our
options and compensation committee. This payroll deduction may be a specific
amount or a designated percentage to be determined by the employee, but the
specific amount may not be less than an amount established by us and the
designated percentage may not exceed an amount of eligible compensation
established by us from which the deduction is made. In no event will an employee
be granted an option under the plan that would permit the purchase of stock with
a fair market value in excess of $          , or to purchase more than
          shares, in a period established by us.

     There are two six-month offering periods in each calendar year. The date of
grant and the date of exercise for the first option period is January 1 and June
30, respectively, and the date of grant and date of exercise for the second
option period is July 1 and December 31, respectively. The first offering period
of the plan will commence on the date we close this offering, and will conclude
on June 30, 2001. The exercise price of options granted under the plan will be
an amount equal to the lesser of 85% of the fair market value of our common
stock on the date of exercise or on the date of grant.

                                       59
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ISSUANCE OF EQUITY SECURITIES

     COMMON STOCK AND CLASS A COMMON STOCK

     From March 1998 to August 2000, we issued 510,140 shares of our common
stock in private placements at prices ranging from $2.00 to $4.00 per share and
we issued 23,519,534 shares of our Class A common stock in private placements at
prices ranging from $2.00 to $4.00 per share. Some of the purchasers of our
common stock and our Class A common stock in these private placements are
officers, directors and stockholders owning more than 5% of our outstanding
common stock and persons and entities associated with our officers, directors
and those stockholders. See "Security Ownership of Principal Stockholders and
Management." Each share of Class A common stock will convert into one share of
common stock upon completion of this offering.

     SERIES A REDEEMABLE PREFERRED STOCK

     From September 28, 1998 to October 9, 1998, we sold to Welsh, Carson,
Anderson & Stowe 30,000 shares of our Series A redeemable preferred stock at a
purchase price of $1,000 per share. As of September 30, 2000, we had 31,200
shares of Series A redeemable preferred stock outstanding. We intend to use
$32.6 million of the net proceeds of this offering to redeem all outstanding
shares of our Series A redeemable preferred stock and pay all accrued and unpaid
dividends on those shares.

     SERIES C CONVERTIBLE PREFERRED STOCK

     On March 27, 2000, we sold 18,750 shares of our Series C convertible
preferred stock, which represent all of our outstanding shares of Series C
convertible preferred stock, at a purchase price of $1,000 per share. We sold
15,000 shares to Welsh, Carson, Anderson & Stowe, a stockholder owning more than
5% of our outstanding common stock, and its affiliates. We sold 3,601 shares to
FFT Partners I, L.P. and 149 shares to FFT Executive Partners I, L.P.,
affiliates of Carlos A. Ferrer, a director and a stockholder owning more than 5%
of our outstanding common stock. Each share of Series C convertible preferred
stock is convertible into the number of shares of our common stock that is equal
to the initial purchase price plus accrued dividends divided by $3.50, which as
of December 31, 2000 would have been 300 shares.

     The following table sets forth the aggregate number of shares acquired by,
and the aggregate consideration paid by, our executive officers, directors and
stockholders owning more than 5% of our outstanding common stock in the private
placement transactions described above and in connection with our acquisition of
OrthoLink. We sold each share of our Series A redeemable and Series C
convertible preferred stock for $1,000 per share.
SERIES A        SERIES C
                                                                                    CLASS A          REDEEMABLE      CONVERTIBLE
                                           COMMON STOCK                           COMMON STOCK     PREFERRED STOCK PREFERRED STOCK
EXECUTIVE OFFICERS,          ---------------------------------- ---------------------------------- --------------- ---------------
DIRECTORS                       NUMBER OF        AGGREGATE         NUMBER OF        AGGREGATE         NUMBER OF       NUMBER OF
AND 5% STOCKHOLDERS          SHARES ACQUIRED CONSIDERATION PAID SHARES ACQUIRED CONSIDERATION PAID SHARES ACQUIRED SHARES ACQUIRED
---------------------------- --------------- ------------------ --------------- ------------------ --------------- ---------------
FFT Partners I, L.P. ........        --                           $--               $ 5,761,620            --            3,601
FFT Executive Partners I, ...         149
L.P. ........................      68,109           238,380              --                --
WCAS Capital Partners III,
L.P. ........................        --                --           1,500,000         5,250,000          28,050         14,017
Welsh, Carson, Anderson & ...        --                --
Stowe VII, L.P. .............   2,193,222                (1)       15,813,272        41,246,782              60           --
Donald E. Steen .............        --                --           1,089,000         2,499,000            --             --
William H. Wilcox ...........        --                --             278,000           943,000            --             --
Sue H. Shelley ..............        --                --             260,000           535,000            --             --
Jonathan R. Bond ............      28,571            99,999              --                --              --             --
John J. Wellik ..............      30,000           105,000              --                --              --             --
Mark A. Kopser ..............     125,000           437,500              --                --                12              6
Brett Brodnax ...............      53,571           199,999              --                --                48             23
D. Scott Mackesy ............        --                --               6,753            17,615            --             --
Paul B. Queally .............       4,720                (1)           25,999            67,816            --             --
Dave A. Alexander, Jr., M.D .      79,125                (1)             --                --              --             --
John C. Garrett, M.D ........     214,844                (1)             --                --
Dale L. Stegall .............      29,500                (1)             --                --
------------
(1) These shares of common stock were issued in connection with our acquisition
    of OrthoLink in February 2001.

                                       60
WARRANTS

     We issued a warrant, dated March 27, 2000, to Welsh, Carson, Anderson &
Stowe VII, L.P., a stockholder owning more than 5% of our outstanding common
stock, to purchase 800,000 shares of our Class A common stock at an exercise
price of $.01 per share in connection with its purchase of shares of our Series
C convertible preferred stock. The warrants are exercisable to purchase 800,000
shares of our common stock at an exercise price of $.01 per share. The warrant
will terminate on June 18, 2009.

7% SENIOR SUBORDINATED NOTES

     In November 1998, March 1999 and June 1999, we issued $16.0 million
principal amount of our 7% senior subordinated notes due April 30, 2008 to
Welsh, Carson, Anderson & Stowe and its affiliates, $3.8 million principal
amount of our 7% senior subordinated notes to FFT Partners I, L.P. and
$0.2 million principal amount of our 7% senior subordinated notes to FFT
Executive Partners I, L.P. We paid to these entities $91,013 in accrued interest
on the notes in 1999 and $1,271,811 in accrued interest on the notes during the
nine months ended September 30, 2000. Under the notes, we are required to repay
in full the principal balance of the notes and any accrued and unpaid interest
on the notes upon completion of this offering. However, Welsh, Carson, Anderson
& Stowe, FFT Partners I, L.P. and FFT Executive Partners I, L.P. have advised us
that they intend to waive their rights to such mandatory prepayment under the
notes.

10% SENIOR SUBORDINATED NOTES

     In March 2000, in connection with the issuance of 1,500,000 shares of our
Class A common stock for an aggregate purchase price of $5,250,000, we issued
$36,000,000 principal amount of our 10% senior subordinated notes due March 27,
2010, for a purchase price of $30,750,000 to WCAS Capital Partners III, L.P., an
affiliate of Welsh, Carson, Anderson & Stowe. We paid no interest on the notes
during the nine months ended September 30, 2000. Under the notes, we are
required to repay in full the principal balance of the notes and any accrued and
unpaid interest on the notes upon completion of this offering. However, WCAS
Capital Partners III, L.P. has advised us that it intends to waive its rights to
such mandatory prepayment under the notes.

STOCKHOLDERS AGREEMENT

     We are party to a stockholders agreement with:

      o  Donald E. Steen;

      o  Sue H. Shelley;

      o  William H. Wilcox;

      o  FFT Partners I, L.P.;

      o  FFT Executive Partners I, L.P.;

      o  Baylor Health Care System Foundation;

      o  Welsh, Carson, Anderson & Stowe VII, L.P.;

      o  WCAS Capital Partners III, L.P.;

      o  WCAS Healthcare Partners, L.P.; and

      o  some other holders of our capital stock.

     The stockholders agreement contains customary transfer restrictions
including co-sale and right of first refusal provisions as well as provisions
regarding voting for specified director nominees. This agreement will
automatically terminate upon the completion of this offering.

REGISTRATION RIGHTS AGREEMENT

     Donald E. Steen, William H. Wilcox, Sue H. Shelley, Paul B. Queally, D.
Scott Mackesy, Dave A. Alexander, Jr., M.D., Dale L. Stegall, Mark Garvin, John
C. Garrett, M.D., Baylor Health Services, Welsh, Carson, Anderson & Stowe VII,
L.P., WCAS Healthcare Partners, L.P., WCAS Capital Partners III, L.P., FFT
Partners I, L.P. and FFT Executive Partners I, L.P. and other holders of our

                                       61
Class A common stock and shares of common stock issuable upon the conversion of
our Class A common stock are entitled under a registration rights agreement with
us to the following registration rights for the shares of Class A common stock
and shares of common stock issuable upon conversion of Class A common stock held
by them:

     o  at any time Welsh, Carson, Anderson & Stowe VII, L.P., on behalf of the
        holders of registrable securities, may require, on two occasions only,
        that we use our best efforts to register registrable securities for
        public resale;

     o  holders of registrable securities under the agreement may require us to
        use our best efforts to register their shares of common stock on a
        Form S-3 registration statement, provided that we are eligible to use
        the form and provided further that we shall not be required to effect
        the registration more than once in any 180 day period; and

     o  if we register any common stock at any time, either for our own account
        or for the account of other security holders, holders of registrable
        securities under the agreement are entitled to include their shares of
        common stock in the registration, subject to the ability of the
        underwriters to limit the number of shares included in the offering in
        view of market conditions.

     We will bear all registration expenses other than underwriting discounts
and commissions in connection with any registration under the registration
rights agreement. All holders of registrable securities have agreed not to
exercise their registration rights during the 180-day period following the date
of this prospectus without the consent of Credit Suisse First Boston
Corporation.

OTHER TRANSACTIONS

     We have loaned money to the following executive officers in exchange for
promissory notes given as partial consideration for the purchase by the
executive officer of our common stock as set forth below:

                          DATE                                    OUTSTANDING
                           OF        PRINCIPAL                   BALANCE AS OF
  EXECUTIVE OFFICER       NOTE        AMOUNT       INTEREST     FEBRUARY 1, 2001
  -----------------     --------    -----------    ---------    ----------------
Sue H. Shelley........   4/30/98     $250,000          7%           $250,000
William H. Wilcox.....  10/31/98      400,000          7             400,000
Jonathan R. Bond......  11/22/99       75,000          7              75,000
John J. Wellik........  11/22/99       26,250          7              26,250
John J. Wellik........   8/15/00       52,500          7              52,500
Mark A. Kopser........    5/1/00      328,125          7             328,125
Brett Brodnax.........   2/15/00       75,000          7              75,000
Brett Brodnax.........   8/15/00       75,000          7              75,000

     Interest on the outstanding balance of the promissory notes is payable
quarterly. The principal amount is due on the fourth anniversary of the note.
The maturity date of the notes will be accelerated upon completion of this
offering to the six-month anniversary of the completion of this offering. Each
promissory note is secured by a pledge of the shares of our common stock or our
Class A common stock purchased with such note.

     On June 1, 1999, we issued a convertible subordinated promissory note to
Baylor Health Care System Foundation in the principal amount of $3,287,234 in
connection with Baylor's contribution of two surgery centers to our joint
venture with Baylor. The conversion price of the convertible subordinated
promissory note is $3.50 per share of common stock. Our contribution and
purchase agreement with Baylor contains an "earn-out" provision under which
Baylor could receive additional convertible promissory notes. Under the earn-out
provision, if earnings before interest, taxes, depreciation, amortization and
management fees of our limited partnership with Baylor exceed stated amounts in
the second and third years of the limited partnership, Baylor would be entitled
to receive additional convertible subordinated notes in an amount equal to 50%
of the excess. The conversion price of any additional convertible promissory
notes will be the greater of $3.50 per share or the fair market value of the
underlying common stock at the time the additional convertible promissory note
is issued. Under the convertible subordinated promissory note, we are required
to repay in full the principal balance of the note and any accrued and unpaid
interest on the note upon completion of this offering.

                                       62
However, we believe that Baylor will convert the note into shares of our common
stock. Boone Powell, Jr., one of our directors, is the chairman of the board of
directors of Baylor and served as president and chief executive officer from
1980 until 2000. For the nine months ended September 30, 2000, we derived
approximately 6.7% of our revenues from our joint venture with Baylor. For more
information regarding our joint venture with Baylor, see
"Business--Operations--Operations in the United States--Strategic
Relationships."

     On October 12, 2000, we exchanged 1,000,000 shares of our Class B common
stock for the minority interest in our Spanish subsidiary, USPE, and on
September 26, 2000 assumed a recourse promissory note in the principal amount of
$811,093 from HDT, S.C., the minority interest holder and successor of HMT, S.C.
On January 31, 2001, we accepted $45,306 in cash and a recourse promissory note
in the principal amount of $244,655 from HDT, S.C., as consideration for the
purchase of 82,846 shares of our Class B common stock. HDT is a holding company
owned primarily by the management team responsible for our Spanish operations.
Gabriel Masfurroll, president of our Spanish operations, beneficially owns
approximately 37% of HDT. Both promissory notes bear interest at a rate of 5%
per annum, payable at maturity. As of February 1, 2001, the outstanding
principal balances of the notes were $811,093 and $244,655, respectively. The
notes mature on the earlier of six months following the completion of this
offering or September 26, 2004 and January 31, 2005, respectively. The
promissory notes are secured by a pledge of the 1,082,846 shares of our Class B
common stock and are guaranteed by the stockholders of HDT. Upon completion of
the offering, all shares of our Class B common stock will be converted into
shares of common stock based on the factors set forth in our certificate of
incorporation. As of December 31, 2000, our 1,000,000 shares of outstanding
Class B common stock would have converted into 930,000 shares of common stock.

                                       63
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

     The following table sets forth information with respect to the beneficial
ownership of our common stock as of February 12, 2001, after giving effect to
the conversion of all outstanding shares of our Class A common stock, Class B
common stock and Series C convertible preferred stock into shares of our common
stock.

     We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. Unless otherwise indicated, the persons
included in this table have sole voting and investment power with respect to all
the shares of common stock beneficially owned by them, subject to applicable
community property laws. The number of shares beneficially owned by a person
includes shares of common stock that are subject to stock options or warrants
that are either currently exercisable or exercisable within 60 days after
February 12, 2001. These shares are also deemed outstanding for the purpose of
computing the percentage of outstanding shares owned by the person. These shares
are not deemed outstanding, however, for the purpose of computing the percentage
ownership of any other person.
PERCENT OF COMMON STOCK
                                                                                BENEFICIALLY OWNED
                                             SHARES OF COMMON        -----------------------------------------
      NAME OF BENEFICIAL OWNER           STOCK BENEFICIALLY OWNED    BEFORE THE OFFERING    AFTER THE OFFERING
-------------------------------------    ------------------------    -------------------    ------------------
FFT Partners I, L.P..................            2,739,163(1)                6.72%
  Ferrer Freeman & Thompson
  10 Glenville Street
  Greenwich, CT 06831
WCAS Capital Partners III, L.P.......            1,558,999(2)                3.82%
  320 Park Avenue, Suite 2500
  New York, NY 10022-9500
Welsh, Carson, Anderson & Stowe VII,
  L.P................................           23,060,974(3)               55.49%
  320 Park Avenue, Suite 2500
  New York, NY 10022-9500
HDT, S.C.............................            1,082,846(4)                2.66%
  Paseo de la Castellana, numero 40
  bis, 4a planta
  28046 Madrid, Spain
Donald E. Steen......................            1,573,980(5)                3.82%
William H. Wilcox....................              708,000(6)                1.72%
Mark A. Kopser.......................              125,000                      *
Sue H. Shelley.......................              400,000(7)                   *
Jonathan R. Bond.....................               41,071(8)                   *
Brett Brodnax........................               57,321(9)                   *
Philip J. Parker.....................               17,500(10)                  *
John J. Wellik.......................               40,000(11)                  *
Gabriel Masfurroll...................           --                        --
John Wotherspoon.....................           --                        --
Dave A. Alexander, Jr., M.D..........              198,177(12)                  *
Dale L. Stegall......................               87,202(13)                  *
Mark Garvin..........................               73,750(14)                  *
John C. Garrett, M.D.................              224,284(15)                  *
Carlos A. Ferrer.....................            2,852,497(16)               7.00%
D. Scott Mackesy.....................                8,574(17)                  *
Thomas L. Mills......................                6,250(18)                  *
Boone Powell, Jr.....................           --                        --
Paul B. Queally......................           24,957,761(19)              60.05%
David P. Zarin, M.D..................                6,250(20)                  *
All directors and executive officers
  as a group (20 persons)............           31,378,216(21)              73.10%
------------
 * Less than one percent (1%).

 (1) Consists of (i) 1,646,177 shares issuable upon conversion of our Class A
     common stock and (ii) 1,092,986 shares issuable upon conversion of our
     Series C convertible preferred stock.

 (2) Includes 1,500,000 shares issuable upon conversion of our Class A common
     stock.

 (3) Includes (i) 15,813,272 shares issuable upon conversion of our Class A
     common stock, (ii) 4,254,480 shares issuable upon conversion of our
     Series C convertible preferred stock and (iii) 800,000 shares issuable upon
     exercise of outstanding warrants.

 (4) Consists of 1,082,846 shares issuable upon conversion of our Class B common
     stock.

 (5) Consists of (i) 1,089,000 shares issuable upon conversion of our Class A
     common stock and (ii) 484,980 shares issuable upon exercise of stock
     options that have already vested or will vest within 60 days.

                                         (FOOTNOTES CONTINUED ON FOLLOWING PAGE)

                                       64
(6) Consists of (i) 278,000 shares issuable upon conversion of our Class A
     common stock and (ii) 430,000 shares issuable upon exercise of stock
     options that have already vested or will vest within 60 days.

 (7) Consists of (i) 260,000 shares issuable upon conversion of our Class A
     common stock and (ii) 140,000 shares issuable upon exercise of stock
     options that have already vested or will vest within 60 days.

 (8) Includes 12,500 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

 (9) Includes 3,750 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(10) Consists of 17,500 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(11) Includes 10,000 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(12) Includes 119,652 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(13) Includes 57,702 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(14) Includes 66,670 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(15) Includes 9,440 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(16) Consists of (i) the shares held by FFT Partners I, L.P. as previously
     described in Note (1), (ii) 68,109 shares issuable upon conversion of our
     Class A common stock held of record by FFT Executive Partners I, L.P. and
     (iii) 45,225 shares issuable upon conversion of our Series C convertible
     preferred stock held of record by FFT Executive Partners I, L.P. Mr. Ferrer
     is a member of Ferrer, Freeman & Thompson & Co., LLC, the general partner
     of both FFT Partners I, L.P. and FFT Executive Partners I, L.P.

(17) Consists of (i) 6,753 shares issuable upon conversion of our Class A common
     stock and (ii) 1,821 shares issuable upon conversion of our Series C
     convertible preferred stock.

(18) Consists of 6,250 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(19) Includes (i) the shares held by WCAS Capital Partners III, L.P. as
     previously described in Note (2), (ii) the shares held by Welsh, Carson,
     Anderson & Stowe VII, L.P. as previously described in Note (3),
     (iii) 58,999 shares held of record by WCAS Healthcare Partners, L.P.,
     (iv) 236,347 shares issuable upon conversion of our Class A common stock
     held of record by WCAS Healthcare Partners, L.P., (v) 63,740 shares
     issuable upon conversion of our Series C convertible preferred stock held
     of record by WCAS Healthcare Partners, L.P., (vi) 25,999 shares issuable
     upon conversion of our Class A common stock and (vii) 6,981 shares issuable
     upon conversion of our Series C convertible preferred stock. Mr. Queally is
     a general partner of each of WCAS Capital Partners III, L.P., Welsh,
     Carson, Anderson & Stowe VII, L.P. and WCAS Healthcare Partners, L.P.

(20) Consists of 6,250 shares issuable upon exercise of stock options that have
     already vested or will vest within 60 days.

(21) Includes (i) 1,364,694 shares issuable upon exercise of stock options that
     have already vested or will vest within 60 days and (ii) 800,000 shares
     issuable upon exercise of outstanding warrants.

                                       65
DESCRIPTION OF CAPITAL STOCK

     Our authorized capital stock consists of 135,000,000 shares of common
stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par
value $0.01 per share. 87,000,000 shares of our common stock are designated as
common stock, 45,000,000 shares of common stock are designated as Class A common
stock and 3,000,000 shares of common stock are designated as Class B common
stock. 31,200 shares of our preferred stock are designated as Series A
redeemable preferred stock and 20,000 shares of preferred stock are designated
as Series C convertible preferred stock. As of the date of this prospectus,

     o  10,471,877 shares of common stock were issued and outstanding,

     o  23,519,534 shares of Class A common stock were issued and outstanding,

     o  1,082,846 shares of Class B common stock were issued and outstanding,

     o  31,200 shares of Series A redeemable preferred stock were issued and
        outstanding, and

     o  18,750 shares of Series C convertible preferred stock were issued and
        outstanding.

     In addition,

     o  6,000,000 shares of common stock were reserved for issuance under our
        1998 stock option plan,

     o             shares of common stock were reserved for issuance under our
        2001 equity-based compensation plan,

     o             shares of common stock were reserved for issuance under our
        employee stock purchase plan,

     o  900,000 shares of common stock were reserved for issuance upon exercise
        of outstanding warrants, and

     o  30,008,273 shares of common stock were reserved for issuance upon
        conversion of our Class A and Class B common stock and our Series C
        convertible preferred stock.

     All of our outstanding shares of Class A and Class B common stock and
Series C convertible preferred stock will be converted automatically into common
stock upon completion of this offering.

     The following descriptions of our capital stock and provisions of our
certificate of incorporation and bylaws are summaries of all of their material
terms and provisions and are qualified by reference to our certificate of
incorporation and bylaws, copies of which have been filed with the SEC as
exhibits to the registration statement of which this prospectus is a part. The
descriptions of the common stock and preferred stock reflect changes to our
capital structure that will occur upon the closing of this offering in
accordance with the terms of the certificate of incorporation.

COMMON STOCK

     Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive
proportionately any dividends that may be declared by our board of directors,
subject to any preferential dividend rights of outstanding preferred stock. In
the event of our liquidation, dissolution or winding up, holders of common stock
will be entitled to receive proportionately any of our assets remaining after
the payment of liabilities and subject to the prior rights of any outstanding
preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights.

PREFERRED STOCK

     Upon the closing of this offering, (1) all outstanding shares of our Series
A redeemable preferred stock will be redeemed and (2) all outstanding shares of
our Series C convertible preferred stock will be converted into shares of common
stock. Thereafter, our board of directors will have the authority, without
further action by the stockholders, to issue up to 10,000,000 shares of
preferred stock in one

                                       66
or more series and to designate the rights, preferences, privileges and
restrictions of each series. The issuance of preferred stock could have the
effect of restricting dividends on the common stock, diluting the voting power
of the common stock, impairing the liquidation rights of the common stock or
delaying or preventing our change in control without further action by the
stockholders. We have no present plans to issue any shares of preferred stock
after the completion of this offering.

WARRANTS

     As of the date of this prospectus, there were outstanding warrants to
purchase 900,000 shares of our common stock at a weighted average exercise price
of $0.45 per share. See "Certain Relationships and Related Transactions."

REGISTRATION RIGHTS

     Some of our stockholders are entitled to registration rights under a
registration rights agreement with us for the shares of our common stock held by
them. See "Certain Relationships and Related Transactions -- Registration Rights
Agreement."

DESCRIPTION OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND
DELAWARE LAW

     A number of provisions in our certificate of incorporation and bylaws and
under the Delaware General Corporation Law may make it more difficult to acquire
control of us. These provisions could deprive the stockholders of opportunities
to realize a premium on the shares of common stock owned by them. In addition,
these provisions may adversely affect the prevailing market price of the common
stock. These provisions are intended to:

     o  enhance the likelihood of continuity and stability in the composition of
        our board of directors;

     o  discourage some types of transactions that may involve an actual or
        threatened change in control of us;

     o  discourage various tactics that may be used in proxy fights;

     o  ensure that our board of directors will have sufficient time to act in
        what the board believes to be in the best interest of us and our
        stockholders; and

     o  encourage persons seeking to acquire control of us to consult first with
        our board to negotiate the terms of any proposed business combination or
        offer.

     CLASSIFIED BOARD OF DIRECTORS

     Our bylaws provide that the board of directors shall be divided into three
classes of directors of the same or nearly the same number, with each class
elected for three-year terms expiring in successive years. Section 141 of the
Delaware General Corporation Law provides that, in the case of a corporation
having a staggered board, holders of a majority of the shares then entitled to
vote in an election of directors may remove a director only for cause. Our
certificate of incorporation defines "cause" as (i) a final conviction of a
felony involving moral turpitude or (ii) willful misconduct that is materially
and demonstrably injurious economically to us. No act, or failure to act, by a
director will be considered "willful" unless committed in bad faith and without
a reasonable belief that the act or failure to act was in the best interest of
us or any of our affiliates. "Cause" will not exist unless and until we have
delivered to the director a written notice of the act or failure to act that
constitutes "cause" and the director has not cured the act or omission within 90
days after the delivery of the notice. The effect of this may be to restrict the
ability of stockholders to remove directors from our board of directors. Our
certificate of incorporation also allows the board of directors to fix the
number of directors in the bylaws.

     STOCKHOLDER MEETINGS AND PROPOSALS

     Our bylaws provide that special meetings of stockholders generally can be
called only by the chairman of the board, the chief executive officer, the
president or our board of directors. There are

                                       67
advance notice procedures for the nomination, other than by or at the direction
of the board of directors, of candidates for election as directors as well as
for other stockholder proposals to be considered at annual stockholder meetings.
In general, notice of intent to nominate a director or raise business at annual
meetings must be received by us not less than 90 nor more than 120 days before
the meeting. The notice must contain specific information concerning the person
to be nominated or the matters to be brought before the meeting and concerning
the stockholder submitting the proposal. These provisions may preclude a
nomination for the election of directors or preclude the conduct of business at
a particular annual meeting if the proper procedures are not followed.
Furthermore, these provisions may discourage or deter a third party from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of the company, even if the conduct of
the solicitation or attempt might be beneficial to us and our stockholders.

     STOCKHOLDER ACTION

     Our certificate of incorporation does not allow stockholders to act by
written consent without a meeting. Our certificate of incorporation requires the
affirmative vote of the holders of not less than eighty percent of our shares
entitled to vote in an election of directors to amend or repeal this prohibition
of stockholder action by written consent. The effect of this provision is to
restrict stockholders ability to circumvent the notice requirements relating to
an annual meeting.

     BUSINESS COMBINATION UNDER DELAWARE LAW

     We are subject to Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless:

     o  the board of directors approved the transaction in which the stockholder
        became an interested stockholder prior to the date the interested
        stockholder attained that status;

     o  upon consummation of the transaction that resulted in the stockholder's
        becoming an interested stockholder, the interested stockholder owned at
        least 85% of the voting stock of the corporation outstanding at the time
        the transaction commenced, excluding shares owned by persons who are
        directors and also officers; or

     o  on or subsequent to that date, the business combination is approved by
        the board of directors and authorized at an annual or special meeting of
        stockholders by the holders of at least two-thirds of our outstanding
        voting stock which is not owned by the interested stockholder.

     LIMITATION OF LIABILITY OF DIRECTORS

     Our certificate of incorporation provides that no director will be
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability:

     o  for any breach of the directors duty of loyalty to us or our
        stockholders;

     o  for acts or omissions not in good faith or which involve intentional
        misconduct or a knowing violation of laws;

     o  for unlawful payment of a dividend or an unlawful stock purchase or
        stock redemption; and

     o  for any transaction from which the director derived an improper personal
        benefit.

     The effect of these provisions is to eliminate our rights and the rights of
our stockholders, through stockholder derivative suits on our behalf, to recover
monetary damages against a director for breach of fiduciary duty as a director,
including breaches resulting from grossly negligent behavior, except in the
situations described above.

     AMENDMENTS TO BYLAWS

     Our certificate of incorporation provides that our bylaws may be amended,
altered or repealed by our board of directors or the affirmative vote of the
holders of not less than 80% of our shares

                                       68
entitled to vote in an election of directors. This provision makes it more
difficult for our stockholders to make changes in our bylaws.

     AMENDMENTS TO CERTIFICATE OF INCORPORATION

     Our certificate of incorporation requires the affirmative vote of the
holders of not less than 80% of our shares entitled to vote in an election of
directors to amend, alter or repeal the following provisions in our certificate
of incorporation:

     o  the classified board provisions;

     o  the prohibition on stockholder actions by written consent;

     o  the prohibition on the right of stockholders to call special meetings of
        stockholders;

     o  the limitation of the power of our stockholders to amend our bylaws; and

     o  the provision requiring the affirmative vote of the holders of not less
        than 80% of our shares to amend the foregoing provisions.

     This requirement makes it more difficult for our stockholders to make
changes to the provisions in our certificate of incorporation that could have
anti-takeover effects.

STOCKHOLDER RIGHTS PLAN

     We anticipate that, immediately upon completion of this offering, our board
of directors will declare, pursuant to a rights agreement, a dividend
distribution of one common share purchase right for each outstanding share of
our common stock. Each right will entitle the registered holder to purchase from
us one thousandth of a share of our Series A junior participating preferred
stock, par value $.01 per share, at a price per share to be determined by our
board with the advice of our financial advisor about the long-term prospects for
our value, subject to adjustment. Each thousandth of a junior preferred share
will be economically equivalent to one share of our common stock. The purchase
price is expected to be significantly higher than the trading price of our
common stock. Therefore, the dividend will have no initial value and no impact
on our financial statements. The following summary of the rights does not
purport to be complete and is qualified in its entirety by reference to the
rights agreement, which is an exhibit to the registration statement of which
this prospectus is a part.

     Initially, the rights will be attached to all certificates representing
shares of our common stock then outstanding, and no separate certificates
representing the rights will be distributed. Subject to extension by a majority
of our directors acting on our behalf, the rights will separate from our common
stock upon the distribution date, which is defined as the earlier of:

     o  ten business days following a public announcement that a person or group
        of affiliated or associated persons (other than Welsh, Carson, Anderson
        & Stowe, for so long as it and its affiliates and associates own 15% or
        more of our outstanding common stock) has acquired, or obtained the
        right to acquire, beneficial ownership of 15% or more of the outstanding
        shares of our common stock, any of the foregoing persons being an
        acquiring person; or

     o  ten business days following the commencement of, or after the date of
        the first public announcement of, a tender offer or exchange offer that
        would result in a person or group (other than Welsh, Carson, Anderson &
        Stowe, for so long as it and its affiliates and associates own 15% or
        more of our outstanding common stock) beneficially owning 15% or more of
        the outstanding shares of our common stock.

                                       69
Until the distribution date or earlier redemption or expiration of the
rights:

          o  with respect to any shares of our common stock outstanding on the
             date that we issue the rights, the rights will be evidenced (A)
             with respect to shares of our common stock that are held in
             certificated form, by the certificates representing the shares with
             a copy of a summary of rights attached and (B) with respect to
             shares of our common stock that are held in book-entry form, by a
             notation in the records of the rights agent and the records of our
             transfer agent if different from the rights agent;

          o  the rights will be transferred with and only with shares of common
             stock;

          o  new common stock certificates issued after the date we issue the
             rights, upon transfer or new issuance of shares of the common
             stock, will contain a notation incorporating the rights agreement
             by reference; and

          o  the surrender for transfer (A) of any certificates for common stock
             outstanding as of the date that we issue the rights, even without
             the notation or a copy of a summary of rights being attached
             thereto, and (B) of any shares of our common stock held in
             book-entry form, will also constitute the transfer of the rights
             associated with the common stock represented by the certificate.

     As soon as practicable after the distribution date, separate certificates
evidencing the rights will be mailed to holders of record of our common stock.

     The rights are not exercisable until the distribution date and will expire
ten years after consummation of this offering, unless earlier redeemed by us.

     If a person or group (other than Welsh, Carson, Anderson & Stowe, for so
long as it and its affiliates and associates own 15% or more of our outstanding
common stock) were to acquire 15% or more of the then outstanding shares of our
common stock, each right then outstanding and not owned by an acquiring person
would become a right to buy that number of shares of our common stock, or under
specified circumstances, the equivalent number of one one-thousandths of a
junior preferred share, that at the time of the acquisition would have a market
value of two times the purchase price of the right. For example, at an exercise
price of $100.00 per right, each right not owned by an acquiring person
following an event described above would entitle its holder to purchase from us
$200.00 worth of common stock, or in specified circumstances, the equivalent
number of one one-thousandths of a junior preferred share, for $100.00. Assuming
that our common stock had a current market price per share of $20.00 at that
time, the holder of each valid right would be entitled to purchase ten shares of
common stock for $100.00. Notwithstanding the foregoing, following the
occurrence of any of the events set forth in this paragraph, all rights that
are, or, under circumstances specified in the rights agreement were,
beneficially owned by an acquiring person will be null and void.

     In the event that, at any time following the date that a person has become
an acquiring person, which is referred to as a shares acquisition date,

          o  we are acquired in a merger or other combination transaction in
             which we are not the surviving entity;

          o  we consolidate with or merge with or into any other person pursuant
             to which we are the surviving entity but all or a part of the
             shares of our common stock are changed into or exchanged for stock
             of another person or cash or other property; or

          o  50% or more of our assets or earning power is sold or transferred;

each holder of a right, except rights that previously have been voided as
described above, shall thereafter have the right to receive, upon exercise,
common stock or other securities of the acquiring company having a value equal
to two times the exercise price of the right.

