HEALTHTRUST INC THE HOSPITAL CO, S-3, 1994-02-25

HEALTHTRUST INC THE HOSPITAL CO
S-3, 1994-02-25
GENERAL MEDICAL & SURGICAL HOSPITALS, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 1994

REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------

HEALTHTRUST, INC. - THE HOSPITAL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

4525 HARDING ROAD
NASHVILLE, TENNESSEE 37205
(615) 383-4444
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

<TABLE>
<S> <C>
DELAWARE 62-1234332
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>

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

PHILIP D. WHEELER, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
HEALTHTRUST, INC. - THE HOSPITAL COMPANY
4525 HARDING ROAD
NASHVILLE, TENNESSEE 37205
(615) 383-4444
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

<TABLE>
<S> <C>
MORTON A. PIERCE, ESQ. WINTHROP B. CONRAD, ESQ.
DEWEY BALLANTINE DAVIS POLK & WARDWELL
1301 AVENUE OF THE AMERICAS 450 LEXINGTON AVENUE
NEW YORK, NY 10019 NEW YORK, NY 10017
(212) 259-8000 (212) 450-4000
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED(1) PER UNIT(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock (par value $.001 per
share) and associated preferred
stock purchase rights.............. 9,394,311 $28.625 $268,912,152 $92,729
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</TABLE>

(1) Includes 780,000 shares which may be purchased by the Underwriters solely to
cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457(c), using the average of the high and low sales
prices on the New York Stock Exchange on February 18, 1994.
------------------------

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.
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<PAGE> 2

EXPLANATORY NOTE

This registration statement contains a prospectus relating to a public
offering of securities in the United States and Canada (the "U.S. Offering")
together with separate prospectus pages relating to a concurrent offering of
securities outside the United States and Canada (the "International Offering").
The complete prospectus for the U.S. Offering follows immediately after this
Explanatory Note. After such prospectus are the following alternate pages for
the International Offering: a front cover page, an "Underwriting" section and a
back cover page. All other pages of the prospectus for the U.S. Offering are to
be used for both the U.S. Offering and the International Offering. Final forms
of each prospectus will be filed with the Securities and Exchange Commission
pursuant to Rule 424(b).
<PAGE> 3

***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY JURISDICTION *
* IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* JURISDICTION. *
* *
***************************************************************************

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 25, 1994

PROSPECTUS

HEALTHTRUST INC.
The Hospital Company

COMMON STOCK
------------------------

Of the shares of Common Stock (par value $.001 per share) offered
hereby, shares are being offered hereby in the United States and Canada
by the U.S. Underwriters and shares are being offered in a concurrent
offering outside the United States and Canada by the International Underwriters.
The offering price and the aggregate underwriting discount per share are
identical for both offerings. See "Underwriting."

Of the shares of Common Stock offered, shares are being sold
by Healthtrust, Inc. - The Hospital Company and shares are being sold by
certain non-management selling stockholders upon the exercise of warrants which
were issued in connection with the formation of the Company. See "Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders.

Concurrently with the Offerings, the Company is publicly offering $200
million aggregate principal amount of % Subordinated Notes due 2004. The
Offerings and the offering of the Subordinated Notes are being made as part of
the financing of the Company's acquisition of EPIC Holdings, Inc. and certain
related transactions. The Offerings and the offering of the Subordinated Notes
are contingent upon the consummation of the acquisition. See "The Acquisition
and the Financing Plan."

The Common Stock of the Company is traded on the New York Stock Exchange
under the symbol "HTI." On February 24, 1994, the last sale price of the
Company's Common Stock, as reported on the New York Stock Exchange, was $28 5/8
per share.

FOR INFORMATION CONCERNING CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "INVESTMENT CONSIDERATIONS."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
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<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
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Total(3).......................... $ $ $ $
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</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities under the Securities Act
of 1933. See "Underwriting."
(2) Before deducting expenses of the offerings payable by the Company estimated
at $ .
(3) The Company has granted the U.S. Underwriters and the International
Underwriters options exercisable within 30 days after the date hereof to
purchase up to and additional shares, respectively, solely to
cover over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Company will
be $ , $ , and $ , respectively. See "Underwriting."
------------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to various prior conditions, including the right to reject orders in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made in New York, New York on or about , 1994.
------------------------

MERRILL LYNCH & CO. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
------------------------------

The date of this Prospectus is , 1994.
<PAGE> 4

[MAP OF HOSPITALS]

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

IN CONNECTION WITH THESE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
COMPANY'S COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
<PAGE> 5

THE COMPANY

Healthtrust, Inc. - The Hospital Company (together with its subsidiaries,
"Healthtrust" or the "Company") is one of the largest providers of health care
services in the United States, delivering a full range of inpatient, outpatient
and other health care services principally through its affiliated hospitals. At
February 1, 1994, the Company owned or leased through its subsidiaries or joint
ventures 81 acute care hospitals (the "affiliated hospitals") and is an
investor, through joint ventures, in four other acute care hospitals. The
Company's affiliated hospitals are located in rural, suburban and urban
communities in 21 southern and western states. Approximately 40% of
Healthtrust's affiliated hospitals are the sole providers of general acute care
hospital services in their communities, and an additional 20% are one of two
general acute care hospitals in their communities. The Company's affiliated
hospitals generally provide a full range of inpatient and outpatient health care
services, including medical/surgical, diagnostic, obstetric, pediatric and
emergency services. Many of the Company's affiliated hospitals also offer
certain specialty programs and services, including occupational medicine
programs, home health care services, skilled nursing services, physical therapy
programs, rehabilitation services, alcohol and drug dependency programs and
selected mental health services.

The Company has experienced consistent growth since it began operations
through the acquisition of a group of hospitals and related assets (the
"Formation") from Hospital Corporation of America ("HCA") in September 1987. The
81 affiliated hospitals presently operated by the Company generated
approximately $2.4 billion of net operating revenue for the fiscal year ended
August 31, 1993, compared with approximately $1.8 billion of net operating
revenue for the fiscal year ended August 31, 1989 generated by the 94 hospitals
then operated by the Company. In addition, for the same periods, the Company's
net operating revenue less hospital service costs ("EBITDA") increased from
$339.2 million to $506.0 million and EBITDA as a percentage of net operating
revenue increased from 19.2% to 21.1%.

The Company's principal objective is to be a significant and growing
provider of low cost, high quality health care services in the markets in which
it operates. Although the means of achieving this objective will vary depending
upon the local market and the relative position of the Company's affiliated
hospitals and other health care businesses in that market, the strategies
employed generally include (i) expanding market share through improvements in
quality and reductions in cost for existing services and through the provision
of new or expanded services to meet underserved needs, (ii) participating in
quality health care delivery networks through affiliations, joint ventures,
partnerships and other arrangements with physicians, other hospitals and
providers of other health care related services, (iii) continuously improving
operating and financial performance, and (iv) developing the resources needed by
management to operate more effectively in the changing health care environment.
In addition, the Company has pursued and will continue to pursue other
opportunities to grow through the acquisition, construction or development of
hospital facilities or other health care related businesses that are or can be
positioned competitively in their markets consistent with the Company's
objectives. The Company recently entered into a letter of intent to acquire
Nashville Memorial Hospital in Madison, Tennessee and executed a definitive
agreement to purchase Holy Cross Hospital of Salt Lake City, Utah, Holy
Cross-Jordan Valley Hospital in Jordan Valley, Utah and St. Benedict's Hospital
in Ogden, Utah.

Consistent with the Company's strategy, Healthtrust entered into an
agreement on January 9, 1994 to acquire EPIC Holdings, Inc. (together with its
subsidiaries, "EPIC") (the "Acquisition"). EPIC is a health care services
provider that owns and operates 34 general acute care hospitals providing
inpatient, outpatient and other specialty services in 10 southern, southwestern
and western states. Approximately 29% of EPIC's hospitals are the sole providers
of general acute care hospital services in their communities, and an additional
27% of EPIC's hospitals are one of two general acute care hospitals in their
communities. Following the Acquisition, Healthtrust will be the second largest
hospital management company in the United States, operating 115 hospitals in 22
states. Of these 115 hospitals, approximately 37% are the sole providers of
general acute care hospital services in their communities and an additional 22%
are one of two such providers in their communities. Total combined net operating
revenue and combined EBITDA for Healthtrust and EPIC for their 1993 fiscal years
were approximately $3.4 billion and $651.4 million, respectively.

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<PAGE> 6

The Company believes that the Acquisition will enhance the Company's
presence in the geographic areas it presently serves and provide access to new
markets. In addition, the Acquisition will allow the Company to expand its
health care delivery capabilities in such areas as home health care,
geropsychiatric care, rehabilitation services and physical therapy services,
thereby enhancing the Company's development of integrated health care delivery
networks designed to provide a full range of health care services to managed
care plans, self-insured employers and certain government payors. Healthtrust
also expects to realize operating cost savings of approximately $50 million
during the fiscal year ending August 31, 1995 resulting from increased economies
of scale and improved operating efficiencies following the Acquisition. After
giving effect to these savings, the Acquisition is expected to add $0.10 to
$0.12 per share to the Company's earnings during fiscal year 1995. See
"Investment Considerations -- Acquisition-Related Considerations," "The
Acquisition and the Financing Plan" and the Unaudited Pro Forma Condensed
Combined Financial Statements of the Company included elsewhere in this
Prospectus.

THE OFFERINGS

Of the shares of Common Stock offered hereby, shares are
being offered in the United States and Canada by the U.S. Underwriters and
shares are being offered in a concurrent offering outside the United
States and Canada by the International Underwriters (the "Offerings").

