1998 -- During the first quarter of 1998, the Company acquired three hospitals located in Puerto Rico for an aggregate purchase price of $187 million. The hospitals acquired were Hospital San Pablo located in Bayamon (430-beds), Hospital San Francisco located in Rio Piedras (160-beds) and Hospital San Pablo del Este located in Fajardo (180-beds). The Hospital San Pablo del Este, which had been closed prior to acquisition, was reopened in April, 1998 after completion of renovations.

    Also during the first quarter of 1998, the Company contributed substantially all of the assets, liabilities and operations of Valley Hospital Medical Center, a 417-bed acute care facility, and its newly-constructed Summerlin Hospital, a 148-bed acute care facility in exchange for a 72.5% interest in a series of newly-formed limited liability corporations (“LLCs”). Quorum Health Group, Inc. (“Quorum”) holds the remaining 27.5% interest in the LLCs. Quorum obtained its interest by contributing substantially all of the assets, liabilities and operations of Desert Springs Hospital, a 241-bed acute care facility, and $11 million of net cash to the LLCs. The assets and liabilities contributed by the Company were recorded by the LLCs at carryover value. The LLCs applied purchase accounting to the assets and liabilities provided by Quorum and recorded them at fair market value. As a result of this partial sale transaction, the Company recorded a pre-tax gain of $55.1 million ($34.7 million after-tax) that was recorded as a capital contribution to the Company. The Company elected the option of recording the gain to capital in excess of par value in the consolidated balance sheet. The option must be consistently applied to all future gains and losses arising from similar transactions and is adopted as the Company’s accounting policy. Also during 1998, the Company spent $2 million to purchase the property of a radiation therapy center located in California.

    The aggregate net purchase price of the transactions mentioned above of $178 million ($189 million cash paid less $11 million of net cash received), was allocated to assets and liabilities based on their estimated fair values as follows:

	Amount (000s)
Working capital, net	$34,000
Land	23,000
Buildings & equipment	110,000
Goodwill	152,000
Minority interest liability	(85,000)
Deferred income taxes	(21,000)
Additional paid in capital	(35,000)
Total Purchase Price	$178,000

    Assuming the 1998 acquisition of Hospital San Pablo and Hospital San Francisco had been completed as of January 1, 1998, the effect on the December 31, 1998 unaudited pro forma net revenues, net income and basic and diluted earnings per share would have been immaterial, as the acquisitions occurred early in 1998. Assuming the above mentioned 1998 acquisitions and the 1997 acquisition of The George Washington University Hospital (“GWUH”) had been completed as of January 1, 1997, the unaudited pro forma net revenues and net income for the year ended December 31, 1997 would have been approximately $1.6 billion and $63.9 million, respectively. In addition, the unaudited pro forma basic and diluted earnings per share would have been $1.98 and $1.93, respectively.

    1997 -- During the third quarter of 1997 the Company acquired an 80% interest in a partnership which owns and operates GWUH, a 501-bed acute care facility located in Washington, DC. The George Washington University (“GWU”) holds a 20% interest in the partnership. In connection with this acquisition, the Company provided an immediate commitment of $80 million, consisting of $40 million in cash (which has been invested and is restricted for construction) and a $40 million surety bond. The Company and GWU are planning to build a newly constructed 371-bed acute care facility which is scheduled to be completed in 2002. The total cost of this new facility is estimated to be approximately $96 million, of which the Company intends to provide a total of $83 million (including the $80 million immediate commitment mentioned above) with the remainder being provided by GWU and the interest earnings on the $40 million of funds restricted for construction.

    In addition, during the third and fourth quarters of 1997, the Company completed construction and opened the following facilities: (i) a 129-bed acute care facility located in Edinburg, Texas; (ii) a medical complex located in Summerlin, Nevada including a 148-bed acute care facility, and; (iii) two newly constructed specialized women’s health centers located in Austin, Texas and Lakeside, Oklahoma of which the Company, through a subsidiary, owns interests in limited liability companies (“LLCs”) which own and operate the facilities. The Company spent a total of $71 million during 1997 for completion of these newly constructed facilities. Also during 1997, the Company spent an additional $11 million to acquire various behavioral healthcare related businesses.