                                       70
At any time after the acquisition by a person or group of affiliated or
associated persons (other than Welsh, Carson, Anderson & Stowe, for so long as
it and its affiliates and associates own 15% or more of our outstanding common
stock) of beneficial ownership of 15% or more of the then outstanding shares of
our common stock for whom a different ownership threshold applies, and before
the acquisition by a person or group (other than Welsh, Carson, Anderson &
Stowe, for so long as it and its affiliates and associates own 15% or more of
our outstanding common stock), of 50% or more of the outstanding shares of our
common stock, our board of directors may, at its option, issue shares of common
stock in mandatory redemption of, and in exchange for, all or part of the then
outstanding and exercisable rights, other than rights owned by an acquiring
person. The exchange would be made at an exchange ratio of one share of common
stock for each two shares of common stock for which each right is then
exercisable.

     The purchase price payable and the number of junior preferred shares or
other securities or property issuable upon exercise of the rights are subject to
adjustment from time to time if we at any time after the date of the rights
agreement:

          o  declare a dividend on the junior preferred shares payable in junior
             preferred shares;

          o  subdivide the outstanding junior preferred shares;

          o  combine the outstanding junior preferred shares into a smaller
             number of junior preferred shares; or

          o  issue any shares of our capital stock in a reclassification of the
             junior preferred shares, including any reclassification in
             connection with a consolidation or merger in which we are the
             continuing or surviving corporation.

     With several exceptions, no adjustment to the purchase price will be
required until cumulative adjustments require an adjustment of at least one
percent to the purchase price. Upon the exercise of a right, we will not be
required to issue fractional junior preferred shares or fractional shares of our
common stock, other than fractions in multiples of one one-thousandths of a
junior preferred share, and, in lieu thereof, an adjustment in cash may be made
based on the market price of the junior preferred shares or our common stock on
the last trading date prior to the date of exercise.

     At any time prior to the time any person becomes an acquiring person, our
board of directors may redeem all but not less than all the then outstanding
rights at a price of $0.00001 per right. The redemption of the rights may be
made effective at the time, on the basis and with the conditions as our board of
directors in its sole discretion may establish. Immediately upon the action of
our board of directors ordering redemption of the rights, the right to exercise
the rights will terminate and the only right of the holders of rights will be to
receive the $0.00001 redemption price.

     Until a right is exercised, the holder of the right will have no rights as
a stockholder of ours, including, without limitation, the right to vote or to
receive dividends. While the distribution of the rights will not be taxable to
stockholders or to us, stockholders may, depending upon the circumstances,
recognize taxable income in the event that any of the rights are exercised for
our common stock, or other consideration, or for common stock or other
securities of the acquiring company as set forth above.

     The terms of the rights may be amended by our board of directors without
the consent of the holders of the rights, including an amendment to extend the
expiration date of the rights, and, provided a distribution date has not
occurred, to extend the period during which the rights may be redeemed, except
that after any person becomes an acquiring person, no amendment may materially
and adversely affect the interests of the holders of the rights.

     The rights have several anti-takeover effects. The rights will cause
substantial dilution to any person or group that attempts to acquire us without
conditioning the offer on our redemption of the rights. The rights should not
interfere with any merger or other business combination approved by our board of
directors because the board of directors may, at its option, at any time prior
to the time any

                                       71
person becomes an acquiring person or ten years after the adoption of the rights
agreement, redeem all, but not less than all, of the then outstanding rights at
$.00001 per right.

LISTING

     We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol "SURG".

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for our common stock is
                           . The transfer agent may act upon the written
directions of any of our officers regarding the issuance of certificates for
shares of common stock.

                                       72
SHARES ELIGIBLE FOR FUTURE SALE

     Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of common stock in the public market
could adversely affect the market price of our common stock. After this offering
is completed, the number of shares available for future sale into the public
markets will be subject to legal and contractual restrictions, some of which are
described below. The lapsing of these restrictions will permit sales of
substantial amounts of our common stock in the public market or could create the
perception that these sales could occur, which could adversely affect the market
price for our common stock. These factors could also make it more difficult to
raise funds through future offerings of common stock.

     After this offering,              shares of common stock will be
outstanding, or              shares if the underwriters' exercise their
over-allotment option in full. Of these shares,

          o  the              shares sold in this offering, plus any shares
             issued upon exercise of the underwriters over-allotment option,
             will be freely tradable without restriction under the Securities
             Act, unless purchased by our "affiliates" as that term is defined
             in Rule 144 under the Securities Act; and

          o  the remaining              shares of common stock that will be
             outstanding after this offering are "restricted securities" within
             the meaning of Rule 144.

     Upon completion of this offering, we intend to file one or more
registration statements under the Securities Act to register the shares of
common stock to be issued under our equity-based compensation plan and our stock
purchase plan and, as a result, all shares of common stock acquired upon
exercise of stock options and other equity-based awards granted under these
plans will also be freely tradable under the Securities Act unless purchased by
our affiliates.

     Restricted securities generally may be sold only if they are registered
under the Securities Act or are sold under an exemption from registration,
including the exemptions provided by Rules 144 and 701 under the Securities Act,
which are summarized below. Subject to the lock-up agreements described in
"Underwriting," shares held by our affiliates that are not restricted securities
may be sold subject to compliance with Rule 144 of the Securities Act without
regard to the prescribed holding period under Rule 144.

     Our officers, directors and other stockholders who together own
shares of our common stock have agreed that they will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any shares of
our common stock or securities convertible into or exchangeable or exercisable
for any shares of our common stock, enter into a transaction that would have the
same effect, or enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of our common
stock, whether any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or publicly disclose the
intention to make any offer, sale, pledge or disposition, or to enter into any
transaction, swap, hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus.

     Following the lock-up period, the number of shares of common stock that
will become eligible for sale in the public market under Rule 144 under the
Securities Act will be as follows:

               o  Beginning 180 days after the date of this prospectus,
                  approximately           shares will be eligible for sale; and

               o  At various times thereafter upon the expiration of the
                  applicable holding periods, approximately           shares
                  will become eligible for sale.

     Some of our securityholders have the right to require us to register shares
of common stock for resale in some circumstances. See "Certain Relationships and
Related Transactions -- Registration Rights Agreement."

                                       73
In general, under Rule 144 as currently in effect, any person or persons
whose shares are aggregated, including an affiliate, who has beneficially owned
restricted securities for a period of at least one year is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of:

          o  1% of the then outstanding shares of common stock, which will equal
             approximately           shares immediately after this offering; or

          o  the average weekly trading volume in the common stock on the Nasdaq
             National Market during the four calendar weeks preceding the date
             on which the notice of the sale is filed with the Securities and
             Exchange Commission.

     Sales under Rule 144 are also subject to provisions relating to notice and
manner of sale and the availability of current public information about us.

     Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares for at least two years, including the holding
period of any prior owner other than an "affiliate," is entitled to sell the
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.

     Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 under the Securities Act may be relied upon for the
resale of our common stock originally issued by us before the date of this
prospectus to our employees, directors, officers, consultants or advisers under
written compensatory benefit plans, including our stock option plans, or
contracts relating to the compensation of these persons. Shares of our common
stock issued in reliance on Rule 701 are "restricted securities" and, beginning
90 days after the date of this prospectus, may be sold by non-affiliates subject
only to the manner of sale provisions of Rule 144 and by affiliates under Rule
144 without compliance with the one-year holding period, in each case subject to
the lock-up agreements described in "Underwriting."

                                       74
MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
                  TO NON-UNITED STATES HOLDERS OF COMMON STOCK

     The following is a general discussion of the material U.S. federal income
and estate tax considerations with respect to the ownership and disposition of
our common stock applicable to non-U.S. holders. In general, a "Non-U.S. Holder"
is any holder of our common stock other than:

     o  a citizen or individual resident of the United States,

     o  a corporation or other entity created or organized in the United States
        or under the laws of the United States or of any state or political
        subdivision of the United States,

     o  an estate, the income of which is includible in gross income for U.S.
        federal income tax purposes regardless of its source, or

     o  a trust whose administration is subject to the primary supervision of a
        United States court and which has one or more United States persons who
        have the authority to control all substantial decisions of the trust.

     This discussion is based on current provisions of the Internal Revenue
Code, Treasury Regulations promulgated under the Internal Revenue Code, judicial
opinions, published positions of the Internal Revenue Service, and all other
applicable authorities, all of which are subject to change, possibly with
retroactive effect. This discussion does not address all aspects of U.S. federal
income and estate taxation or any aspects of state, local, or non-U.S. taxation,
nor does it consider any specific facts or circumstances that may apply to
particular Non-U.S. Holders that may be subject to special treatment under the
U.S. federal income tax laws, such as insurance companies, tax-exempt
organizations, financial institutions, brokers, dealers in securities, and U.S.
expatriates.

     PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSIDERATIONS OF
ACQUIRING, HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.

DIVIDENDS

     In general, dividends paid to a Non-U.S. Holder will be subject to U.S.
withholding tax at a 30% rate of the gross amount, or a lower rate prescribed by
an applicable income tax treaty, unless the dividends are effectively connected
with a trade or business carried on by the Non-U.S. Holder within the United
States. Dividends that are effectively connected with such a U.S. trade or
business generally will not be subject to U.S. withholding tax if the Non-U.S.
Holder files the required forms, including IRS Form W-8ECI, or any successor
form, with the payor of the dividend, and generally will be subject to U.S.
federal income tax on a net income basis, in the same manner as if the Non-U.S.
Holder were a resident of the United States. A corporate Non-U.S. Holder that
receives effectively connected dividends may be subject to an additional branch
profits tax at a rate of 30%, or at a lower rate as may be specified by an
applicable income tax treaty, on the repatriation from the United States of its
"effectively connected earnings and profits," subject to adjustments.

     Under Treasury Regulations generally effective for payments made after
December 31, 2000, referred to in this prospectus as the "Final Regulations," a
Non-U.S. Holder will be required to satisfy certification requirements, directly
or through an intermediary, in order to claim a reduced rate of withholding
under an applicable income tax treaty. A Non-U.S. Holder generally certifies
entitlement to benefits under a treaty by providing an IRS Form W-8BEN. In
addition, under the Final Regulations, in the case of dividends paid to a
foreign partnership, the certification requirement would generally be applied to
the partners of the partnership, unless the partnership agrees to become a
"withholding foreign partnership," and the partnership would be required to
provide various information, including a United States taxpayer identification
number. The Final Regulations also provide "look-through" rules for tiered
partnerships.

                                       75
A Non-U.S. Holder of our common stock that is eligible for a reduced rate
of U.S. federal income tax withholding under a tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.

GAIN ON SALE OR OTHER DISPOSITION OF COMMON STOCK

     In general, a Non-U.S. Holder will not be subject to U.S. federal income
tax on any gain realized upon the sale or other taxable disposition of the
holders shares of common stock unless:

     o  the gain is effectively connected with a trade or business carried on by
        the Non-U.S. Holder within the United States, in which case the branch
        profits tax discussed above may also apply if the Non-U.S. Holder is a
        corporation,

     o  the Non-U.S. Holder is an individual who holds shares of common stock as
        a capital asset and is present in the United States for 183 days or more
        in the taxable year of disposition and various other conditions are met,

     o  the Non-U.S. Holder is subject to tax under the provisions of the
        Internal Revenue Code regarding the taxation of U.S. expatriates, or

     o  we are or have been a "U.S. real property holding corporation" within
        the meaning of Section 897(c)(2) of the Internal Revenue Code at any
        time within the shorter of the five-year period preceding such
        disposition or such holders holding period. We do not believe that we
        are, and do not anticipate becoming, a U.S. real property holding
        corporation.

BACKUP WITHHOLDING AND INFORMATION REPORTING

     Generally, we must report annually to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of tax withheld.
A similar report is sent to the recipient. These information reporting
requirements apply even if withholding was not required because the dividends
were effectively connected dividends or withholding was reduced by an applicable
income tax treaty. Under tax treaties or other agreements, the IRS may make its
reports available to tax authorities in the recipients country of residence.

     Payments made to a Non-U.S. Holder that is not an exempt recipient
generally will be subject to backup withholding at a rate of 31%, rather than
withholding at a 30% rate or lower treaty rate discussed above, unless a
Non-U.S. Holder certifies as to its foreign status, which certification may be
made on IRS Form W-8 BEN.

     Proceeds from the disposition of common stock by a Non-U.S. Holder effected
by or through a United States office of a broker will be subject to information
reporting and to backup withholding at a rate of 31% of the gross proceeds
unless the Non-U.S. Holder certifies to the payor under penalties of perjury as
to, among other things, its address and status as a Non-U.S. Holder or otherwise
establishes an exemption. Generally, United States information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
transaction is effected outside the United States by or through a non-United
States office of a broker. However, if the broker is, for United States federal
income tax purposes, a United States person, a controlled foreign corporation, a
foreign person who derives 50% or more of its gross income for specified periods
from the conduct of a United States trade or business, specified U.S. branches
of foreign banks or insurance companies, or, a foreign partnership with various
connections to the United States, information reporting but not backup
withholding will apply unless:

     o  the broker has documentary evidence in its files that the holder is a
        Non-U.S. Holder and other conditions are met; or

     o  the holder otherwise establishes an exemption.

     Backup withholding is not an additional tax. Rather, the U.S. federal
income tax liability of persons subject to backup withholding will be reduced by
the amount of tax withheld. If backup

                                       76
withholding results in an overpayment of United States federal income taxes, a
refund may be obtained, provided the required documents are filed with the IRS.

ESTATE TAX

     Our common stock owned or treated as owned by an individual who is not a
citizen or resident, as defined for U.S. federal estate tax purposes, of the
United States at the time of death will be includible in the individuals gross
estate for U.S. federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise.

                                       77
UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated            , 2001, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, UBS Warburg LLC,
Lehman Brothers Inc. and SG Cowen Securities Corporation are acting as
representatives, the following respective numbers of shares of common stock:
NUMBER OF
                UNDERWRITER                                   SHARES
                -----------                                 ----------
Credit Suisse First Boston Corporation....................
UBS Warburg LLC...........................................
Lehman Brothers Inc. .....................................
SG Cowen Securities Corporation...........................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                      ....................
                                                             -------
     Total................................................
                                                             =======
The underwriting agreement provides that the underwriters are obligated to
purchase all of the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering may be terminated.

     We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to        additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.

     The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a selling concession of $     per share. The
underwriters and selling group members may allow a discount of $     per share
on sales to other broker/dealers. After the initial public offering, the
representatives may change the public offering price and concession and discount
to brokers/dealers.

     The following table summarizes the compensation and estimated expenses we
will pay.
PER SHARE                                 TOTAL
                                         ------------------------------------    ------------------------------------
                                             WITHOUT               WITH              WITHOUT               WITH
                                          OVER-ALLOTMENT      OVER-ALLOTMENT      OVER-ALLOTMENT      OVER-ALLOTMENT
                                         ----------------    ----------------    ----------------    ----------------
Underwriting Discounts and
  Commissions paid by us.............        $                   $                   $                   $
Expenses payable by us...............        $                   $                   $                   $
78
The representatives have informed us that the underwriters do not expect
discretionary sales to exceed 5% of the shares of common stock being offered.

     We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
the filing of a registration statement on Form S-8 under the Securities Act,
grants of options to purchase shares of common stock under the plans disclosed
in this prospectus and existing on the date of this prospectus or issuances of
shares of common stock pursuant to the exercise of employee stock options
outstanding on the date of this prospectus.

     Our officers, directors and other stockholders who together own
shares of our common stock have agreed that they will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, any shares of
our common stock or securities convertible into or exchangeable or exercisable
for any shares of our common stock, enter into a transaction that would have the
same effect, or enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of our common
stock, whether any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or publicly disclose the
intention to make any offer, sale, pledge or disposition, or to enter into any
transaction, swap, hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus.

     The underwriters have reserved for sale, at the initial public offering
price up to       shares of the common stock for employees, directors and other
persons associated with us who have expressed an interest in purchasing common
stock in the offering. The number of shares available for sale to the general
public in the offering will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares not so purchased will be offered by the
underwriters to the general public on the same terms as the other shares.

     We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make in that respect.

     We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "SURG".

     We are in discussions with affiliates of Credit Suisse First Boston
Corporation, UBS Warburg LLC, Lehman Brothers Inc. and SG Cowen Securities
Corporation to provide us with a $75.0 million revolving credit facility to
replace our existing domestic credit facilities upon consummation of this
offering. If we enter into that credit facility, we will pay them customary
fees.

     Prior to this offering, there has been no established market for our common
stock. The initial public offering price for the shares of our common stock
offered by this prospectus will be determined by negotiation between us and the
representatives and may not reflect the market price for our common stock that
may prevail following this offering. The principal factors in determining the
initial public offering price will include:

     o  the information presented in this prospectus and otherwise available to
        the underwriters;

     o  the history of and the prospects for our industry;

     o  the ability of our management;

     o  our past and present operations;

     o  our historical results of operations;

     o  our prospects for future operational results;

                                       79
o  the recent market prices of, and the demand for, publicly traded common
        stock of generally comparable companies; and

     o  the general condition of the securities markets at the time of this
        offering.

     We cannot be sure that the initial public offering price will correspond to
the price at which the common stock will trade in the public market following
this offering or that an active trading market for the common stock will develop
and continue after this offering.

     In connection with the offering the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.

     o  Stabilizing transactions permit bids to purchase the underlying security
        so long as the stabilizing bids do not exceed a specified maximum.

     o  Over-allotment involves sales by the underwriters of shares in excess of
        the number of shares the underwriters are obligated to purchase, which
        creates a syndicate short position. The short position may be either a
        covered short position or a naked short position. In a covered short
        position, the number of shares over-allotted by the underwriters is not
        greater than the number of shares that they may purchase in the
        over-allotment option. In a naked short position, the number of shares
        involved is greater than the number of shares in the over-allotment
        option. The underwriters may close out any short position by either
        exercising their over-allotment option, purchasing shares in the open
        market, or both.

     o  Syndicate covering transactions involve purchases of the common stock in
        the open market after the distribution has been completed in order to
        cover syndicate short positions. In determining the source of shares to
        close out the short position, the underwriters will consider, among
        other things, the price of shares available for purchase in the open
        market as compared to the price at which they may purchase shares
        through the over-allotment option. If the underwriters sell more shares
        than could be covered by the over-allotment option--a naked short
        position--the position can only be closed out by buying shares in the
        open market. A naked short position is more likely to be created if the
        underwriters are concerned that there could be downward pressure on the
        price of the shares in the open market after pricing that could
        adversely affect investors who purchase in the offering.

     o  Penalty bids permit the representatives to reclaim a selling concession
        from a syndicate member when the common stock originally sold by the
        syndicate member is purchased in a stabilizing or syndicate covering
        transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may have the effect of raising or maintaining the market price of our common
stock or preventing or retarding a decline in the market price of the common
stock. As a result, the price of our common stock may be higher than the price
that might otherwise exist in the open market. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.

     A prospectus in electronic format will be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet distributions on the same
basis as other allocations. Credit Suisse First Boston Corporation may effect an
on-line distribution through its affiliate, CSFBDIRECT Inc., an online
broker/dealer, as a selling group member.

                                       80
NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

     The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are made. Any resale of the common stock in Canada must
be made under applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made under available
statutory exemptions or under a discretionary exemption granted by the
applicable Canadian securities regulatory authority. Purchasers are advised to
seek legal advice prior to any resale of the common stock.

REPRESENTATIONS OF PURCHASERS

     By purchasing common stock in Canada and accepting a purchase confirmation
a purchaser is representing to us and the dealer from whom the purchase
confirmation is received that:

     o  the purchaser is entitled under applicable provincial securities laws to
        purchase the common stock without the benefit of a prospectus qualified
        under those securities laws;

     o  where required by law, that the purchaser is purchasing as principal and
        not as agent; and

     o  the purchaser has reviewed the text above under Resale Restrictions.

RIGHTS OF ACTION (ONTARIO PURCHASERS)

     The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

     All of the issuers directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

     A purchaser of common stock to whom the SECURITIES ACT (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser pursuant to this offering. The report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed for common stock acquired on the same date and under the same
prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

     Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian legislation.

                                       81
LEGAL MATTERS

     The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Vinson & Elkins L.L.P., Dallas, Texas. Akin, Gump,
Strauss, Hauer & Feld, L.L.P., has acted as counsel for the underwriters with
regard to certain legal matters in connection with the offering.

                                    EXPERTS

     The consolidated financial statements and schedule of United Surgical
Partners International, Inc. as of December 31, 1999 and 1998, and for the year
ended December 31, 1999 and the period from February 27, 1998 (inception)
through December 31, 1998, have been included herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.

     Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of OrthoLink Physicians Corporation at December 31, 1999
and 1998 and for each of the three years in the period ended December 31, 1999
as set forth in their report. The OrthoLink Physicians Corporation consolidated
financial statements are included in this prospectus and elsewhere in this
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

     The consolidated financial statements of Aspen Healthcare Holdings Limited
as of December 31, 1999 and 1998, and for each of the years in the two-year
period ended December 31, 1999 have been included herein and in the registration
statement in reliance upon the report of Arthur Andersen, independent certified
public accountants, appearing elsewhere in this prospectus, and upon the
authority of said firm as experts in accounting and auditing.

                      WHERE YOU CAN FIND MORE INFORMATION

     We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission for the common stock we are offering by this prospectus.
This prospectus is a part of that registration statement. As allowed by SEC
rules, this prospectus does not include all of the information contained in the
registration statement or the exhibits to the registration statement. You should
refer to the registration statement and its exhibits for additional information.

     When we complete this offering, we will be required to file annual,
quarterly and special reports, proxy statements and other information with the
SEC. You can obtain our SEC filings, including the registration statement, over
the Internet at the SEC's website at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, Suite
1300, New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. You may also obtain copies of these
documents at prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0300 for further information on the operation of the public reference
facilities.

                                       82
SUMMARY PRO FORMA FINANCIAL STATEMENTS

The unaudited pro forma combined condensed statements of operations data
presents:

     o  our consolidated statement of operations for the year ended December 31,
        1999, combined with the consolidated statement of operations of
        OrthoLink and of Aspen for the year ended December 31, 1999; and

     o  our consolidated statement of operations for the nine months ended
        September 30, 2000, combined with the consolidated statement of
        operations of OrthoLink for the nine months ended September 30, 2000 and
        of Aspen for the three months ended March 31, 2000 prior to its
        acquisition by us on April 1, 2000;

in each case giving effect to our acquisitions of OrthoLink and Aspen as if each
had occurred on January 1, 1999. The acquisitions of Aspen and OrthoLink were
accounted for using the purchase method of accounting.

     Pro forma financial information gives effect to the consummation of the
offering and the application of the net proceeds, as described in "Use of
Proceeds," and the conversion of all of our Series C convertible preferred stock
and of our convertible subordinated note with Baylor Health Care System
Foundation into shares of our common stock as if each of these events had been
completed at the beginning of the period presented.

     The unaudited pro forma combined condensed balance sheet data gives effect
to the acquisition of OrthoLink and the consummation of the offering and the
application of the net proceeds, as described in "Use of Proceeds," and the
conversion of our convertible subordinated note to Baylor Health Care System
Foundation and Series C convertible preferred stock into common stock as if each
had occurred on September 30, 2000.

     The unaudited pro forma combined condensed information is presented for
illustrative purposes. Net losses from discontinued operations of $2.1 million
recognized by OrthoLink in the year ended December 31, 1999 in connection with
the discontinued operations of a subsidiary are not reflected in the unaudited
pro forma combined condensed statements of operations for any period presented.
The pro forma adjustments are preliminary and based on management's estimates of
the value of the tangible and intangible assets acquired. The actual adjustments
may differ materially from those presented in these unaudited pro forma combined
condensed financial statements.

     The unaudited pro forma combined condensed information does not purport to
represent what our results actually would have been if the acquisitions and
other events had occurred at the dates indicated nor does such information
purport to project our results for any future period.

                                      P-1
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASPEN
                                         USPI      ORTHOLINK    HISTORICAL    PRO FORMA       PRO FORMA   PRO FORMA
                                      HISTORICAL   HISTORICAL      (A)       ADJUSTMENTS      COMBINED    OFFERING     PRO FORMA
                                      ----------   ----------   ----------   -----------      ---------   ---------   -----------
Revenues............................   $70,413      $114,566     $37,641      $(70,841)(b)    $152,599                 $152,599
                                                                                   820 (c)
Operating expenses, excluding
  depreciation and amortization.....    65,634       104,245      27,921       (67,618)(b)     131,002                  131,002
                                                                                   820 (c)
Depreciation and amortization.......     7,875         3,149       2,840         1,037 (d)      14,901                   14,901
                                       -------      --------     -------      --------        --------     -------     --------
Operating income (loss).............    (3,097)        7,172       6,880        (4,260)          6,695                    6,695
Minority interests in income of
  consolidated entities.............      (118)       --           --                             (118)                    (118)
Interest expense, net...............    (2,816)       (2,798)     (3,601)       (4,296)(e)     (13,511)      4,118 (g)    (9,393)
Other expense.......................      (362)       --           --                             (362)                    (362)
                                       -------      --------     -------      --------        --------     -------     --------
Income (loss) from operations before
  income taxes......................    (6,393)        4,374       3,279        (8,556)         (7,296)      4,118       (3,178)
Income tax expense (benefit)........       451         1,906       1,774        (1,644)(f)       2,487                    2,487
                                       -------      --------     -------      --------        --------     -------     --------
Income (loss) from operations.......    (6,844)        2,468       1,505        (6,912)         (9,783)      4,118       (5,665)
Preferred stock dividends...........    (1,696)       --           --                           (1,696)      1,696 (i)    --
                                       -------      --------     -------      --------        --------     -------     --------
Net income (loss) attributable to
  common stockholders...............   $(8,540)     $  2,468     $ 1,505      $ (6,912)       $(11,479)    $ 5,814     $ (5,665)
                                       =======      ========     =======      ========        ========     =======     ========
Earnings (loss) per common share....   $ (0.39)                                               $  (0.36)
Weighted average shares used in
  earnings per common share
  computations (in thousands).......    21,924                                                  31,885 (h)
See accompanying notes to the
        Unaudited Pro Forma Combined Condensed Statements of Operations.

                                      P-2
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
         UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASPEN
                                                                   THREE
                                                                  MONTHS
                                                                   ENDED
                                          USPI      ORTHOLINK    MARCH 31,    PRO FORMA       PRO FORMA   PRO FORMA
                                       HISTORICAL   HISTORICAL     2000      ADJUSTMENTS      COMBINED    OFFERING     PRO FORMA
                                       ----------   ----------   ---------   -----------      ---------   ---------   -----------
Revenues.............................   $98,770      $ 89,259     $ 9,999     $(64,025)(b)    $135,117                 $135,117
                                                                                 1,114 (c)
Operating expenses, excluding
  depreciation and amortization......    82,392        77,518       6,900      (61,466)(b)     106,458                  106,458
                                                                                 1,114 (c)
Depreciation and amortization........     9,295         4,128         731          237 (d)      14,391                   14,391
                                        -------      --------     -------     --------        --------     -------     --------
Operating income (loss)..............     7,083         7,613       2,368       (2,796)         14,268                   14,268
Minority interests in (income) loss
  of consolidated entities...........    (1,232)            9       --                          (1,223)                  (1,223)
Interest expense, net................    (7,770)       (3,521)       (938)      (1,074)(e)     (13,303)      4,642 (g)    (8,661)
Other expense........................       (50)       --           --                             (50)                     (50)
                                        -------      --------     -------     --------        --------     -------     --------
Income (loss) from operations before
  income taxes.......................    (1,969)        4,101       1,430       (3,870)           (308)      4,642        4,334
Income tax expense (benefit).........     1,059         1,915         524       (1,915)(f)       1,583       1,491        3,074
                                        -------      --------     -------     --------        --------     -------     --------
Income (loss) from operations........    (3,028)        2,186         906       (1,955)         (1,891)      3,151        1,260
Preferred stock dividends............    (5,018)       --           --                          (5,018)      5,018 (j)    --
                                        -------      --------     -------     --------        --------     -------     --------
Net income (loss) attributable to
  common stockholders................   $(8,046)     $  2,186     $   906     $ (1,955)       $ (6,909)    $ 8,169     $  1,260
                                        =======      ========     =======     ========        ========     =======     ========
Earnings (loss) per common share from
  operations.........................   $((0.35)                                              $  (0.21)
Weighted average shares used in
  earnings per common and common
  equivalent share computations (in
  thousands).........................    23,109                                                 33,071 (h)
See accompanying notes to the
        Unaudited Pro Forma Combined Condensed Statements of Operation.

                                      P-3
NOTES TO UNAUDITED COMBINED CONDENSED PRO FORMA STATEMENTS OF OPERATIONS
(DOLLARS AND POUNDS IN THOUSANDS)

  (a) Represents historical Aspen Healthcare Holdings Limited results of
      operations for the year ended December 31, 1999 after the following:

     o  conversion from U.K. GAAP to U.S. GAAP; and

     o  conversion from U.K. pounds to U.S. dollars using the average exchange
        rate for the year.

     The following table reconciles Aspen net income in accordance with U.K.
GAAP to U.S. GAAP:

Net income in accordance with U.K.
GAAP.................................              Pounds  1,050
U.S. GAAP adjustments:
     Deferred income tax.............                       (60)
     Pension expense.................                      (106)
     Capitalization of interest
       expense.......................                        22
     Tax effect of above
       adjustments...................                        26
                                                        -------
Net income in accordance with U.S.
GAAP.................................                Pounds 932
Foreign currency exchange rate.......                    1.6146
                                                        -------
Net income in accordance with U.S.
GAAP.................................                   $ 1,505
                                                        -------

  (b) Adjustments to reflect the restructuring of OrthoLink's service agreements
      with physician practices whereby (i) the service fee is reduced as a
      percentage of practice earnings, (ii) the remaining term of the agreements
      are reduced to 15 years, (iii) the physicians' professional corporations
      hire all direct employees and assume certain leases and operating
      contracts, and (iv) the physicians' professional corporations assume all
      clinical facility expenses of the practices.

  (c) Adjustment to reclassify OrthoLink's equity in earnings of unconsolidated
      entities to revenues as the operations are central to our business
      strategy.

  (d) Adjust amortization expense for the following:
NINE MONTHS
                                             YEAR ENDED               ENDED
                                         DECEMBER 31, 1999     SEPTEMBER 30, 2000
                                         ------------------    -------------------
Record amortization, using a 25 year
  period, related to the excess of
  purchase price over fair value of
  net assets acquired:
     OrthoLink.......................         $ 1,541                $ 1,156
     Aspen...........................           2,083                    521
Eliminate historical amortization
  expense:
     OrthoLink.......................          (1,431)                (1,152)
     Aspen...........................          (1,156)                  (288)
                                              -------                -------
                                              $ 1,037                $   237
                                              =======                =======
(e) Adjust interest expense for the incremental borrowings related to the
      Aspen acquisition.

  (f) Eliminate U.S. federal tax on portion of OrthoLink income offset by USPI
      losses.

  (g) Adjust interest expense for the following:
FOR THE             FOR THE NINE
                                             YEAR ENDED           MONTHS ENDED
                                         DECEMBER 31, 1999     SEPTEMBER 30, 2000
                                         ------------------    -------------------
Reflect reduction of interest expense
  in connection with the repayment of
  bank debt with proceeds from the
  offering...........................         $(4,020)               $(4,516)
Eliminate interest expense on
  convertible subordinated note to
  Baylor Health Care System
  Foundation due to conversion into
  common stock in connection with the
  offering...........................             (98)                  (126)
                                              -------                -------
     Net reduction in interest
     expense.........................         $(4,118)               $(4,642)
                                              =======                =======
(h) Includes impact of 9,961,737 shares of USPI common stock used as
      consideration for the acquisition of OrthoLink.

  (i) Eliminates dividends on Series A redeemable preferred stock.

  (j) Eliminates dividends on Series A redeemable and Series C convertible
      preferred stock.