<TABLE>
<S> <C>
Common Stock Offered by:
The Company................................. 5,200,000 shares
The Selling Stockholders.................... shares(1)
Common Stock Outstanding after the
Offerings................................... shares(2)
Use of Proceeds............................... The proceeds of the Offerings, together with
the proceeds of the Subordinated Debt
Offering, borrowings under the 1994 Credit
Agreement and cash on hand, will be used to
finance the Acquisition, the Tender Offers
and the Debt Redemption (all as hereinafter
defined). See "Use of Proceeds."
New York Stock Exchange Symbol................ HTI
</TABLE>

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

(1) All such shares of Common Stock are being sold by the holders thereof (the
"Selling Stockholders") upon exercise of warrants to purchase Common Stock
("Warrants"), issued in 1987 in connection with the formation of the
Company, at an exercise price of $5.30 per share. Upon consummation of the
Offerings, Warrants will remain outstanding. See "Selling Stockholders."
(2) Does not include (i) 4,304,107 shares of Common Stock issuable upon exercise
of options granted under the Company's stock option plans (of which options
for 916,100 shares are presently exercisable) as of January 31, 1994 and
(ii) approximately 1,000,000 shares of Common Stock to be issued and
contributed to the Company's 401(k) Retirement Program (the "Plan") on or
about May 15, 1994.

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<PAGE> 7

INVESTMENT CONSIDERATIONS

Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following factors before
purchasing the Common Stock offered hereby.

SUBSTANTIAL INDEBTEDNESS

Following the consummation of the Acquisition and the Financing Plan, the
Company will continue to have substantial indebtedness and, as a result,
significant debt service obligations. As of November 30, 1993, the Company's
ratio of long-term debt (including current maturities) to stockholders' equity
was 1.4 to 1. After giving effect to the Acquisition and the transactions
contemplated by the Financing Plan, at November 30, 1993, the ratio of the
Company's long-term debt (including current maturities) to stockholders' equity
would have been 2.1 to 1, assuming 100% of each issue of the outstanding
Specified EPIC Debt Securities (as hereinafter defined) is purchased in the
Tender Offers. See "Capitalization" and the Unaudited Pro Forma Condensed
Combined Financial Statements of the Company included elsewhere in this
Prospectus.

The degree to which the Company is leveraged could have important
consequences to holders of the Common Stock, including the following: (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or other
purposes may be impaired; (ii) a substantial portion of the Company's cash flow
from operations must be dedicated to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the Company for its
operations; (iii) certain of the Company's borrowings are and will continue to
be at variable rates of interest, which causes the Company to be vulnerable to
increases in interest rates; and (iv) such indebtedness contains numerous
financial and other restrictive covenants, including those restricting the
incurrence of indebtedness, the creation or existence of liens, the declaration
or payment of dividends, certain investments, the acquisition of securities of
the Company, and certain extraordinary corporate transactions. Failure by the
Company to comply with such covenants may result in an event of default which,
if not cured or waived, could have a material adverse effect on the Company.

The Company's ability to make scheduled payments or to refinance its
obligations with respect to its indebtedness depends on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to financial, business and other factors beyond its control.
Although the Company's cash flow from its operations has been sufficient to meet
its debt service obligations in the past, there can be no assurance that the
Company's operating results will continue to be sufficient for payment of the
Company's indebtedness.

HEALTH CARE REFORM

On November 20, 1993, President Clinton submitted proposed comprehensive
health care reform legislation ("Administration's Proposal") to Congress. A
central component of the Administration's Proposal is the restructuring of
health insurance markets through the use of "managed competition." Under the
Administration's Proposal, states would be required to establish regional
purchasing cooperatives, known as "regional alliances," that would be the
exclusive source of coverage for individuals and employers with less than 5,000
employees. All employers would be required to make coverage available to their
employees and contribute 80% of the premium, and all individuals would be
required to enroll in an approved health plan. Regional alliances would contract
with health plans that demonstrate an ability to provide consumers with a full
range of benefits, including hospital services, and the provision of such
benefits would be mandated by the federal government. The federal government
would provide subsidies to low income individuals and certain small businesses
to help pay for the cost of coverage. These subsidies and other costs of the
Administration's Proposal would be funded in significant part by reductions in
payments by the Medicare and Medicaid programs to providers, including
hospitals. The Administration's Proposal would also place stringent limits on
the annual growth in health plan premiums. Other comprehensive reform proposals
have been or are expected to be introduced in Congress. These other proposals
contain or are expected to contain coverage guarantees, benefit standards,
financing and cost control mechanisms which are different than the
Administration's Proposal. The Company is unable to predict what, if any,
reforms will be adopted, or when any such reforms

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will be implemented. No assurance can be given that such reforms will not have a
material adverse impact on the Company's revenues or earnings.

REIMBURSEMENT AND REGULATION

The Company derives a substantial portion of its revenue from Medicare and
Medicaid programs. Such programs are highly regulated and subject to frequent
and in certain cases substantial changes. Significant changes in Medicare and
Medicaid reimbursement programs have resulted in reduced levels of reimbursement
for a substantial portion of hospital procedures and costs. Changes in other
existing reimbursement programs are scheduled or anticipated in the future which
changes are likely to result in further reductions in reimbursement levels. In
addition, the Company's revenue could be affected by any implementation of
federal government sequestration under the Balanced Budget and Emergency Deficit
Control Act of 1985, as amended.

The health care industry is subject to extensive federal, state and local
regulation relating to licensure, conduct of operations, addition of facilities
and services and cost containment. Over the past several years, federal and
state initiatives have been undertaken to evaluate the impact that financial
arrangements between health care providers and physicians may have on Medicare
and state health care programs. As a result of such initiatives, the U.S.
Department of Health and Human Services ("HHS") issued final regulations
outlining certain "safe harbor" practices which, although potentially capable of
inducing prohibited referrals of business, would not be subject to enforcement
action under the Social Security Act of 1935, as amended (the "Social Security
Act"). In addition, certain provisions of Section 1877 of the Social Security
Act, commonly known as the "Stark Bill," have recently been amended to
significantly broaden the scope of prohibited physician self-referrals
thereunder. Certain of the Company's current financial arrangements with
physicians do not qualify for the safe harbor exemptions and, as a result, risk
scrutiny by HHS and may be subject to enforcement action. Additionally, the
Company believes that certain of EPIC's financial arrangements with physicians
do not qualify for the safe harbor exemptions. The Company's participation in
and development of joint ventures and other financial arrangements with
physicians could be adversely affected by the recent HHS regulations and Stark
Bill amendments. The Company is unable to predict the future course of federal,
state and local regulation or legislation, including Medicare and Medicaid
statutes and regulations. Further changes in the regulatory framework could have
an adverse impact on the Company.

DEPENDENCE ON PHYSICIANS AND OTHER KEY PERSONNEL

Since physicians generally control the majority of hospital admissions, the
success of the Company, in part, is dependent upon the number and quality of
physicians on its hospitals' medical staffs. The Company's operations also are
dependent on the efforts, ability and experience of its key corporate and
hospital management teams. The loss of some or all of these key personnel or an
inability to attract and retain sufficient numbers of qualified physicians could
adversely affect the Company's hospitals.

COMPETITION

The health care business is highly competitive and subject to excess
capacity. Competition among hospitals and other health care providers for
patients has intensified in recent years. During this period, hospital occupancy
rates in the United States have declined as a result of cost containment
pressures, changing technology, changes in regulations and reimbursement,
changes in practice patterns from inpatient to outpatient treatment, an
increasing supply of physicians and other factors. In many geographic areas in
which the Company operates, there are other hospitals or facilities that provide
inpatient or outpatient services comparable to those offered by the Company's
hospitals. Certain of these hospitals have greater financial resources than the
Company's hospitals and offer a wider range of services than the Company's
hospitals. Even in communities in which the Company's hospitals are the sole
providers of general acute care hospital services, the Company may face
competition from local providers of outpatient services and hospitals and other
health care providers in nearby communities. The competitive position of the
Company's hospitals also has been, and in all likelihood will continue to be,
affected by the increased initiatives undertaken during the past several years
by federal and state governments and other major purchasers of health care,
including

6
<PAGE> 9

insurance companies and employers, to revise payment methodologies and monitor
health care expenditures in order to contain health care costs. Due in part to
these initiatives, managed care organizations such as health maintenance
organizations ("HMOs") and preferred provider organizations ("PPOs"), which
offer prepaid and discounted medical services packages, represent an increasing
segment of health care payors, tending to reduce the historical rate of growth
of hospital revenue. In addition, hospitals owned by governmental agencies or
other tax-exempt entities benefit from endowments, charitable contributions and
tax-exempt financing, which advantages are not enjoyed by the Company's
hospitals.

LEGAL PROCEEDINGS

Certain of the Company's Utah hospitals, along with other Utah hospitals,
were the subject of a federal grand jury investigation of possible criminal
violations of the federal antitrust laws in connection with nursing compensation
practices. The Company has been informed by the Antitrust Division of U.S.
Department of Justice that the Government does not intend to pursue criminal
charges against the Company but may pursue civil proceedings in connection with
the actions of its Utah facilities. Although the Company attempts to structure
its compensation practices to comply with federal and state law, the Company
cannot predict with certainty the outcome of this ongoing civil investigation.

PROFESSIONAL LIABILITY

As is typical in the health care industry, the Company is subject to claims
and legal actions by patients and others in the ordinary course of business. The
Company generally self-insures against substantially all of its professional and
general liabilities and maintains an unfunded reserve for liability risks. While
the Company's cash flow has been adequate to provide for liability claims in the
past, there can be no assurance that the Company's cash flow will continue to be
adequate. If payments with respect to self-insured liabilities increase in the
future, the results of operations of the Company could be adversely affected.

