IASIS HEALTHCARE LLC (Exact Name of Registrant As Specified in Its Charter)
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Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2006 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number: 333-117362 IASIS HEALTHCARE LLC (Exact name of registrant as specified in its charter) DELAWARE 20-1150104 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) DOVER CENTRE 117 SEABOARD LANE, BUILDING E FRANKLIN, TENNESSEE 37067 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (615) 844-2747 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES NO o Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. YES NO o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and non-accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated filer o Accelerated filer o Non-Accelerated filer Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO As of December 19, 2006, 100% of the registrant’s common interests outstanding (all of which are privately owned and are not traded on any public market) were owned by IASIS Healthcare Corporation, its sole member. TABLE OF CONTENTS PART I Item 1. Business 1 Item 1A. Risk Factors 25 Item 2. Properties 35 Item 3. Legal Proceedings 35 Item 4. Submission of Matters to a Vote of Security Holders 35 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 36 Item 6. Selected Financial Data 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 64 Item 8. Financial Statements and Supplementary Data 66 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 107 Item 9A. Controls and Procedures 107 Item 9B. Other Information 107 PART III Item 10. Directors and Executive Officers of the Registrant 107 Item 11. Executive Compensation 111 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 116 Item 13. Certain Relationships and Related Transactions 118 Item 14. Principal Accountant Fees and Services 119 Item 15. Exhibits and Financial Statement Schedules 120 Ex-4.6 July 20, 2006 Supplemental Indenture Ex-4.7 July 27, 2006 Supplemental Indenture Ex-10.24 Amendment No. 15 to Contract Ex-10.47 Non-qualified Deferred Compensation Program Ex-10.48 July 20, 2006 Joinder Agreement Ex-10.49 July 27, 2006 Joinder Agreement Ex-21 Subsidiaries of IASIS Healthcare Ex-31.1 Section 302 Certification Ex-31.2 Section 302 Certification i Table of Contents IASIS HEALTHCARE LLC Item 1. Business. Company Overview We are a leading owner and operator of medium-sized acute care hospitals in high-growth urban and suburban markets. We operate our hospitals with a strong community focus by offering and developing healthcare services targeted to the needs of the markets we serve, promoting strong relationships with physicians and working with local managed care plans. As of September 30, 2006, we owned or leased 14 acute care hospitals and one behavioral health hospital with a total of 2,206 beds in service. Our hospitals are located in five regions, each of which has a projected population growth rate in excess of the national average: • Salt Lake City, Utah; • Phoenix, Arizona; • Tampa-St. Petersburg, Florida; • three cities in Texas, including San Antonio; and • Las Vegas, Nevada. We are currently constructing Mountain Vista Medical Center, a new 172-bed hospital located in Mesa, Arizona, which we expect to be open on June 1, 2007. Our general, acute care hospitals offer a variety of medical and surgical services commonly available in hospitals, including emergency services, general surgery, internal medicine, cardiology, obstetrics, orthopedics, psychiatry and physical rehabilitation. In addition, our facilities provide outpatient and ancillary services including outpatient surgery, physical therapy, radiation therapy, diagnostic imaging and respiratory therapy. We also own and operate a Medicaid and Medicare managed health plan in Phoenix called Health Choice Arizona, Inc. (“Health Choice” or the “Plan”), that served over 114,700 members as of September 30, 2006. For the year ended September 30, 2006, we generated revenue of approximately $1.63 billion, of which approximately 75.0% was derived from our acute care segment. Our principal executive offices are located at Dover Centre, 117 Seaboard Lane, Building E, Franklin, Tennessee 37067 and our telephone number at that address is (615) 844-2747. Our Internet website address is www.iasishealthcare.com. Information contained on our website is not part of this annual report on Form 10-K. In this report, unless we indicate otherwise or the context requires, “we,” “us,” “our” or “our company” refers to IASIS Healthcare LLC (“IASIS”) and its consolidated subsidiaries and includes IASIS Healthcare Corporation (“IAS”), our predecessor company. Business Strategy Our objective is to provide high-quality, cost-effective healthcare services in the communities we serve. The key elements of our business strategy are: • Provide High-Quality Services. We strive to provide high-quality services at each of our facilities. This includes improving clinical performance and patient safety, which is a focus of all our hospitals. We believe that the measurement of quality of care has become an increasingly important factor in third- party reimbursement as well as in negotiating preferred managed care contracting rates. Reflecting our commitment to the quality of care and in response to these developments, we have implemented an advanced clinical information system at eight of our 14 acute care hospitals to provide us with more timely availability of key clinical care data. We expect to complete installation at the remaining six hospitals in 2007. We believe that this system will help us enhance patient safety, reduce medical errors through bar coding, increase staff time available for direct patient care and continue to meet or exceed quality of care indicators for reimbursement. Our success at delivering high-quality services can be measured by items such as: • dedicated corporate and hospital resources; 1 Table of Contents • on-going training and education of clinical personnel; • focus on information systems; • JCAHO accreditation at all hospitals; • four centers of excellence within our hospitals; • HealthGrades 5 Star ratings and top 5% of Hospitals awards at various hospitals; • Solucient’s Top 100 Hospital Awards for process improvements at two hospitals; and • various other independent ratings. • Focus on Operational Excellence. Our management team has extensive multi-facility operating experience and focuses on operational excellence at each of our facilities. We intend to continue to improve our operations and profitability by: • using our advanced information systems platform across all of our hospitals to provide us with accurate, real-time and cost-effective financial and clinical information; • expanding our profitable product lines and improving our business mix; • focusing on efficient staffing, outsourcing programs and supply utilization; • capitalizing on purchasing efficiencies and reducing operating costs through monitoring compliance with our national group purchasing contract; and • improving our processes for patient registration, including patient qualification for financial assistance and point-of-service collections, billing, collections, managed care contract compliance and all other aspects of our revenue cycle. • Strategically Invest in Our Markets to Expand Services and Increase Revenue . Our disciplined approach to investing our capital includes analyzing demographic data, utilizing our advanced information systems to identify the profitability of our product lines and consulting with physicians and payors to prioritize the healthcare needs of the communities we serve. We intend to continue to increase our revenue and local presence by focusing our investment efforts on: • upgrading and expanding specialty services and surgical capacity, including cardiology, orthopedics, women’s