                                      P-4
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
             UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
                               SEPTEMBER 30, 2000
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
USPI       ORTHOLINK      PRO FORMA     PRO FORMA    PRO FORMA
                                         HISTORICAL    HISTORICAL    ADJUSTMENTS    COMBINED     OFFERING        PRO FORMA
                                         ----------    ----------    -----------    ---------    ---------      -----------
ASSETS:
Current assets:
Cash and cash equivalents............     $  6,422      $  5,342       $(1,000)(a)  $ 10,764                     $ 10,764
Accounts receivable, net.............       19,966        42,470                      62,436                       62,436
Inventories..........................        4,096        --                           4,096                        4,096
Other................................        7,525         5,203                      12,728                       12,728
                                          --------      --------       -------      --------                     --------
    Total current assets.............       38,008        53,015        (1,000)       90,023                       90,023
Property and equipment, net..........       95,650        27,178                     122,828                      122,828
Investments in affiliates............        7,278         5,144                      12,422                       12,422
Intangible assets, net...............      139,724        29,664         4,198 (a)   173,586                      173,586
Other................................       12,095         3,276                      15,371                       15,371
                                          --------      --------       -------      --------                     --------
    Total assets.....................     $292,755      $118,277       $ 3,198      $414,230                     $414,230
                                          ========      ========                    ========                     ========
LIABILITIES AND COMMON STOCKHOLDERS'
  EQUITY:
Current liabilities:
Accounts payable.....................     $ 13,138      $  7,126                    $ 20,264                     $ 20,264
Accrued expenses.....................       13,977        13,397                      27,374     $   (674)(b)      26,700
Short-term debt......................        2,178                                     2,178                        2,178
Current portion of long-term debt....        5,514         2,300                       7,814                        7,814
                                          --------      --------                    --------     --------        --------
    Total current liabilities........       34,807        22,823                      57,630         (674)         56,956
Long-term debt.......................      157,346        49,213                     206,559      (77,251)(b)     126,021
                                                                                                   (3,287)(c)
Other liabilities....................        7,291           569                       7,860                        7,860
Minority interests...................       12,500           725                      13,225                       13,225
Redeemable preferred stock...........       32,175        --                          32,175      (32,175)(b)      --
Convertible preferred stock..........       19,421        --                          19,421      (19,421)(c)      --
Common stockholders' equity..........       29,216        44,947         3,198 (a)    77,361      110,100 (b)     210,169
                                                                                                   22,708 (c)
                                          --------      --------       -------      --------                     --------
    Total liabilities and
      stockholders' equity...........     $292,755      $118,277       $ 3,198      $414,230                     $414,230
                                          ========      ========                    ========                     ========
------------

NOTES TO UNAUDITED COMBINED CONDENSED PRO FORMA BALANCE SHEET
 (DOLLARS IN THOUSANDS)

(a) Adjustment to record the excess of the OrthoLink purchase price over fair
    value of net assets acquired:

Aggregate purchase price.                $49,488
Net assets of OrthoLink at
September 30, 2000...................     45,290
                                         -------
Excess of purchase price over fair
value of net assets acquired.........    $ 4,198
                                         =======

(b) Reflects our sale of       shares of common stock generating $120,000 in
    gross proceeds and the use of the estimated proceeds of $110,100 net of the
    estimated underwriting discount and the offering expenses totaling $9,900,
    to:

  o  redeem in full all outstanding shares of our Series A redeemable preferred
     stock, including the payment of all accrued dividends; and

  o  pay a portion of our senior bank indebtedness including all outstanding
     balances and the accrued interest under our Chase and Bank of America
     credit facilities.

(c) Reflects conversion of our convertible subordinated note to Baylor Health
    Care System Foundation and Series C convertible preferred stock into common
    stock.

                                      P-5
INDEX TO FINANCIAL STATEMENTS

                                         PAGE
                                         ----
UNITED SURGICAL PARTNERS
INTERNATIONAL, INC.
Independent Auditors' Report of KPMG
  LLP................................    F-2
Consolidated Balance Sheets as of
  September 30, 2000 (unaudited),
  December 31, 1999 and 1998.........    F-3
Consolidated Statements of Operations
  for the nine months ended
  September 30, 2000 (unaudited) and
  September 30, 1999 (unaudited), the
  year ended December  31, 1999 and
  the period from February 27, 1998
  (inception) through December 31,
  1998...............................    F-5
Consolidated Statements of
  Comprehensive Loss for the nine
  months ended September 30, 2000
  (unaudited) and September 30, 1999
  (unaudited), the year ended
  December 31, 1999 and the period
  from February 27, 1998 (inception)
  through December 31, 1998..........    F-6
Consolidated Statements of
  Stockholders' Equity for the nine
  months ended September 30, 2000
  (unaudited), the year ended
  December 31, 1999 and the period
  from February 27, 1998 (inception)
  through December  31, 1998.........    F-7
Consolidated Statements of Cash Flows
  for the nine months ended
  September 30, 2000 (unaudited) and
  September 30, 1999 (unaudited), the
  year ended December 31, 1999 and
  the period from February 27, 1998
  (inception) through December 31,
  1998...............................    F-8
Notes to Consolidated Financial
  Statements.........................    F-10
ORTHOLINK PHYSICIANS CORPORATION
Report of Independent Auditors, Ernst
  & Young LLP........................    F-29
Consolidated Balance Sheets as of
  September 30, 2000 (unaudited) and
  December 31, 1999 and 1998.........    F-30
Consolidated Statements of Income for
  the nine months ended September 30,
  2000 (unaudited) and September 30,
  1999 (unaudited) and the three
  years ended December 31, 1999......    F-32
Consolidated Statements of Changes in
  Stockholders' Equity for the nine
  months ended September 30, 2000
  (unaudited) and the three years
  ended December 31, 1999............    F-33
Consolidated Statements of Cash Flows
  for the nine months ended September
  30, 2000 (unaudited) and September
  30, 1999 (unaudited) and the three
  years ended December 31, 1999......    F-34
Notes to Consolidated Financial
  Statements.........................    F-36
ASPEN HEALTHCARE HOLDINGS LIMITED
Report of Independent Public
Accountants, Arthur Andersen.........    F-45
Consolidated Profit and Loss Account
  for the year ended December 31,
  1999 and the ten-month period ended
  December 31, 1998..................    F-46
Consolidated Balance Sheets as of
  December 31, 1999 and 1998.........    F-47
Consolidated Cash Flow Statement for
  the year ended December 31, 1998
  and the ten-month period ended
  December 31, 1998..................    F-48
Reconciliation of Net Cash Flow to
Movement in Net Debt.................    F-48
Statement of Accounting Policies.....    F-49
Notes to Consolidated Financial
  Statements.........................    F-51

                                      F-1
INDEPENDENT AUDITORS' REPORT

The Board of Directors
United Surgical Partners International, Inc.:

     We have audited the accompanying consolidated balance sheets of United
Surgical Partners International, Inc. and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of operations, comprehensive
loss, stockholders' equity and cash flows for the year ended December 31, 1999
and the period from February 27, 1998 (inception) through December 31, 1998.
These consolidated financial statements are the responsibility of Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of United
Surgical Partners International, Inc. and subsidiaries as of December 31, 1999
and 1998, and the results of their operations and their cash flows for the year
ended December 31, 1999 and the period from February 27, 1998 (inception)
through December 31, 1998, in conformity with accounting principles generally
accepted in the United States of America.

                                               KPMG LLP

Dallas, Texas
April 21, 2000

                                      F-2
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
DECEMBER 31,
                                         SEPTEMBER 30,    ----------------------------
                                             2000             1999            1998
                                         -------------    ------------    ------------
(UNAUDITED)
               ASSETS
Cash and cash equivalents.               $   6,422,329    $  3,716,334    $  4,964,751
Restricted cash (note 14)............       1,721,045       13,100,000      13,100,000
Patient receivables, net of allowance
  for doubtful accounts of $3,521,313
  at September 30, 2000 (unaudited),
  $2,741,549 at December 31, 1999 and
  $1,430,824 at December 31, 1998....      19,965,638       11,801,006       8,502,544
Other receivables....................       3,020,742        3,331,448       1,343,365
Inventories of supplies..............       4,095,851        2,620,768       1,464,461
Prepaids and other current assets....       2,782,885        3,312,494       4,205,245
                                         ------------     ------------    ------------
          Total current assets.......      38,008,490       37,882,050      33,580,366
                                         ------------     ------------    ------------
Property and equipment, net (note
  4).................................      95,649,851       59,418,082      40,581,311
Investments in affiliates (note 2)...       7,278,166        7,880,526       3,155,826
Intangible assets, net (note 3)......     139,723,697       69,876,974      45,823,407
Other assets.........................      12,095,184        1,645,601       1,651,492
                                         ------------     ------------    ------------
          Total assets...............    $292,755,388     $176,703,233    $124,792,402
                                         ============     ============    ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.                        $  13,137,600    $  9,822,443    $  7,068,460
Accrued salaries and benefits........       3,396,628        1,577,483         842,784
Current portion of long-term debt
  (note 5)...........................       5,514,462        9,390,882       4,437,107
Other accrued expenses...............      12,473,382        6,362,248       2,695,444
Deferred tax liability, net..........         285,000          268,000          47,000
                                         ------------     ------------    ------------
          Total current
             liabilities.............      34,807,072       27,421,056      15,090,795
                                         ------------     ------------    ------------
Long-term debt, less current portion
  (note 5)...........................     157,345,802       63,292,902       7,238,389
Other long-term liabilities..........       2,962,228        3,142,449       3,576,970
Deferred tax liability, net..........       4,328,606        3,317,000       3,439,888
                                         ------------     ------------    ------------
          Total liabilities..........     199,443,708       97,173,407      29,346,042
Minority interests (note 2)..........      12,499,991        6,918,882       8,999,050
Redeemable preferred stock (note 7):
     Series A, $0.01 par value per
       share; 31,200 shares
       authorized, issued and
       outstanding...................      32,175,000       33,131,470      31,571,465
     Series B, $0.01 par value per
       share; 0 shares issued and
       outstanding at September 30,
       2000 and 2,716 shares
       authorized, issued and
       outstanding at December 31,
       1999 and December 31, 1998....         --             2,908,383       2,772,585
Commitments and contingencies (note
  14)................................
(CONTINUED)

            See accompanying notes to consolidated financial statements.

                                      F-3
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
DECEMBER 31,
                                         SEPTEMBER 30,    ----------------------------
                                             2000             1999            1998
                                         -------------    ------------    ------------
(UNAUDITED)

LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity (notes 8 and
15):
     Series C preferred stock, $0.01
       par value; 20,000 shares
       authorized; 18,750 shares
       issued and outstanding at
       September 30, 2000
       (unaudited), and -0- shares
       issued and outstanding at
       December 31, 1999 and December
       31, 1998......................    $ 19,420,594          --              --
     Common stock:
       Class A shares, $0.01 par
          value; 30,000,000 shares
          authorized; 23,519,534
          shares issued at September
          30, 2000 (unaudited),
          22,007,857 shares issued at
          December 31, 1999 and
          21,938,929 at December 31,
          1998.......................         235,196          220,078         219,389
       Other, $0.01 par value;
          40,000,000 shares
          authorized; 510,140 shares
          issued and outstanding at
          September 30, 2000
          (unaudited), 73,570 shares
          issued and outstanding at
          December 31, 1999, and -0-
          shares at December 31,
          1998.......................           5,101              736         --
     Additional paid-in capital......      60,421,587       55,836,719      56,966,454
     Treasury stock, at cost, 162,500
       shares at September 30, 2000
       (unaudited), 162,500 shares at
       December 31, 1999 and -0-
       shares at December 31, 1998...        (343,750)        (343,750)        --
     Receivables from sales of common
       stock.........................      (2,179,434)      (1,103,887)     (1,050,000)
     Accumulated other comprehensive
       loss,
       net of tax....................     (15,122,731)      (7,266,717)       (104,285)
     Accumulated deficit.............     (13,799,874)     (10,772,088)     (3,928,298)
                                         ------------     ------------    ------------
               Total stockholders'
                  equity.............      48,636,689       36,571,091      52,103,260
                                         ------------     ------------    ------------
               Total liabilities and
                  stockholders'
                  equity.............    $292,755,388     $176,703,233    $124,792,402
                                         ============     ============    ============
See accompanying notes to consolidated financial statements.

                                      F-4
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD FROM
                                                                                        FEBRUARY 27, 1998
                                         NINE MONTHS     NINE MONTHS                       (INCEPTION)
                                            ENDED           ENDED        YEAR ENDED          THROUGH
                                        SEPTEMBER 30,   SEPTEMBER 30,   DECEMBER 31,      DECEMBER 31,
                                            2000            1999            1999              1998
                                        -------------   -------------   -------------   -----------------
(UNAUDITED)     (UNAUDITED)
Net patient service revenue..........    $94,759,373     $43,364,992     $63,769,768       $19,116,092
Management and administrative
  services revenue...................      1,552,116       3,848,862       5,111,496           223,011
Equity in earnings (loss) of
  unconsolidated affiliates..........        486,667        (283,675)       (236,874)          (39,822)
Other income.........................      1,972,276       1,303,080       1,768,194         1,272,790
                                         -----------     -----------     -----------       -----------
          Total revenues.............     98,770,432      48,233,259      70,412,584        20,572,071
                                         -----------     -----------     -----------       -----------
Salaries, benefits and other employee
  costs..............................     31,256,191      15,123,472      21,643,193        10,020,124
Supplies.............................     18,294,861       9,398,294      14,024,396         3,675,890
Medical services.....................      5,263,107       6,632,513       8,843,351         3,929,676
Other operating expenses.............     17,829,980       6,173,148       9,450,385         2,893,838
General and administrative...........      8,170,538       7,555,208      10,441,552         2,032,413
Provision for doubtful accounts......      1,577,631         704,606       1,231,396           235,725
Depreciation and amortization........      9,294,691       5,531,742       7,875,448         2,015,123
                                         -----------     -----------     -----------       -----------
          Total operating expenses...     91,686,999      51,118,983      73,509,721        24,802,789
                                         -----------     -----------     -----------       -----------
          Operating income (loss)....      7,083,433      (2,885,724)     (3,097,137)       (4,230,718)
Minority interest in (income) loss of
  consolidated subsidiaries..........     (1,232,493)       (137,325)       (118,453)           23,030
Interest income......................        496,434         252,483         328,769           721,530
Interest expense.....................     (8,266,756)     (1,772,424)     (3,144,479)         (496,874)
Other................................        (49,686)       (123,473)       (361,953)         (246,378)
                                         -----------     -----------     -----------       -----------
          Total other income
             (expense)...............     (9,052,501)     (1,780,739)     (3,296,116)            1,308
                                         -----------     -----------     -----------       -----------
          Loss before income taxes...     (1,969,068)     (4,666,463)     (6,393,253)       (4,229,410)
Income tax (expense) benefit (Note
  10)................................     (1,058,718)       (298,661)       (450,537)          301,112
                                         -----------     -----------     -----------       -----------
          Net loss...................     (3,027,786)     (4,965,124)     (6,843,790)       (3,928,298)
Preferred stock dividends............     (5,018,265)     (1,271,850)     (1,695,803)         (428,050)
                                         -----------     -----------     -----------       -----------
          Net loss attributable to
             common stockholders.....    $(8,046,051)    $(6,236,974)    $(8,539,593)      $(4,356,348)
                                         ===========     ===========     ===========       ===========
Net loss per common share (note
  12)................................    $     (0.35)    $     (0.28)    $     (0.39)      $     (0.43)
Weighted average number of common
  shares
     Basic...........................     23,109,221      21,942,152      21,923,645        10,099,281
     Diluted.........................     23,109,221      21,942,152      21,923,645        10,099,281
See accompanying notes to consolidated financial statements.

                                      F-5
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
PERIOD FROM
                                                                                           FEBRUARY 27,
                                                                                               1998
                                          NINE MONTHS      NINE MONTHS                     (INCEPTION)
                                             ENDED            ENDED         YEAR ENDED       THROUGH
                                         SEPTEMBER 30,    SEPTEMBER 30,    DECEMBER 31,    DECEMBER 31,
                                             2000             1999             1999            1998
                                         -------------    -------------    ------------    ------------
(UNAUDITED)      (UNAUDITED)

Net loss.............................    $ (3,027,786)     $(4,965,124)    $ (6,843,790)   $(3,928,298)
                                         ------------      -----------     ------------    -----------

Other comprehensive loss, before
  taxes:

     Foreign currency translation
       adjustments...................     (12,086,175)      (6,791,723)     (11,019,126)      (160,438)

Income tax benefit related to other
  comprehensive loss.................       4,230,161        2,377,103        3,856,694         56,153
                                         ------------      -----------     ------------    -----------

     Other comprehensive loss........      (7,856,014)      (4,414,620)      (7,162,432)      (104,285)
                                         ------------      -----------     ------------    -----------

     Comprehensive loss..............    $(10,883,800)     $(9,379,744)    $(14,006,222)   $(4,032,583)
                                         ============      ===========     ============    ===========
See accompanying notes to consolidated financial statements.

                                      F-6
UNITED SURGICAL PARTNERS INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
    FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED), THE YEAR ENDED
                             DECEMBER 31, 1999 AND
    THE PERIOD FROM FEBRUARY 27, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998
SERIES C
                                             PREFERRED STOCK             COMMON STOCK                                  RECEIVABLES
                                        -------------------------   ----------------------   ADDITIONAL                FROM SALES
                                        OUTSTANDING   LIQUIDATION   OUTSTANDING     PAR        PAID-IN     TREASURY     OF COMMON
                                          SHARES         VALUE        SHARES       VALUE       CAPITAL       STOCK        STOCK
                                        -----------   -----------   -----------   --------   -----------   ---------   -----------
Balance, February 27, 1998
  (inception)........................      --         $   --            --        $  --      $   --        $  --       $   --
Issuance of common stock.............      --             --        21,938,929     219,389    57,394,504      --        (1,050,000)
Accrued dividends on preferred
  stock..............................      --             --            --           --         (428,050)     --           --
Net loss.............................      --             --            --           --          --           --           --
Foreign currency translation
  adjustments, net of taxes..........      --             --            --           --          --           --           --
                                          ------      -----------   ----------    --------   -----------   ---------   -----------
Balance, December 31, 1998...........      --             --        21,938,929     219,389    56,966,454      --        (1,050,000)
Issuance of common stock.............      --             --           142,498       1,425       521,068      --          (253,887)
Issuance of warrants for noncompete
  agreement..........................      --             --            --           --           45,000      --           --
Repurchases of common stock..........      --             --          (162,500)      --          --         (343,750)      200,000
Accrued dividends on preferred
  stock..............................      --             --            --           --       (1,695,803)     --           --
Net loss.............................      --             --            --           --          --           --           --
Foreign currency translation
  adjustments, net of taxes..........      --             --            --           --          --           --           --
                                          ------      -----------   ----------    --------   -----------   ---------   -----------
Balance, December 31, 1999...........      --             --        21,918,927     220,814    55,836,719    (343,750)   (1,103,887)
Issuance of common stock
  (unaudited)........................      --             --         1,948,247      19,483     6,803,133      --        (1,075,547)
Issuance of Series C preferred stock
  (unaudited)........................     18,750      15,950,000        --           --          --           --           --
Issuance of warrants (unaudited).....      --             --            --           --        2,800,000      --           --
Accrued dividends on preferred stock
  (unaudited)........................      --          3,470,594        --           --       (5,018,265)     --           --
Net loss (unaudited).................      --             --            --           --          --           --           --
Foreign currency translation
  adjustments, net of taxes
  (unaudited)........................      --             --            --           --          --           --           --
                                          ------      -----------   ----------    --------   -----------   ---------   -----------
Balance, September 30, 2000
  (unaudited)........................     18,750      $19,420,594   23,867,174    $240,297   $60,421,587   $(343,750)  $(2,179,434)
                                          ======      ===========   ==========    ========   ===========   =========   ===========
ACCUMULATED
                                           OTHER
                                       COMPREHENSIVE   ACCUMULATED
                                           LOSS          DEFICIT         TOTAL
                                       -------------   ------------   -----------
Balance, February 27, 1998
  (inception)........................   $   --         $   --         $   --
Issuance of common stock.............       --             --          56,563,893
Accrued dividends on preferred
  stock..............................       --             --            (428,050)
Net loss.............................       --          (3,928,298)    (3,928,298)
Foreign currency translation
  adjustments, net of taxes..........      (104,285)       --            (104,285)
                                        -----------    ------------   -----------
Balance, December 31, 1998...........      (104,285)    (3,928,298)    52,103,260
Issuance of common stock.............       --             --             268,606
Issuance of warrants for noncompete
  agreement..........................       --             --              45,000
Repurchases of common stock..........       --             --            (143,750)
Accrued dividends on preferred
  stock..............................       --             --          (1,695,803)
Net loss.............................       --          (6,843,790)    (6,843,790)
Foreign currency translation
  adjustments, net of taxes..........    (7,162,432)       --          (7,162,432)
                                        -----------    ------------   -----------
Balance, December 31, 1999...........    (7,266,717)   (10,772,088)    36,571,091
Issuance of common stock
  (unaudited)........................       --             --           5,747,069
Issuance of Series C preferred stock
  (unaudited)........................       --             --          15,950,000
Issuance of warrants (unaudited).....       --             --           2,800,000
Accrued dividends on preferred stock
  (unaudited)........................       --             --          (1,547,671)
Net loss (unaudited).................       --          (3,027,786)    (3,027,786)
Foreign currency translation
  adjustments, net of taxes
  (unaudited)........................    (7,856,014)       --          (7,856,014)
                                        -----------    ------------   -----------
Balance, September 30, 2000
  (unaudited)........................   $(15,122,731)  $(13,799,874)  $48,636,689
                                        ===========    ============   ===========
See accompanying notes to consolidated financial statements.

                                      F-7
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD
                                                                                            FROM
                                                                                        FEBRUARY 27,
                                                                                            1998
                                         NINE MONTHS     NINE MONTHS                     (INCEPTION)
                                            ENDED           ENDED        YEAR ENDED        THROUGH
                                        SEPTEMBER 30,   SEPTEMBER 30,   DECEMBER 31,    DECEMBER 31,
                                            2000            1999            1999            1998
                                        -------------   -------------   -------------   -------------
(UNAUDITED)     (UNAUDITED)
Cash flows from operating activities:
    Net loss.........................    $(3,027,786)    $(4,965,124)    $(6,843,790)    $(3,928,298)
    Adjustments to reconcile net loss
     to net cash provided by
     operating activities:
         Provision for doubtful
         accounts....................      1,577,631         704,606       1,231,396         235,725
         Depreciation and
         amortization................      9,294,691       5,531,742       7,875,448       2,015,123
         Amortization of discount on
         debt........................        262,500         --              --              --
         Deferred income taxes.......        233,000          73,584          98,112        (301,112)
         Equity in (earnings) loss of
         unconsolidated affiliates...       (486,667)        283,675         236,874          39,822
         Minority interest in income
         (loss) of consolidated
         subsidiaries................      1,232,493         137,325         118,453         (23,030)
         Increases (decreases) in
         cash from changes in
         operating assets and
         liabilities, net of effects
         from purchases of new
         businesses:
             Patient receivables.....     (3,205,190)     (2,737,325)     (2,212,918)        118,590
             Other receivables.......     (1,662,520)     (2,377,628)     (3,548,344)     (1,046,467)
             Inventories of supplies,
             prepaids and other
             assets..................     (5,886,879)        738,375        (132,965)        603,553
             Accounts payable and
             accrued expenses........      3,368,632       6,444,880       9,121,603       1,001,133
             Other long-term
             liabilities.............        413,683        (193,424)     (1,753,915)      1,906,083
                                         -----------     -----------     -----------     -----------
                  Net cash provided
                 by operating
                 activities..........      2,113,588       3,640,686       4,189,954         621,122
                                         -----------     -----------     -----------     -----------
Cash flows from investing activities:
    Purchases of new businesses, net
     of cash received................    (54,759,302)    (34,141,801)    (35,863,123)    (66,216,330)
    Purchases of property and
     equipment.......................    (12,241,142)     (9,292,843)    (12,805,692)     (3,948,751)
    Proceeds from sale of
     investments.....................        --              867,662       1,156,883         424,659
    Cash (placed in) released from
     escrow..........................     11,435,724         --              --          (13,100,000)
                                         -----------     -----------     -----------     -----------
                  Net cash used in
                 investing
                 activities..........    (55,564,720)    (42,566,982)    (47,511,932)    (82,840,422)
                                         -----------     -----------     -----------     -----------
Cash flows from financing activities:
    Proceeds from long-term debt.....     60,374,284      65,112,489      67,821,962       1,493,337
    Payments on long-term debt.......    (24,209,861)    (23,697,068)    (26,176,060)       (245,673)
    Proceeds from issuance of common
     stock...........................      5,747,069         190,000         268,606      54,750,747
    Payments to repurchase common
     stock...........................        --             (143,750)       (143,750)        --
    Proceeds from issuance of
     preferred stock and warrants....     18,750,000         --              --           31,200,000
    Payments of dividends and
     redemption of redeemable
     preferred stock.................     (5,234,593)        --              --              --
    Distributions on investments in
     affiliates......................      1,065,990         170,047         506,407         (50,000)
                                         -----------     -----------     -----------     -----------
                  Net cash provided
                 by financing
                 activities..........     56,492,889      41,631,718      42,277,165      87,148,411
                                         -----------     -----------     -----------     -----------
Effect of exchange rate changes on
  cash...............................       (335,762)        (99,972)       (203,604)         35,640
                                         -----------     -----------     -----------     -----------
Net increase (decrease) in cash and
  cash equivalents...................      2,705,995       2,605,450      (1,248,417)      4,964,751
Cash and cash equivalents at
  beginning of period................      3,716,334       4,964,751       4,964,751         --
                                         -----------     -----------     -----------     -----------
Cash and cash equivalents at end of
  period.............................    $ 6,422,329     $ 7,570,201     $ 3,716,334     $ 4,964,751
                                         ===========     ===========     ===========     ===========
See accompanying notes to consolidated financial statements.

                                                                     (CONTINUED)

                                      F-8
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

                                                                                        PERIOD FROM
                                                                                       FEBRUARY 27,
                                                                                           1998
                                        NINE MONTHS     NINE MONTHS                     (INCEPTION)
                                           ENDED           ENDED        YEAR ENDED        THROUGH
                                        SEPTEMBER 30,   SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,
                                            2000           1999            1999            1998
                                         -----------     ----------      ----------       ----------
                                        (UNAUDITED)     (UNAUDITED)
Supplemental information:
       Interest paid.................    $ 6,127,536     $1,031,011      $2,263,328       $  473,046
                                         ===========     ==========      ==========       ==========
       Non-cash transactions:
          Debt issued for purchases
           of new business...........    $54,012,058        --              --              --
                                         ===========     ==========      ==========       ==========
          Subordinated debt issued
           for purchases of new
           business..................    $   --           3,287,234       3,287,234         --
                                         ===========     ==========      ==========       ==========
          Sale of common stock for
           notes receivable from
           employees, net............    $ 1,075,547        --               53,887        1,050,000
                                         ===========     ==========      ==========       ==========
          Common stock issued for
           purchases of new
           businesses................    $   --             --              --             1,813,146
                                         ===========     ==========      ==========       ==========
          Preferred stock issued for
           purchase of new
           business..................    $   --             --              --             2,716,000
                                         ===========     ==========      ==========       ==========
          Accrued dividends on
           preferred stock...........    $ 5,018,265      1,271,850       1,695,803          428,050
                                         ===========     ==========      ==========       ==========
          Warrants issued for
           noncompete agreement......    $   --          $  --           $   45,000       $ --
                                         ===========     ==========      ==========       ==========
See accompanying notes to consolidated financial statements.

                                      F-9
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

      (A)  DESCRIPTION OF BUSINESS

           United Surgical Partners International, Inc. and subsidiaries (USPI
           or the Company), a Delaware Company, majority-owned by Welsh, Carson,
           Anderson & Stowe and certain of its affiliates (WCAS) was formed in
           February 1998 for the primary purpose of ownership and operation of
           hospitals, outpatient surgical centers and related businesses in the
           United States and Europe. At December 31, 1999, USPI, headquartered
           in Dallas, Texas, operated twenty surgical centers in the United
           States. Of these twenty centers, USPI consolidates the results of
           nine and owns a minority equity interest in eight which are accounted
           for under the equity method. The Company holds no ownership interest
           in the remaining three centers which are operated by USPI under
           management contracts. In addition, United Surgical Partners Europe,
           S.L. (USPE), a company incorporated in Spain and majority-owned by
           USPI, managed and owned a majority interest in four hospitals and one
           plastic surgery center in Spain at December 31, 1999.

           USPI is subject to changes in government legislation that could
           impact Medicare, Medicaid and foreign government reimbursement levels
           and is also subject to increased levels of managed care penetration
           and changes in payor patterns that may impact the level and timing of
           payments for services rendered.

           USPI maintains its books and records on the accrual basis of
           accounting.

      (B)  UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

           The accompanying unaudited consolidated balance sheet as of September
           30, 2000 and the related unaudited consolidated statements of
           operations, comprehensive loss, and cash flows for the nine months
           ended September 30, 2000 and September 30, 1999, and the statement of
           stockholders' equity for the nine months ended September 30, 2000
           (interim financial statements) have been prepared in accordance with
           generally accepted accounting principles for interim financial
           information and with the instructions to Article 10 of Regulation
           S-X. Accordingly, they do not include all of the information and
           footnotes required by accounting principles generally accepted in the
           United States of America for complete financial statements. In the
           opinion of management, all adjustments (consisting of normal
           recurring adjustments) considered necessary for a fair presentation
           of the interim results have been included.

           The unaudited interim consolidated financial statements should be
           read in conjunction with the audited December 31, 1999 and 1998
           consolidated financial statements appearing herein. The results of
           the nine months ended September 30, 2000 may not be indicative of
           operating results for the full year.

      (C)  TRANSLATION OF FOREIGN CURRENCIES

           The financial statements of foreign subsidiaries are measured in
           local currency and then translated into U.S. dollars. All assets and
           liabilities have been translated using the current rate of exchange
           at the balance sheet date. Results of operations have been translated
           using the average rates prevailing throughout the year. Translation
           gains or losses resulting from the changes in the exchange rates are
           accumulated in a separate component of stockholders' equity.

                                      F-10
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

      (D)  PRINCIPLES OF CONSOLIDATION

           The consolidated financial statements include the financial
           statements of USPI and its wholly-owned and majority-owned
           subsidiaries. Significant investments in other affiliated companies
           are generally accounted for using the equity method. All significant
           intercompany balances and transactions have been eliminated in
           consolidation.

      (E)  USE OF ESTIMATES

           The preparation of financial statements in conformity with accounting
           principles generally accepted in the United States of America
           requires management to make a number of estimates and assumptions
           relating to the reporting of assets and liabilities and the
           disclosure of contingent assets and liabilities at the date of the
           financial statements and reported amounts of revenues and expenses
           during the reporting period. Actual results could differ from those
           estimates.

      (F)  RECLASSIFICATIONS

           Certain prior year amounts have been reclassified to be consistent
           with the current year presentation.

      (G)  CASH EQUIVALENTS AND INVESTMENTS

           For purposes of the consolidated statements of cash flows, USPI
           considers all highly liquid debt instruments with original maturities
           of three months or less to be cash equivalents.

           Investments in unconsolidated companies, owned between 20% and 50%,
           or where the Company otherwise demonstrates that it has significant
           influence over the investee are accounted for using the equity method
           of accounting.

           Investments in companies owned less than 20%, and for which USPI does
           not exercise significant influence, are carried at cost.

      (H)  INVENTORIES OF SUPPLIES

           Inventories of supplies are stated at cost which approximates market.

      (I)  PROPERTY AND EQUIPMENT

           Property and equipment are stated at cost. Depreciation is calculated
           on the straight-line method over the estimated useful lives of the
           assets. Upon retirement or disposal of assets, the asset and
           accumulated depreciation accounts are adjusted accordingly, and any
           gain or loss is reflected in earnings or loss of the respective
           period. Maintenance costs and repairs are expensed as incurred;
           significant renewals and betterments are capitalized.

      (J)  INTANGIBLE ASSETS

           Intangible assets consist of costs in excess of net assets acquired
           (goodwill), costs associated with the purchase of management
           contracts and other intangibles, which consist primarily of
           non-compete contracts. Intangibles, except goodwill, are amortized
           over the life of the associated contracts. Goodwill is amortized on a
           straight-line basis over the expected periods to be benefited,
           generally 25 years.

      (K)  IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED
           OF

           Long-lived assets, certain identifiable intangibles, and goodwill are
           reviewed for impairment whenever events or changes in circumstances
           indicate that the carrying amount of an asset, or related groups of
           assets, may not be fully recoverable from estimated future cash
           flows. The assessment of the recoverability of goodwill will be
           impacted if estimated future operating cash flows are not achieved.
           In the event of impairment, measurement of the amount

F-11
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         of impairment may be based on appraisal, market values of similar
           assets or estimates of future discounted cash flows resulting from
           use and ultimate disposition of the asset.

      (L)  FAIR VALUE OF FINANCIAL INSTRUMENTS

           The carrying amounts of cash and cash equivalents, short-term
           investments, accounts receivable, current portion of long-term debt
           and accounts payable approximate fair value because of the short
           maturity of these instruments. The carrying values of long-term debt
           are based on quoted market prices and are not materially different
           from the estimated fair values of these instruments.

     (M)  REVENUE RECOGNITION

          Revenue consists primarily of net patient service revenues which is
          based on the facilities' established billing rates less allowances and
          discounts, principally for patients covered under contractual
          programs. USPI has entered into agreements with certain majority and
          minority owned surgery centers to provide management services. As
          compensation for these services, USPI charges the surgery centers
          management fees which are either fixed in amount or represent a fixed
          percentage of each centers net revenue less a provision for doubtful
          accounts. Amounts are recognized as services are provided.

      (N)  EQUITY IN EARNINGS (LOSS) OF UNCONSOLIDATED AFFILIATES

           Equity in earnings (loss) of unconsolidated affiliates consists of
           USPI's share of the profits or losses generated from its equity
           investments in eight ambulatory surgery centers. Because these
           operations are central to USPI's business strategy, equity in
           earnings (loss) of unconsolidated affiliates is classified as revenue
           in the accompanying statements of operations.

      (O)  INTEREST RATE SWAPS

           USPI uses interest rate swap agreements to modify its variable rate
           debt obligations to fixed rate obligations, thereby reducing the
           exposure to market rate risk. Amounts currently due to and from
           interest rate swaps agreements are recorded in interest expense in
           the period in which they accrue.