PRINCIPAL STOCKHOLDER

As of December 31, 1993, the trustee (the "Plan Trustee") of the Plan held
approximately 31% of the outstanding Common Stock. After giving effect to the
Offerings, as of December 31, 1993, the Plan Trustee would have held
approximately 28% of the outstanding Common Stock. Shares of Common Stock held
by the Plan Trustee are held in the accounts of participants in the Plan. Such
participants are able to direct the Plan Trustee to vote the shares allocated to
their accounts, except when the Plan Trustee believes its fiduciary duties
obligate it to override such directions. As a principal stockholder, the Plan
Trustee may have the ability to influence the policies and affairs of the
Company to a greater extent than other stockholders.

FORMATION-RELATED CONSIDERATIONS

In connection with the Formation of Healthtrust in 1987, HCA agreed to
indemnify the Company against tax claims, professional liability claims and
claims covered by standard public liability insurance relating to the acquired
assets, in each case relating to periods prior to the Formation. In the past HCA
has satisfied its obligation to indemnify the Company for all such claims, and
the Company has no reason to believe that HCA would not continue to do so.
However, if HCA should fail to meet its indemnification obligations, the Company
would be responsible for the satisfaction of any such claims in the future,
which claims, if substantial, could have a material adverse effect on the
Company.

With respect to certain taxable periods ending on or prior to the Formation
in September 1987, the Company and certain of its subsidiaries filed federal
income tax returns on a consolidated basis with HCA and, as a result, under
federal income tax law, the Company and such subsidiaries are severally liable
with HCA for the federal income taxes of HCA's consolidated group for such
periods. However, in connection with the Formation, HCA agreed that it would be
responsible for the payment of all taxes, assessments, interest and penalties
imposed by any taxing authority for any periods prior to and including the date
of the Formation. HCA has disclosed that following a recent examination of HCA's
federal income tax returns for tax years 1981 through 1990, the Internal Revenue
Service has proposed certain adjustments to such returns, and HCA

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<PAGE> 10

has received notices of deficiencies for certain years, which it is contesting
through litigation. Should HCA be unable to sustain its position on disputed
matters, additional taxes would approximate $383 million, plus accrued interest
of approximately $640 million as of December 31, 1993, for taxable periods in
which the Company and certain of its subsidiaries were members of HCA's
consolidated group. If the additional taxes that have been asserted by the
Internal Revenue Service were finally determined to be due and HCA were unable
to, or for any other reason did not, pay such taxes or related interest, the
Company could be responsible for such payment, which payment could have a
material adverse effect on the Company.

ERISA MATTERS

In connection with the Formation in 1987, the Company's Employee Stock
Ownership Plan (the "ESOP") purchased approximately 50.9 million shares of
Common Stock for $810 million. The purchase price was based on the determination
of the committee administering the ESOP (the "ESOP Committee") as to the fair
market value of such shares at that time. Based on such determination, and
subject to limitations contained in the Internal Revenue Code of 1986, as
amended (the "Code"), the Company has claimed income tax deductions for
contributions to the ESOP for the years to which such contributions relate.
Contributions to the ESOP were used by the ESOP to pay interest and principal on
the loans owed to the Company. These payments were in turn used by the Company
to pay interest and principal on the ESOP term loans under the Company's
previous bank credit agreement and certain other indebtedness related to the
ESOP. As a result, the Company was effectively able to obtain a deduction for
principal, as well as interest payments, on ESOP-related borrowings. If the ESOP
Committee's determination of fair market value was incorrect, the Company's
contribution to the ESOP might not be fully deductible, which could have a
material adverse effect on the Company.

It was intended that qualified holders of the ESOP term loans and the other
indebtedness incurred in connection with the ESOP be entitled to exclude from
taxable income 50% of the interest received on such indebtedness. In addition,
the loans to the ESOP and the purchase of Common Stock by the ESOP were intended
to qualify for exemption from the "prohibited transaction" rules under the Code
and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
which rules generally prohibit sale and loan transactions between an employer
and a qualified retirement plan. The 50% interest exclusion and the prohibited
transaction exemption were available only if the plan was designed to invest
primarily in "employer securities." It is likely that if Healthtrust and HCA
were deemed to have been members of the same "controlled group of corporations"
for purposes of the relevant section in the Code or ERISA, the stock of HCA, and
not Healthtrust's Common Stock, would have been "employer securities" for these
purposes. Healthtrust and HCA concluded that they were not in the same
"controlled group of corporations" (as defined in Section 409(1) of the Code).
If, notwithstanding such conclusion, HCA's common stock were deemed to have been
"employer securities" for such purposes, there could be severe adverse
consequences to Healthtrust, including violation of the prohibited transaction
rules discussed above (which could subject Healthtrust or other disqualified
persons with respect to the ESOP to an excise tax and could require that certain
corrective action be taken) and retroactive increases in the rate of interest
payable on certain of the Company's previously outstanding ESOP-related
indebtedness as a result of the loss of the 50% interest exclusion. In addition,
the 50% interest exclusion and the prohibited transaction exemption were
available only if the price paid by the ESOP reflected the fair market value of
the employer securities as determined in good faith by the plan fiduciaries.
Accordingly, if the ESOP Committee's determination of fair market value was
incorrect, the 50% interest exclusion might not have been fully available and
the Company or other disqualified persons may have committed prohibited
transactions, either of which events could have a material adverse effect on the
Company. See Note 6 to "Capitalization."

ACQUISITION-RELATED CONSIDERATIONS

The purchase of EPIC common stock by the EPIC Employee Stock Ownership Plan
(the "EPIC ESOP") in connection with EPIC's acquisition (the "EPIC Formation")
of its facilities from American Medical International, Inc. ("AMI") in 1988 was
structured in a manner similar to the purchase of Common Stock by the ESOP in
connection with the Formation of Healthtrust and was intended to (i) qualify for

8
<PAGE> 11

exemption from the "prohibited transaction" rules of the Code and ERISA, (ii)
permit EPIC to deduct for federal income tax purposes its contributions to the
EPIC ESOP used to pay principal and interest on loans made by EPIC to the EPIC
ESOP and (iii) permit qualified holders of indebtedness incurred in connection
with the EPIC ESOP to benefit from the 50% interest exclusion provision referred
to in "-- ERISA Matters" above. Exemption from the prohibited transaction rules
and the availability of the ESOP-related benefits described above depends on (i)
the amount the EPIC ESOP paid for EPIC common stock not having exceeded the fair
market value of that EPIC common stock, (ii) the EPIC common stock being
"employer securities" and (iii) compliance with the other relevant provisions of
the Code and ERISA. If (i) the EPIC ESOP paid an amount in excess of fair market
value for the EPIC common stock, (ii) the EPIC common stock were to fail to
qualify as "employer securities" or (iii) the EPIC ESOP were to fail to comply
with the other relevant provisions of the Code or ERISA, such events could
result in material adverse consequences to EPIC similar to those described with
respect to the Company under "-- ERISA Matters" above, which could have a
material adverse effect on the Company following consummation of the
Acquisition. See "The Acquisition and the Financing Plan" and Note 6 to
"Capitalization." In addition, although the Company believes that the actions
which the parties intend to take with respect to the EPIC ESOP pursuant to the
ESOP Agreement (as hereinafter defined) should not give rise to any adverse tax
or other consequences to EPIC or the Company, if the Internal Revenue Service or
the Department of Labor were to successfully challenge certain aspects of such
actions, the Company or EPIC could be subject to certain taxes or penalties,
which could have a material adverse effect on the Company following consummation
of the Acquisition. See "The Acquisition and the Financing Plan."

In connection with the EPIC Formation, AMI agreed to indemnify EPIC against
certain losses, including the loss of certain expected tax benefits. If AMI is
unable to or otherwise does not satisfy such indemnification obligations, EPIC
could be responsible for such losses, which could adversely affect the Company
following the Acquisition.

The Company will use the proceeds of the Offerings to fund a portion of the
Acquisition. While the Company believes that it can improve the profitability of
the operations acquired from EPIC, there can be no assurance that this will be
the case. In addition, there can be no assurance that the Company will be able
to realize expected operating and economic efficiencies following the
Acquisition or that the Acquisition will not adversely affect the Company's
results of operations or financial condition. See the Unaudited Pro Forma
Condensed Combined Financial Statements of the Company included elsewhere in
this Prospectus.

9
<PAGE> 12

THE ACQUISITION AND THE FINANCING PLAN

On January 9, 1994, Healthtrust, Odyssey Acquisition Corp., a wholly-owned
subsidiary of Healthtrust ("Odyssey") and EPIC entered into a merger agreement
pursuant to which Odyssey will merge into EPIC and EPIC will become a
wholly-owned subsidiary of Healthtrust. Upon consummation of the Acquisition,
the holders of EPIC common stock (and securities exercisable therefor) will
become entitled to receive $7.00 per share in cash from Healthtrust. It is
anticipated that the Company will purchase approximately 39.7 million shares of
EPIC common stock (and securities exercisable therefor) at the closing of the
Acquisition, for an aggregate purchase price of approximately $278 million,
comprised of the following securities: (i) approximately 17.6 million shares of
EPIC common stock allocated or allocable to EPIC ESOP participants, (ii)
approximately 15.9 million other shares of outstanding EPIC common stock and
(iii) outstanding stock appreciation rights, warrants and options exercisable
for approximately 6.2 million shares of EPIC common stock. The consummation of
the Acquisition is subject to certain conditions, including, among others, the
approval of the stockholders of EPIC, certain regulatory approvals and the
consent solicitation in connection with the Specified EPIC Debt Securities
described below. The approval of the Acquisition requires the affirmative vote
of the holders of a majority of the outstanding shares of EPIC common stock
entitled to vote thereon. Subject to certain conditions, each of AMI and the
EPIC ESOP Trustee has agreed to vote the shares of EPIC common stock over which
it exercises voting power (in the aggregate approximately 52% of the EPIC common
stock outstanding on January 8, 1994) in favor of the Acquisition.