      (P)  INCOME TAXES

           USPI accounts for income taxes under the asset and liability method.
           Deferred tax assets and liabilities are recognized for the future tax
           consequences attributable to differences between the financial
           statement carrying amounts of existing assets and liabilities and
           their respective tax bases and operating loss and tax credit
           carryforwards. Deferred tax assets and liabilities are measured using
           enacted tax rates expected to apply to taxable income in the years in
           which these temporary differences are expected to be recovered or
           settled. The effect on deferred tax assets and liabilities of a
           change in tax rates is recognized in income in the period that
           includes the enactment date. Deferred tax assets are reduced by a
           valuation allowance when, in the opinion of management, it is more
           likely than not that some or all of the deferred tax assets may not
           be realized.

      (Q)  STOCK OPTION PLAN

           USPI applies the intrinsic value-based method of accounting
           prescribed by Accounting Principles Board Opinion No. 25, ACCOUNTING
           FOR STOCK ISSUED TO EMPLOYEES, and related interpretations in
           accounting for its stock option grants to employees. As such, USPI
           does not record compensation expense because USPI issues options
           whereby the option exercise price equals the current market price of
           the underlying stock on the date of grant. SFAS

                                      F-12
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

           No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, established
           accounting and disclosure requirements using a fair value-based
           method of accounting for stock-based employee compensation plans. As
           allowed by SFAS No. 123, the Company has elected to continue to apply
           the intrinsic value-based method of accounting described above, and
           has adopted the disclosure requirements of SFAS No. 123.

           The Company accounts for equity instruments issued to nonemployees in
           accordance with the provisions of SFAS No. 123 and Emerging Issues
           Task Force (EITF) Issue No. 96-18, ACCOUNTING FOR EQUITY INSTRUMENTS
           THAT ARE ISSUED TO OTHER THAN EMPLOYEES FOR ACQUIRING, OR IN
           CONJUNCTION WITH SELLING, GOODS OR SERVICES.

      (R)  COMMITMENTS AND CONTINGENCIES

           Liabilities for loss contingencies arising from claims, assessments,
           litigation, fines and penalties, and other sources are recorded when
           it is probable that a liability has been incurred and the amount of
           the assessment can be reasonably estimated.

(2)  ACQUISITIONS AND EQUITY INVESTMENTS

     On April 30, 1998, USPI purchased 100% of the issued and outstanding stock
of Columbia International Holdings, Inc. (CIH), an unrelated Delaware
corporation, for approximately $7.3 million in cash. As a result of the purchase
of CIH, USPI obtained ownership of 79% and 71%, respectively, of the issued and
outstanding stock of Instituto Dexeus, S.A., the owner of a hospital in Spain,
and Diagnosticos y Tratamientos Medicos, S.A., the owner of a group of clinics
in Spain, both Spanish corporations. The total purchase price for the
acquisitions was allocated to the purchased assets and liabilities based on
their estimated fair values and approximated the fair value of the net assets
acquired. Through this acquisition, USPI also obtained equity interests, ranging
from 7% to 15% in five additional Spanish corporations which own healthcare
related operations in Spain. USPI subsequently contributed the Instituto Dexeus
hospital plus $250,000 in cash for a majority ownership stake in USPE. At
December 31, 1999 and 1998, USPI owned approximately 89% and 86%, respectively,
of USPE. The remaining approximate 11% and 14%, respectively, was held by
Hospital Management Team (HMT), a hospital management company incorporated in
Spain.

     On July 29, 1998, USPI acquired 100% of the stock of Health Horizons, Inc.
(HHI), an unrelated Delaware corporation, for approximately $7.5 million
consisting of $3 million in cash, $2.7 million in USPI Series B redeemable
preferred stock and $1.8 million in USPI Class A common stock. As a result of
the acquisition, USPI acquired a 66% interest in an ambulatory surgery center
joint venture located in Decatur, Alabama and interests ranging from 35% to 50%
in three additional ambulatory surgery center joint ventures located in
Nashville, Tennessee; Kansas City, Missouri; and Murfreesboro, Tennessee. The
total purchase price was allocated to the purchased assets and liabilities based
on their estimated fair values and exceeded the fair value of the net assets
acquired by approximately $7.3 million. On June 30, 1999, USPI acquired an
additional 36% interest in the ambulatory surgery center joint venture in
Nashville for $550,000 in cash, bringing its total ownership in the venture to
72%.

     On August 3, 1998, USPI and St. Rose Dominican Hospital, a not-for-profit
hospital located in Henderson, Nevada entered into an operating agreement to
organize a Nevada limited liability company, Parkway Surgery Center, LLC. Each
party contributed assets totaling approximately $1.9 million for a 50% ownership
interest in the Parkway Surgery Center.

     On October 5, 1998, USPE purchased 80% of the issued and outstanding stock
of Clinica Maternal Nuestra Senora de la Esperanza, S.A., a Spanish corporation,
for approximately $2.4 million in cash. The total purchase price was allocated
to the purchased assets and liabilities based on their

                                      F-13
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

estimated fair values and exceeded the fair value of the net assets acquired by
approximately $1.7 million (using the exchange rate in effect at the date of
purchase).

     On October 15, 1998, USPI purchased a 70% interest in the assets used to
operate the University Surgical Center in Winter Park, Florida (Assets) for
approximately $5.7 million in cash and assumed approximately $200,000 of
liabilities of University Surgical Center, Inc. (Seller), an unrelated Florida
corporation. The Assets were then contributed to a newly formed Florida limited
partnership, University Surgery Center, Ltd. (limited partnership) in exchange
for general and limited partnership interests. The Seller contributed the
remaining 30% of assets to the Limited Partnership in exchange for its 30%
limited partnership interest. The total purchase price was allocated to the
purchased assets and liabilities based on their estimated fair values and
exceeded the fair value of the net assets acquired by approximately
$5.2 million.

     On October 16, 1998, USPI purchased, through USPE, 100% of the issued and
outstanding stock of Clinica Sagrado Corazon, S.A., a hospital and Spanish
corporation, and interests ranging from 55% to 100% in ten related companies
providing a variety of medical services, for approximately $27.5 million in
cash. The total purchase price was allocated to the purchased assets and
liabilities based on their estimated fair values and exceeded the fair value of
the net assets acquired by approximately $17.8 million (using the exchange rate
in effect at the date of purchase).

     On November 5, 1998, USPI purchased, through USPE, 62% of the issued and
outstanding stock of Instituto Policlinico Santa Teresa, S.A., a hospital and
Spanish corporation, which also owns 60% of Resonancia Nuclear Magnetica, S.A.,
a Spanish corporation that provides magnetic resonance imaging services. The
total purchase price of approximately $8.8 million was allocated to the
purchased assets and liabilities based on their estimated fair values and
exceeded the fair value of the net assets acquired by approximately
$5.3 million (using the exchange rate in effect at the date of purchase). During
April 1999 and May 1999, USPI made stock purchases totaling $1.9 million in cash
for an additional 26% interest in Instituto Policlinico Santa Teresa, S.A.

     On December 4, 1998, a newly created subsidiary of USPI (Day-Op Consulting)
entered into certain agreements (Day-Op Agreements) with the shareholders of
Day-Op Surgery Center of Long Island, Inc. (Day-Op Center) and Day-Op Management
Company, Inc. (Day-Op Management). As defined in the Day-Op Agreements, Day-Op
Consulting acquired 100% of the outstanding common stock of Day-Op Management
for $300,000 and certain tangible net assets of Day-Op Center for $1.4 million
(the Asset and Stock Purchase). In addition, Day-Op Consulting and the
shareholders of Day-Op Center entered into a Consulting and Administrative
Agreement whereby Day-Op Consulting provides certain administrative and
consulting services to Day-Op Center in exchange for a monthly service fee. The
State of New York did not approve the Day-Op Agreements until December 1999.
However, the Day-Op Agreements provided that they become effective, upon state
approval, retroactive to December 4, 1998. Because of the uncertainty regarding
the state of New York approval process, no amounts or activity with respect to
the Agreements was recognized in the 1998 consolidated financial statements. As
a result, the accompanying 1999 consolidated statement of operations reflects
operating results for the period from December 4, 1998 through December 31, 1999
and the 1999 accompanying consolidated balance sheet includes the acquired
assets of Day-Op Center, the net assets of Day-Op Management, and short-term
debt of $1.7 million representing the cost of the Asset and Stock Purchase.

     The Day-Op Agreements also provided for a note receivable from Day-Op
Consulting to Day-Op Center in the amount of $11.4 million. Accordingly,
$13.1 million of cash, which was escrowed in 1998 and reported as restricted
cash in the accompanying 1999 and 1998 consolidated balance sheets, was released
from escrow on January 4, 2000 and used to settle the $1.7 million of short-term
acquisition debt related to the Asset and Stock Purchase and fund the
$11.4 million note receivable.

                                      F-14
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On December 18, 1998, USPI entered into an asset purchase agreement to
purchase certain management agreements related to the operations of five
ambulatory surgery centers located in the Dallas and Ft. Worth, Texas
metropolitan area (HealthFirst Transaction). In addition, USPI acquired a 20%
interest in two of the five ambulatory surgery centers (Equity Centers). The
total cost of $8.2 million, all paid to unrelated parties, exceeded the fair
value of the identifiable net assets acquired by $7.6 million of which
$5.5 million was allocated to the management agreements and $2.1 million was
allocated to goodwill. USPI is also obligated to offer (the Buyup) to purchase
newly issued partnership units that would increase USPI's ownership interest by
40% in each of the Equity Centers at a price based upon the financial
performance of the centers. Successful completion of any or all of the Buyup
further obligates USPI to make additional payments to the parties who sold USPI
the equity interests. USPI was not obligated to buy any partnership units under
the Buyup at December 31, 1999.

     On February 1, 1999, USPI acquired, for $400,000 in cash, a 50% interest in
Texas Health Ventures Group, L.L.C. (THVG  1), which held ownership interests in
one operational surgery center and three surgery centers under development in
the Dallas/Fort Worth, Texas metropolitan area. THVG is a limited liability
company which facilitates the joint management and development by USPI and
Baylor Health System (Baylor) of ambulatory surgery centers.

     In May 1999, USPI purchased through USPE, a 70% interest in USP
Dermoestetica, S.L. for $1.6  million in cash. The total purchase price was
allocated to the purchased assets and liabilities and exceeded the fair value of
the net assets by approximately $1.1 million.

     On June 1, 1999, USPI entered into an additional ambulatory surgery joint
venture with Baylor by contributing its equity investments and management
agreements acquired in the December 1998 HealthFirst Transaction to a newly
created limited liability company, THVG/HealthFirst, L.L.C. (THVG 2). In
exchange for its contribution to THVG 2, USPI received a 51% ownership interest
in THVG 2. Baylor contributed 100% of the assets of two operational surgery
centers to THVG  1, in exchange for receiving a 49% ownership in THVG 2 as well
as convertible subordinated note payable from USPI in the amount of
$3.3 million. The joint venture agreements for THVG 1 and THVG 2 have
non-compete clauses and provide for shared management services and fees. On
August 1, 1999 and October 1, 1999, USPI invested additional cash of
$2.7 million and $740,400, respectively, in THVG  2, which acquired additional
ownership interests in the two operational surgery centers in which it had
previously invested, increasing THVG 2's ownership interest in the centers from
20% to 40% and 20% to 57%, respectively.

     On June 30, 1999, USPI acquired 100% of the stock of Texas Outpatient
Surgicare Center, Inc. (TOPS GP), a Texas corporation that is the general
partner with a 63% ownership interest in TOPS Specialty Hospital, Ltd. (TOPS), a
Limited Partnership that operates a surgical hospital in Houston, Texas.
Concurrent with its acquisition of TOPS GP, USPI also facilitated the
acquisition by TOPS GP of an additional 31% interest in TOPS. In connection with
the acquisition of the additional limited partner interests, USPI issued
warrants for the purchase of 100,000 shares of its common stock at an exercise
price of $4.00 per share in exchange for non-compete agreements with the selling
limited partners. Subsequent to these transactions, TOPS borrowed $15 million,
guaranteed by USPI. TOPS GP subsequently sold limited partner interests
representing approximately 25% ownership of TOPS. Total net cash consideration
paid by USPI for these acquisition transactions was approximately $11 million.
As a result of these transactions, USPI owns 100% of TOPS GP, which in turn owns
approximately 69% of TOPS. The total purchase price was allocated to the
purchased assets and liabilities and exceeded the fair value of the net assets
by approximately $12.2 million.

     On July 1, 1999, USPI acquired 100% of the assets used to operate Warner
Park Surgery Center in Chandler, Arizona for approximately $5.1 million in cash.
The total purchase price was allocated to

                                      F-15
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the purchased assets and liabilities and exceeded the fair value of the net
assets by approximately $4.2 million.

     On September 1, 1999, USPI acquired 100% of the assets used to operate two
ambulatory surgery centers in the Houston metropolitan area, for approximately
$12  million in cash. The total purchase price was allocated to the purchased
assets and liabilities and exceeded the fair value of the net assets by
approximately $9.2 million.

     The terms of certain of USPI's acquisition agreements provide for
additional consideration to be paid to or received from the seller based on
certain financial targets for the acquired facilities. The potential for
additional consideration ranges from USPI receiving a return of $1  million of
amounts previously paid to the sellers to an estimated maximum of USPI paying up
to an additional $13.1 million. Additional consideration paid or received, if
any, will be paid or received in cash and will be recorded as an increase or
decrease to goodwill at the time of payment or receipt. There were no payments
made or received under these agreements during December 31, 1999 and 1998.

     The acquisitions of majority interests and step acquisitions referred to
above were accounted for under the purchase method of accounting, and
accordingly, the accompanying statements of operations and comprehensive loss do
not include any revenues or expenses related to these acquisitions prior to the
respective closing dates. The unconsolidated ownership interests acquired are
accounted for under the equity method of accounting. Following are the unaudited
pro forma results for the year ended December 31, 1999 and the period from
February 27, 1998 (inception) through December 31, 1998 as if the consolidated
acquisitions occurred on February  27, 1998 (inception).

                                                             PERIOD FROM
                                                             FEBRUARY 27,
                                                                 1998
                                                             (INCEPTION)
                                          YEAR ENDED           THROUGH
                                         DECEMBER 31,        DECEMBER 31,
                                             1999                1998
                                         -------------       ------------
Net operating revenues...............     $86,670,584        $67,590,931
Income (loss) before income taxes....      (2,840,259)           648,967

These unaudited pro forma results have been prepared for comparative purposes
only. The pro forma results do not purport to be indicative of the results of
operations which would have actually resulted had the acquisitions been in
effect on February 27, 1998, nor are they necessarily indicative of the results
of operations that may be achieved in the future.

(3)  INTANGIBLE ASSETS

     At December 31, intangible assets consisted of the following:
ESTIMATED
                                            USEFUL
                                            LIVES           1999           1998
                                         ------------    -----------    -----------
Goodwill........................      25 years      $65,601,492    $40,388,455
     Management contracts............    5 - 17 years      6,317,990      5,471,107
     Other...........................      5 years         1,044,783        747,604
                                                         -----------    -----------
                                                          72,964,265     46,607,166
     Less accumulated amortization...                     (3,087,291)      (783,759)
                                                         -----------    -----------
          Net intangible assets......                    $69,876,974    $45,823,407
                                                         ===========    ===========
F-16
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4)  PROPERTY AND EQUIPMENT

     At December 31, property and equipment consisted of the following:
ESTIMATED
                                            USEFUL
                                            LIVES            1999           1998
                                         ------------    ------------    -----------
Land and land improvements......         --         $  2,418,669    $   738,000
     Buildings and leasehold
       improvements..................    7 - 50 years      44,205,265     28,612,582
     Equipment.......................    3 - 12 years      34,095,622      9,071,272
     Furniture and fixtures..........    4 - 20 years       9,401,819      3,666,121
     Construction in progress........                       1,646,279         23,138
                                                         ------------    -----------
                                                           91,767,654     42,111,113
     Less accumulated depreciation...                     (32,349,572)    (1,529,802)
                                                         ------------    -----------
          Net property and
             equipment...............                    $ 59,418,082    $40,581,311
                                                         ============    ===========
(5)  LONG-TERM DEBT

     At December 31, long-term debt consisted of the following:

                                            1999              1998
                                         -----------       -----------
Lines of credit......................    $25,029,151       $ 2,853,000
Senior subordinated notes............     23,407,234         1,493,337
Notes payable to financial
  institution........................     14,623,907           --
Mortgage notes.......................      1,584,447         2,296,000
Loans to former owners of
  subsidiaries.......................      1,116,155         2,103,000
Capital lease obligations............      4,873,743         1,889,851
Other................................      2,049,147         1,040,308
                                         -----------       -----------
          Total long-term debt.......     72,683,784        11,675,496
Less current portion.................     (9,390,882)       (4,437,107)
                                         -----------       -----------
          Long-term debt, less
             current portion.........    $63,292,902       $ 7,238,389
                                         ===========       ===========

     Total borrowings under lines of credit were approximately $25.0 million at
December 31, 1999 including $22.0 million owed to a commercial bank as part of a
credit agreement dated June 29, 1999 (the Credit Agreement), allowing the
Company to borrow up to $25.0 million at an interest rate of LIBOR plus 1%. The
Credit Agreement and any borrowings thereunder mature June 30, 2001; interest
payments are due quarterly. Repayment of amounts borrowed under the Credit
Agreement is guaranteed by WCAS. The other lines of credit, all unsecured, are
held by several of the Company's subsidiaries, mature at various times in 2000
and have variable rates of interest ranging from MIBOR plus 0.25% to MIBOR plus
0.85%. MIBOR was approximately 3.8% at December 31, 1999. Fees paid for the
unused portion of the lines of credit were approximately $16,000 in 1999 and
$-0- in 1998.

     During 1998, the Company entered into a Securities Purchase Agreement which
grants certain stockholders and note holders the right to obtain a specified
amount of senior subordinated notes aggregating not more than $20,120,000 in
principal, all of which had been issued at December 31, 1999. The notes are
subordinated to all senior indebtedness, bear interest at 7% which is payable
annually beginning April 30, 2000, and mature April 30, 2008. The notes are
required to be repaid in the event of a change in control, as defined. In
addition, the Company issued a convertible subordinated note payable in the
amount of $3.3 million with a conversion price of $3.50 per share of common
stock to Baylor in setting up its two joint ventures with Baylor, THVG 1 and
THVG 2. Interest at a rate of 5.07% is payable quarterly on the Baylor note,
with all principal due on the maturity date of June 1, 2007.

                                      F-17
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Notes payable to financial institutions of $14.6 million have principal and
interest due periodically at fixed rates ranging from 8.15% to 9.78% and
variable rates ranging from LIBOR plus 2.25% to LIBOR plus 2.75% through various
maturity dates, the latest of which is in 2009. LIBOR was 6.18% at December 31,
1999. At December 31, 1999, USPI had entered into two interest rate swap
transactions related to these loans as the fixed rate payor with a fixed rate of
6.59% on notional amounts of $3,666,667 and $2,503,000.

     Mortgage notes totaling $1.6 million are owed by two of the company's
subsidiaries and are payable in periodic installments through maturity dates not
later than 2028 and bear interest at rates ranging from 3.75% to 6.25%.

     Amounts totaling $1.1 million are owed to the former owners of companies
acquired by the Company during 1998. Interest, which ranges from MIBOR plus 0.5%
to MIBOR plus 1.5%, and principal payments are due at various dates over the
next three years.

     Capital lease obligations totaling $4.9 million are secured by underlying
equipment and have interest rates ranging from 3.20% to 14.42%.

     The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1999 are as follows: 2000, $9,390,882; 2001,
$25,709,499; 2002, $3,163,374; 2003, $2,900,393; 2004, $2,596,959; thereafter,
$28,922,677.

(6)  LEASES

     USPI leases various office equipment and office space under a number of
operating lease agreements, which expire at various times through the year 2020.
Such leases do not involve contingent rentals, nor do they contain significant
renewal or escalation clauses. Office leases generally require USPI to pay all
executory costs (such as property taxes, maintenance and insurance).

     Minimum future payments under noncancelable leases, with remaining terms in
excess of one year as of December 31, 1999 are as follows:

YEAR ENDING                               CAPITAL            OPERATING
DECEMBER 31,                               LEASES             LEASES
------------                             ----------         -----------
  2000...............................    $1,620,271         $ 2,271,320
  2001...............................     1,449,199           2,211,812
  2002...............................     1,225,298           1,897,733
  2003...............................       628,241           1,733,231
  2004...............................       254,000           1,724,807
  Thereafter.........................       264,077           3,983,842
                                         ----------         -----------
     Total minimum lease payments....    $5,441,086         $13,822,745
                                         ==========         ===========
Amount representing interest.........      (567,343)
                                         ----------
          Present value of minimum
             lease payments..........    $4,873,743
                                         ==========

     Total rent expense under operating leases was $1,815,529 and $538,792 for
the years ended December 31, 1999 and 1998, respectively.

(7)  REDEEMABLE PREFERRED STOCK, SERIES A AND SERIES B

     USPI has authorized 31,200 shares of Series A redeemable preferred stock
with a $.01 par value and authorized 2,716 shares of Series B redeemable
preferred stock with a $.01 par value (collectively Preferred Stock). USPI may
redeem some or all of the outstanding shares of preferred stock at any time for
$1,000 per share plus accrued dividends. USPI has a mandatory requirement to
redeem all Preferred Stock on April 30, 2008 or upon an initial public offering
of its common stock registered under the Securities Act of 1933, as amended.
Additionally, preferred stockholders may choose to

                                      F-18
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

have their shares redeemed in the case of a change in control, as defined.
Shares of redeemed Preferred Stock are deemed retired. Preferred Stock has a
stated liquidation preference of $1,000 plus accrued dividends and is senior to
all common shares. Dividends are cumulative and accrue at an annual rate of $50
per share through April 30, 2000 and $75 per share thereafter. Accumulated
dividends are non-interest bearing and accrue whether or not declared and
whether or not funds are legally available for payment. As of December 31, 1999
and 1998, USPI had issued 31,200 shares of Series A redeemable preferred stock
for $31,200,000 and 2,716 shares of Series B redeemable preferred stock for
$2,716,000. Accrued dividends for Series A and Series B were $1,931,470 and
$192,383, respectively, at December 31, 1999 and $371,465 and $56,585,
respectively, at December 31, 1998.

     The holders of Series B redeemable preferred stock have the right at any
time after the second anniversary of issuance to convert any such shares to
Class A common stock. Each share of Series B redeemable preferred stock is
converted by multiplying by 1,000 with the result divided by the greater of the
base conversion price, currently $2 per share, or the fair market value of the
Class A common stock, as determined by the Board of Directors.

(8)  STOCKHOLDERS' EQUITY

     Employees and certain independent contractors holding common stock in USPI
are bound by a Stockholders Agreement (Agreement), which restricts the ability
to transfer or assign Company common stock under certain circumstances and also
contains certain repurchase rights.

     The Agreement terminates at the earlier of April 30, 2008, an initial
public offering, the consummation of any sale, transfer or other disposition of
substantially all the capital stock or assets of USPI for cash, or with respect
to any stockholder, the date on which such stockholder no longer owns any shares
of capital stock.

     Receivables from sales of stock, primarily resulting from purchases of
common stock by employees, are presented in the consolidated balance sheet as a
deduction from stockholders' equity. Interest of 7% is due quarterly and
principal payments are due May 1, 2002. Payment of the principal shall
accelerate in the event of termination of employment, an initial public offering
of common stock by USPI, or a change in control of USPI, as defined.

REGISTRATION RIGHTS AGREEMENT

     Donald E. Steen, William H. Wilcox, Sue H. Shelley, Paul B. Queally, D.
Scott Mackesy, Dave A. Alexander, Jr., M.D., Dale L. Stegall, Mark Garvin, John
C. Garrett, M.D., Baylor Health Services, Welsh, Carson, Anderson & Stowe VII,
L.P., WCAS Healthcare Partners, L.P., WCAS Capital Partners III, L.P., FFT
Partners I, L.P. and FFT Executive Partners I, L.P. and other holders of the
Company's Class A common stock and shares of common stock issuable upon the
conversion of the Company's Class A common stock are entitled under a
registration rights agreement with the Company to the following registration
rights for the shares of Class A common stock and shares of common stock
issuable upon conversion of Class A common stock held by them:

     o  at any time Welsh, Carson, Anderson & Stowe VII, L.P., on behalf of the
        holders of registrable securities, may require, on two occasions only,
        that the Company use its best efforts to register registrable securities
        for public resale;

     o  holders of registrable securities under the agreement may require the
        Company to use its best efforts to register their shares of common stock
        on a Form S-3 registration statement, provided that the Company is
        eligible to use the form and provided further that the Company shall not
        be required to effect the registration more than once in any 180 day
        period; and

     o  if the Company registers any common stock at any time, either for its
        own account or for the account of other security holders, holders of
        registrable securities under the agreement are

                                      F-19
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

        entitled to include their shares of common stock in the registration,
        subject to the ability of the underwriters to limit the number of shares
        included in the offering in view of market conditions.

     The Company will bear all registration expenses other than underwriting
discounts and commissions in connection with any registration under the
registration rights agreement. All holders of registrable securities have agreed
not to exercise their registration rights during the 180-day period following
the date of this prospectus without the consent of Credit Suisse First Boston
Corporation.

(9)  RELATED PARTY TRANSACTIONS

     Several partners in a law firm that provides legal services to USPI are
also partners in an entity that owns shares of USPI's stock. Legal fees related
to those services were approximately $326,000 and $152,000 for the years ended
December 31, 1999 and 1998, respectively.

     A minority interest owner of HMT provided financial advisory services to
USPE related to acquisitions. Fees related to these services were approximately
$50,000 and $413,000 for the years ended December 31, 1999 and 1998,
respectively.

     USPI has entered into agreements with certain majority and minority owned
surgery centers to provide management services. As compensation for these
services, USPI charges the surgery centers management fees which are either
fixed in amount or represent a fixed percentage of each center's net revenue
less bad debt. The percentages range from 3.8% to 7.0%. Amounts recognized under
these agreements totaled approximately $5,111,000 and $223,000 for the years
ended December 31, 1999 and 1998, respectively.

     USPI held a note receivable from HMT at December 31, 1998 in the amount of
$903,000. In May 1999, HMT settled the note by (1) transferring $510,000 in
equity securities to USPI and (2) paying $393,000 in cash to USPE in exchange
for USPE assuming the remaining $393,000 obligation to USPI.

     USPI has an agreement with HMT to manage its hospitals in Spain. In
initiating this arrangement in 1998, USPI incurred costs of $2,180,874.

(10)  INCOME TAXES

     Income tax expense (benefit) attributable to income consists of:
CURRENT        DEFERRED        TOTAL
                                         --------       --------       --------
Year ended December 31, 1999:
     U.S. federal....................    $  --          $  --          $  --
     State and local.................       --             --             --
     Foreign.........................     352,425         98,112        450,537
                                         --------       --------       --------
          Total tax expense..........    $352,425       $ 98,112       $450,537
                                         ========       ========       ========
CURRENT        DEFERRED          TOTAL
                                         --------       ---------       ---------
Year ended December 31, 1998:
     U.S. federal....................    $  --          $  --           $  --
     State and local.................       --             --              --
     Foreign.........................       --           (301,112)       (301,112)
                                         --------       ---------       ---------
          Total tax benefit..........    $  --          $(301,112)      $(301,112)
                                         ========       =========       =========
F-20
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Income tax expense (benefit) differed from the amount computed by applying
the U.S. federal income tax rate of 34% to pretax loss for the years ended
December 31, 1999 and 1998 as follows:

                                           YEARS ENDED DECEMBER 31,
                                         -----------------------------
                                            1999              1998
                                         -----------       -----------
Computed "expected" tax benefit......    $(2,173,706)      $(1,437,999)
Increase (reduction) in income taxes
  resulting from:
     Net operating loss
       carryforwards.................        --                 20,944
     Transactions not deducted for
       tax in Spain..................        664,020           --
     Removal of 1% tax rate
       differential between Spain and
       US............................        (59,830)          (17,022)
     Capitalized professional fees...        --                 47,250
     Goodwill........................       (106,839)           47,131
     Increase in valuation
       allowance.....................      1,743,838           362,166
     Equity investment in foreign
       subsidiary....................        306,189           665,557
     Other...........................         76,865            10,861
                                         -----------       -----------
          Total......................    $   450,537       $  (301,112)
                                         ===========       ===========

     The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities for the years ended
December 31, 1999 and 1998 are presented below.

                                           YEARS ENDED DECEMBER 31,
                                         -----------------------------
                                            1999              1998
                                         -----------       -----------
Deferred tax assets:
     Net operating loss
       carryforwards.................    $ 2,320,529       $   540,458
     Organization costs due to
       difference in amortization
       lives.........................      1,709,000            33,606
     Basis difference in start-up
       costs.........................        148,264           155,383
     Spanish tax credit..............        669,000           518,112
     Other accruals..................         95,410           --
                                         -----------       -----------
          Total deferred tax
             assets..................      4,942,203         1,247,559
Less valuation allowance.............     (2,320,228)         (576,390)
                                         -----------       -----------
          Net deferred tax assets....    $ 2,621,975       $   671,169
                                         ===========       ===========
Deferred tax liabilities:
     Basis difference of
     acquisitions....................    $ 6,018,000       $ 3,886,000
     Capital leases..................         74,000           173,000
     Unrealized gains................         98,975            82,000
     Other...........................         16,000            17,057
                                         -----------       -----------
          Total deferred tax
             liabilities.............    $ 6,206,975       $ 4,158,057
                                         ===========       ===========

     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. At December 31, 1999,
USPI had net operating loss carryforwards for federal income tax purposes of
$6,254,796, which are available to offset future federal taxable income, if any,
through 2018. In addition, USPI has $570,289 of net operating loss
carryforwards, which are only

                                      F-21
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

available to reduce future federal taxable income related to the Health
Horizons, Inc. acquisition. The valuation allowance which primarily reserves the
net operating loss carryforwards, was increased by $1,743,838 during the period.

(11)  STOCK OPTION PLAN

     On April 30, 1998, USPI adopted a stock option plan (the Plan) pursuant to
which USPI's Board of Directors may grant non-qualified or incentive stock
options to selected employees, officers, and directors of USPI. The Plan
authorizes grants of options to purchase up to 4,250,000 shares of par value
$.01 common stock. The Board of Directors or a designated committee shall have
the sole authority to determine which employees receive grants, the type of
grant to be received, vesting period and all other option terms. Incentive stock
options granted have an option price no less than 100% of the fair market value
of the common stock on the date of grant with the term not to exceed ten years.

     At December 31, 1999, there were 1,679,200 shares available for grant under
the Plan. The per share weighted-average fair values at date of grant for stock
options granted for the years ended December 31, 1999 and 1998 were $1.03 and
$0.85, respectively, and were estimated using the Black Scholes option pricing
model, using the following assumptions:

                                                  YEARS ENDED
                                                 DECEMBER 31,
                                               -----------------
                                               1999         1998
                                               ----         ----
      Expected life in years...............    5.0          5.0
      Interest rate........................    6.3%         6.0%
      Dividend yield.......................    0.0%         0.0%
      Volatility...........................    0.0%         0.0%

     USPI applies APB Opinion No. 25 in accounting for its Plan whereby no
compensation expense is recognized when options are granted at a price equal to
the fair market value of the underlying stock on the date of grant. Accordingly,
no compensation cost has been recognized for stock options granted in the
accompanying financial statements. Had USPI determined compensation cost based
on the fair value at the grant date for its stock options under SFAS No. 123,
USPI's net loss would have resulted in the pro forma amounts indicated below:

                                                  YEARS ENDED DECEMBER 31,
                                               -------------------------------
                                                  1999                1998
                                               -----------         -----------
      Net loss  As reported................    $(6,843,790)        $(3,928,298)
                 Pro forma.................     (7,214,503)         (4,129,306)

                                      F-22
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Stock option activity during 1999 and 1998 was as follows:

                                                               WEIGHTED
                                                               AVERAGE
                                                NUMBER         EXERCISE
                                               OF SHARES       PRICE
                                               ---------        -----
      Balance at February 27, 1998.........       --            $--
           Granted.........................    2,283,300         2.80
           Exercised.......................       --             --
           Forfeited.......................       --             --
           Expired.........................       --             --
                                               ---------        -----
      Balance at December 31, 1998.........    2,282,300         2.80
           Granted.........................      657,500         3.70
           Exercised.......................       --               --
           Forfeited.......................     (370,000)        3.25
           Expired.........................       --               --
                                               ---------        -----
      Balance at December 31, 1999.........    2,570,800        $3.00
                                               =========        =====

     Exercise prices for options outstanding as of December 31, 1999 ranged from
$2.00 to $5.00. The following table provides certain information with respect to
stock options outstanding at December 31, 1999:
WEIGHTED
                                                              WEIGHTED      AVERAGE
                                                  STOCK       AVERAGE      REMAINING
                    RANGE OF                     OPTIONS      EXERCISE    CONTRACTUAL
                 EXERCISE PRICES               OUTSTANDING     PRICE         LIFE
                 ---------------               -----------    --------    -----------
Under $3.50..........................     1,195,800      $2.00         8.44
      $3.50 - $5.00........................     1,375,000       3.87         9.01
                                                ---------      -----         ----
                                                2,570,800      $3.00         8.74
                                                =========      =====         ====
The following table provides certain information with respect to stock
options exercisable at December 31, 1999:

                                                                   WEIGHTED
                                                                   AVERAGE
                    RANGE OF                   STOCK OPTIONS       EXERCISE
                 EXERCISE PRICES                EXERCISABLE         PRICE
                 ---------------               -------------       --------
      Under $3.50..........................       464,445           $2.00
      $3.50 - $5.00........................       244,375            3.88
                                                  -------           -----
                                                  708,820           $2.65
                                                  =======           =====

(12)  LOSS PER SHARE

     Basic and diluted loss per common share are based on the weighted average
number of common shares outstanding. Convertible preferred stock, convertible
debt and outstanding options and warrants to purchase shares have not been
included in the computation of loss per common share because the effect would be
anti-dilutive. Net loss attributable to common stockholders and net loss per
common share include preferred stock dividends for purposes of this computation.