In connection with the Acquisition, the Company entered into an agreement
(the "ESOP Agreement") with EPIC, EPIC Healthcare Group, Inc. ("EPIC Group"),
U.S. Trust Company of California, N.A., the trustee of the trust established
under the EPIC ESOP (the "EPIC ESOP Trustee") and the EPIC Committee
administering the EPIC ESOP. Pursuant to the ESOP Agreement, all shares of EPIC
common stock held by the EPIC ESOP Trustee and not allocated or allocable to
EPIC ESOP participants as of the closing of the Acquisition (approximately 6.7
million shares) will be returned to EPIC in full satisfaction of certain loans
granted by EPIC to the EPIC ESOP Trustee, and contributions to the EPIC ESOP
will be terminated. Subject to certain Code limitations, the parties to the ESOP
Agreement have agreed that there will be approximately 17.6 million shares of
EPIC common stock allocated or allocable to EPIC ESOP participants as of the
closing of the Acquisition. Following the acquisition, the EPIC ESOP
participants who continue to be employed by the Company will be entitled to
participate in the Plan or in a similar plan to be established by the Company
(the Plan or such other plan, the "Healthtrust Plan"). Subject to Code
limitations, EPIC ESOP participants who participate in the Healthtrust Plan will
be allocated additional shares of EPIC common stock in an amount equivalent to
the 4% profit sharing contribution (described below) to which EPIC ESOP
participants would have been entitled had they participated in the Plan from
March 1, 1994 through the Acquisition closing date. In addition, the Company has
agreed to provide certain minimum retirement benefits in accordance with the
terms of the Plan and subject to Code limitations, including (i) a profit
sharing contribution by the Company on behalf of EPIC ESOP participants who
participate in the Healthtrust Plan of 4% of compensation from the Acquisition
closing date through December 31, 1994 and (ii) a matching contribution by the
Company of 100% for each EPIC ESOP participant who participates in the
Healthtrust Plan, up to a maximum of 3% of compensation, for the period from the
Acquisition closing date through December 31, 1998. In the event that fewer
shares are so allocated or allocable to EPIC ESOP participants as of the closing
or the full amount of contributions to the Healthtrust Plan are not permitted to
be made due to Code limitations, additional contributions will be made in the
future in lieu of any shares not so allocated or allocable and any contributions
not so permitted to be made. The obligations of the parties under the ESOP
Agreement are conditioned upon, among other things, the consummation of the
Acquisition. The foregoing does not purport to be a complete description of the
ESOP Agreement and reference is hereby made to the ESOP Agreement, which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part.

In connection with the Acquisition and the related merger agreement, it is
anticipated that certain EPIC subsidiaries will offer to purchase up to 100% of
the following outstanding debt securities of EPIC (collectively, the "Specified
EPIC Debt Securities") at the following purchase prices: (i) $250 million
aggregate principal amount (representing an aggregate accreted value of
approximately $170.6 million) of 12% Senior Deferred Coupon Notes due 2002 of
EPIC Holdings, Inc. (the "EPIC 12% Notes") for 112% of

10
<PAGE> 13

accreted value (expected to be approximately $178.8 million at the time of
purchase), (ii) $160 million aggregate principal amount of 10 7/8% Senior
Subordinated Notes due 2003 of EPIC Group (the "EPIC 10 7/8% Notes") for 116% of
principal amount, (iii) $100 million aggregate principal amount (representing an
aggregate accreted value of approximately $99.6 million) of 11 3/8% Class B-1
First Priority Mortgage Notes due 2001 of EPIC Properties (the "EPIC Class 1
Mortgage Notes"), for 118 3/4% of principal amount, (iv) approximately $83.5
million aggregate principal amount (representing an aggregate accreted value of
approximately $83.1 million) of 11 1/2% Class B-2 First Priority Mortgage Notes
due 2001 of EPIC Properties (the "EPIC Class 2 Mortgage Notes") for 121 1/8% of
principal amount and (v) $15 million aggregate principal amount of Floating Rate
Class B-3 First Priority Mortgage Notes due 1998 (with an interest rate of
6 3/8% at February 1, 1994) of EPIC Properties (the "EPIC Class 3 Mortgage
Notes" and, together with the EPIC Class 1 Mortgage Notes and EPIC Class 2
Mortgage Notes, the "EPIC Mortgage Notes") for 103 1/8% of principal amount. In
connection therewith, the consent of the holders of the Specified EPIC Debt
Securities will be solicited to eliminate or modify substantially all of the
restrictive covenants and certain event of default provisions relating to any
Specified EPIC Debt Securities which remain outstanding after the offers to
purchase are completed. Consent payments of $20 per $1,000 of principal amount
will be made with respect to the Specified EPIC Debt Securities for which
consents have been validly delivered (and not revoked) prior to the acceptance
thereof. The offers to purchase the Specified EPIC Debt Securities and the
related solicitations of consents are hereinafter referred to as the "Tender
Offers." The obligation to make the consent payments is subject to certain
conditions, including the acceptance for purchase and payment of the applicable
issue of Specified EPIC Debt Securities in the Tender Offers. The consummation
of the Tender Offers is conditioned upon, among other things, (i) the
consummation of the Acquisition, (ii) receipt of validly delivered and unrevoked
consents from holders of a majority in aggregate principal amount of each of the
EPIC 12% Notes, EPIC 10 7/8% Notes and EPIC Mortgage Notes and (iii) there
having been validly tendered and not withdrawn at least a majority in aggregate
principal amount of each of the EPIC 12% Notes, EPIC 10 7/8% Notes and EPIC
Mortgage Notes.

Following the consummation of the Acquisition, it is anticipated that the
following outstanding indebtedness of EPIC Group (collectively, the "EPIC
Redeemable Debt") will be redeemed in accordance with the optional redemption
provisions thereof (the "Debt Redemption"): (i) approximately $74.8 million
aggregate principal amount (representing an aggregate accreted value of
approximately $72.2 million) of 11 7/8% Senior ESOP Notes due 1998, (ii)
approximately $96.4 million aggregate principal amount (representing an
aggregate accreted value of approximately $31.5 million) of Zero Coupon Notes
due 2001 (with an effective interest rate of 14.8% at November 30, 1993) and
(iii) approximately $30.1 million aggregate principal amount (representing an
aggregate accreted value of approximately $19.7 million) of 11% Junior
Subordinated Pay-In-Kind Notes due 2003.

The Acquisition, the Tender Offers and the Debt Redemption will be financed
through the following:

(i) the Offerings;

(ii) the public offering by the Company of $200 million aggregate
principal amount of a new series of Subordinated Notes due 2004 (the
"Subordinated Debt Offering");

(iii) the refinancing of the Company's existing bank credit facility
with a new bank credit facility (the "1994 Credit Agreement"), which will
provide for aggregate commitments of up to $1.2 billion; and

(iv) cash on hand.

The Tender Offers, the Debt Redemption, the Offerings, the Subordinated
Debt Offering and the 1994 Credit Facility are hereinafter referred to as the
"Financing Plan." The Offerings are expected to occur contemporaneously with the
Acquisition and the other transactions contemplated by the Financing Plan and
are conditioned upon the consummation of the Acquisition.

The following table sets forth the sources of funds to be used to effect
the Acquisition, the Tender Offers and the Debt Redemption, assuming (i)
5,200,000 shares of Common Stock are sold by the Company in the Offerings at a
public offering price of $28.625 per share (the average of the high and low
prices for the Common Stock reported on the NYSE for February 18, 1994), (ii)
$200 million aggregate principal amount

11
<PAGE> 14

of Subordinated Notes are sold by the Company in the Subordinated Debt Offering
at a public offering price of 100% of principal amount, (iii) approximately
39,687,000 shares of EPIC common stock (and securities exercisable therefor) are
acquired pursuant to the Acquisition; and (iv) 100% of each issue of the
outstanding Specified EPIC Debt Securities is purchased in the Tender Offers.

ACQUISITION AND FINANCING PLAN
(DOLLARS IN MILLIONS)

<TABLE>
<S> <C>
SOURCES OF FUNDS
Cash on hand............................................. $ 215.8
1994 Credit Agreement.................................... 671.4
The Offerings............................................ 148.9
The Subordinated Debt Offering........................... 200.0
--------
Total............................................... $1,236.1
--------
--------
USE OF FUNDS
Purchase of EPIC equity in Acquisition................... $ 277.8
Tender Offers(1)......................................... 632.7
Debt Redemption.......................................... 138.2
Refinancing of existing bank credit facility............. 167.0
Estimated Fees and Expenses(2)........................... 20.4
--------
Total............................................... $1,236.1
--------
--------
</TABLE>

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

(1) Represents (a) the principal amount of the EPIC 10 7/8% Notes and the EPIC
Class 3 Mortgage Notes, (b) the accreted value as of November 30, 1993 of
the EPIC 12% Notes, EPIC Class 1 Mortgage Notes and EPIC Class 2 Mortgage
Notes and (c) $104.4 million of aggregate premiums and consent payments.
(2) Includes underwriting discounts and commissions, bank fees and legal and
accounting expenses.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock in the
Offerings are estimated to be approximately $ million (approximately
$ million if the Underwriters' over-allotment options are exercised in
full), after giving effect to the receipt of an aggregate of approximately
$ from the exercise of warrants by the Selling Stockholders. The Company
intends to use the net proceeds of the Offerings, together with the net proceeds
of the Subordinated Debt Offering, borrowings under the 1994 Credit Agreement
and cash on hand, to effect the Acquisition, the Tender Offers and the Debt
Redemption. See "The Acquisition and the Financing Plan."

12
<PAGE> 15

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
November 30, 1993, and as adjusted to reflect the Acquisition, the Offerings,
the Subordinated Debt Offering and the other transactions contemplated by the
Financing Plan. This table should be read in conjunction with "The Acquisition
and the Financing Plan," the Unaudited Pro Forma Condensed Combined Financial
Statements of the Company and the historical financial statements of the Company
and EPIC and the notes thereto included or incorporated by reference in this
Prospectus.