     The potential common stock amounts listed below were not included in the
computation of diluted earnings per share because to do so would have been
antidilutive for the periods presented.

                                      F-23
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PERIOD FROM
                                                                                            FEBRUARY 27,
                                          NINE MONTHS      NINE MONTHS                          1998
                                             ENDED            ENDED                          (INCEPTION)
                                         SEPTEMBER 30,    SEPTEMBER 30,     YEAR ENDED         THROUGH
                                             2000             1999         DECEMBER 31,     DECEMBER 31,
                                          (UNAUDITED)      (UNAUDITED)         1999             1998
                                         -------------    -------------    -------------    -------------
Stock options........................      3,008,300        2,693,300        2,570,800        2,283,300
Warrants.............................        900,000          100,000          100,000          --
Convertible subordinated debt........        939,210          939,210          939,210          --
Series C preferred stock.............      5,548,741          --               --               --
(13)  SEGMENT DISCLOSURES

     USPI has adopted Statement of Financial Accounting Standards No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION (SFAS 131).
SFAS 131 establishes standards for reporting information about operating
segments in annual financial statements. USPI's business is the operation of
hospitals, outpatient surgical centers and related businesses in the United
States, Spain and the United Kingdom. USPI's chief operating decision maker, as
that term is defined in the accounting standard, regularly reviews financial
information about its hospitals and surgical centers for assessing performance
and allocating resources both domestically and abroad. Accordingly, USPI's
reportable segments consist of (1) U.S. based facilities, (2) Spain based
facilities, and (3) U.K. based facilities (beginning with USPI's acquisition of
Aspen in April 2000, as discussed in Note 15).
NINE MONTHS ENDED
         SEPTEMBER 30, 2000
             (UNAUDITED)                     U.S.           SPAIN           U.K           TOTAL
         ------------------              ------------    -----------    -----------    ------------
Net patient service revenue..........    $ 36,363,773    $41,647,709    $16,747,891    $ 94,759,373
Other revenue........................       2,325,756      1,087,784        597,519       4,011,059
                                         ------------    -----------    -----------    ------------
          Total revenues.............    $ 38,689,529    $42,735,493    $17,345,410    $ 98,770,432
                                         ============    ===========    ===========    ============
Depreciation and amortization........    $  3,872,368    $ 3,614,875    $ 1,807,448    $  9,294,691
Operating income.....................       3,566,698      1,054,513      2,462,222       7,083,433
Net interest income (expense)........      (4,150,375)    (1,556,758)    (2,063,189)     (7,770,322)
Total assets.........................     113,398,464     88,472,137     90,884,787     292,755,388
Capital expenditures.................       4,591,470      6,433,549      1,216,123      12,241,142
NINE MONTHS ENDED
         SEPTEMBER 30, 1999
             (UNAUDITED)                     U.S.           SPAIN          TOTAL
         ------------------              ------------    -----------    ------------
Net patient service revenue..........    $  9,188,262    $34,176,730    $ 43,364,992
Other revenue........................       3,893,536        974,731       4,868,267
                                         ------------    -----------    ------------
          Total revenues.............    $ 13,081,798    $35,151,461    $ 48,233,259
                                         ============    ===========    ============
Depreciation and amortization........    $  1,611,405    $ 3,920,337    $  5,531,742
Operating income (loss)..............      (3,034,810)       149,086      (2,885,724)
Net interest income (expense)........        (893,573)      (626,368)     (1,519,941)
Total assets.........................     100,151,045     72,083,513     172,234,558
Capital expenditures.................       1,091,993      8,200,850       9,292,843
F-24
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999                  U.S.           SPAIN          TOTAL
          -----------------              ------------    -----------    ------------
Net patient service revenue..........    $ 18,050,768    $45,719,000    $ 63,769,768
Other revenue........................       5,322,816      1,320,000       6,642,816
                                         ------------    -----------    ------------
          Total revenues.............    $ 23,373,584    $47,039,000    $ 70,412,584
                                         ============    ===========    ============
Depreciation and amortization........    $  2,701,448    $ 5,174,000    $  7,875,448
Operating income (loss)..............      (3,545,137)       448,000      (3,097,137)
Net interest income (expense)........        (606,710)    (2,209,000)     (2,815,710)
Total assets.........................     100,268,233     76,435,000     176,703,233
Capital expenditures.................       2,913,901      9,891,791      12,805,692
PERIOD FROM
          FEBRUARY 27, 1998
         (INCEPTION) THROUGH
          DECEMBER 31, 1998                 U.S.           SPAIN          TOTAL
         -------------------             -----------    -----------    -----------
Net patient service revenue..........    $ 1,719,092    $17,397,000    $19,116,092
Other revenue........................        200,979      1,255,000      1,455,979
                                         -----------    -----------    -----------
          Total revenues.............    $ 1,920,071    $18,652,000    $20,572,071
                                         ===========    ===========    ===========
Depreciation and amortization........    $   315,123    $ 1,700,000    $ 2,015,123
Operating income (loss)..............     (1,849,844)    (2,380,874)    (4,230,718)
Net interest income (expense)........        696,656       (472,000)       224,656
Total assets.........................     43,142,402     81,650,000    124,792,402
Capital expenditures.................        405,055      3,543,696      3,948,751
(14)  COMMITMENTS AND CONTINGENCIES

      (A)  RESTRICTED CASH

           As discussed in note 2, approximately $13.1 million in cash remained
           in escrow at December 31, 1999 prior to the final consummation of the
           Day-Op transactions, which were approved by the State of New York in
           December 1999. This amount is reported as restricted cash in the
           accompanying consolidated balance sheets.

       (B)  FINANCIAL GUARANTEES

            As of December 31, 1999, USPI had issued guarantees aggregating
            $1.6 million on borrowings of unconsolidated affiliated companies.
            No amount has been accrued for USPI's obligation under these
            guaranty arrangements.

            As of December 31, 1999, USPE had issued guarantees on certain
            acquisitions in the amount of $1.2 million. Short-term investments
            of approximately $1.0 million and other long-term investments of
            approximately $200,000 at December 31, 1999 have been pledged as
            security for these guarantees. USPE has also received guarantees in
            the amount of $2.9 million from the sellers of certain acquisitions
            regarding potential liabilities at the date of acquisition.
            Approximately $2.3 million of these guarantees received by USPE
            remained outstanding at December 31, 1999.

       (C)  GENERAL AND PROFESSIONAL LIABILITY

            In its normal course of business, USPI is subject to claims and
            lawsuits relating to patient treatment. USPI believes that its
            liability for damages resulting from such claims and lawsuits is
            adequately covered by insurance or is adequately provided for in its
            consolidated financial statements.

                                      F-25
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       (D)  SELF INSURANCE

            The Company is self-insured for healthcare for its U.S. employees up
            to predetermined amounts above which third party insurance applies.
            The Company believes that the reserves established at December 31,
            1999, which were estimated based on actual employee health claim
            patterns, adequately provide for any liability under this
            arrangement.

(15)  SUBSEQUENT EVENTS

     Effective March 1, 2000, USPI acquired, for $200,000 in cash, an additional
25% in the ambulatory surgery center joint venture in Kansas City, increasing
its ownership in the center from 50% to 75%.

     In March 2000, USPE reached an agreement with a commercial lender that
provides USPE with the ability to borrow up to 100 million Pounds, equivalent to
$100.7 million at December 31, 1999. Borrowings under the agreement mature in
2007 and are secured by certain assets of USPE and its subsidiaries. During
March 2000, USPE borrowed the equivalent of approximately $19.9 million under
this agreement, primarily to fund its acquisition of a 72% interest in Clinica
San Camilo, S.A., a hospital in Madrid, Spain for $17.6 million in cash, and its
acquisition of 100% of Centro Radiologico, S.L., a radiology center in Madrid,
Spain for $1.6 million in cash.

     In March 2000, the Company received additional funding from its investors
totaling $54,750,000, which consisted of $30,750,000 of 10% senior subordinated
notes due March 27, 2010, $5,250,000 in Class A common stock, and $18,750,000 in
Series C Convertible Preferred Stock including 800,000 detachable warrants. The
Series C Convertible Preferred Stock per share liquidation value is determined
by adding $1,000 per share plus an amount equal to 7% on each $1,000 per share
amount compounded quarterly. Series C shares are converted to common stock by
dividing the liquidation value by $3.50. The detachable warrants are exercisable
at $.01 per warrant into common stock at $3.50 per share. In connection with the
Series C shares and detachable warrants, the $18,750,000 in proceeds was
allocated $15,950,000 to the Series C Convertible Preferred Stock and $2,800,000
to the warrants as reflected in the September 30, 2000 consolidated statement of
stockholders' equity. The $2,800,000 was calculated based on a Black Scholes
valuation model using the following assumptions: expected life in years -- 2,
interest rate 5.12%, dividend yield 0% and volatility 0%. The Company paid no
interest on the 10% senior subordinated notes during the nine months ended
September 30, 2000.

     In April 2000, the Company, through Global Healthcare Partners Limited
(GHPL, a wholly-owned United Kingdom subsidiary), acquired 100% of the
outstanding common stock of Aspen Healthcare Holdings Limited (Aspen) for
approximately $35.2 million in cash and $54.0 million in debt. Aspen owns and
operates two hospitals in England. The debt portion of the acquisition cost was
financed with borrowings under a credit agreement between GHPL and a commercial
bank that provides for total borrowings of up to 42 million British pounds,
equivalent to $68.1 million at December 31, 1999. Borrowings under this
agreement mature in 2010 and are secured by certain assets of GHPL and its
subsidiaries. This acquisition was accounted for as a purchase.

(16)  SUBSEQUENT EVENTS (UNAUDITED)

ORTHOLINK ACQUISITION

     In February 2001, the Company acquired OrthoLink Physicians Corporation
(OrthoLink) by issuing 9,961,737 shares of the Company's common stock for all of
the outstanding capital stock of OrthoLink. In addition, the Company assumed
options to purchase shares of OrthoLink common stock

                                      F-26
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

that the Company converted into options to purchase 1,895,942 shares of USPI
common stock. This acquisition was accounted for as a purchase.

EMPLOYMENT AGREEMENTS

     On November 1, 2000, the Company entered into a four-year employment
agreement with Donald E. Steen that provides that he will serve as the Company's
chairman and chief executive officer. The employment agreement provides for
annual base compensation of $400,000. Mr. Steen is also eligible for a
performance bonus of up to 100% of his annual base salary. During any time when
Mr. Steen is no longer serving as chief executive officer and, therefore, only
serving as chairman, his annual base compensation would be reduced by $100,000.
The employment agreement provides that, at any time after November 1, 2002,
Mr. Steen is entitled to resign and that the Company's board of directors is
entitled to remove Mr. Steen from his position as chief executive officer, but
not as chairman of the board of directors. In the event that the Company
terminates the employment agreement other than for cause, Mr. Steen would be
entitled to receive his annual base salary for the balance of the term of the
employment agreement plus the average annual bonus, if any, awarded to
Mr. Steen for the prior two calendar years until the later of 12 months
following termination or the expiration of the initial four-year term of the
agreement. The employment agreement further provides that all of Mr. Steen's
stock options automatically become fully vested if the Company terminates the
agreement for any reason other than for cause.

     On January 1, 2001, the Company entered into a two-year employment
agreement with William H. Wilcox that provides that he will serve as the
Company's president. The employment agreement provides for annual base
compensation of $350,000. Mr. Wilcox is also eligible for a performance bonus of
up to 100% of his base salary. In the event that the Company terminates the
employment agreement other than for cause, Mr. Wilcox would be entitled to
receive his annual base salary for the balance of the term of the employment
agreement plus the average annual bonus, if any, awarded to Mr. Wilcox for the
prior two calendar years until the later of 12 months following termination or
the expiration of the initial two-year term of the agreement. The employment
agreement further provides that if the Company terminates the agreement for any
reason other than for cause all of Mr. Wilcox's stock options automatically
become fully vested.

STOCK OPTIONS AND RESTRICTED STOCK PURCHASE PLAN

     The Company adopted a 1998 stock option plan on April 30, 1998. This plan
was amended in fiscal 2000 to increase the number of common stock authorized for
issuance under the plan to a total of 6,000,000 shares. The Company does not
intend to grant any additional stock options under this plan after the
completion of an initial public offering. The plan provides for grants of
incentive stock options to the Company's employees, including officers and
employee-directors, and for grants of non-qualified stock options and the right
to purchase restricted stock to the Company's officers, other employees,
directors and consultants and other key persons.

2001 EQUITY-BASED COMPENSATION PLAN

     USPI plans to adopt a 2001 Equity-Based Compensation Plan in 2001. At any
given time the number of shares of common stock issued under the plan plus the
number of shares of common stock issuable upon the exercise of all outstanding
awards under the plan and USPI's 1998 stock option plan may not exceed the
lesser of [      ] shares or 15% of the total number of shares of common stock
then outstanding, assuming the exercise of all outstanding options and warrants.
The plan provides for grants of incentive stock options, within the meaning of
Section 422 of the Internal Revenue Code, to USPI employees, including officers
and employee-directors, and for grants of nonstatutory stock

                                      F-27
UNITED SURGICAL PARTNERS INTERNATIONAL, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

options, restricted stock awards, stock appreciation rights, phantom stock
awards and annual incentive awards to USPI employees, consultants and
nonemployee directors.

EMPLOYEE STOCK PURCHASE PLAN

     USPI plans to adopt an Employee Stock Purchase Plan in 2001. The plan
provides for the grant of stock options to selected eligible employees. Any
eligible employee may elect to participate in the plan by authorizing USPI's
options and compensation committee to make payroll deductions to pay the
exercise price of an option at the time and in the manner prescribed by USPI's
options and compensation committee. This payroll deduction may be a specific
amount or a designated percentage to be determined by the employee, but the
specific amount may not be less than an amount established by the Company and
the designated percentage may not exceed an amount of eligible compensation
established by the Company from which the deduction is made.

OPTION GRANT

     In December 2000, the Company granted approximately 1,000,000 options to
employees. In connection with this option grant, the Company recorded a
compensation charge in December 2000 for approximately $10,000, representing the
difference between the option exercise price of $4.50 and the estimated fair
value of the options based on the underwriter's share valuation, multiplied by
the options granted and considering the four-year vesting period.

(17)  LIQUIDITY (UNAUDITED)

     The Company has reached the limits of its current financing arrangements.
Additionally, GHPL defaulted on certain of its debt covenants with the Bank of
Scotland. The Company's plans to address its liquidity are as follows:

          o  GHPL received a waiver from the Bank of Scotland as a result of
             USPI and WCAS agreeing to support the operations of GHPL.

          o  Finalized a $10,000,000 increase in its revolving line of credit
             with Chase Bank, which amount is guaranteed by WCAS.

           o  Initiate negotiations for a $75 million credit facility.

          o  Finalize its initial public offering (IPO) for net proceeds of
             $110 million.

     In the event negotiations for the $75 million credit facility and the IPO
are not consummated, the Company will seek additional financing from WCAS.

                                      F-28
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
OrthoLink Physicians Corporation

     We have audited the accompanying consolidated balance sheets of OrthoLink
Physicians Corporation as of December 31, 1999 and 1998, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of OrthoLink
Physicians Corporation as of December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

                                          /s/  ERNST & YOUNG LLP

Nashville, Tennessee
March 14, 2000

                                      F-29
ORTHOLINK PHYSICIANS CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31
                                         SEPTEMBER 30,       -----------------------
                                             2000              1999           1998
                                         -------------       --------       --------
(UNAUDITED)
ASSETS
Current assets:
     Cash and cash equivalents.......      $  5,342          $     46       $  2,704
     Accounts receivable, less
       allowances of $288, $236 and
       $170 at September 30, 2000,
       December 31, 1999 and 1998,
       respectively..................        42,470            42,607         32,225
     Related party receivable........        --                   625            625
     Deferred taxes..................         1,654             1,654            278
     Other current assets............         3,549             1,092            788
                                           --------          --------       --------
Total current assets.................        53,015            46,024         36,620
Leasehold improvements...............         6,218             2,754          2,115
Leased equipment.....................         2,966             2,588          1,783
Furniture and equipment..............        17,902             8,965          7,408
Computer equipment and software......         7,544             5,274          4,004
Construction in progress.............        --                 --               312
                                           --------          --------       --------
                                             34,630            19,581         15,622
Less accumulated depreciation and
  amortization.......................        (7,452)           (4,476)        (2,049)
                                           --------          --------       --------
Leasehold improvements and equipment,
  net................................        27,178            15,105         13,573
Service agreements, net..............        18,970            18,059         15,542
Goodwill, net........................        10,694             7,393         11,295
Investments in joint ventures........         5,144             4,516          3,927
Other assets.........................           332               839            600
Joint venture project costs..........         2,944             8,977            701
                                           --------          --------       --------
     Total assets....................      $118,277          $100,913       $ 82,258
                                           ========          ========       ========
F-30
ORTHOLINK PHYSICIANS CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31
                                              SEPTEMBER 30,             -----------------------
                                                   2000                   1999           1998
                                         ------------------------       --------       --------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable...................            $  1,441               $  4,427       $  1,009
  Salaries and benefits payable......               6,368                  4,811          3,765
  Due to physician groups............               5,685                  3,434          4,746
  Deferred revenue...................           --                         1,954          2,254
  Current portion of capital lease
     obligations.....................               2,300                    702            403
  Other accrued expenses.............               7,029                  3,817          2,254
  Net liabilities of discontinued
     operations......................           --                           782          --
                                                 --------               --------       --------
Total current liabilities............              22,823                 19,927         14,431
Line of credit.......................              39,500                 37,000         24,000
Notes payable........................               3,223                  --             --
Deferred taxes.......................                 569                    336            770
Capital lease obligations, less
  current portion....................               6,490                  1,078          1,166
                                                 --------               --------       --------
          Total liabilities..........              72,605                 58,341         40,367
Minority interests...................                 725
Series A Redeemable Preferred Stock,
  $.01 par value, 150 authorized.....           --                         --             --
Stockholders' equity:
  Common stock, $.01 par value,
     30,000 authorized; 10,038, 9,907
     and 9,752 issued and outstanding
     at September 30, 2000,
     December 31, 1999 and 1998,
     respectively....................                 100                     99             98
  Class A common stock, convertible,
     $.01 par value, 10,000
     authorized; 5,898 issued and
     outstanding at September 30,
     2000, December 31, 1999 and
     1998............................                  59                     59             59
  Class B common stock, convertible,
     $.01 par value; 1,000 authorized
     and issued at September 30,
     2000, December 31, 1999 and
     1998, respectively..............                  10                     10             10
  Additional paid-in capital.........              40,968                 40,780         40,470
  Retained earnings..................               3,810                  1,624          1,254
                                                 --------               --------       --------
Total stockholders' equity...........              44,947                 42,572         41,891
                                                 --------               --------       --------
Total liabilities and stockholders'
equity...............................            $118,277               $100,913       $ 82,258
                                                 ========               ========       ========
See accompanying notes to consolidated financial statements.

                                      F-31
ORTHOLINK PHYSICIANS CORPORATION
                       CONSOLIDATED STATEMENTS OF INCOME
                                 (IN THOUSANDS)
NINE MONTHS       NINE MONTHS
                                            ENDED             ENDED           YEAR ENDED DECEMBER 31
                                        SEPTEMBER 30,     SEPTEMBER 30,    ----------------------------
                                             2000             1999           1999      1998      1997
                                        --------------   ---------------   --------   -------   -------
(UNAUDITED)      (UNAUDITED)
Net service agreement revenue........      $74,372           $58,214       $ 80,341   $60,709   $31,553
Contract revenue.....................       11,272            26,475         32,091    12,405     --
Other income.........................        3,615             1,326          2,134     1,497       636
                                           -------           -------       --------   -------   -------
Total income.........................       89,259            86,015        114,566    74,611    32,189
Operating expenses:
  Clinic expenses....................       54,560            44,130         58,749    43,371    22,889
  Contract expenses..................        9,428            24,775         29,567    11,896     --
  General and administrative.........        2,316             1,627          1,706     1,215     1,256
  Personnel costs....................        5,605             5,341          6,336     5,090     3,303
  Depreciation and amortization......        4,128             2,447          3,149     1,871       584
  Rent and lease expense.............        6,723             3,468          7,614     6,339     3,093
  Interest expense...................        3,521             1,396          2,798     1,151       229
  Loss on disposal of software.......       --                 1,089          1,093     --        --
  Equity in earnings of
     unconsolidated entities.........       (1,114)             (514)          (820)     (203)    --
  Minority interest in earnings of
     consolidated subsidiaries.......           (9)          --               --        --        --
                                           -------           -------       --------   -------   -------
                                            85,158            83,759        110,192    70,730    31,354
Income from continuing operations
  before income taxes................        4,101             2,256          4,374     3,881       835
Provision for income taxes...........       (1,915)             (736)        (1,906)   (1,061)       (5)
                                           -------           -------       --------   -------   -------
Income from continuing operations....        2,186             1,520          2,468     2,820       830
Discontinued operations:
Loss from operations of OMS, less
  applicable income tax benefit of
  $361 and $333 at December 31, 1999
  and 1998, respectively.............       --               --                 590       544     --
Loss on disposal of OMS, including
  provision of $782 for operating
  losses during phase-out period,
  less applicable income tax benefit
  of $924............................       --               --               1,508     --        --
                                           -------           -------       --------   -------   -------
Net income...........................      $ 2,186           $ 1,520       $    370   $ 2,276   $   830
                                           =======           =======       ========   =======   =======
See accompanying notes to consolidated financial statements.

                                      F-32
ORTHOLINK PHYSICIANS CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED) AND
                THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (IN THOUSANDS)
CLASS A             CLASS B
                                      COMMON STOCK        COMMON STOCK        COMMON STOCK      ADDITIONAL   RETAINED
                                    -----------------   -----------------   -----------------    PAID-IN     EARNINGS
                                    SHARES    AMOUNT    SHARES    AMOUNT    SHARES    AMOUNT     CAPITAL     (DEFICIT)    TOTAL
                                    -------   -------   -------   -------   -------   -------   ----------   ---------   --------
Balance at
  January 1, 1997.................   2,474     $ 25      2,305      $23       --       $--       $12,336      $(1,852)   $ 10,532
  Sale of stock...................    --       --        3,593       36       --       --         18,000        --         18,036
  Stock issued for acquisitions...   6,291       63       --       --         --       --          3,273        --          3,336
  Exercise of stock options.......      40     --         --       --         --       --             16        --             16
  Stock issuance costs............    --       --         --       --         --       --            (95)       --            (95)
  Net income......................    --       --         --       --         --       --          --             830         830
                                    ------     ----      -----      ---      -----     ----      -------      -------    --------
Balance at
  December 31, 1997...............   8,805       88      5,898       59       --       --         33,530       (1,022)     32,655
  Sale of stock...................    --       --         --       --        1,000       10        4,990        --          5,000
  Stock issued for acquisitions...     909        9       --       --         --       --          1,932        --          1,941
  Stock reacquired................     (12)    --         --       --         --       --             (7)       --             (7)
  Exercise of stock options.......      50        1       --       --         --       --             25        --             26
  Net income......................    --       --         --       --         --       --          --           2,276       2,276
                                    ------     ----      -----      ---      -----     ----      -------      -------    --------
Balance at
  December 31, 1998...............   9,752       98      5,898       59      1,000       10       40,470        1,254      41,891
  Stock issued for acquisitions...     151        1       --       --         --       --            397        --            398
  Stock reacquired................     (22)    --         --       --         --       --           (100)       --           (100)
  Exercise of stock options.......      26     --         --       --         --       --             13        --             13
  Net income......................    --       --         --       --         --       --          --             370         370
                                    ------     ----      -----      ---      -----     ----      -------      -------    --------
Balance at
  December 31, 1999...............   9,907       99      5,898       59      1,000       10       40,780        1,624      42,572
  Stock issued for
    acquisitions..................      71        1       --       --         --       --            149        --            150
  Exercise of stock options.......      60     --         --       --         --       --             39        --             39
  Net income......................    --       --         --       --         --       --          --           2,186       2,186
                                    ------     ----      -----      ---      -----     ----      -------      -------    --------
Balance at
  September 30, 2000..............  10,038     $100      5,898      $59      1,000     $ 10      $40,968      $ 3,810    $ 44,947
                                    ======     ====      =====      ===      =====     ====      =======      =======    ========
See accompanying notes to consolidated financial statements.

                                      F-33
ORTHOLINK PHYSICIANS CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
YEAR ENDED DECEMBER 31
                                         NINE MONTHS ENDED    NINE MONTHS ENDED    ------------------------------
                                         SEPTEMBER 30, 2000   SEPTEMBER 30, 1999     1999       1998       1997
                                         ------------------   ------------------   --------   --------   --------
(UNAUDITED)          (UNAUDITED)
OPERATING ACTIVITIES
Income from continuing operations....        $   2,186            $   1,520        $  2,468   $  2,820   $    830
Adjustments to reconcile net income
  to net cash provided by (used in)
  operating activities:
    Equity in earnings of joint
      ventures.......................           (1,114)                (514)           (820)      (203)        --
    Minority interest in earnings of
      consolidated subsidiaries......               (9)                  --              --         --         --
    Loss on disposal of software.....               --                1,089           1,093         --         --
    Depreciation and amortization....            4,128                2,447           3,149      1,871        584
    Deferred taxes...................              233                   --          (1,810)       492         --
    Changes in operating assets and
      liabilities, net of effects of
      acquisitions:
         Accounts receivable.........              137               (8,836)        (10,157)   (13,636)   (14,298)
         Other current assets........           (2,457)                 413            (338)      (202)      (855)
         Accounts payable, salaries
           and benefits payable and
           other accrued
           liabilities...............            1,540                3,679           8,629       (847)       893
         Due to physician groups.....            2,251                1,422          (1,312)     1,690      2,421
         Deferred revenue............           (1,954)                (300)           (300)     2,254          5
                                             ---------            ---------        --------   --------   --------
  Net cash provided by (used in)
    operating activities.............            4,941                  920             602     (5,761)   (10,420)
INVESTING ACTIVITIES
Cash paid for acquisitions...........           (5,214)              (3,363)         (3,363)   (13,761)    (4,499)
Purchases of leasehold improvements
  and equipment......................          (15,049)              (2,066)         (3,375)    (3,261)    (4,132)
Related party receivable.............              625                   --              --       (625)        --
Distributions from joint venture
  partners...........................              786                  218             459        (78)        --
Investments in joint ventures........             (300)                (278)           (440)    (3,271)        --
Decrease (increase) in joint venture
  project costs......................            6,033               (4,011)         (8,276)      (701)      (375)
Distributable minority interest......              733                   --              --         --
Other assets.........................              508                   34             (72)        (5)        (9)
                                             ---------            ---------        --------   --------   --------
  Net cash used in investing
    activities.......................          (11,878)              (9,466)        (15,067)   (21,702)    (9,015)
FINANCING ACTIVITIES
Proceeds from issuance of stock, net
  of stock reacquired................               --                   --              --      4,994     17,958
Cash paid to repurchase stock........               --                  (49)           (100)        --         --
Proceeds from stock option
  exercises..........................               39                   13              13         25         --
Proceeds from line of credit.........            8,000                8,000          13,000     24,000         --
Payments on line of credit...........           (5,500)                  --              --         --         --
Proceeds from notes payable..........            3,454                   --              --         --         --
Payments on notes payable............             (231)                  --              --     (3,455)        --
Proceeds from capital lease
  obligations........................            9,854                   --              --         --         --
Payments on capital lease
  obligations........................           (2,844)                (137)           (603)      (213)        --
Deferred financing costs.............               --                   --             (55)      (162)      (229)
                                             ---------            ---------        --------   --------   --------
  Net cash provided by financing
    activities.......................           12,772                7,827          12,255     25,189     17,729
DISCONTINUED OPERATIONS
Loss from discontinued operations....             (539)                  --            (448)      (544)        --
                                             ---------            ---------        --------   --------   --------
  Net cash used in discontinued
    operations.......................               --                   --            (448)      (544)        --
Net change in cash and cash
  equivalents........................            5,296                 (719)         (2,658)    (2,818)    (1,706)
Cash and cash equivalents at
  beginning of period................               46                2,704           2,704      5,522      7,228
                                             ---------            ---------        --------   --------   --------
Cash and cash equivalents at end of
  period.............................        $   5,342            $   1,985        $     46   $  2,704   $  5,522
                                             =========            =========        ========   ========   ========
F-34
ORTHOLINK PHYSICIANS CORPORATION
              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
                                 (IN THOUSANDS)
YEAR ENDED DECEMBER 31
                                         NINE MONTHS ENDED     NINE MONTHS ENDED     ----------------------------------
                                         SEPTEMBER 30, 2000    SEPTEMBER 30, 1999     1999         1998          1997
                                         ------------------    ------------------    ------       -------       -------
(UNAUDITED)           (UNAUDITED)
SUPPLEMENTAL CASH FLOW INFORMATION:
Effects of acquisitions:
  Fair value of assets acquired......        $   7,311             $   3,792         $3,792       $20,876       $11,771
  Fair value of liabilities
  assumed............................           (1,947)                  (31)           (31)       (5,174)       (1,371)
  Notes payable issued for
     acquisitions....................         --                    --                 --           --           (2,565)
  Stock issued for acquisitions......             (150)                 (398)          (398)       (1,941)       (3,336)
                                             ---------             ---------         ------       -------       -------
Cash paid for acquisitions...........        $   5,214             $   3,363         $3,363       $13,761       $ 4,499
                                             =========             =========         ======       =======       =======
Income taxes paid....................        $   1,001             $     248         $  333       $   241       $ --
                                             =========             =========         ======       =======       =======
Interest paid........................        $   2,490             $   1,325         $1,977       $   547       $ --
                                             =========             =========         ======       =======       =======
Assets acquired under capital lease
  obligations........................        $   9,854             $     463         $  814       $ 1,783       $ --
                                             =========             =========         ======       =======       =======
See accompanying notes to consolidated financial statements.

                                      F-35
ORTHOLINK PHYSICIANS CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 1999
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

     OrthoLink Physicians Corporation (the "Company" or "OrthoLink") is a
physician practice management company that develops, in selected geographic
markets, comprehensive and integrated networks of musculoskeletal care systems
that provide high quality care in a cost-effective manner. As of December 31,
1999, the Company operated 16 clinics with 196 physicians in six states and
manages the orthopaedic services of five hospitals. In addition, the Company has
minority interests in joint ventures that provide orthopaedic outpatient
services.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
accounts have been eliminated in consolidation.

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

     The consolidated balance sheet as of September 30, 2000, the consolidated
statement of stockholders' equity for the nine-month period ended September 30,
2000, and the consolidated statements of income and cash flows for the
nine-month periods ended September 30, 2000 and 1999 (the "unaudited interim
consolidated statements") have been prepared by the Company's management in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions of Regulation S-X
and are unaudited. In the opinion of the Company's management, the unaudited
combined financial statements include all adjustments consisting of only normal
recurring adjustments necessary for a fair presentation of the results.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted from the unaudited combined
financial statements. The unaudited interim consolidated financial statements
should be read in conjunction with the audited financial statements appearing
herein.

CASH AND CASH EQUIVALENTS

     Cash equivalents consist of highly-liquid investments with an original
maturity of three months or less when purchased.

ACCOUNTS RECEIVABLE

     Accounts receivable consist of receivables from patients for medical
services which the Company has purchased from physician groups. Such amounts are
purchased net of contractual allowances and estimated bad debts. In addition,
the Company had approximately $1,227 and $1,257 of receivables due from
hospitals as of December 31, 1999 and 1998, respectively, with which the Company
has service agreements. Concentration of credit risk relating to accounts
receivable is limited to some extent by the diversity of the number of patients
and payors and the geographic dispersion of the Company's operations.

LEASEHOLD IMPROVEMENTS AND EQUIPMENT

     Leasehold improvements and equipment are stated at cost and depreciated
using the straight-line method over the estimated useful lives of the assets.
The general range of useful lives is 10  years for equipment, furniture, and
leasehold improvements and 5 years for computer equipment and software.

                                      F-36
ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

JOINT VENTURES

     The Company has entered into joint venture agreements with certain of its
affiliated physicians obtaining ownership interests ranging from 15% to 39%.
Earnings from investments in joint ventures, are accounted for under the equity
method. The joint ventures generally provide ancillary services which compliment
the services provided by the Company and its affiliated physicians. The Company
has entered into management agreements with some of the joint ventures for the
provision of non-medical related services in exchange for a fee. Such agreements
are for terms consistent with the term of the joint venture agreements and range
from 5 to 25 years.