<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1993
-----------------------------------
ACTUAL
--------------------- COMBINED
HEALTHTRUST EPIC AS ADJUSTED
----------- ------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
LONG-TERM DEBT:
Bank Indebtedness............................................................... $ 167.0 $ -- $ 671.4
10 3/4% Subordinated Notes due 2002............................................. 500.0 -- 500.0
8 3/4% Subordinated Debentures due 2005......................................... 300.0 -- 300.0
Subordinated Debt Offering...................................................... -- -- 200.0
Specified EPIC Debt Securities.................................................. -- 528.3 --(1)
EPIC Redeemable Debt............................................................ -- 123.4 --
EPIC Group 15% Senior Subordinated Notes(2)..................................... -- 40.3 --
Other Debt...................................................................... 16.9 38.0 54.9
----------- ------- -----------
Less Current Portion.......................................................... (35.6) (47.0) (42.3)
----------- ------- -----------
Total Long-Term Debt...................................................... 948.3 683.0 1,684.0
STOCKHOLDERS' EQUITY:
Common Stock, $.001 par value: 400,000,000 shares authorized, 81,130,136 shares
issued and outstanding(3)..................................................... 0.1 -- 0.1
EPIC common stock, $.01 par value: 100,000,000 shares authorized, 40,167,753
shares issued and outstanding(4).............................................. -- 0.4 --
Common Stock Offerings(5)....................................................... -- -- 142.9
Additional paid-in capital(6)................................................... 827.4 245.8 827.4
Deferred compensation........................................................... (0.9) (137.4) (0.9)
Retained deficit................................................................ (130.8) (188.8) (130.8)
----------- ------- -----------
Total Stockholders' Equity................................................ 695.8 (80.0) 838.7
----------- ------- -----------
Total Capitalization...................................................... $ 1,644.1 $ 603.0 $ 2,522.7
----------- ------- -----------
----------- ------- -----------
</TABLE>

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

(1) Assumes 100% of each issue of Specified EPIC Debt Securities is purchased in
the Tender Offers.
(2) EPIC has delivered redemption notices with respect to such indebtedness and
will redeem such indebtedness in February 1994.
(3) Excludes (i) 7,798,170 shares of Common Stock reserved for issuance under
the Company's stock plans and upon exercise of options granted under the
Company's stock option plans; and (ii) 3,409,219 shares of Common Stock
reserved for issuance upon the exercise of Warrants. Also excludes
approximately 1,000,000 shares of Common Stock to be issued and contributed
by the Company to the Plan on or about May 15, 1994.
(4) As of January 8, 1994. Excludes 6,227,165 shares reserved for issuance upon
exercise of certain options, stock appreciation rights and warrants.
(5) Excludes 3,409,219 shares of Common Stock issuable upon the exercise of
Warrants, of which shares will be sold in the Offerings by the Selling
Stockholders.
(6) Additional paid-in capital with respect to the Company equals the total
amount of (i) the net proceeds of the Company's initial public offering of
Common Stock, (ii) the net proceeds of the sales of Common Stock to the
ESOP, (iii) the estimated value of shares of Common Stock awarded under the
Company's stock plans, (iv) the estimated aggregate fair market value of
Warrants that were issued to HCA and certain other investors in connection
with the Formation and the financing thereof and (v) the estimated aggregate
fair market value of the Company's preferred stock surrendered by HCA upon
exercise of Warrants to receive Common Stock, minus (vi) dividends paid and
accrued and accretion of discount on preferred stock. In connection with the
Formation, the Company issued Warrants exercisable for an aggregate of
36,874,551 shares of Common Stock (33,460,240 shares for HCA and 3,414,311
shares of certain other investors). The Company initially recorded its
Warrants at an aggregate fair value of $117.0 million, or $3.18 per Warrant,
as determined by an independent investment banking firm subsequent to the
Formation. HCA recorded the fair value of its investment in the Warrants at
$37.0 million or $1.11 per Warrant, based upon a valuation range determined
by another investment banking firm. These respective values were based upon
a number of assumptions and projections as to financial results, including
estimates by the investment banking firms of the discounted present value of
a share of Common Stock at September 17, 1987 ($3.38 in the case of the
Warrant value recorded by the Company and a range of $.66 to $1.59 in the
case of the Warrant value recorded by HCA). Each such estimate was based
upon, among other things, certain different assumptions in the valuation of
the Warrants as to the investment objectives of a purchaser of such Warrants
(and, accordingly, an annual yield assumption for discounting to the date of
the Formation the estimated value of a share of Common Stock at a future
date) and the number of shares of Common Stock subject to the Warrants.
After further review, the Company decreased the amount recorded for Warrants
to $52.0 million, or $1.41 per Warrant. In addition, EPIC has received
determinations of the fair value of the EPIC common stock from independent
financial advisors that valued such stock at prices lower than the amount
paid therefor by the EPIC ESOP in connection with the EPIC Formation.

13
<PAGE> 16

SELECTED HISTORICAL FINANCIAL INFORMATION

The following tables set forth selected historical financial information
for (i) the Company for each of the years in the five-year period ended August
31, 1993 and for the three months ended November 30, 1993 and 1992; and (ii)
EPIC for each of the years in the five-year period ended September 30, 1993 and
for the three months ended December 31, 1993 and 1992. The selected financial
information for the Company and EPIC for each of the years in the five-year
periods ended August 31, 1993 and September 30, 1993, respectively, are derived
from the consolidated financial statements of the Company and EPIC, each of
which have been audited by Ernst & Young, independent auditors. The selected
financial information for the Company and EPIC for the three months ended
November 30, 1993 and 1992 and December 31, 1993 and 1992, respectively, are
derived from unaudited condensed consolidated financial statements of the
Company and EPIC and reflect all adjustments (consisting of normal recurring
adjustments) that, in the opinion of management, are necessary for a fair
presentation of such information. Operating results for the three months ended
November 30, 1993 and December 31, 1993 are not necessarily indicative of the
results that may be expected for the Company's fiscal year ending August 31,
1994.

All information contained in the following tables should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the consolidated financial statements and
related notes of the Company and EPIC included or incorporated by reference
herein.

14
<PAGE> 17

HEALTHTRUST, INC. - THE HOSPITAL COMPANY

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
NOVEMBER 30, YEAR ENDED AUGUST 31,
-------------------- ------------------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
-------- ------- -------- -------- -------- -------- --------
(UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenue................... $ 622.1 $ 591.8 $2,394.6 $2,265.3 $2,025.7 $1,856.9 $1,769.1
Hospital service costs.................. 494.3 464.0 1,888.6 1,796.0 1,615.8 1,488.2 1,429.9
-------- ------- -------- -------- -------- -------- --------
127.8 127.8 506.0 469.3 409.9 368.7 339.2
Depreciation and amortization........... 34.6 33.1 132.7 127.5 120.8 119.2 121.5
Interest expense........................ 21.6 25.6 99.8 119.6 152.6 161.1 189.8
ESOP/pension expense.................... 9.9 11.6 39.0 38.7 97.0 100.7 138.6
Deferred compensation expense........... 0.3 0.9 4.3 8.1 18.7 31.1 27.2
Other (income) expense, net............. (5.5) (3.2) (7.6) (4.6) (14.5) 23.1 14.8
-------- ------- -------- -------- -------- -------- --------
Income (loss) before minority
interests, taxes and extraordinary
charges............................. 66.9 59.8 237.8 180.0 35.3 (66.5) (152.7)
Minority interests...................... 1.4 3.3 11.9 15.3 13.3 8.6 1.7
Income tax expense (benefit)............ 26.6 23.2 90.7 71.4 15.4 (21.9) (53.1)
Extraordinary charges (net of
taxes)(1)............................. -- -- 13.6 136.4 -- 5.8 --
-------- ------- -------- -------- -------- -------- --------
Net income (loss)..................... 38.9 33.3 121.6 (43.1) 6.6 (59.0) (101.3)
Redeemable preferred stock dividends.... -- -- -- 24.6 76.3 65.7 58.6
-------- ------- -------- -------- -------- -------- --------
Net income (loss) to common
stockholders........................ $ 38.9 $ 33.3 $ 121.6 $ (67.7) $ (69.7) $ (124.7) $ (159.9)
-------- ------- -------- -------- -------- -------- --------
-------- ------- -------- -------- -------- -------- --------
EARNINGS (LOSS) PER SHARE:
Before extraordinary charges............ $ 0.46 $ 0.40 $ 1.62 $ 0.90 $ (1.15) $ (2.03) $ (2.78)
Extraordinary charges................... -- -- 0.16 1.78 -- 0.10 --
-------- ------- -------- -------- -------- -------- --------
Net income (loss) per common share...... $ 0.46 $ 0.40 $ 1.46 $ (0.88) $ (1.15) $ (2.13) $ (2.78)
-------- ------- -------- -------- -------- -------- --------
-------- ------- -------- -------- -------- -------- --------
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF AUGUST 31,
NOVEMBER 30, ------------------------------------------------------------
1993 1993 1992 1991 1990 1989
--------------------- -------- -------- -------- -------- --------
(UNAUDITED) (DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments........... $ 167.4 $ 151.3 $ 172.6 $ 302.6 $ 230.7 $ 12.2
Working capital........................... 305.6 219.1 245.3 390.2 309.8 72.9
Total assets.............................. 2,489.0 2,536.7 2,379.7 2,445.4 2,293.8 2,210.6
Long-term debt............................ 948.3 948.6 1,033.9 1,150.0 1,155.6 1,151.3
Redeemable preferred stock................ -- -- -- 575.9 499.6 433.9
Stockholders' equity...................... 695.8 655.7 530.8 88.0 42.1 34.9
</TABLE>

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

(1) Extraordinary after-tax charges relate to the early extinguishment of debt.
(2) EBITDA represents net operating revenue less hospital service costs.
(3) EBITDA margin represents the ratio of EBITDA to net operating revenue.

15
<PAGE> 18

EPIC HOLDINGS, INC.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31, YEAR ENDED SEPTEMBER 30,
-------------------- ------------------------------------------------------------
1993 1992 1993 1992 1991 1990 1989
-------- ------- -------- -------- -------- -------- --------
(UNAUDITED) (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenue................... $ 272.5 $ 244.4 $1,019.1 $ 941.3 $ 802.7 $ 742.4 $ 613.2
Hospital service costs.................. 236.2 215.1 873.7 809.9 683.3 631.7 520.1
-------- ------- -------- -------- -------- -------- --------
36.3 29.3 145.4 131.4 119.4 110.7 93.1
Depreciation and amortization........... 13.1 13.8 57.9 53.0 49.3 47.5 44.4
Interest expense........................ 23.8 22.0 89.9 79.8 68.3 69.2 76.2
ESOP expense............................ 5.7 5.2 20.7 20.7 23.1 15.4 16.9
Deferred compensation expense........... 0.7 (0.5) 3.8 11.8 8.1 5.8 15.6
Other income, net....................... (0.8) (0.6) (7.2) (2.8) (4.9) (5.1) (8.2)
-------- ------- -------- -------- -------- -------- --------
Loss before minority interests, taxes
and extraordinary charges........... (6.2) (10.6) (19.7) (31.1) (24.5) (22.1) (51.8)
Minority interests...................... 1.7 0.6 3.5 2.0 2.1 1.8 0.1
Income tax expense (benefit)............ 0.4 0.2 2.0 (9.3) (7.6) (6.6) (17.0)
Extraordinary charges (net of
taxes)(1)............................. -- 0.6 21.9 1.3 2.6 -- --
-------- ------- -------- -------- -------- -------- --------
Net loss.............................. (8.3) (12.0) (47.1) (25.1) (21.6) (17.3) (34.9)
Redeemable preferred stock dividends.... -- -- -- 11.1 22.8 19.0 18.1
-------- ------- -------- -------- -------- -------- --------
Net loss to common stockholders....... $ (8.3) $ (12.0) $ (47.1) $ (36.2) $ (44.4) $ (36.3) $ (53.0)
-------- ------- -------- -------- -------- -------- --------
-------- ------- -------- -------- -------- -------- --------
LOSS PER SHARE:
Before extraordinary charges............ $ (0.21) $ (0.28) $ (0.63) $ (1.07) $ (1.71) $ (1.48) $ (2.16)
Extraordinary charges................... -- 0.01 0.55 0.04 0.11 -- --
-------- ------- -------- -------- -------- -------- --------
Net loss per common share............... $ (0.21) $ (0.29) $ (1.18) $ (1.11) $ (1.82) $ (1.48) $ (2.16)
-------- ------- -------- -------- -------- -------- --------
-------- ------- -------- -------- -------- -------- --------
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
AS OF ------------------------------------------------------------
DECEMBER 31, 1993 1992 1991 1990 1989
1993 -------- -------- -------- -------- --------
(UNAUDITED) (DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments........... $ 89.3 $ 112.5 $ 53.8 $ 84.6 $ 69.1 $ 71.3
Working capital........................... 37.6 35.1 41.3 53.7 8.3 2.8
Total assets.............................. 898.5 875.0 780.8 763.4 758.0 743.2
Long-term debt............................ 685.2 679.6 619.4 478.3 462.5 481.4
Redeemable preferred stock................ -- -- -- 186.0 163.2 144.2
Stockholders' equity (deficit)............ (82.9) (85.3) (58.4) (101.7) (79.9) (58.9)
</TABLE>

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

16
<PAGE> 19

SELECTED PRO FORMA FINANCIAL INFORMATION

The following selected pro forma financial information is derived from the
Unaudited Pro Forma Condensed Combined Financial Statements included elsewhere
in this Prospectus and is based upon the consolidated financial statements of
each of the Company and EPIC, adjusted to give effect to the Acquisition and the
Financing Plan. The selected pro forma statement of operations data for the year
ended August 31, 1993 and the three months ended November 30, 1993 gives effect
to the Acquisition and the Financing Plan as if they had occurred on September
1, 1992. The pro forma balance sheet data as of November 30, 1993 gives effect
to the Acquisition and the Financing Plan as if they had occurred on November
30, 1993.

All information contained in the following tables should be read in
conjunction with "The Acquisition and the Financing Plan," "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Unaudited Pro Forma Condensed Combined Financial Statements of
the Company and the consolidated financial statements and related notes of the
Company and EPIC included or incorporated by reference herein.

<TABLE>
<CAPTION>
PRO FORMA
---------------------------
THREE MONTHS
ENDED YEAR ENDED
NOVEMBER 30, AUGUST 31,
1993 1993
------------ ----------
(UNAUDITED)
(DOLLARS IN MILLIONS
EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net operating revenue............................................... $ 894.6 $3,413.7
Hospital service costs.............................................. 730.5 2,762.3
------------ ----------
164.1 651.4
Depreciation and amortization....................................... 50.7 202.7
Interest expense.................................................... 35.2 151.2
ESOP/pension expense................................................ 15.5 59.7
Deferred compensation expense....................................... 0.3 4.3
Other income, net................................................... (3.1) (6.8)
------------ ----------
Income before minority interests, taxes and extraordinary charges... 65.5 240.3
Minority interests.................................................. 3.1 15.4
Income tax expense.................................................. 26.3 95.4
------------ ----------
Net income before extraordinary charges............................. $ 36.1 $ 129.5
------------ ----------
------------ ----------
Earnings per share before extraordinary charges..................... $ 0.40 $ 1.46
------------ ----------
------------ ----------
</TABLE>

<TABLE>
<CAPTION>
AS OF
NOVEMBER 30,
1993
------------
(UNAUDITED)
(DOLLARS IN
MILLIONS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and short-term investments..................................... $ 20.0
Working capital..................................................... 104.6
Total assets........................................................ 3,645.7
Long-term debt...................................................... 1,684.0
Stockholders' equity................................................ 838.7
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
NOVEMBER 30, AUGUST 31,
1993 1993
------------ ----------
<S> <C> <C>
OTHER DATA:
EBITDA(1)........................................................... $ 164.1 $ 651.4
EBITDA margin(2).................................................... 18.3% 19.1%
Capital expenditures................................................ $ 58.7 $ 436.7
Ratio of EBITDA to interest expense................................. 4.7x 4.3x
</TABLE>

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

(1) EBITDA represents net operating revenue less hospital service costs.
(2) EBITDA margin represents the ratio of EBITDA to net operating revenue.

17
<PAGE> 20

SELECTED OPERATING STATISTICS

The following tables set forth certain operating statistics for the
hospitals operated by the Company and EPIC for each of the periods indicated.

HEALTHTRUST, INC. - THE HOSPITAL COMPANY

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------
1993 1992 1991
---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
HISTORICAL OPERATING DATA:
Number of hospitals........................................ 81 81 85
Bed capacity(1)............................................ 11,233 11,374 11,607
Gross revenue:(2)
Inpatient................................................ $ 2,594.2 $ 2,439.3 $ 2,148.6
Outpatient............................................... $ 1,181.6 $ 1,021.9 $ 814.2
Net operating revenue(3)................................... $ 2,394.6 $ 2,265.3 $ 2,025.7
Patient days............................................... 1,541,536 1,616,340 1,658,061
Adjusted patient days(4)................................... 2,243,677 2,293,453 2,286,357
Average length of stay (days).............................. 5.4 5.5 5.7
Admissions................................................. 284,606 291,599 293,344
Adjusted admissions(5)..................................... 414,239 413,755 404,502
Occupancy rate(6).......................................... 40.5% 40.2% 40.4%
EBITDA margin(7)........................................... 21.1% 20.7% 20.2%
</TABLE>

EPIC HOLDINGS, INC.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1993 1992 1991
---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
HISTORICAL OPERATING DATA:
Number of hospitals........................................ 34 35 34
Bed capacity(1)............................................ 4,444 4,332 4,296
Net operating revenue:(3)
Acute inpatient net revenue.............................. $ 469.2 $ 489.1 $ 454.4
Outpatient net revenue................................... 317.2 282.1 234.7
Other net revenue(8)..................................... 232.7 170.1 113.6
---------- ---------- ----------
Net operating revenue(3)................................... $ 1,019.1 $ 941.3 $ 802.7
Patient days............................................... 589,283 641,373 643,210
Adjusted patient days(4)................................... 943,355 940,046 906,640
Average length of stay (days).............................. 5.8 6.0 6.0
Admissions................................................. 101,487 106,990 106,534
Adjusted admissions(5)..................................... 162,466 156,813 150,134
Occupancy rate(6).......................................... 39% 40% 41%
EBITDA margin(7)........................................... 14.3% 14.0% 14.9%
</TABLE>

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

(1) Average number of licensed beds during the period. "Licensed beds" are those
beds for which a facility has been granted approval to operate from the
appropriate state licensing agency.
(2) Gross revenue represents the hospitals' standard charges for services
performed prior to any contractual adjustments and/or policy discounts.
(3) Net operating revenue represents gross revenue less any contractual
adjustments and/or policy discounts.
(4) Represents actual patient days adjusted to include outpatient and emergency
room services by multiplying actual patient days by the sum of inpatient
revenue and outpatient revenue and dividing the result by inpatient revenue.
(5) Represents actual admissions adjusted to include outpatient and emergency
room services by multiplying actual admissions by the sum of inpatient
revenue and outpatient revenue and dividing the result by inpatient revenue.
(6) Based on the number of licensed beds in service.
(7) EBITDA margin for each period presented refers to the result obtained by
dividing (i) net operating revenue less hospital service costs by (ii) net
operating revenue.
(8) Other net revenue includes revenue from skilled nursing, rehabilitation and
geropsychiatric units, home health visits and management contract fees.