INTANGIBLE ASSETS

SERVICE AGREEMENTS

     The Company enters into service agreements with each acquired practicing
physician group for a period of 40  years. Upon acquisition of clinic assets by
OrthoLink, the physician groups maintain their separate corporate entities and
enter into employment and noncompete agreements with the practicing physicians.
Costs of obtaining clinic service agreements are amortized using the
straight-line method over a period of 25  years. Clinic service agreements
represent the exclusive right to operate the Company's clinics in affiliation
with the related physician groups during the term of the agreements. Accumulated
amortization of clinic service agreements amounted to $1,271 and $549 at
December 31, 1999 and 1998, respectively.

     As part of the service agreement, physician groups are required to maintain
medical malpractice insurance which names the Company as an additional insured.
The Company is also required to maintain professional liability insurance naming
the physician groups as additional insureds.

GOODWILL

     Goodwill represents the excess of purchase price over the fair value of net
assets acquired. Goodwill is amortized over 25 years. Accumulated amortization
on goodwill was $631 and $175 at December 31, 1999 and 1998, respectively.

     The Company reviews its intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. The measurement of possible impairment is based upon determining
whether projected undiscounted future cash flows of the acquired business, or
from the use of the asset, over the remaining amortization period is less than
the carrying amount of the asset. The amount of impairment, if any, is measured
based on projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. As of December 31, 1999, in the
opinion of management, there has been no such impairment, other than described
in Note 4.

JOINT VENTURE PROJECT COSTS

     Joint venture costs associated with the acquisition, development and
construction of surgery center projects are capitalized as a cost of that
project. Costs to fund these projects were $8,977 and $701 as of December 31,
1999 and 1998, respectively.

SELF-INSURANCE

     The Company is self-insured with respect to employee health insurance for
claims up to $15  on an individual basis and maintains commercial stop-loss
insurance for individual claims in excess of $100, up to an individual maximum
of $2,000 per participant. The Company has accrued self-insurance reserves of
$482 and $678 at December 31, 1999 and 1998, respectively.

                                      F-37
ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFERRED REVENUE

     The Company receives payment for certain of its hospital contracts one
month in advance. Revenue is recognized on such amounts as services are
performed, which is generally within 30 days of receipt of payment.

USE OF ESTIMATES

     Management of the Company has made certain estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts reported in the consolidated balance sheets for cash,
accounts receivable, accounts payable and due to physician groups approximate
fair value. The Company's debt bears interest at variable market rates and
approximates fair value.

RECLASSIFICATIONS

     Certain reclassifications have been made in the 1997 and 1998 financial
statements to conform to the 1999 presentation. These reclassifications had no
effect on the net results of operations as previously reported.

CHANGE IN ACCOUNTING POLICY

     Effective January 1, 1998, the Company changed its policy with respect to
amortization of intangible assets. All existing and future intangible assets
will be amortized over a period not to exceed 25 years from the inception of the
respective intangible assets.

2.  REVENUES AND EXPENSES

NET SERVICE AGREEMENT REVENUE

     Net medical service revenue for orthopaedic clinics is recorded at
established rates, reduced by allowances for doubtful accounts and contractual
adjustments and physician expenses. Contractual adjustments arise due to the
terms of certain reimbursement and managed care contracts. Such adjustments
represent the difference between charges at established rates and estimated
recoverable amounts and are recognized in the period the services are rendered.
Physician expenses consist primarily of salaries and benefits for physicians and
other professional services.

     The allowance for doubtful accounts represents management's estimate of
potential credit issues associated with amounts due from patients, commercial
insurers, and other third-party payors.

     Net service agreement revenue consists of the following amounts:
YEAR ENDED DECEMBER 31,
                                         -----------------------------------------
                                           1999            1998            1997
                                         ---------       ---------       ---------
Medical service revenue..............    $ 314,106       $ 239,411       $ 117,687
Contractual and bad debt
allowances...........................     (162,915)       (114,176)        (56,143)
                                         ---------       ---------       ---------
     Net medical service revenue.....      151,191         125,235          61,544
Physician expenses...................      (70,850)        (64,526)        (29,991)
                                         ---------       ---------       ---------
     Net service agreement revenue...    $  80,341       $  60,709       $  31,553
                                         =========       =========       =========
F-38
ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company's affiliated physician groups derived approximately 20%, 16%
and 17% of their net medical service revenue from services provided under the
Medicare program for the years ended December 31, 1999, 1998 and 1997,
respectively. Other than the Medicare program, the physician groups have no
customers which individually represent more than 10% of net medical service
revenue.

     The following sets forth the net service agreement revenue generated under
management service agreements by clinics who accounted for more than 10% of the
Company's net service agreement revenue:

                                          YEAR ENDED DECEMBER 31,
                                         --------------------------
               CLINIC                    1999       1998       1997
               ------                    ----       ----       ----
Tennessee Orthopaedic Alliance,
Inc. ................................    21.8%      19.7%      41.7%
Resurgens Orthopaedic, P.C. .........    18.6       16.2       23.3
New Mexico Orthopaedics Associates,
P.C. ................................    10.6       10.3        --
Tennessee Orthopaedic Clinic, P.C.       11.2       11.5        --

CONTRACT REVENUE AND EXPENSE

     The Company manages the orthopaedic services of five hospitals with which
it has service agreements. The service agreements are generally for terms of one
year and require the respective hospital to pay the Company a fixed fee on a
monthly basis. The Company is then responsible for the costs of certain
overhead, supplies and personnel required by the service agreement. The excess
of fees received less expenses incurred by the Company is retained by the
Company up to a predetermined limit, at which point such excess is generally
shared in equal proportion between the respective hospital and the Company. The
Company is responsible for any expenses which exceed fees received. Upon
termination of a service agreement, any amounts payable to a hospital are
generally due within 30 days.

3.  ACQUISITIONS

ACQUIRED CLINICS

     The Company acquired four clinics with 14 physicians in 1999, seven clinics
with 32 physicians in 1998 and 12 clinics with 115 physicians in 1997.
Consideration for the clinic acquisitions, including cash, common stock, and
notes payable, was $3,792 in 1999, $8,667 in 1998 and $10,379 in 1997. The
Company exchanged a total of 151, 909 and 6,291 shares of Common Stock in 1999,
1998 and 1997, respectively. The Company also entered into long-term service
agreements with each of the clinics physician groups. Intangible assets of
approximately $3,298 and $7,850 in 1999 and 1998, respectively, were recorded
related to the underlying service agreement rights. The acquisitions were
accounted for as purchases and the accompanying consolidated financial
statements include the results of their operations, as defined in the service
agreements, from the dates of acquisition.

ACQUIRED BUSINESSES

     Effective September 1, 1998, the Company acquired the outstanding common
stock of OrthoExcel, Inc. and related entities ("OrthoExcel") in exchange for
200 shares of the Company's common stock plus $5,100 in cash. OrthoExcel manages
the orthopaedic services of hospitals with which it has contracts. The
transaction was accounted for as a purchase and resulted in goodwill of $10,250.

     Effective January 1, 1998, the Company acquired Occupational Medicine
Services, Inc. and related entities ("OMS"). OMS performs workers compensation
medical case management services and was acquired by the Company for $1,102 in
cash. In addition, the Company issued warrants to

                                      F-39
ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

purchase 225 shares of Company Common Stock for $5.00 per share contingent on
OMS meeting certain income levels, which were not achieved. The transaction was
accounted for as a purchase and resulted in goodwill of $1,402. See Note 4.

     The consolidated financial statements of the Company include the results of
operations for OrthoExcel and OMS from their respective dates of acquisition.

4.  DISCONTINUED OPERATIONS

     On March 14, 2000, the Company entered into a formal plan to dispose of
OMS. The Company expects to complete the disposal by June 2000. The operations
of OMS are reflected in the consolidated statements of income as discontinued
operations for both 1999 and 1998. Also, the Company recorded a loss on disposal
of $2,432 related to the write-off of assets expected to be disposed and losses
expected to be incurred during the phase-out period. Based on the allocated debt
balance attributable to those operations, the Company allocated interest expense
of $78. Income taxes have been allocated using the same overall rate incurred by
the Company in each of the years presented.

5.  LEASES

     The Company has entered into operating and capital leases for office space,
office equipment and computer equipment. At December 31, 1999, future minimum
lease payments under noncancelable operating leases and capital lease
obligations are as follows:
ORTHOLINK         CLINIC
                                          OPERATING       OPERATING        CAPITAL
                                            LEASE           LEASE           LEASE
                                         OBLIGATIONS     OBLIGATIONS     OBLIGATIONS      TOTAL
                                         ------------    ------------    ------------    -------
2000.................................        $358          $ 7,330          $  821         8,509
2001.................................         307            4,857             633         5,797
2002.................................         310            2,637             397         3,344
2003.................................       --               2,148             158         2,306
2004.................................       --               1,455              29         1,484
Thereafter...........................       --               3,423          --             3,423
                                             ----          -------          ------       -------
                                             $975          $21,850          $2,038       $24,863
                                             ====          =======                       =======
Less amounts representing interest...                                         (258)
                                                                            ------
                                                                             1,780
Less current portion.................                                         (702)
                                                                            ------
                                                                            $1,078
                                                                            ======
Total rental expense for operating leases (excluding amounts paid to
related parties) was approximately $7,312, $5,117 and $2,908 for the years ended
December 31, 1999, 1998 and 1997, respectively. The Company leases certain
office space and equipment from related parties. Expense incurred related to
transactions under agreements with related parties was $303, $270 and $172 for
the years ended December 31, 1999, 1998 and 1997, respectively. The capital
lease obligations were incurred to purchase equipment for use in clinics with
which the Company has service agreements. Future payments under capital lease
obligations are reimbursable under the service agreements. Accumulated
amortization of equipment under capital lease obligations was $731 and $172 at
December 31, 1999 and 1998, respectively.

                                      F-40
ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.  LONG-TERM DEBT

     On December 18, 1998, the Company amended its line of credit agreement to
increase the aggregate principal available thereunder to $45,000 and to extend
the maturity date to December 28, 2001. The line is collateralized by the
Company's assets and bears interest at the bank's prime interest rate or LIBOR,
plus 1%-2.25% depending upon the borrowing capacity of the Company as defined in
the line of credit agreement. At December 31, 1999, the Company had $37,000 of
outstanding borrowings under the line of credit, and had available borrowings of
$8,000.

     Effective December 31, 1999, the Company amended its line of credit
agreement that changed the definitions of certain debt covenant ratio terms.
Borrowings available under the agreement are subject to certain financial and
operating convenants, all of which the Company was in compliance with at
December 31, 1999.

7.  STOCKHOLDERS' EQUITY

     The Company has authorized Common Stock, Class A Common Stock and Class B
Common Stock. Holders of Common Stock and Class A Common Stock are both entitled
to one vote per share. Class B Common Stock does not carry with it any voting
privileges but is entitled to a liquidation preference of $5.00 per share and
may be converted to common stock upon the occurrence of certain events. Class A
Common Stock is convertible into Common Stock at any time at the option of the
holder and is entitled to a liquidation preference of $5.00 per share.

     The Company also has authorized 150 shares of Series A Redeemable Preferred
Stock. At December 31, 1999 and 1998 there were no such outstanding shares.

8.  INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities were as follows:
DECEMBER 31
                                         ---------------------
                                          1999          1998
                                         -------       -------
Deferred tax assets:
  Amortization.......................    $ --          $   112
  Accrued vacation...................        713           411
  AMT credit.........................        439           259
  Disposal of OMS....................        924         --
  Net operating loss carryforward....      3,952         1,397
  Other..............................         17            17
                                         -------       -------
Total gross deferred tax asset.......      6,045         2,196
Less valuation allowance.............     (2,043)       (1,098)
                                         -------       -------
Net deferred tax asset...............      4,002         1,098
Deferred tax liabilities:
  Tax over book basis of partnership
     investments.....................       (155)        --
  Amortization.......................       (142)        --
  Depreciation.......................     (2,387)       (1,590)
                                         -------       -------
Total gross deferred tax liability...     (2,684)       (1,590)
                                         =======       =======
Net deferred tax asset (liability)...    $ 1,318       $  (492)
                                         =======       =======
F-41
ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At December 31, 1997, the Company had a valuation allowance for its
deferred tax assets in the amount of $398. The allowance related to these assets
was removed during 1998 with a corresponding decrease in the provision for
income taxes. The purchase of OrthoExcel during 1998 included deferred tax
assets subject to a valuation allowance in the amount of $1,098, which remained
on the Company's books at December 31, 1998. In 1999, the valuation allowance
increased to $2,043, the amount of federal net operating losses that the Company
may lose due to the IRC  ss382 limitation on net operating losses. If these
deferred tax assets are subsequently recognized, the related tax benefit will be
allocated to reduce intangible assets acquired in the transaction.

     As of December 31, 1999, the Company had federal and state net operating
loss carry-forwards of approximately $17.8 million expiring from 2012 to 2019.

     Significant components of federal income tax expense were as follows:

                                              YEAR ENDED DECEMBER 31
                                         --------------------------------
                                          1999         1998         1997
                                         ------       ------       ------
Current:
  Federal............................    $ --         $  236       $    5
  State..............................        59         --           --
Deferred
  Federal............................     1,555          696         --
  State..............................       292          129         --
                                         ------       ------       ------
Income tax expense...................    $1,906       $1,061       $    5
                                         ======       ======       ======

     The reconciliation of income tax expense computed at the federal statutory
tax rate to income tax expense is as follows:

                                              YEAR ENDED DECEMBER 31
                                         --------------------------------
                                          1999         1998         1997
                                         ------       ------       ------
Federal income taxes.................    $1,487       $1,320       $  265
State income tax, net of federal
benefit..............................       231           34         --
Change in valuation allowance........      --           (398)        (268)
Goodwill amortization................       136           46         --
Meals and entertainment..............        12           13         --
Other................................        40           46            8
                                         ------       ------       ------
Total income tax expense.............    $1,906       $1,061       $    5
                                         ======       ======       ======

9.  STOCK OPTION PLANS

     The Company has three stock option plans: (1) the 1996 Management Stock
Option Plan (the "Management Plan"), (2) the 1996 Physician's Stock Option Plan
(the "Physician's Plan"), and (3) the 1996 Director's Stock Option Plan (the
"Director's Plan").

     The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation" (FAS 123), requires
use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant no compensation expense is recognized.

                                      F-42
ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Pro forma information regarding net income and earnings per share is
required by FAS 123 and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value of options granted during 1999, 1998 and 1997 was estimated at $0.00,
$0.49 and $0.13 per share, respectively, on the date of grant using a minimum
value option pricing model with the following weighted-average assumptions:
risk-free interest rates of 6.0%; dividend yields of 0%; and a weighted average
expected life of the options of approximately five years.

     Option valuation models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

     For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the options vesting period. The Company's
pro forma information follows:

                                             YEAR ENDED DECEMBER 31
                                         -------------------------------
                                          1999         1998        1997
                                         ------       ------       -----
Net income...........................    $  370       $2,276       $ 830
Pro forma compensation expense from
stock options, net of taxes..........      (522)        (100)        (27)
                                         ------       ------       -----
Pro forma net (loss) income..........    $ (152)      $2,176       $ 803
                                         ======       ======       =====

     Stock option activity is as follows:
AVERAGE                    AVERAGE                   AVERAGE
                                        MANAGEMENT    EXERCISE    PHYSICIAN'S    EXERCISE    DIRECTOR'S    EXERCISE
                                           PLAN        PRICE         PLAN         PRICE         PLAN        PRICE      TOTAL
                                        ----------    --------    -----------    --------    ----------    --------    -----
December 31, 1996....................       730        $ .50           63         $ .50          150        $ .50        943
  Granted............................     1,048          .51          266           .89        --            --        1,314
  Exercised..........................       (40)         .50        --             --          --            --          (40)
                                          -----        -----         ----         -----        -----        -----      -----
December 31, 1997....................     1,738          .51          329           .81          150          .50      2,217
  Granted............................       528         1.81           56          2.51        --            --          584
  Exercised..........................       (51)         .50        --             --          --            --          (51)
  Forfeited..........................      (133)         .51          (21)          .50        --            --         (154)
                                          -----        -----         ----         -----        -----        -----      -----
December 31, 1998....................     2,082          .83          364          1.09          150          .50      2,596
  Granted............................       355         5.00          202          4.76           10         5.00        567
  Exercised..........................       (26)         .51        --             --          --            --          (26)
  Forfeited..........................     --            --             (6)         --          --            --           (6)
                                          -----        -----         ----         -----        -----        -----      -----
December 31, 1999....................     2,411         1.45          560          2.37          160          .78      3,131
Available for grant..................       589         --            440          --             90           --      1,119
Options exercisable..................       859          .67          148           .95           90          .50      1,097
Option price range at                                                                                            $5.00$0.50-
  December 31, 1999..................    $0.50-$5.00               $0.50-$5.00                 $0.50-$5.00
F-43
ORTHOLINK PHYSICIANS CORPORATION
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At December 31, 1999, the weighted-average remaining contractual life of
outstanding options was 8.6 years.

10.  EMPLOYEE BENEFIT PLANS

     The Company has a defined contribution retirement plan (the "OrthoLink
Plan") which covers substantially all employees and is designed to qualify under
Section 401(k) of the Internal Revenue Code of 1986. The OrthoLink Plan includes
a Company matching contribution not to exceed 6% of eligible employee
compensation and a discretionary profit sharing contribution not to exceed 6% of
total compensation. Employer contributions amounted to $1,445, $1,963 and $755
for the years ended December 31, 1999, 1998 and 1997, respectively.

11.  COMMITMENTS AND CONTINGENCIES

     The Company is subject to various claims and legal actions which arise in
the ordinary course of business. The Company has professional liability
insurance to protect against such claims or legal actions. In the opinion of
management, the ultimate resolution of such matters will be adequately covered
by insurance and will not have a material adverse effect on the Company's
financial position or results of operations.

     The Company and its affiliated physician groups are insured with respect to
medical malpractice risks on a claims-made basis. Management is not aware of any
claims against it or its affiliated physician groups which might have a material
impact on the Company's financial position.

     Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential
wrongdoing. While no such regulatory inquiries have been made, compliance with
such laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties, and exclusion from the Medicare and Medicaid programs.

     The Company has acquired and will likely continue to acquire entities with
prior operating histories. Acquired entities may have unknown or contingent
liabilities for failure to comply with healthcare laws and regulations, such as
billing and reimbursement, fraud and abuse and similar anti-referral laws.
Although the Company attempts to assure itself that no such liabilities exist
and obtains indemnification from prospective sellers covering such matters,
there can be no assurance that any such matter will be covered by
indemnification or, if covered, that the liability sustained will not exceed
contractual limits or the financial capacity of the indemnifying party.

12.  IMPACT OF YEAR 2000

     In late 1999, the Company completed its remediation and testing of systems.
As a result of those planning and implementation efforts, the Company
experienced no significant disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company is not aware of
any material problems resulting from Year 2000 issues. The Company will continue
to monitor its mission critical computer applications and those of its suppliers
and vendors throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.

                                      F-44
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF
ASPEN HEALTHCARE HOLDINGS LIMITED:

We have audited the consolidated financial statements of Aspen Healthcare
Holdings Limited and subsidiaries (the "company") on pages 2 to 20 which have
been prepared under the historical cost convention and the accounting policies
set out on pages 5 to 6. As explained in the accounting policies, the financial
statements have not been prepared for the purposes of Section 226 of the
Companies Act 1985.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The directors are responsible for preparing the financial statements in
accordance with applicable United Kingdom law and accounting standards. Our
responsibilities, as independent auditors, are established in the United Kingdom
by the Auditing Practices Board and by our profession's ethical guidance. It is
our responsibility to report our opinion to you as to whether the financial
statements give a true and fair view.

BASIS OF AUDIT OPINION

We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board and with generally accepted auditing standards in the
United States. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements and of whether the
accounting policies are appropriate to the circumstances of the company,
consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregulatory or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.

OPINION

In our opinion the financial statements give a true and fair view of the state
of affairs of the company as at 31 December 1999 and 31 December 1998 and of the
company's income and cash flows for the year ended 31 December 1999 and the
period ended 31 December 1998 in conformity with generally accepted accounting
principles in the United Kingdom.

RECONCILIATION TO US GAAP

Accounting practices used by the company in preparing the accompanying financial
statements confirm with generally accepted accounting principles in the United
Kingdom, but do not conform with accounting principles generally accepted in the
United States. A description of these differences and a complete reconciliation
of consolidated net income and shareholders' equity to generally accepted
accounting principles in the United States is set forth in note 22.

ARTHUR ANDERSEN
CHARTERED ACCOUNTANTS

London, England

3 April 2000 (except with respect to
the matters discussed in note 22, as
to which the date is 12 February 2001).

                                      F-45
CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEAR ENDED          PERIOD ENDED
                                                  31 DECEMBER 1999     31 DECEMBER 1998
                                         NOTES         Pounds                 Pounds
                                         -----    -----------------    -----------------
TURNOVER.............................       1         23,312,597           18,739,552
Operating expenses...................                (18,945,502)         (14,697,766)
                                                     -----------          -----------
OPERATING PROFIT.....................                  4,367,095            4,041,786
Investment income....................       2             25,433               67,591
Interest payable and similar
charges..............................       3         (2,277,128)          (1,837,731)
                                                     -----------          -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE
TAXATION.............................       4          2,115,400            2,271,646
Tax on profit on ordinary
  activities.........................       7         (1,065,000)            (703,000)
                                                     -----------          -----------
PROFIT FOR THE FINANCIAL PERIOD
  TRANSFERRED TO RESERVES............      17          1,050,400            1,568,646
                                                     ===========          ===========
There were no recognised gains or losses in the year and the prior period
     other than those disclosed.

     The accompanying notes are an integral part of this consolidated profit and
loss account.

                                      F-46
CONSOLIDATED BALANCE SHEETS
AT                   AT
                                                  31 DECEMBER 1999     31 DECEMBER 1998
                                         NOTES           Pounds             Pounds
                                         -----    -----------------    -----------------
FIXED ASSETS
Intangible assets....................       8         13,012,262           13,728,533
Tangible assets......................       9         25,688,943           22,227,323
                                                     -----------          -----------
                                                      38,701,205           35,955,856
CURRENT ASSETS
Stocks...............................      10            462,895              389,941
Debtors..............................      11          2,438,685            2,182,201
Cash at bank and in hand.............                      1,869              889,349
                                                     -----------          -----------
                                                       2,903,449            3,461,491
CREDITORS: Amounts falling due within
one year.............................      12         (8,850,865)          (5,888,712)
                                         ----        -----------          -----------
NET CURRENT LIABILITIES..............                 (5,947,416)          (2,427,221)
                                         ----        -----------          -----------
TOTAL ASSETS LESS CURRENT
  LIABILITIES........................                 32,753,789           33,528,635
CREDITORS: Amounts falling due after
  more than one year.................      13        (29,197,743)         (31,127,989)
PROVISIONS FOR LIABILITIES AND
  CHARGES............................      14           (532,000)            (427,000)
                                         ----        -----------          -----------
NET ASSETS...........................                  3,024,046            1,973,646
                                                     -----------          -----------
CAPITAL AND RESERVES
Called-up equity share capital.......      15             40,500               40,500
Share premium account................      16            364,500              364,500
Profit and loss account..............      16          2,619,046            1,568,646
                                         ----        -----------          -----------
TOTAL EQUITY SHAREHOLDERS' FUNDS.....      17          3,024,046            1,973,646
                                                     ===========          ===========
The accompanying notes are an integral part of these balance sheets.

                                      F-47
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED          PERIOD ENDED
                                                  31 DECEMBER 1999     31 DECEMBER 1998
                                         NOTES           Pounds              Pounds
                                         -----    -----------------    -----------------
NET CASH INFLOW FROM OPERATING
ACTIVITIES...........................      18          5,964,511            5,773,310
Returns on investments and servicing
  of finance.........................      19         (1,975,866)          (1,403,337)
Taxation.............................      19         (1,072,954)          (1,289,730)
Capital expenditure and financial
investment...........................      19         (4,521,950)            (778,518)
Acquisition..........................      19           --                (24,423,425)
CASH OUTFLOW BEFORE MANAGEMENT OF
  LIQUID RESOURCES AND FINANCING
Financing............................      19            496,826           23,011,049
                                                     -----------          -----------
(Decrease) increase in cash in the
  period.............................      20         (1,109,433)             889,349
                                                     -----------          -----------
RECONCILIATION OF NET CASH FLOW TO
  MOVEMENT IN NET DEBT
                                                         1999                 1998
                                                        Pounds               Pounds
                                                     -----------          -----------

(Decrease) Increase in cash in the
period...............................      20         (1,109,433)             889,349
Cash inflow from loan financing......      20        (12,535,070)         (24,056,336)
Cash outflow on bank loans...........      20          1,500,000              750,000
Cash outflow on finance leases.......      20            591,310              827,522
Repayment of loan notes..............      20         10,000,000
Net borrowings acquired with
  acquisition........................      20           --                (11,006,393)
Non cash movements...................      20            (24,375)             (14,220)
                                                     -----------          -----------
Change in net debt...................                 (1,577,568)         (32,610,078)
Net debt at beginning of year........                (32,610,078)            --
                                                     -----------          -----------
Net debt at end of year..............      20        (34,187,646)         (32,610,078)
                                                     ===========          ===========
F-48
STATEMENT OF ACCOUNTING POLICIES

BASIS OF PREPARATION

     The consolidated financial statements have been prepared under the
historical cost convention and in accordance with applicable accounting
standards.

     The consolidated financial statements have not been prepared for the
purposes of section 226 of the Companies Act 1985 (the "Act"), and therefore do
not constitute statutory accounts within the context of the Act. However, the
consolidated financial statements include all disclosures required under the
Companies Act with the exception of a directors' report, which is not required
in order for the financial statements to give a true and fair view of the state
of affairs at any point in time. Accordingly, the consolidated financial
statements comply with accounting principles generally accepted in the United
Kingdom (UK GAAP).

     UK GAAP and accounting principles adopted by the Company differ in certain
respects from accounting principles generally accepted in the United States (US
GAAP). See Note [ ] for a discussion of the principal differences that would
affect the company's consolidated net income and shareholders' equity if US GAAP
had been applied instead of UK GAAP in the preparation of the consolidated
financial statements.

BASIS OF CONSOLIDATION

     The group financial statements consolidate the financial statements of the
company and all its subsidiary undertakings drawn up to 31 December 1999 and 31
December 1998.

     The principles of acquisition accounting have been adopted in respect of
the acquisitions of subsidiaries. Under this method, the results of the
subsidiary undertakings are included in the consolidated profit and loss account
from the date of acquisition. Goodwill arising on consolidation (representing
the excess of the consideration given over the fair value of the separable net
assets acquired) is capitalised in the Group's balance sheet and amortised over
its estimated economic life of 20 years.

TANGIBLE FIXED ASSETS

     Tangible fixed assets are stated at cost, net of depreciation. Depreciation
is provided at rates calculated to write off the cost less estimated residual
value of each asset on a straight-line basis over its expected useful life, as
follows:

Freehold buildings.                      50 years
Short leasehold properties...........    Over the shorter life of
                                         the lease or useful life
Plant and machinery..................    5-10 years
Fixtures and fittings................    8-10 years
Computers............................    4 years

     Freehold land is not depreciated.

     Residual value is calculated on prices prevailing at the date of
acquisition or revaluation.

TAXATION

     Corporation tax payable is provided on taxable profits at the current rate.

     Deferred taxation is provided using the liability method on all timing
differences only to the extent that they are expected to reverse in the future
without being replaced, except that the deferred tax effects of timing
differences arising from pensions and other post-retirement benefits are always
recognised in full.

                                      F-49
STATEMENT OF ACCOUNTING POLICIES -- (CONTINUED)

STOCKS

     Stocks of drugs and medical consumables have been valued at the lower of
cost and net realisable value.

PENSIONS COSTS AND OTHER POST-RETIREMENT BENEFITS

     For defined benefit schemes the amount charged to the profit and loss
account in respect of pension costs and other post-retirement benefits is the
estimated regular cost of providing the benefits accrued in the year, adjusted
to reflect variations from that cost. The regular cost is calculated so that it
represents a substantially level percentage of current and future payroll.
Variations from regular cost are charged or credited to the profit and loss
account as a constant percentage of payroll over the estimated average remaining
working life of scheme members. Defined benefit schemes are either externally
funded, with the assets of the scheme held separately from those of the group in
separate trustee administered funds. Differences between amounts charged to the
profit and loss account and amounts funded or paid directly to members of
unfunded schemes are shown as either provisions or prepayments in the balance
sheet.

     For defined contributions schemes the amount charged to the profit and loss
account in respect of pension costs and other post-retirement benefits is the
contributions payable in the year. Differences between contributions payable in
the year and contributions actually paid are shown as either accruals or
prepayments in the balance sheet.

DEBT

     Debt is initially stated at the amount of the net proceeds after deduction
of issue costs. The carrying amount is increased by the finance cost in respect
of the accounting period and reduced by payments made in the period.

FINANCE COSTS

     Finance costs (principally interest and arrangement fees) of debt are
recognised in the profit and loss account over the term of such instruments at a
constant rate on the carrying amount.

LEASES

     Assets held under finance leases and other similar contracts, which confer
rights and obligations similar to those attached to owned assets, are
capitalised as tangible fixed assets and are depreciated over the shorter of the
lease terms or their useful lives. The capital elements of future lease
obligations are recorded as liabilities, while the interest elements are charged
to the profit and loss account over the period of the leases to produce a
constant rate of charge on the balance of capital repayments outstanding. Hire
purchase transactions are dealt with similarly, except that assets are
depreciated over their useful lives.

     Rentals under operating leases are charged on a straight-line basis over
the lease term, even if the payments are not made on such a basis.

                                      F-50
NOTES TO FINANCIAL STATEMENTS

1.  TURNOVER

     Turnover represents the invoiced value of medical and ancillary services
rendered to patients in the United Kingdom exclusive of VAT and net of trade
discounts.

2.  INVESTMENT INCOME

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                            Pounds          Pounds
                                         ------------    ------------
Other interest receivable and similar
  income.............................        25,433          67,591
                                           ========        ========

3.  INTEREST PAYABLE AND SIMILAR CHARGES

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                            Pounds           Pounds
                                         ------------    ------------
Bank loans and overdrafts............     1,820,981       1,122,456
Finance Leases.......................        53,066          93,671
Other interest payable...............       403,081         621,604
                                           --------        --------
                                          2,277,128       1,837,731
                                           ========        ========

4.  PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

     Profit on ordinary activities before taxation is stated after charging:

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                            Pounds           Pounds
                                         ------------    ------------
Depreciation and amounts written off
tangible fixed assets
     -- owned........................       693,216         556,446
     -- held under hire purchase
     agreements......................       350,136         327,988
Amortisation of goodwill.............       716,271         596,893
Operating lease rentals
     -- plant and machinery..........        44,752          79,298
     -- land and buildings...........        40,465          47,637
Auditors' remuneration for audit
services.............................        38,911          34,687
                                           ========        ========

     Amounts payable to Arthur Andersen and their associates in respect of non
audit services were Pounds 22,446 (1998 _ Pounds 706,417). Of this amount,
Pounds nil (1998 _ Pounds 685,786) relates to the acquisition of the group and
has been included as part of the cost of that acquisition.

                                      F-51
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5.  STAFF COSTS

     The average monthly number of employees (including executive directors)
was:

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                              Pounds         Pounds
                                         ------------    ------------
Medical..............................           215             201
Other................................           153             156
                                           --------        --------
                                                368             357
                                           ========        ========

     Their aggregate remuneration comprised:

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                            Pounds           Pounds
                                         ------------    ------------
Wages and salaries...................      6,460,215       5,356,228
Social security costs................        493,772         389,109
Other pension costs..................        310,896         207,008
                                          ----------      ----------
                                           7,264,883       5,952,345
                                          ==========      ==========

6.  DIRECTOR'S REMUNERATION AND TRANSACTIONS

DIRECTORS' REMUNERATION
SALARY                                        SALARY
                                       (INCLUDING                      YEAR ENDED    (INCLUDING                     PERIOD ENDED
                                        BENEFITS        PENSION       31 DECEMBER     BENEFITS        PENSION       31 DECEMBER
                                        IN KIND)     CONTRIBUTIONS        1999        IN KIND)     CONTRIBUTIONS        1998
          NAME OF DIRECTOR               Pounds         Pounds           Pounds         Pounds        Pounds           Pounds
          ----------------             -----------   --------------   ------------   -----------   --------------   ------------
John Wotherspoon.....................    165,404         27,459         192,863        150,096         27,973         178,069
Michael Broke (Chairman).............     25,000         --              25,000         16,667         --              16,667
                                         -------         ------         -------        -------         ------         -------
                                         190,404         27,459         217,863        166,763         27,973         194,736
                                         =======         ======         =======        =======         ======         =======
During the year, Pounds 17,907 (1998 _ Pounds 14,494) was paid to
ElectraFleming Limited in respect of services provided to the group by David
Symondson.