18
<PAGE> 21

DESCRIPTION OF EPIC

EPIC is a health care services provider that owns and operates acute care
hospitals and related health care businesses. EPIC owns and operates 34 general
acute care hospitals with a total of 4,444 licensed beds and has approximately
11,200 full time equivalent employees. EPIC's hospitals offer inpatient,
outpatient and other specialty services and are situated primarily in suburban
locations and cities in 10 southern, southwestern and western states.
Twenty-seven of EPIC's hospitals are located in Texas, California, Oklahoma or
Louisiana. EPIC also owns or manages (i) associated medical office buildings, as
well as related health care businesses, (ii) two long-term care facilities,
(iii) certain vacant developed and undeveloped properties and (iv) a 238,000
square foot office facility in Dallas, Texas which serves as its administrative
support center. EPIC is also constructing a 125-bed acute care facility in
Mandeville, Louisiana which is expected to be completed in June 1994. As of
December 6, 1993, the EPIC ESOP, which was established to increase incentives to
EPIC employees and to finance the EPIC Formation, owned approximately 60.8% (53%
on a fully-diluted basis) of the EPIC common stock outstanding. Pursuant to the
ESOP Agreement and in connection with the Acquisition, contributions to the EPIC
ESOP will be terminated.

EPIC, through a group of its subsidiaries, is developing other healthcare
businesses which provide outpatient and health care management services. As of
November 30, 1993, these EPIC subsidiaries, among other things, provided home
health and rehabilitation services, managed eight non-EPIC owned hospitals,
managed four EPIC-owned outpatient surgery centers, owned and managed two
diagnostic imaging centers, owned one patient transport company, managed 56
geropsychiatric and skilled nursing units (46 of which are at non-EPIC
hospitals) and six partial day hospital programs, owned one long-term care
hospital and managed another long-term care hospital. These businesses generated
approximately $232.7 million of net operating revenue for the fiscal year ended
September 30, 1993.

PROPERTIES

The following table sets forth certain information relating to each of the
hospitals operated by the Company at November 1, 1993 and by EPIC at September
30, 1993, grouped by state. Hospitals operated by EPIC appear in italicized
type. Unless otherwise noted below, all hospitals are wholly-owned by
subsidiaries of the Company or EPIC.

<TABLE>
<CAPTION>
NUMBER OF
STATE NAME LOCATION LICENSED BEDS
- --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Alabama Andalusia Hospital Andalusia 77
Crestwood Hospital Huntsville 120
Selma Medical Center Selma 214
Arizona El Dorado Hospital & Medical Center Tucson 166
Northwest Hospital Tucson 150
Arkansas DeQueen Regional Medical Center DeQueen 122
*Medical Park Hospital Hope 91
California Chino Community Hospital Chino 118
Palm Drive Hospital Sebastopol 56
*Healdsburg General Hospital Healdsburg 49
*Mission Bay Memorial Hospital San Diego 150
*Visalia Community Hospital Visalia 52
Westside Hospital(1) Los Angeles 87
</TABLE>

19
<PAGE> 22

<TABLE>
<CAPTION>
NUMBER OF
STATE NAME LOCATION LICENSED BEDS
- --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Florida North Okaloosa Medical Center Crestview 110
Palm Beach Regional Hospital Lake Worth 200
East Pointe Hospital Lehigh Acres 88
Palms West Hospital Loxahatchee 117
Santa Rosa Medical Center(2) Milton 129
Plantation General Hospital(3) Plantation 264
Edward White Hospital St. Petersburg 167
South Bay Hospital Sun City Center 112
*Clearwater Community Hospital(4) Clearwater 133
*Lake City Medical Center Lake City 75
Georgia Doctors Hospital(5) Columbus 248
Lanier Park Regional Hospital Gainesville 124
*Barrow Medical Center Winder 60
Idaho West Valley Medical Center Caldwell 150
Eastern Idaho Regional Medical Center Idaho Falls 286
Indiana Terre Haute Regional Hospital Terre Haute 284
Kentucky Scott General Hospital Georgetown 75
Spring View Hospital Lebanon 113
PineLake Medical Center Mayfield 116
Meadowview Regional Hospital Maysville 111
Bourbon General Hospital Paris 60
Logan Memorial Hospital Russellville 100
Louisiana Medical Center of Baton Rouge Baton Rouge 225
Medical Center of SW Louisiana Lafayette 166
Women's and Children's Hospital(6) Lafayette 93
Lakeside Hospital Metairie 186
Dauterive Hospital New Iberia 113
Doctor's Hospital of Opelousas(7)(8) Opelousas 133
*Highland Park Hospital Covington 104
*Riverview Medical Center Gonzales 104
Mississippi Vicksburg Medical Center Vicksburg 144
*Garden Park Community Hospital(9) Gulfport 120
Missouri Springfield Community Hospital Springfield 200
North Carolina Davis Community Hospital Statesville 149
The Brunswick Hospital(10) Supply 60
Heritage Hospital Tarboro 127
Oklahoma Edmond Regional Medical Center Edmond 139
Wagoner Community Hospital(11) Wagoner 100
*Claremore Hospital Claremore 89
*Doctor's Medical Center Tulsa 211
*Southwestern Medical Center Lawton 108
Oregon McMinnville Community Hospital McMinnville 80
Douglas Community Hospital Roseburg 118
South Carolina Marlboro Park Hospital Bennettsville 111
Chesterfield General Hospital Cheraw 72
Colleton Regional Hospital Walterboro 131
Doctor's Memorial Hospital(8)(12) Spartanburg 108
</TABLE>

20
<PAGE> 23

<TABLE>
<CAPTION>
NUMBER OF
STATE NAME LOCATION LICENSED BEDS
- --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Tennessee Smith County Memorial Hospital Carthage 66
Sycamore Shoals Hospital Elizabethton 100
Trinity Hospital Erin 40
Hendersonville Hospital(13) Hendersonville 120
Johnson City Specialty Hospital(14) Johnson City 39
North Side Hospital(15) Johnson City 154
Crockett Hospital Lawrenceburg 106
Livingston Regional Hospital Livingston 106
River Park Hospital(16) McMinnville 89
South Pittsburg Municipal Hospital(17) South Pittsburg 107
Southern Tennessee Medical Center(18) Winchester 212
Stones River Hospital Woodbury 85
Texas Northeast Community Hospital Bedford 200
Valley Regional Medical Center Brownsville 158
Brownwood Regional Hospital(19) Brownwood 218
Doctors Hospital(20) Conroe 135
Medical Center Hospital Conroe 182
El Campo Memorial Hospital El Campo 41
Gilmer Medical Center Gilmer 46
Sun Belt Regional Medical Center(21) Houston 273
Midway Park Medical Center Lancaster 90
Longview Regional Hospital Longview 80
Woodland Heights Medical Center Lufkin 117
Coronado Hospital Pampa 115
Bayshore Medical Center Pasadena 469
Detar Hospital Victoria 303
Gulf Coast Medical Center Wharton 161
*Alice Physicians & Surgeons Hospital Alice 131
*Alvin Community Hospital Alvin 86
*Coastal Bend Hospital Aransas Pass 75
*Denton Regional Medical Center Denton 297
Doctor's Hospital of Laredo(22) Laredo 91
*Fort Bend Community Hospital Missouri City 80
*Katy Medical Center Katy 103
Mainland Regional Healthcare System(23) Texas City 430
Medical Arts Hospital(8) Dallas 72
Medical Arts Hospital(8) Texarkana 110
*Medical Plaza Hospital Sherman 164
North Texas Medical Center McKinney 270
*Parkway Hospital Houston 262
*Riverside Hospital Corpus Christi 89
*Round Rock Community Hospital Round Rock 75
Terrell Community Hospital(23) Terrell 101
*Westbury Hospital Houston 134
Utah Lakeview Hospital Bountiful 128
Brigham City Community Hospital Brigham City 50
Mountain View Hospital Payson 118
Castleview Hospital Price 88
Ashley Valley Medical Center Vernal 39
Pioneer Valley Hospital West Valley City 139
</TABLE>

21
<PAGE> 24

<TABLE>
<CAPTION>
NUMBER OF
STATE NAME LOCATION LICENSED BEDS
- --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Virginia Northern Virginia Doctors Hospital Arlington 267
Montgomery Regional Hospital Blacksburg 146
Pulaski Community Hospital Pulaski 153
Washington Capital Medical Center Olympia 110
Wyoming Riverton Memorial Hospital Riverton 70
</TABLE>