7.  TAX ON PROFIT ON ORDINARY ACTIVITIES

     The tax charge is based on the profit for the year/period and comprises:

                                          YEAR ENDED     PERIOD ENDED
                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                           Pounds          Pounds
                                         ------------    ------------
Corporation tax charge at 30.5% (1998
-31%)................................       960,000         811,000
Deferred taxation (see note 14)......       105,000        (108,000)
                                          ---------       ---------
                                          1,065,000         703,000
                                          =========       =========

                                      F-52
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8.  INTANGIBLE FIXED ASSETS -- GOODWILL

                                         31 DECEMBER     31 DECEMBER
                                             1999            1998
                                           Pounds          Pounds
                                         ------------    ------------
COSTS
At 31 December 1998..................     14,325,426         --
Additions............................        --           14,325,426
                                          ----------      ----------
At 31 December 1999..................     14,325,426      14,325,426
                                          ==========      ==========
AMORTISATION
At 31 December 1998..................        596,893         --
Charge for the year/period...........        716,271         596,893
                                          ----------      ----------
At 31 December 1999..................      1,313,164         596,893
                                          ==========      ==========
NET BOOK VALUE
At 31 December 1998..................     13,728,533         --
                                          ----------      ----------
At 31 December 1999..................     13,012,262      13,728,533
                                          ==========      ==========

9.  TANGIBLE FIXED ASSETS
LAND AND     PLANT AND     FIXTURES AND                     MOTOR
                                         BUILDINGS     MACHINERY       FITTINGS       COMPUTERS     VEHICLES       TOTAL
                                           Pounds        Pounds        Pounds           Pounds        Pounds       Pounds
                                         ----------    ----------    -------------    ----------    ---------    ----------
COST
At 31 December 1998..................    19,426,977    3,058,193        267,406         186,471      125,515     23,064,562
Additions............................     3,916,129      560,562         83,304          44,168       17,673      4,621,836
Disposals............................      (139,614)     (83,933)        --             (35,042)     (12,850)      (271,439)
                                         ----------    ---------        -------        --------      -------     ----------
At 31 December 1999..................    23,203,492    3,534,822        350,710         195,597      130,338     27,414,959
                                         ==========    =========        =======        ========      =======     ==========
DEPRECIATION
At 31 December 1998..................       306,979      415,727         42,099          60,907       11,527        837,239
Charge for the year..................       373,157      515,198         50,347          76,038       28,609      1,043,349
Disposals............................       (39,425)     (73,143)        --             (31,938)     (10,066)      (154,572)
                                         ----------    ---------        -------        --------      -------     ----------
At 31 December 1999..................       640,711      857,782         92,446         105,007       30,070      1,726,016
                                         ==========    =========        =======        ========      =======     ==========
NET BOOK VALUE
At 31 December 1998..................    19,119,998    2,642,466        225,307         125,564      113,988     22,227,323
                                         ----------    ---------        -------        --------      -------     ----------
At 31 December 1999..................    22,562,781    2,677,040        258,264          90,590      100,268     25,688,943
                                         ==========    =========        =======        ========      =======     ==========
The net book value of fixed assets for the group includes the following
amounts in respect of obligations under hire purchase agreements:

                                                       COMPUTERS,
                                      FIXTURES AND     PLANT AND       MOTOR
                                        FITTINGS       EQUIPMENT     VEHICLES
                                         Pounds          Pounds       Pounds
                                      -------------    ----------    ---------
NET BOOK VALUE......................      55,199        1,464,254      22,980
                                         -------       ----------     -------
Depreciation charged in the year....      11,206          329,798       9,132
                                         =======       ==========     =======

     The net book value of land and buildings comprises freehold property of
 Pounds 22,496,194 (1998 _  Pounds 18,890,000) and short leasehold property of
 Pounds 43,256 (1998 _  Pounds 152,000).

     Freehold land amounting to Pounds 6,900,000 (1998 _ Pounds 6,900,000) has
not been depreciated.

                                      F-53
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10.  STOCKS

                                           1999        1998
                                         --------    --------
                                          Pounds      Pounds
Drugs................................     184,206     138,586
Medical consumables..................     278,689     251,355
                                         --------    --------
                                          462,895     389,941
                                         ========    ========

     There is no material difference between the balance sheet value of stocks
and their replacement cost.

11.  DEBTORS

                                            1999          1998
                                         ----------    ----------
                                           Pounds        Pounds
Amounts falling due within one year:
Trade debtors........................     1,774,938     1,826,581
Other debtors........................       426,135       130,458
Prepayments and accrued income.......       237,612       225,162
                                         ----------    ----------
                                          2,438,685     2,182,201
                                         ----------    ----------

12.  CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

                                            1999          1998
                                         ----------    ----------
                                           Pounds        Pounds
Bank loans and overdrafts............     4,634,493     1,866,180
Obligations under hire purchase
  contracts..........................       357,279       505,258
Trade creditors......................     1,627,513     1,523,778
Amounts owed to other group
  undertakings.......................        --            --
Corporation tax......................       908,177       811,000
Other taxation and social security...       168,851       146,902
Other creditors......................        87,325        70,868
Accruals and deferred income.........     1,067,227       964,726
                                         ----------    ----------
                                          8,850,865     5,888,712
                                         ==========    ==========

                                      F-54
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

13.  CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

                                            1999          1998
                                         ----------    ----------
                                           Pounds        Pounds
Obligations under hire purchase
  contracts..........................       130,536       496,358
Bank loans...........................    24,067,207    15,631,631
Loan notes...........................     5,000,000    15,000,000
                                         ----------    ----------
                                         29,197,743    31,127,989
                                         ==========    ==========

     Bank loans are repayable half yearly in equal instalments with a final
balloon payment of Pounds 2 million falling due in March 2011. Interest is
accrued on these loans at LIBOR + 1.5%.

     Additionally, at 31 December 1999, the group had an undrawn guarantee
facility for  Pounds 1 million which expires in March 2000.

     Bank loans are secured on the property and assets of the group.

     The stepped coupon subordinated Loan Notes 2008 are fully repayable in 2008
although they can be repaid earlier at the discretion of the directors with no
financial penalty to the group. Interest accrues on the Loan Notes as follows:

     --  5% per annum until March 2000

     --  7% per annum until March 2001

     --  10% per annum until the earlier of the redemption in March 2008 or
repurchase of the Loan Notes by the group

     At 31 December 1999 unamortised loan issue costs amounted to Pounds 182,793
(1998- Pounds 105,224).

     The maturity profile of the groups borrowings at 31 December 1999 were as
follows:

                                            1999             1998
                                         ----------       ----------
                                            Pounds          Pounds
LOAN NOTES
After five years.....................     5,000,000       15,000,000
                                         ----------       ----------
BANK LOANS
Between one and two years............     1,500,000        1,500,000
Between two and five years...........     5,750,000        7,250,000
After five years.....................    16,817,207        6,881,631
                                         ----------       ----------
                                         24,067,207       15,631,631
Due within one year..................     4,412,540        1,866,180
                                         ----------       ----------
                                         28,479,747       17,497,811
                                         ----------       ----------
HIRE PURCHASE AGREEMENTS
Between one and two years............       130,536          496,358
                                         ----------       ----------
Due within one year..................       357,279          505,258
                                         ----------       ----------
                                            487,815        1,001,616
                                         ----------       ----------
TOTAL BORROWINGS INCLUDING FINANCE
  LEASES
Between one and two years............     1,630,536        1,996,358
Between two and five years...........     5,750,000        7,250,000
After five years.....................    21,817,207       21,881,631
                                         ----------       ----------
                                         29,197,743       31,127,989
Due within one year..................     4,769,819        2,371,438
                                         ----------       ----------
                                         33,967,562       33,499,427
                                         ==========       ==========

                                      F-55
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

14.  PROVISIONS FOR LIABILITIES AND CHARGES

     Deferred taxation -- accelerated capital allowances

                                             1999            1998
                                           DEFERRED        DEFERRED
                                           TAXATION        TAXATION
                                         ------------    ------------
GROUP                                       Pounds          Pounds
At beginning of year/period..........       427,000          --
Acquisition of businesses............        --             535,000
Released to profit and loss
  account............................        --            (108,000)
Charged to profit and loss account...       105,000          --
                                           --------        --------
At end of year/period................       532,000         427,000
                                           ========        ========

     Deferred taxation of Pounds 1,200,000 has not been provided on the freehold
properties as the directors currently have no intention of disposing of these
properties in the foreseeable future.

15.  CALLED-UP EQUITY SHARE CAPITAL

                                             1999            1998
                                         ------------    ------------
                                            Pounds          Pounds
AUTHORISED
450,000 ordinary shares of 10 pence
  each...............................        45,000          45,000
                                           --------        --------
ALLOTTED, CALLED-UP AND FULLY PAID...
405,000 ordinary shares of 10 pence
  each...............................        40,500          40,500
                                           --------        --------

16.  RESERVES

                                          SHARE        PROFIT
                                         PREMIUM      AND LOSS
                                         ACCOUNT      ACCOUNT        TOTAL
                                         --------    ----------    ----------
                                          Pounds       Pounds        Pounds
At beginning of year.................     364,500     1,568,646     1,933,146
Retained profit for the year.........       --        1,050,400     1,050,400
                                         --------    ----------    ----------
At end of year.......................     364,500     2,619,046     2,983,546
                                         ========    ==========    ==========

     Of the above reserves, only the profit and loss account is regarded as
distributable.

17.  RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

                                            1999           1998
                                           Pounds         Pounds
                                         -----------    -----------
Profit for the financial
year/period..........................      1,050,400      1,568,646
New shares issued....................        --             405,000
                                         -----------    -----------
Net increase in shareholders'
  funds..............................      1,050,400      1,973,646
Opening shareholders' funds..........      1,973,646        --
                                         -----------    -----------
Closing shareholders' funds..........      3,024,046      1,973,646
                                         ===========    ===========

                                      F-56
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

18.  RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES

                                            1999           1998
                                           Pounds         Pounds
                                         -----------    -----------
Operating profit.....................      4,367,095      4,041,786

Depreciation charges.................      1,043,349        884,434

Amortisation charges.................        716,271        596,893

Increase in stocks...................        (72,955)           (40)

Increase in debtors..................       (256,483)      (114,355)

Increase in creditors................        167,234        364,592
                                         -----------    -----------

NET CASH INFLOW FROM OPERATING
  ACTIVITIES.........................      5,964,511      5,773,310
                                         -----------    -----------

19.  ANALYSIS OF CASH FLOWS

                                            1999           1998
                                           Pounds         Pounds
                                         -----------    -----------
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received....................         25,433         67,591
Interest paid on bank loans..........     (1,364,261)      (996,304)
Interest paid on Loan Notes..........       (583,972)      (347,389)
Interest paid on hire purchase
  contracts..........................        (53,066)      (127,235)
                                         -----------    -----------
NET CASH OUTFLOW.....................     (1,975,866)    (1,403,337)
                                         -----------    -----------
TAXATION
Tax paid.............................     (1,072,954)    (1,289,730)
                                         -----------    -----------
NET CASH OUTFLOW.....................     (1,072,954)    (1,289,730)
                                         -----------    -----------
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Purchase of tangible fixed assets....     (4,621,836)      (799,818)
Sale of tangible fixed assets........         99,886         21,300
                                         -----------    -----------
NET CASH OUTFLOW.....................     (4,521,950)      (778,518)
                                         ===========    ===========
1999           1998
                                                                         Pounds         Pounds
                                                                       -----------    -----------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings................................        --         (24,855,445)
Net cash acquired with subsidiary undertakings.....................        --             432,020
                                                                       -----------    -----------
NET CASH OUTFLOW...................................................        --         (24,423,425)
                                                                       -----------    -----------
FINANCING
Issue of ordinary share capital....................................        --             405,000
Repayment of secured loan..........................................     (1,500,000)      (750,000)
New secured bank loans (net of issue costs)........................     12,535,070      9,056,336
New unsecured and secured loans other than from banks..............        --          15,000,000
Repaid capital element of hire purchase contracts..................       (538,244)      (700,287)
Repayment of loan notes............................................    (10,000,000)       --
                                                                       -----------    -----------
NET CASH INFLOW....................................................        496,826     23,011,049
                                                                       ===========    ===========
F-57
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

20.  RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
31 DECEMBER                    NON CASH      31 DECEMBER
                                             1999          CASHFLOW     MOVEMENTS         1999
                                            Pounds          Pounds        Pounds         Pounds
                                         -------------    ----------    ----------    -------------
Cash at bank and in hand.............         889,349       (887,480)      --                1,869
Overdraft............................         --            (221,953)      --             (221,953)
                                          -----------     ----------     -------       -----------
                                              889,349     (1,109,433)      --             (220,084)
Debt due within one year.............      (2,371,438)    (2,398,381)      --           (4,769,819)
Debt due after more than one year....     (31,127,989)     1,954,621     (24,375)      (29,197,743)
                                          -----------     ----------     -------       -----------
Net debt.............................     (32,610,078)    (1,553,193)    (24,375)      (34,187,646)
                                          ===========     ==========     =======       ===========
21.  GUARANTEES AND OTHER FINANCIAL COMMITMENTS

A)  LEASE COMMITMENTS

     The minimum annual commitment under operating leases is as follows:
OTHER                      OTHER
                                         LAND AND     OPERATING     LAND AND     OPERATING
                                         BUILDINGS      LEASES      BUILDINGS      LEASES
                                           1999          1999         1998          1998
                                          Pounds        Pounds       Pounds        Pounds
                                         ---------    ----------    ---------    ----------
Operating leases expiring:
  -- within 1 year...................      39,710       52,189        43,243       35,342
  -- between 1-5 years...............     129,058       96,215       168,768       85,690
                                          -------      -------       -------      -------
                                          168,768      148,404       212,011      121,032
                                          =======      =======       =======      =======
B)  PENSION ARRANGEMENTS

     The group operates a defined benefit pension scheme for all employees,
although this scheme has been closed to new entrants since 1 January 1999. The
assets of the scheme are held separately from those of the group in an
independently administered fund. Contributions to the scheme are charged to the
profit and loss account so as to spread the cost of pensions over the employees'
working lives with the group. The contributions to the scheme are determined
with the advice of independent qualified actuaries on the basis of triennial
valuations.

     The most recent valuation was conducted as at 1 June 1999 using both the
Minimum Funding Requirement and Projected Unit methods.

     The valuation using the Minimum Funding Requirement showed that the market
value of the scheme's assets were  Pounds 2,787,000, representing 97% of the
benefits due to members (a deficit of  Pounds 89,000). The assumptions used in
performing the Minimum Funding Requirement valuation are governed by the
Pensions Act 1995 and guidance issued by the Institute and Faculty of Actuaries.

     The valuation using the Projected Unit method showed that the actuarial
value of the scheme's assets were  Pounds 2,011,000, representing 82% of the
benefits due to members (a deficit of  Pounds 432,000). The principal long-term
actuarial assumptions used under the Projected Unit method were that investment
returns would be 8.5% per annum and that the increase in pensionable earnings
would be 7% per annum.

                                      F-58
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The Trustees and the Directors have considered the deficits arising under
both valuations, and they consider that the Minimum Funding Requirement
valuation is the most appropriate basis for determining the level of future
contributions that will be required. Accordingly, the employer's contribution
rates have remained unchanged as follows:

Staff                        12.2% per annum
Management                   13.0% per annum
Senior Management            17.7% per annum

     The Group is amortising the deficit arising under the Projected Unit basis
over the estimated service lives of the employees. Consequently, the pension
charge for the year was Pounds 310,896 (1998 _ Pounds 260,198) which included a
regular charge of Pounds 284,896 (1998 _ Pounds 260,198)

C)  CAPITAL COMMITMENTS

     At 31 December 1999 the capital commitments of the group were:

                                          1999       1998
                                         Pounds     Pounds
                                         -------    -------
Amounts contracted for but not
provided for.........................    111,016    107,000
                                         =======    =======

22.  SUMMARY OF RELEVANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

     The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the UK (UK GAAP)
which differ in certain significant respects from those generally accepted in
the United States (US GAAP). Set forth below is a summary of certain significant
differences between US and UK GAAP which management believe are relevant to the
group.

DEFERRED INCOME TAX

     Under UK GAAP, deferred taxation is calculated under the liability method
to the extent that it is probable that the liabilities will crystallise in the
foreseeable future. Under US GAAP, deferred taxation is provided for all
temporary differences using the asset and liability method. Valuation allowances
are provided for to the extent that the realisation of deferred tax assets is
not more likely than not. An adjustment to record a deferred tax liability of
Pounds 1,200,000 in respect of future capital gains taxation has been made in
the opening balance sheet of the Group at 4 March 1998. Accordingly under US
GAAP this resulted in a corresponding increase in goodwill arising on
acquisition of Pounds 1,200,000.

PENSION COSTS

     Under UK GAAP, pension costs are accounted for in accordance with Statement
of Standard Accounting Practice  24. As a result, such costs are charged against
profit over employees' working lives. Under US GAAP, pension costs are
determined in accordance with the requirements of Statement of Financial
Accounting Standards No. 87. Differences between the UK and US GAAP figures
arise from the requirement to use different actuarial methods and assumptions
and a different method of amortising surpluses or deficits.

CAPITALISATION OF INTEREST

     Under UK GAAP, interest on external financing of assets in the course of
construction is charged to income as incurred. US GAAP requires the
capitalisation of interest assets if certain conditions are met in respect of
assets in the course of construction. This relates to the acquisition and
development of a new cancer centre at 49 Parkside during the year.

                                      F-59
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

DEBT

     Under UK GAAP, debt is initially stated at the amount of the net proceeds
after deduction of issue costs. These unamortised issue costs amount to
 Pounds 182,793 at 31 December 1999. US GAAP requires debt issue costs to be
separately classified within current assets.

CASH FLOW STATEMENT

     Under UK GAAP, the consolidated cash flow statements are presented in
accordance with UK Financial Reporting Standard No. 1 (FRS 1). The statements
prepared under FRS  1 present substantially the same information as that
required under SFAS No.  95. Under US GAAP, however, there are certain
differences from UK GAAP with regard to classification of items within the cash
flow statement and with regard to the definition of cash.

     Under FRS  1, cash flows are presented separately for operating activities;
returns on investments and servicing of finance; taxation; capital expenditure
and financial investments; acquisitions and disposals; dividends paid to the
company's shareholders; management of liquid resources and financing. SFAS
No. 95 cash flows are reported as resulting from operating, investing and
financing activities.

     Under SFAS No. 95 cash and cash equivalents include cash and short-term
investments with original maturities of three months or less. Under FRS  1 cash
comprises cash in hand and at bank and overnight deposits, net of bank
overdrafts. The presentation of cash flows provided by (used in) operating,
investing and financing activities in accordance with US GAAP would be as
follows:

                                          YEAR ENDED
                                         DECEMBER 31,
                                             1999
                                            Pounds
                                         ------------
Net cash provided by operating
activities...........................      2,915,691
Net cash used in investing
activities...........................     (4,521,950)
Net cash provided by financing
activities...........................        718,779
Net decrease in cash and cash
equivalents..........................       (887,480)
Cash and cash equivalents under US
  GAAP at beginning of year..........        889,349
                                          ----------
Cash and cash equivalents under US
  GAAP at end of year................          1,869
                                          ==========

RECONCILIATION TO US ACCOUNTING PRINCIPLES

     The following is a summary of the adjustments to net income and
shareholders' equity which would have been required if US GAAP had been applied
instead of UK GAAP.

PROFIT ATTRIBUTABLE TO SHAREHOLDERS

                                          YEAR ENDED
                                         DECEMBER 31,
                                             1999
                                            Pounds
                                         ------------
Profit attributable to shareholders
  as reported in the consolidated
  profit and loss account............      1,050,400
Adjustments
     -- deferred income tax..........        (60,000)
     -- pension costs................       (106,104)
     -- capitalisation of interest...         21,853
     -- tax effect of the above
     adjustments.....................         25,696
                                          ----------
Net income under US GAAP.............        931,845
                                          ==========

                                      F-60
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

                                              AT
                                         DECEMBER 31,
                                             1999
                                            Pounds
                                         ------------
SHAREHOLDERS' EQUITY
Shareholders' funds as reported in
  the consolidated balance sheet.....      3,024,046
Adjustments
     -- deferred income tax..........       (110,000)
     -- pensions costs...............       (805,104)
     -- capitalisation of interest...         21,853
     -- tax effect of the above
     adjustments.....................        245,557
                                          ----------
Shareholders' equity under US GAAP...      2,376,352
                                          ==========

                                      F-61
[LOGO]
PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by United Surgical Partners
International, Inc. in connection with the issuance and distribution of common
stock being registered. All amounts are estimates except the SEC registration
fee and the NASD filing fee.

SEC registration fee.................    $ 34,500
NASD filing fee......................       *
Nasdaq National Market Listing Fee...       *
Printing and engraving costs.........       *
Legal fees and expenses..............       *
Accounting fees and expenses.........       *
Transfer Agent and Registrar fees....       *
Miscellaneous expenses...............       *
                                         --------
     Total...........................    $  *
                                         ========

------------

* To be supplied by amendment.

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees)), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.

     The Company's Amended and Restated Certificate of Incorporation provides
for the indemnification of directors to the fullest extent permitted by the
DGCL. In addition, as permitted by

                                      II-1
the DGCL, the Amended and Restated Certificate of Incorporation provides that
directors of the Company shall have no personal liability to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except (1) for any breach of the director's duty of loyalty to the Company or
its stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (3) under Section 174 of the
DGCL or (4) for any transaction from which a director derived an improper
personal benefit.

     The Company's Amended and Restated Certificate of Incorporation provides
for the indemnification of all current and former directors and all current or
former officers to the fullest extent permitted by the DGCL.

     The Company has entered into indemnification agreements with its directors
and executive officers, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

     The following information relates to all securities issued or sold by the
Company in the last three years and not registered under the Securities Act.
Each of the transactions described below was conducted in reliance upon the
exemptions from registration provided in Sections 3(b) and 4(2) of the
Securities Act and the rules and regulations promulgated thereunder. Each of the
certificates representing the Company's securities issued in connection with
such transaction contains a restrictive legend.

     On March 2, 1998, United Surgical Partners International, Inc. sold 415,391
shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII, L.P. for
a purchase price of $830,782.

     On March 2, 1998, United Surgical Partners International, Inc. sold 6,208
shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a purchase
price of $12,416.

     On March 2, 1998, United Surgical Partners International, Inc. sold 5,064
shares of Class A Common Stock to Patrick J. Welsh for a purchase price of
$10,128.

     On March 2, 1998, United Surgical Partners International, Inc. sold 5,064
shares of Class A Common Stock to Russell L. Carson for a purchase price of
$10,128.

     On March 2, 1998, United Surgical Partners International, Inc. sold 5,064
shares of Class A Common Stock to Bruce K. Anderson for a purchase price of
$10,128.

     On March 2, 1998, United Surgical Partners International, Inc. sold 887
shares of Class A Common Stock to Richard H. Stowe for a purchase price of
$1,774.

     On March 2, 1998, United Surgical Partners International, Inc. sold 887
shares of Class A Common Stock to Andrew M. Paul for a purchase price of $1,774.

     On March 2, 1998, United Surgical Partners International, Inc. sold 2,661
shares of Class A Common Stock to Thomas E. McInerney for a purchase price of
$5,322.

     On March 2, 1998, United Surgical Partners International, Inc. sold 45
shares of Class A Common Stock to Laura VanBuren for a purchase price of $90.

     On March 2, 1998, United Surgical Partners International, Inc. sold 887
shares of Class A Common Stock to Robert A. Minicucci for a purchase price of
$1,774.

     On March 2, 1998, United Surgical Partners International, Inc. sold 310
shares of Class A Common Stock to Anthony deNicola for a purchase price of $620.

     On March 2, 1998, United Surgical Partners International, Inc. sold 133
shares of Class A Common Stock to Rudolph E. Rupert for a purchase price of
$266.

     On March 2, 1998, United Surgical Partners International, Inc. sold 683
shares of Class A Common Stock to Paul B. Queally for a purchase price of
$1,366.

                                      II-2
On March 2, 1998, United Surgical Partners International, Inc. sold 177
shares of Class A Common Stock to D. Scott Mackesy for a purchase price of $354.

     On March 2, 1998, United Surgical Partners International, Inc. sold 56,539
shares of Class A Common Stock to Donald Steen for a purchase price of $113,078.

     On April 30, 1998, United Surgical Partners International, Inc. sold
6,067,274 shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII,
L.P. for a purchase price of $12,134,548.

     On April 30, 1998, United Surgical Partners International, Inc. sold 90,682
shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a purchase
price of $181,364.

     On April 30, 1998, United Surgical Partners International, Inc. sold 73,971
shares of Class A Common Stock to Patrick J. Welsh for a purchase price of
$147,942.

     On April 30, 1998, United Surgical Partners International, Inc. sold 73,971
shares of Class A Common Stock to Russell L. Carson for a purchase price of
$147,942.

     On April 30, 1998, United Surgical Partners International, Inc. sold 73,971
shares of Class A Common Stock to Bruce K. Anderson for a purchase price of
$147,942.

     On April 30, 1998, United Surgical Partners International, Inc. sold 12,955
shares of Class A Common Stock to Richard H. Stowe for a purchase price of
$25,910.

     On April 30, 1998, United Surgical Partners International, Inc. sold 12,955
shares of Class A Common Stock to Andrew M. Paul for a purchase price of
$25,910.

     On April 30, 1998, United Surgical Partners International, Inc. sold 38,864
shares of Class A Common Stock to Thomas E. McInerney for a purchase price of
$77,728.

     On April 30, 1998, United Surgical Partners International, Inc. sold 648
shares of Class A Common Stock to Laura VanBuren for a purchase price of $1,296.

     On April 30, 1998, United Surgical Partners International, Inc. sold 12,955
shares of Class A Common Stock to Robert A. Minicucci for a purchase price of
$25,910.

     On April 30, 1998, United Surgical Partners International, Inc. sold 4,534
shares of Class A Common Stock to Anthony deNicola for a purchase price of
$9,068.

     On April 30, 1998, United Surgical Partners International, Inc. sold 1,943
shares of Class A Common Stock to Rudolph E. Rupert for a purchase price of
$3,886.

     On April 30, 1998, United Surgical Partners International, Inc. sold 9,975
shares of Class A Common Stock to Paul B. Queally for a purchase price of
$19,950.

     On April 30, 1998, United Surgical Partners International, Inc. sold 2,591
shares of Class A Common Stock to D. Scott Mackesy for a purchase price of
$5,182.

     On April 30, 1998, United Surgical Partners International, Inc. sold 10,500
shares of Class A Common Stock to Kenneth Melkus for a purchase price of
$21,000.

     On April 30, 1998, United Surgical Partners International, Inc. sold
599,711 shares of Class A Common Stock to Donald Steen for a purchase price of
$1,199,422.

     On April 30, 1998, United Surgical Partners International, Inc. sold
187,500 shares of Class A Common Stock to Sue Shelley for a purchase price of
$375,000.

     On April 30, 1998, United Surgical Partners International, Inc. sold 37,500
shares of Class A Common Stock to Laurie Hogue for a purchase price of $75,000.

     On April 30, 1998, United Surgical Partners International, Inc. sold 75,000
shares of Class A Common Stock to Michael Crews for a purchase price of
$150,000.

     On April 30, 1998, United Surgical Partners International, Inc. sold 37,500
shares of Class A Common Stock to Suzan Nelson for a purchase price of $75,000.

                                      II-3
On April 30, 1998, United Surgical Partners International, Inc. sold 75,000
shares of Class A Common Stock to David McDonald for a purchase price of
$150,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to M. Robert Knapp Trust for a purchase price of
$40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to M. Robert Knapp Trust for a
purchase price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 40,000
shares of Class A Common Stock to Calver Fund, Inc. for a purchase price of
$80,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 120
shares of Series A Redeemable Preferred Stock to Calver Fund, Inc. for a
purchase price of $120,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 40,000
shares of Class A Common Stock to James Ken Newman for a purchase price of
$80,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 120
shares of Series A Redeemable Preferred Stock to James Ken Newman for a purchase
price of $120,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 40,000
shares of Class A Common Stock to NGKE/USPI Partners for a purchase price of
$80,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 120
shares of Series A Redeemable Preferred Stock to NGKE/USPI for a purchase price
of $120,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to L&W Co. for a purchase price of $40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to L&W Co. for a purchase price of
$60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30,000
shares of Class A Common Stock to Norman Brownstein for a purchase price of
$60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 90
shares of Series A Redeemable Preferred Stock to Norman Brownstein for a
purchase price of $90,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to William Wilcox for a purchase price of
$40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to William Wilcox for a purchase
price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 40,000
shares of Class A Common Stock to Paul Whitman for a purchase price of $80,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 120
shares of Series A Redeemable Preferred Stock to Paul Whitman for a purchase
price of $120,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30,000
shares of Class A Common Stock to Rivid LLC for a purchase price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 90
shares of Series A Redeemable Preferred Stock to Rivid LLC for a purchase price
of $90,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 25,500
shares of Class A Common Stock to CGJR II, L.P. for a purchase price of $51,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 77
shares of Series A Redeemable Preferred Stock to CGJR II, L.P. for a purchase
price of $77,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 14,500
shares of Class A Common Stock to CGJR/MF III, L.P. for a purchase price of
$29,000.

                                      II-4
On June 26, 1998, United Surgical Partners International, Inc. sold 43
shares of Series A Redeemable Preferred Stock to CGJR/MF III, L.P. for a
purchase price of $43,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to Patrick McMullan for a purchase price of
$40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to Patrick McMullan for a purchase
price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 20,000
shares of Class A Common Stock to Craig Callen for a purchase price of $40,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 60
shares of Series A Redeemable Preferred Stock to Craig Callen for a purchase
price of $60,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 10,000
shares of Class A Common Stock to Lawrence Lavine for a purchase price of
$20,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to Lawrence Lavine for a purchase
price of $30,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 10,000
shares of Class A Common Stock to David Dennis for a purchase price of $20,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to David Dennis for a purchase
price of $30,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 10,000
shares of Class A Common Stock to Michael R. & Jane L. Nicolais for a purchase
price of $20,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to Michael R. & Jane L. Nicolais
for a purchase price of $30,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 10,000
shares of Class A Common Stock to Tom C. Davis for a purchase price of $20,000.

     On June 26, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to Tom C. Davis for a purchase
price of $30,000.

     On July 31, 1998, United Surgical Partners International, Inc. sold 473,581
shares of Class A Common Stock to Edward W. Karrels for a purchase price of
$947,162.

     On July 31, 1998, United Surgical Partners International, Inc. sold 327,031
shares of Class A Common Stock to Michael W. Barton for a purchase price of
$654,062.

     On July 31, 1998, United Surgical Partners International, Inc. sold 65,587
shares of Class A Common Stock to Jeffrey L. Stockard for a purchase price of
$131,174.

     On July 31, 1998, United Surgical Partners International, Inc. sold 2,677
shares of Class A Common Stock to Alice J. Charron for a purchase price of
$5,354.

     On July 31, 1998, United Surgical Partners International, Inc. sold 14,261
shares of Class A Common Stock to Charles Morton for a purchase price of
$28,522.

     On July 31, 1998, United Surgical Partners International, Inc. sold 27,975
shares of Class A Common Stock to David Gaw for a purchase price of $55,950.

     On July 31, 1998, United Surgical Partners International, Inc. sold 7,138
shares of Class A Common Stock to Sandra Holshouser for a purchase price of
$14,276.

     On July 31, 1998, United Surgical Partners International, Inc. issued 2,716
shares of Series  B Convertible Preferred Stock to shareholders of Health
Horizons, Inc. in connection with the merger of Health Horizons, Inc. with and
into United Surgical Partners International, Inc.

                                      II-5
On September 28, 1998, United Surgical Partners International, Inc. sold
2,917,115 shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII,
L.P. for a purchase price of $5,834,230.

     On September 28, 1998, United Surgical Partners International, Inc. sold
4,722 shares of Series A Redeemable Preferred Stock to Welsh, Carson, Anderson &
Stowe VII, L.P. for a purchase price of $4,722,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
43,600 shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a
purchase price of $87,200.

     On September 28, 1998, United Surgical Partners International, Inc. sold 71
shares of Series A Redeemable Preferred Stock to WCAS Healthcare Partners, L.P.
for a purchase price of $71,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
35,565 shares of Class A Common Stock to Patrick J. Welsh for a purchase price
of $71,130.

     On September 28, 1998, United Surgical Partners International, Inc. sold 57
shares of Series A Redeemable Preferred Stock to Patrick J. Welsh for a purchase
price of $57,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
35,565 shares of Class A Common Stock to Russell L. Carson for a purchase price
of $71,130.

     On September 28, 1998, United Surgical Partners International, Inc. sold 57
shares of Series A Redeemable Preferred Stock to Russell L. Carson for a
purchase price of $57,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
35,565 shares of Class A Common Stock to Bruce K. Anderson for a purchase price
of $71,130.

     On September 28, 1998, United Surgical Partners International, Inc. sold 57
shares of Series A Redeemable Preferred Stock to Bruce K. Anderson for a
purchase price of $57,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
6,229 shares of Class A Common Stock to Richard H. Stowe for a purchase price of
$12,458.

     On September 28, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Richard H. Stowe for a purchase
price of $10,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
6,229 shares of Class A Common Stock to Andrew M. Paul for a purchase price of
$12,458.

     On September 28, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Andrew M. Paul for a purchase
price of $10,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
18,686 shares of Class A Common Stock to Thomas E. McInerney for a purchase
price of $37,372.

     On September 28, 1998, United Surgical Partners International, Inc. sold 30
shares of Series A Redeemable Preferred Stock to Thomas E. McInerney for a
purchase price of $30,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
311 shares of Class A Common Stock to Laura VanBuren for a purchase price of
$622.

     On September 28, 1998, United Surgical Partners International, Inc. sold 2
shares of Series A Redeemable Preferred Stock to Laura VanBuren for a purchase
price of $2,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
6,229 shares of Class A Common Stock to Robert A. Minicucci for a purchase price
of $12,458.

     On September 28, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Robert A. Minicucci for a
purchase price of $10,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
2,180 shares of Class A Common Stock to Anthony deNicola for a purchase price of
$4,360.

                                      II-6
On September 28, 1998, United Surgical Partners International, Inc. sold 4
shares of Series A Redeemable Preferred Stock to Anthony deNicola for a purchase
price of $4,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
4,796 shares of Class A Common Stock to Paul B. Queally for a purchase price of
$9,592.

     On September 28, 1998, United Surgical Partners International, Inc. sold 8
shares of Series A Redeemable Preferred Stock to Paul B. Queally for a purchase
price of $8,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
934 shares of Class A Common Stock to Rudolph E. Rupert for a purchase price of
$1,868.

     On September 28, 1998, United Surgical Partners International, Inc. sold 2
shares of Series A Redeemable Preferred Stock to Rudolph E. Rupert for a
purchase price of $2,000

     On September 28, 1998, United Surgical Partners International, Inc. sold
1,246 shares of Class A Common Stock to D. Scott Mackesy for a purchase price of
$2,492.

     On September 28, 1998, United Surgical Partners International, Inc. sold 2
shares of Series A Redeemable Preferred Stock to D. Scott Mackesy for a purchase
price of $2,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
4,500 shares of Class A Common Stock to Kenneth Melkus for a purchase price of
$9,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold 8
shares of Series A Redeemable Preferred Stock to Kenneth Melkus for a purchase
price of $8,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
218,750 shares of Class A Common Stock to Donald Steen for a purchase price of
$437,500.

     On September 28, 1998, United Surgical Partners International, Inc. sold
62,500 shares of Class A Common Stock to Sue Shelley for a purchase price of
$125,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
12,500 shares of Class A Common Stock to Laurie Hogue for a purchase price of
$25,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
25,000 shares of Class A Common Stock to Michael Crews for a purchase price of
$50,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
12,500 shares of Class A Common Stock to Suzan Nelson for a purchase price of
$25,000.

     On September 28, 1998, United Surgical Partners International, Inc. sold
25,000 shares of Class A Common Stock to David McDonald for a purchase price of
$50,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold
23,328 shares of Series A Redeemable Preferred Stock to Welsh, Carson, Anderson
& Stowe VII, L.P. for a purchase price of $23,328,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 351
shares of Series A Redeemable Preferred Stock to WCAS Healthcare Partners, L.P.
for a purchase price of $351,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 282
shares of Series A Redeemable Preferred Stock to Patrick J. Welsh for a purchase
price of $282,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 282
shares of Series A Redeemable Preferred Stock to Russell L. Carson for a
purchase price of $282,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 282
shares of Series A Redeemable Preferred Stock to Bruce K. Anderson for a
purchase price of $282,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 49
shares of Series A Redeemable Preferred Stock to Richard H. Stowe for a purchase
price of $49,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 49
shares of Series A Redeemable Preferred Stock to Andrew M. Paul for a purchase
price of $49,000.

                                      II-7
On October 9, 1998, United Surgical Partners International, Inc. sold 148
shares of Series A Redeemable Preferred Stock to Thomas E. McInerney for a
purchase price of $148,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Laura VanBuren for a purchase
price of $10,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 49
shares of Series A Redeemable Preferred Stock to Robert A. Minicucci for a
purchase price of $49,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 20
shares of Series A Redeemable Preferred Stock to Anthony deNicola for a purchase
price of $20,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 40
shares of Series A Redeemable Preferred Stock to Paul B. Queally for a purchase
price of $40,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to Rudolph E. Rupert for a
purchase price of $10,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 10
shares of Series A Redeemable Preferred Stock to D. Scott Mackesy for a purchase
price of $10,000.

     On October 9, 1998, United Surgical Partners International, Inc. sold 40
shares of Series A Redeemable Preferred Stock to Kenneth Melkus for a purchase
price of $40,000.

     On October 26, 1998, United Surgical Partners International, Inc. sold
4,711,273 shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII,
L.P. for a purchase price of $16,489.455.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
70,415 shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a
purchase price of $246,452.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
57,439 shares of Class A Common Stock to Patrick J. Welsh for a purchase price
of $201,036.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
57,439 shares of Class A Common Stock to Russell L. Carson for a purchase price
of $201,036.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
57,439 shares of Class A Common Stock to Bruce K. Anderson for a purchase price
of $201,036.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
10,060 shares of Class A Common Stock to Richard H. Stowe for a purchase price
of $35,210.

     On October 26, 1998, United Surgical Partners International, Inc. sold
10,060 shares of Class A Common Stock to Richard H. Stowe for a purchase price
of $35,210.

     On October 26, 1998, United Surgical Partners International, Inc. sold
30,178 shares of Class A Common Stock to Thomas E. McInerney for a purchase
price of $105,623.

     On October 26, 1998, United Surgical Partners International, Inc. sold 503
shares of Class A Common Stock to Laura VanBuren for a purchase price of
$1,760.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
10,060 shares of Class A Common Stock to Robert A. Minicucci for a purchase
price of $35,210.

     On October 26, 1998, United Surgical Partners International, Inc. sold
3,521 shares of Class A Common Stock to Anthony deNicola for a purchase price of
$12,323.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
1,509 shares of Class A Common Stock to Rudolph E. Rupert for a purchase price
of $5,281.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
7,746 shares of Class A Common Stock to Paul B. Queally for a purchase price of
$27,111.

     On October 26, 1998, United Surgical Partners International, Inc. sold
2,012 shares of Class A Common Stock to D. Scott Mackesy for a purchase price of
$7,042.

                                      II-8
On October 26, 1998, United Surgical Partners International, Inc. sold
7,518 shares of Class A Common Stock to Lauren Melkus for a purchase price of
$26,313.

     On October 26, 1998, United Surgical Partners International, Inc. sold
12,593 shares of Class A Common Stock to Tucker Taylor for a purchase price of
$44,075.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
12,593 shares of Class A Common Stock to Alyce Craddock for a purchase price of
$44,075.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
6,296 shares of Class A Common Stock to Greg Koonsman for a purchase price of
$22,036.

     On October 26, 1998, United Surgical Partners International, Inc. sold
6,296 shares of Class A Common Stock to Jon O'Sullivan for a purchase price of
$22,036.

     On October 26, 1998, United Surgical Partners International, Inc. sold
1,209,261 shares of Class A Common Stock to Health Care Capital Partners, L.P.
for a purchase price of $4,232,413.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
50,032 shares of Class A Common Stock to Health Care Executive Partners, L.P.
for a purchase price of $175,112.

     On October 26, 1998, United Surgical Partners International, Inc. sold
157,202 shares of Class A Common Stock to Donald Steen for a purchase price of
$550,207.

     On October 26, 1998, United Surgical Partners International, Inc. sold
189,524 shares of Class A Common Stock to William Wilcox for a purchase price of
$663,334.

     On October 26, 1998, United Surgical Partners International, Inc. sold
7,346 shares of Class A Common Stock to Sue Shelley for a purchase price of
$25,711.

     On October 26, 1998, United Surgical Partners International, Inc. sold
14,692 shares of Class A Common Stock to Jeffrey Stockard for a purchase price
of $51,422.

     On October 26, 1998, United Surgical Partners International, Inc. sold
3,673 shares of Class A Common Stock to Laurie Hogue for a purchase price of
$12,855.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
11,019 shares of Class A Common Stock to Michael Crews for a purchase price of
$38,566.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
5,509 shares of Class A Common Stock to David McDonald FBO Tracy McDonald for a
purchase price of $19,281.50.

     On October 26, 1998, United Surgical Partners International, Inc. sold
3,673 shares of Class A Common Stock to James Branon for a purchase price of
$12,855.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,702,219 shares of Class A Common Stock to Welsh, Carson, Anderson & Stowe VII,
L.P. for a purchase price of $5,957,766.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,110,355 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Welsh, Carson, Anderson & Stowe VII, L.P. for consideration
of $1,110,355.

     On November 18, 1998, United Surgical Partners International, Inc. sold
25,442 shares of Class A Common Stock to WCAS Healthcare Partners, L.P. for a
purchase price of $89,047.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$16,700 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to WCAS Healthcare Partners, L.P. for consideration of $16,700.

     On November 18, 1998, United Surgical Partners International, Inc. sold
20,753 shares of Class A Common Stock to Patrick J. Welsh for a purchase price
of $72,635.50.

                                      II-9
On November 18, 1998, United Surgical Partners International, Inc. sold
$13,434 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Patrick J. Welsh for consideration of $13,434.

     On November 18, 1998, United Surgical Partners International, Inc. sold
20,753 shares of Class A Common Stock to Russell L. Carson for a purchase price
of $72,635.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$13,434 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Russell L. Carson for consideration of $13,434.

     On November 18, 1998, United Surgical Partners International, Inc. sold
20,753 shares of Class A Common Stock to Bruce K. Anderson for a purchase price
of $72,635.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$13,434 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Bruce K. Anderson for consideration of $13,434.

     On November 18, 1998, United Surgical Partners International, Inc. sold
3,635 shares of Class A Common Stock to Richard H. Stowe for a purchase price of
$12,722.50

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,375 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Richard H. Stowe for consideration of $2,375.

     On November 18, 1998, United Surgical Partners International, Inc. sold
3,635 shares of Class A Common Stock to Andrew M. Paul for a purchase price of
$12,722.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,375 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Andrew M. Paul for consideration of $2,375.

     On November 18, 1998, United Surgical Partners International, Inc. sold
10,904 shares of Class A Common Stock to Thomas E. McInerney for a purchase
price of $38,164.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$7,051 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Thomas E. McInerney for consideration of $7,051.

     On November 18, 1998, United Surgical Partners International, Inc. sold 182
shares of Class A Common Stock to Laura VanBuren for a purchase price of $637.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$445 aggregate principal amount of 7.0% Senior Subordinated Notes due April 30,
2008, to Laura VanBuren for consideration of $445.

     On November 18, 1998, United Surgical Partners International, Inc. sold
3,635 shares of Class A Common Stock to Robert A. Minicucci for a purchase price
of $12,722.50

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,375 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Robert A. Minicucci for consideration of $2,375.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,272 shares of Class A Common Stock to Anthony deNicola for a purchase price of
$4,452.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$965 aggregate principal amount of 7.0% Senior Subordinated Notes due April 30,
2008, to Anthony deNicola for consideration of $965.

     On November 18, 1998, United Surgical Partners International, Inc. sold 545
shares of Class A Common Stock to Rudolph E. Rupert for a purchase price of
$1,907.50.

                                     II-10
On November 18, 1998, United Surgical Partners International, Inc. sold
$445 aggregate principal amount of 7.0% Senior Subordinated Notes due April 30,
2008, to Rudolph E. Rupert for consideration of $445.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,799 shares of Class A Common Stock to Paul B. Queally for a purchase price of
$9,796.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,856 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Paul B. Queally for consideration of $1,856.

     On November 18, 1998, United Surgical Partners International, Inc. sold 727
shares of Class A Common Stock to D. Scott Mackesy for a purchase price of
$2,544.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$445 aggregate principal amount of 7.0% Senior Subordinated Notes due April 30,
2008, to D. Scott Mackesy for consideration of $445.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,716 shares of Class A Common Stock to Lauren Melkus for a purchase price of
$9,506.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,856 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Lauren Melkus for consideration of $1,856.

     On November 18, 1998, United Surgical Partners International, Inc. sold
4,550 shares of Class A Common Stock to Tucker Taylor for a purchase price of
$15,925.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,969 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Tucker Taylor for consideration of $2,969.

     On November 18, 1998, United Surgical Partners International, Inc. sold
4,550 shares of Class A Common Stock to Alyce Craddock for a purchase price of
$15,925.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$2,969 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Alyce Craddock for consideration of $2,969.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,275 shares of Class A Common Stock to Greg Koonsman for a purchase price of
$7,962.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,484 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Greg Koonsman for consideration of $1,484.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,275 shares of Class A Common Stock to Jon O'Sullivan for a purchase price of
$7,962.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$1,484 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Jon O'Sullivan for consideration of $1,484.

     On November 18, 1998, United Surgical Partners International, Inc. sold
436,916 shares of Class A Common Stock to Health Care Capital Partners, L.P. for
a purchase price of $1,529,206.

     On November 18, 1998, United Surgical Partners International, Inc. sold
$285,085 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Health Care Capital Partners, L.P. for consideration of
$285,085.

     On November 18, 1998, United Surgical Partners International, Inc. sold
18,077 shares of Class A Common Stock to Health Care Executive Partners, L.P.
for a purchase price of $63,269.50.

                                     II-11
On November 18, 1998, United Surgical Partners International, Inc. sold
$11,801 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Health Care Executive Partners, L.P. for consideration of
$11,801.

     On November 18, 1998, United Surgical Partners International, Inc. sold
56,798 shares of Class A Common Stock to Donald Steen for a purchase price of
$198,793.

     On November 18, 1998, United Surgical Partners International, Inc. sold
68,476 shares of Class A Common Stock to William Wilcox for a purchase price of
$239,666.

     On November 18, 1998, United Surgical Partners International, Inc. sold
2,654 shares of Class A Common Stock to Sue Shelley for a purchase price of
$9,289.

     On November 18, 1998, United Surgical Partners International, Inc. sold
5,308 shares of Class A Common Stock to Jeffrey L. Stockard for a purchase price
of $18,578.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,327 shares of Class A Common Stock to Laurie Hogue for a purchase price of
$4,644.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
3,981 shares of Class A Common Stock to Michael Crews for a purchase price of
$13,933.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,991 shares of Class A Common Stock to David McDonald FBO Tracy McDonald for a
purchase price of $6,968.50.

     On November 18, 1998, United Surgical Partners International, Inc. sold
1,327 shares of Class A Common Stock to James Branon for a purchase price of
$4,644.50.

     On January 27, 1999 United Surgical Partners International, Inc. sold 7,500
shares of Class A Common Stock to W. Glenn Bradham, M.D. for a purchase price of
$30,000.

     On January 27, 1999 United Surgical Partners International, Inc. sold
15,000 shares of Class A Common Stock to Maria I. Perales, M.D. for a purchase
price of $60,000.

     On January 27, 1999 United Surgical Partners International, Inc. sold
25,000 shares of Class A Common Stock to Eddie Joe Reddick for a purchase price
of $100,000.

     On April 2, 1999, United Surgical Partners International, Inc. sold
$6,691,851 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Welsh, Carson, Anderson & Stowe VII, L.P. for consideration
of $6,691,851.

     On April 2, 1999, United Surgical Partners International, Inc. sold
$100,646 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to WCAS Healthcare Partners, L.P. for consideration of $100,646.

     On April 2, 1999, United Surgical Partners International, Inc. sold $80,963
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Patrick J. Welsh for consideration of $80,963.

     On April 2, 1999, United Surgical Partners International, Inc. sold $80,963
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Russell L. Carson for consideration of $80,963.

     On April 2, 1999, United Surgical Partners International, Inc. sold $80,963
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Bruce K. Anderson for consideration of $80,963.

     On April 2, 1999, United Surgical Partners International, Inc. sold $14,314
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Richard H. Stowe for consideration of $14,314.

     On April 2, 1999, United Surgical Partners International, Inc. sold $14,314
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Andrew M. Paul for consideration of $14,314.

                                     II-12
On April 2, 1999, United Surgical Partners International, Inc. sold $42,495
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Thomas E. McInerney for consideration of $42,495.

     On April 2, 1999, United Surgical Partners International, Inc. sold $2,684
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Laura VanBuren for consideration of $2,684.

     On April 2, 1999, United Surgical Partners International, Inc. sold $14,314
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Robert A. Minicucci for consideration of $14,314.

     On April 2, 1999, United Surgical Partners International, Inc. sold $5,814
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Anthony deNicola for consideration of $5,814.

     On April 2, 1999, United Surgical Partners International, Inc. sold $2,684
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Rudolph E. Rupert for consideration of $2,684.

     On April 2, 1999, United Surgical Partners International, Inc. sold $11,183
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Paul B. Queally for consideration of $11,183.

     On April 2, 1999, United Surgical Partners International, Inc. sold $2,684
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to D. Scott Mackesy for consideration of $2,684.

     On April 2, 1999, United Surgical Partners International, Inc. sold $11,183
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Lauren Melkus for consideration of $11,183.

     On April 2, 1999, United Surgical Partners International, Inc. sold $17,893
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Tucker Taylor for consideration of $17,893.

     On April 2, 1999, United Surgical Partners International, Inc. sold $17,893
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Alyce Craddock for consideration of $17,893.

     On April 2, 1999, United Surgical Partners International, Inc. sold $8,947
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Greg Koonsman for consideration of $8,947.

     On April 2, 1999, United Surgical Partners International, Inc. sold $8,947
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Jon O'Sullivan for consideration of $8,947.

     On April 2, 1999, United Surgical Partners International, Inc. sold
$1,718,142 aggregate principal amount of 7.0% Senior Subordinated Notes due
April 30, 2008, to Health Care Capital Partners, L.P. for consideration of
$1,718,142.

     On April 2, 1999, United Surgical Partners International, Inc. sold $71,123
aggregate principal amount of 7.0% Senior Subordinated Notes due April 30, 2008,
to Health Care Executive Partners, L.P. for consideration of $71,123.

     On June 1, 1999, United Surgical Partners International, Inc. issued to
Baylor Health Care System Foundation a convertible subordinated promissory note
in the principal amount of $3,287,284, with a conversion price of $3.50 per
share of common stock.

     On July 1, 1999, United Surgical Partners International, Inc. issued to
Giasurg, LLP a warrant to purchase 100,000 shares of Common Stock at an exercise
price of $4.00 per share.

                                     II-13
On November 1, 1999, United Surgical Partners International, Inc. sold
21,428 shares of Class A Common Stock to Dr. William O. Kirkpatrick for a
purchase price of $74,998.

     On November 22, 1999, United Surgical Partners International, Inc. sold
10,000 shares of Common Stock to John J. Wellik for a purchase price of $35,000.

     On November 22, 1999, United Surgical Partners International, Inc. sold
28,571 shares of Common Stock to Jonathan R. Bond for a purchase price of
$99,998.50.

     On November 22, 1999, United Surgical Partners International, Inc. sold
17,142 shares of Common Stock to LuAnn Brown for a purchase price of $59,997.

     On November 22, 1999, United Surgical Partners International, Inc. sold
3,571 shares of Common Stock to Alex Bennett for a purchase price of $12,498.50.

     On December 1, 1999, United Surgical Partners International, Inc. sold
14,286 shares of Common Stock to Earl Reed, III for a purchase price of $50,001.

     On January 15, 2000, United Surgical Partners International, Inc. sold
6,250 shares of Common Stock to Margaret Orman for a purchase price of $25,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
25,000 shares of Common Stock to Brett Brodnax for a purchase price of $100,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
2,500 shares of Common Stock to Bob Thunberg for a purchase price of $10,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
12,500 shares of Common Stock to Wesley Chick for a purchase price of $50,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
3,750 shares of Common Stock to Laura Koonsman for a purchase price of $15,000.

     On February 15, 2000, United Surgical Partners International, Inc. sold
2,500 shares of Common Stock to James Jackson for a purchase price of $10,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 14,017
shares of Series C Convertible Preferred Stock to Welsh, Carson, Anderson &
Stowe VII, L.P. for a purchase price of $14,017,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 210
shares of Series C Convertible Preferred Stock to WCAS Healthcare Partners, L.P.
for a purchase price of $210,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 170
shares of Series C Convertible Preferred Stock to Patrick J. Welsh for a
purchase price of $170,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 170
shares of Series C Convertible Preferred Stock to Russell L. Carson for a
purchase price of $170,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 170
shares of Series C Convertible Preferred Stock to Bruce K. Anderson for a
purchase price of $170,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 30
shares of Series C Convertible Preferred Stock to Richard H. Stowe for a
purchase price of $30,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 30
shares of Series C Convertible Preferred Stock to Andrew M. Paul for a purchase
price of $30,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 89
shares of Series C Convertible Preferred Stock to Thomas E. McInerney for a
purchase price of $89,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 4
shares of Series C Convertible Preferred Stock to Laura VanBuren for a purchase
price of $4,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 30
shares of Series C Convertible Preferred Stock to Robert A. Minicucci for a
purchase price of $30,000.

                                     II-14
On March 27, 2000, United Surgical Partners International, Inc. sold 11
shares of Series C Convertible Preferred Stock to Anthony deNicola for a
purchase price of $11,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 23
shares of Series C Convertible Preferred Stock to Paul B. Queally for a purchase
price of $23,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 5
shares of Series C Convertible Preferred Stock to Rudolph E. Rupert for a
purchase price of $5,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 6
shares of Series C Convertible Preferred Stock to D. Scott Mackesy for a
purchase price of $6,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 23
shares of Series C Convertible Preferred Stock to Lauren Melkus for a purchase
price of $23,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 5
shares of Series C Convertible Preferred Stock to Sanjay Swani for a purchase
price of $5,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 5
shares of Series C Convertible Preferred Stock to Jonathan Rather for a purchase
price of $5,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 2
shares of Series C Convertible Preferred Stock to Sean Traynor for a purchase
price of $2,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 3,601
shares of Series C Convertible Preferred Stock to FFT Partners I, L.P. for a
purchase price of $3,601,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold 149
shares of Series C Convertible Preferred Stock to FFT Executive Partners I, L.P.
for a purchase price of $149,000.

     On March 27, 2000, United Surgical Partners International, Inc. sold
1,500,000 shares of Class A Common Stock and $36,000,000 aggregate principal
amount of 10.0% Senior Subordinated Notes due March 27, 2010, to WCAS Capital
Partners III, L.P. for consideration of $36,000,000.

     On March 27, 2000, United Surgical Partners International, Inc. issued to
Welsh, Carson, Anderson & Stowe VII, L.P. a warrant to purchase 800,000 shares
of Class A Common Stock at an exercise price of $.01 per share.

     On March 27, 2000, United Surgical Partners International, Inc. sold
125,000 shares of Common Stock to Mark A. Kopser for a purchase price of
$437,500.

     On August 11, 2000, United Surgical Partners International, Inc. sold
15,000 shares of Common Stock to Jeff Stockard for a purchase price of
$30,000.00.

     On August 15, 2000, United Surgical Partners International, Inc. sold
10,714 shares of Common Stock to Alex Bennett for a purchase price of $37,499.

     On August 15, 2000, United Surgical Partners International, Inc. sold
28,571 shares of Common Stock to Brett Brodnax for a purchase price of
$99,998.50.

     On August 15, 2000, United Surgical Partners International, Inc. sold
14,285 shares of Common Stock to Kelly L. Byrd for a purchase price of
$49,997.50.

     On August 15, 2000, United Surgical Partners International, Inc. sold
20,000 shares of Common Stock to Rosa Byrum for a purchase price of $70,000.

     On August 15, 2000, United Surgical Partners International, Inc. sold
27,500 shares of Common Stock to Wesley Chick for a purchase price of $96,250.

     On August 15, 2000, United Surgical Partners International, Inc. sold 6,000
shares of Common Stock to Monica Cintado for a purchase price of $21,000.

     On August 15, 2000, United Surgical Partners International, Inc. sold
100,000 shares of Common Stock to Nick Hilger for a purchase price of $350,000.

                                     II-15
On August 15, 2000, United Surgical Partners International, Inc. sold 6,000
shares of Common Stock to Laura Koonsman for a purchase price of $21,000.

     On August 15, 2000, United Surgical Partners International, Inc. sold 3,000
shares of Common Stock to Jonathan Saunders for a purchase price of $10,500.

     On August 15, 2000, United Surgical Partners International, Inc. sold 3,000
shares of Common Stock to Richard Schriefer for a purchase price of $10,500.

     On August 15, 2000, United Surgical Partners International, Inc. sold
20,000 shares of Common Stock to John J. Wellik for a purchase price of $70,000.

     On August 15, 2000, United Surgical Partners International, Inc. sold 5,000
shares of Common Stock to Lori Yarbrough for a purchase price of $17,500.

     On September 26, 2000, United Surgical Partners International, Inc. issued
to HDT, S.C. a promissory note in the principal amount of $811,093.

     On October 12, 2000, United Surgical Partners International, Inc. exchanged
1,000,000 shares of Class B Common Stock to HDT, S.C. for the remaining minority
interest in USPE.

     On February 12, 2001 United Surgical Partners International, Inc. issued
9,961,737 shares of Common Stock to the shareholders of OrthoLink Physicians
Corporation in connection with our acquisition of OrthoLink Physicians
Corporation.

     From April 30, 1998 through December  1, 2000, United Surgical Partners
International, Inc. issued stock options to various employees to purchase
3,270,300 shares of Common Stock of United Surgical Partners International,
Inc., with exercise prices ranging from $2.00 per share to $4.50 per share.

     No underwriters were engaged in connection with the issuance of securities
in any of the foregoing transactions. All of the foregoing sales of securities
were made in reliance upon the exemption from registration set forth in
Section 4(2) of the Securities Act as transactions not involving any public
offering. Issuances of options to employees, officers and directors of the
registrant were made pursuant to Rule 701 under the Securities Act.

ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 (A)  EXHIBITS
EXHIBIT
         NUMBER                                  DESCRIPTION
1.1+     --   Form of Underwriting Agreement
           2.1*      --  Agreement and Plan of Merger, dated as of December 6, 2000,
                         among United Surgical Partners International, Inc., OPC
                         Acquisition Corporation and OrthoLink Physicians Corporation
           3.1*      --  Form of Second Amended and Restated Certificate of
                         Incorporation
           3.2*      --  Form of Amended and Restated Bylaws
           4.1+     --   Form of Common Stock Certificate
           4.2*      --  Third Amended and Restated Stockholders' Agreement, dated
                         March 27, 2000, by and among United Surgical Partners
                         International, Inc. and the security holders named therein
           4.3.1*    --  Amended and Restated Registration Rights Agreement, dated
                         April 30, 1998, by and among United Surgical Partners
                         International, Inc. and the security holders named therein
                         (the "Registration Rights Agreement")
           4.3.2*    --  Amendment No. 1 to the Registration Rights Agreement, dated
                         as of June 26, 1998, by and among United Surgical Partners
                         International, Inc. and the security holders named therein
II-16
EXHIBIT
   NUMBER                                            DESCRIPTION
4.3.3*    --  Amendment No. 2 to the Registration Rights Agreement, dated as of July 31, 1998,
                         by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.4*    --  Amendment No. 3 to the Registration Rights Agreement, dated as of October 26,
                         1998, by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.5*    --  Amendment No. 4 to the Registration Rights Agreement, dated as of December 22,
                         1998, by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.6*    --  Amendment No. 5 to the Registration Rights Agreement, dated as of June 1, 1999,
                         by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.7*    --  Amendment No. 6 to the Registration Rights Agreement, dated as of March 27,
                         2000, by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.3.8+   --   Amendment No. 7 to the Registration Rights Agreement, dated as of             ,
                         by and among United Surgical Partners International, Inc. and the security
                         holders named therein
           4.4+     --   Form of Rights Agreement between United Surgical Partners International, Inc.
                         and Rights Agent
           5.1+     --   Opinion of Vinson & Elkins L.L.P.
          10.1*      --  Revolving Credit Agreement, dated as of June 29, 1999, by and among United
                         Surgical Partners International, Inc., the lenders from time to time party
                         thereto and Chase Bank of Texas, National Association as Administrative Agent
          10.2+     --   Amended and Restated Credit Agreement, dated January   , 2001, by and among
                         OrthoLink Physicians Corporation and Bank of America, N.A.
          10.3*      --  Credit Agreement, dated April 6, 2000, by and among Global Healthcare Partners
                         Limited and the Governor and Company of the Bank of Scotland
          10.4*      --  Senior Term Facility Agreement, dated March 3, 2000, between United Surgical
                         Partners Europe, S.L. Societe Generale and the lenders from time to time party
                         thereto
          10.5*      --  Term Credit Agreement, dated as of July 1, 1999, by and among TOPS Specialty
                         Hospital, Ltd., the lenders from time to time party thereto and Chase Bank of
                         Texas, National Association, as Administrative Agent
          10.6*      --  Stock Purchase Agreement, dated as of March 2, 1998, among United Surgical
                         Partners International, Inc. and the several purchasers named therein
          10.7*      --  Securities Purchase Agreement, dated as of April 30, 1998, among United Surgical
                         Partners International, Inc., Welsh, Carson, Anderson & Stowe VII, L.P. and the
                         several other purchasers named therein
          10.8*      --  Securities Purchase Agreement, dated as of June 26, 1998, among United Surgical
                         Partners International, Inc. and the several purchasers named therein
          10.9*      --  Securities Purchase Agreement, dated as of October 26, 1998, among United
                         Surgical Partners International, Inc., Welsh, Carson, Anderson & Stowe VII,
                         L.P., Health Care Capital Partners, L.P. and the several other purchasers named
                         therein
          10.10*    --   Securities Purchase Agreement, dated as of March 27, 2000, among United Surgical
                         Partners International, Inc., Welsh, Carson, Anderson & Stowe VII, L.P., WCAS
                         Capital Partners III, L.P., FFT Partners I, L.P. and the several other
                         purchasers named therein
          10.11*    --   Contribution and Purchase Agreement, dated as of May 11, 1999, by and among USP
                         North Texas, Inc., Baylor Health Services, Texas Health Ventures Group LLC and
                         THVG/Health First L.L.C.
          10.12*    --   Form of 7% Senior Subordinated Note due April 30, 2008
          10.13*    --   Form of 10% Senior Subordinated Note due March 27, 2010
II-17
EXHIBIT
   NUMBER                                            DESCRIPTION
10.14*    --   Convertible Subordinated Promissory Note due June 1, 2007
          10.15*    --   Common Stock Purchase Warrant, dated July 1, 1999
          10.16*    --   Stock Purchase Warrant, dated March 27, 2000
          10.17*    --   Employment Agreement, dated as of November 1, 2000, by and between United
                         Surgical Partners International, Inc. and Donald E. Steen
          10.18*    --   Employment Agreement, dated as of March 1, 1999, by and between United Surgical
                         Partners International, Inc. and William H. Wilcox
          10.19*    --   United Surgical Partners International, Inc. Stock Option and Restricted Stock
                         Purchase Plan
          10.20+    --   2001 Equity-Based Compensation Plan
          10.21+    --   Employee Stock Purchase Plan
          10.22+    --   Form of Indemnification Agreement between United Surgical Partners
                         International, Inc. and its directors and officers
          10.23*    --   Stockholders Agreement, dated as of September 26, 2000, by and among HDT, S.C.,
                         United Surgical Partners International, Inc. and United Surgical Partners
                         Europe, S.L.
          21.1*      --  Subsidiaries of United Surgical Partners International, Inc.
          23.1*      --  Consent of KPMG LLP
          23.2*      --  Consent of Ernst & Young LLP
          23.3*      --  Consent of Arthur Andersen
          23.4+     --   Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
          24.1*      --  Power of Attorney (included in signature page)
------------

* Filed herewith

+ To be filed by amendment

 (B)  FINANCIAL STATEMENT SCHEDULES

     Schedule II -- United Surgical Partners International, Inc. Valuation and
Qualifying Accounts

ITEM 17.  UNDERTAKINGS

     The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

     The undersigned Registrant hereby undertakes that:

     (1)   For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

     (2)   For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

                                     II-18
SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS, STATE OF TEXAS,
ON THE 12TH DAY OF FEBRUARY, 2001.

                                               UNITED SURGICAL PARTNERS
                                               INTERNATIONAL, INC.

                                               By: /s/ DONALD E. STEEN
                                                       DONALD E. STEEN
                                                       CHIEF EXECUTIVE OFFICER
                                                       AND CHAIRMAN OF THE BOARD

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Donald E. Steen, William H. Wilcox, Mark A.
Kopser and John J. Wellik and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including pre- and post-effective
amendments) to this Registration Statement and any additional registration
statement pursuant to Rule 462(b) under the Securities Act of 1933, and to file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE                                          TITLE                          DATE
                      ---------                                          -----                          ----
/s/ DONALD E. STEEN                     Chief Executive Officer and Chairman     February 12, 2001
                   DONALD E. STEEN                         of the Board

                /s/ WILLIAM H. WILCOX                    President and Director                   February 12, 2001
                  WILLIAM H. WILCOX

                  /s/ MARK A. KOPSER                     Senior Vice President and Chief          February 12, 2001
                   MARK A. KOPSER                          Financial Officer
                                                           (Principal Financial Officer)

                  /s/ JOHN J. WELLIK                     Vice President, Controller and           February 12, 2001
                   JOHN J. WELLIK                          Compliance Officer
                                                           (Principal Accounting Officer)

                                                         Director                                 February 12, 2001
            DAVE A. ALEXANDER, JR., M.D.
II-19
SIGNATURE                                          TITLE                          DATE
                      ---------                                          -----                          ----
                                                         Director                                 February 12, 2001
JOHN C. GARRETT, M.D.

                 /s/ CARLOS A. FERRER                    Director                                 February 12, 2001
                  CARLOS A. FERRER

                 /s/ D. SCOTT MACKESY                    Director                                 February 12, 2001
                  D. SCOTT MACKESY

                 /s/ THOMAS L. MILLS                     Director                                 February 12, 2001
                   THOMAS L. MILLS

                /s/ BOONE POWELL, JR.                    Director                                 February 12, 2001
                  BOONE POWELL, JR.

                 /s/ PAUL B. QUEALLY                     Director                                 February 12, 2001
                   PAUL B. QUEALLY

               /s/ DAVID P. ZARIN, M.D.                  Director                                 February 12, 2001
                DAVID P. ZARIN, M.D.
II-20