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

* The land, building, and improvements are owned by EPIC Properties, are
subject to the Mortgages (as hereinafter defined), and are leased to EPIC
Master Leasing, Inc. ("Master Leasing") pursuant to a lease.
(1) Owned by a limited partnership of which 28.7% of the interest is held by
non-EPIC limited partners. The limited partnership has leased the hospital
to a joint venture of which approximately 23.7% is held by non-EPIC
minority owners.
(2) Lease expires in 2005, unless landlord exercises option to purchase
facility for book value in 1995.
(3) Operated by a partnership of which the Company is the general partner
owning 53% and certain physicians are limited partners owning 47%.
(4) Operated by a limited partnership of which approximately 18.0% of the
interest is held by non-EPIC limited partners.
(5) Owned by the Company as a tenancy in common with physicians having a
minority interest of 40.5%.
(6) Ground lease expires in 2011; there are two ten-year optional renewal
terms.
(7) Operated by a limited partnership of which approximately 23.0% of the
interest is held by non-EPIC limited partners.
(8) The facility is leased from a third party other than EPIC Properties.
(9) Operated by a limited partnership in which investors other than EPIC
receive the first $2 million earned by the partnership after payment of the
lease payments due to EPIC ($3 million per year, increasing by 15% per
year), and EPIC is entitled to 60% of all additional earnings.
(10) Lease expires in 1994.
(11) Lease expires in 2007.
(12) Operated by a limited partnership of which approximately 15% of the
interest is held by non-EPIC limited partners.
(13) Owned by a partnership of which the Company is the general partner owning
83% and certain physicians are limited partners owning 17%.
(14) Owned by a partnership of which the Company is the general partner owning
87% and certain physicians are limited partners owning 13%.
(15) Owned by the Company as a tenancy in common with physicians having a
minority interest of 30.25%.
(16) Owned by a partnership of which the Company is the general partner owning
78% and certain physicians are limited partners owning 22%.
(17) Managed by the Company for profits and losses attributable thereto with an
option to buy for $50,000 and the provision for full payment of all
outstanding indebtedness issued in connection with the construction of the
hospital. The Company's management contract for this facility expires in
1999.
(18) Includes a leased (lease expires in 2020) hospital campus located in
Sewanee, Tennessee with 50 licensed beds.
(19) Lease expires in 2000; there are two optional renewal terms of ten years
each.
(20) Initial term of lease expires in 2006; there are three optional renewal
terms of ten years each. The Company has an option to buy this facility for
an amount determined in accordance with a specified formula.
(21) Includes a hospital campus located at Channelview, Texas with 96 licensed
beds.
(22) Operated by a limited partnership of which approximately 22.125% of the
interest is held by non-EPIC limited partners.
(23) The hospital consists of two facilities, one of which is leased from a
third party.

The Company is engaged from time to time in discussions relating to
proposed sales of certain of its hospitals and of minority interests in, or
joint ventures with medical staff physicians or others with respect to, certain
other facilities. However, except as noted in the table above, as of November 1,
1993, no definitive arrangements with respect to any sales or joint ventures had
been agreed upon by the Company.

The Company also owns (i) a 50% interest in a general partnership with
Orlando Regional Medical Center, Inc., which partnership owns South Seminole
Community Hospital (126 beds) in Longwood, Florida; (ii) a 50% interest in a
general partnership with Presbyterian Hospital of Charlotte, which partnership
owns Orthopaedic Hospital of Charlotte (166 beds) in Charlotte, North Carolina;
and (iii) a 25% interest in a general partnership with AMI, which partnership
owns Encino Hospital (188 beds) in Encino, California and Tarzana Medical Center
(177 beds) in Tarzana, California. The Company has also formed a joint venture
with Austin Diagnostic Clinic, P.A. for the purpose of constructing and
operating an integrated healthcare facility in Austin, Texas. This facility,
currently under construction, will consist of a 180-bed hospital, a diagnostic
and treatment center and a medical office building. Following completion of
construction the Company will manage the hospital. In addition, the Company,
through its subsidiaries or joint venture arrangements, owns, leases or manages
approximately 120 medical office buildings with physicians' office

22
<PAGE> 25

space and various parcels of undeveloped land, substantially all of which are
adjacent to its hospitals. The Company also occupies approximately 65,000 square
feet of corporate office space in Nashville, Tennessee.

Twenty-four of the 34 EPIC hospitals are owned by EPIC Properties, a
wholly-owned subsidiary of EPIC, and are subject to mortgages (the "Mortgages")
granted in connection with the issuance of the EPIC Mortgage Notes. EPIC
Properties leases these 24 hospitals to Master Leasing, a wholly-owned
subsidiary of EPIC. With respect to these 24 hospitals, EPIC has agreed to
indemnify EPIC Properties, the trustee under the indenture governing the EPIC
Mortgage Notes (the "Mortgage Notes Trustee"), all holders of the EPIC Mortgage
Notes and each of their respective subsidiaries, directors, officers, agents,
successors and assigns from liabilities relating to the presence of hazardous
wastes, any medical or infectious wastes, or substances in the soil or ground
water of any real property on which such hospitals are located in concentrations
that the applicable federal or state environmental agency would require remedial
action to correct (the "Environmental Indemnity"). Pursuant to the Environmental
Indemnity, EPIC is obligated to remediate or to cause to be remediated any
spill, leak, disposal, discharge or release of certain materials on or beneath
any property occurring during the period that the EPIC Mortgage Notes remain
outstanding. EPIC Properties has collaterally assigned the Environmental
Indemnity to the Mortgage Notes Trustee.

23
<PAGE> 26

PRICE RANGE OF COMMON STOCK

The Common Stock is listed on the NYSE under the symbol "HTI." On February
24, 1994, the last sale price of the Common Stock, as reported on the NYSE, was
$28 5/8 per share. The following table sets forth the high and low sale prices
of the Common Stock for the periods indicated as reported by the NYSE Composite
Tape since the initial public offering of the Common Stock on December 13, 1991:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, 1992 HIGH LOW
------------------------------------------------------------------- ---- ----
<S> <C> <C>
Second Quarter (beginning December 13, 1991).................. $23 3/4 $13 5/8
Third Quarter................................................. 20 5/8 14 1/8
Fourth Quarter................................................ 17 1/4 13 1/8
FISCAL YEAR ENDED AUGUST 31, 1993
-------------------------------------------------------------------
First Quarter................................................. 17 7/8 11 7/8
Second Quarter................................................ 19 7/8 12
Third Quarter................................................. 19 1/8 13 3/8
Fourth Quarter................................................ 21 7/8 17 3/8
FISCAL YEAR ENDING AUGUST 31, 1994
-------------------------------------------------------------------
First Quarter................................................. 24 3/4 19 3/4
Second Quarter (through February 24, 1994).................... 29 5/8 22 1/2
</TABLE>

24
<PAGE> 27

DIVIDEND POLICY

The Company has never paid dividends on its Common Stock. The Company
currently intends to retain earnings for working capital, capital expenditures,
general corporate purposes and reduction of outstanding indebtedness.
Accordingly, the Company does not expect to pay dividends in the foreseeable
future. In addition, the declaration and payment of dividends on the Common
Stock are prohibited by the terms of the Company's existing bank credit facility
and restricted by the indentures governing certain of the Company's other long
term indebtedness (including the indenture pursuant to which the indebtedness to
be issued in the Subordinated Debt Offering will be issued), and the Company
anticipates that similar prohibitions will be included in the 1994 Credit
Agreement.

SELLING STOCKHOLDERS

The Selling Stockholders listed in the table below have agreed to sell the
number of shares of Common Stock set forth opposite their respective names. All
such shares of Common Stock are being sold in the Offerings upon exercise of
Warrants held by the Selling Stockholders at an exercise price of $5.30 per
share. The table sets forth information with respect to the beneficial ownership
of the Common Stock immediately prior to the consummation of the Offerings and
as adjusted to reflect the sale of the Common Stock pursuant to the Offerings.
None of the Selling Stockholders has had any position, office or other material
relationship with the Company or its affiliates within the past three years.

<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP BENEFICIAL
PRIOR TO THE OWNERSHIP
OFFERINGS AFTER THE OFFERINGS
------------------- NUMBER -------------------
NUMBER OF OF SHARES NUMBER OF
SELLING STOCKHOLDERS SHARES PERCENT BEING OFFERED SHARES PERCENT
- ------------------------------------- --------- ------- ------------- --------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>

25
<PAGE> 28

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of (i) 400,000,000
shares of Common Stock and (ii) 78,000,000 shares of preferred stock, par value
$.001 per share (the "Preferred Stock"), of which 1,000,000 shares have been
designated as Series A Junior Preferred Stock. As of February 1, 1994, there
were 81,207,077 shares of Common Stock outstanding and no shares of Preferred
Stock outstanding. The following summary description of the Company's capital
stock is qualified by reference to the Company's amended and restated
Certificate of Incorporation (the "Certificate") and By-Laws and the Rights
Agreement, dated as of July 8, 1993, between the Company and First Union
National Bank of North Carolina, as Rights Agent (the "Rights Agreement").

Capital Stock

Each share of Common Stock entitles the holder thereof to one vote on all
matters submitted to a vote of stockholders. Subject to preferential rights that
may be applicable to any outstanding Preferred Stock, holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor. See "Dividend Policy." In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and subject to the liquidation preference of any outstanding
Preferred Stock. Holders of Common Stock have no cumulative voting rights and no
preemptive, subscription, redemption or conversion rights. The transfer agent
and registrar for the Common Stock is First Union National Bank of North
Carolina.

Pursuant to the Rights Agreement, attached to each share of Common Stock
(including the Common Stock offered hereby) is one preferred stock purchase
right (a "Right") that, when exercisable, entitles the holder thereof to
purchase one one-hundredth of a share of Series A Junior Preferred Stock at a
price (the "Exercise Price") of $75, subject to adjustment. The Rights generally
become exercisable ten days after the earlier of (i) a public announcement that
a person or group beneficially owns 15% or more of any class of the Company's
voting stock (a "15% Interest") or (ii) the commencement, or announcement of the
intent to commence, a tender offer which would result in any person or group
acquiring a 15% Interest (in either case unless approved by the Company's
Continuing Directors, as defined in the Rights Agreement). Following the
acquisition by a person or group of a 15% Interest, the Rights held by such
person or group (and certain affiliates, associates and transferees thereof)
become null and void. Following certain events (including a person or group
acquiring a 15% Interest, a merger or a sale of a majority of the Company's
assets), exercise of the Rights entitles the holders thereof to receive Common
Stock or common stock of the acquiring corporation, or cash, property or other
securities, with a market value equal to twice the Exercise Price. The Rights
expire on July 8, 2003 and may be redeemed by the Company (with the approval of
the Continuing Directors) for $.01 per Right until the tenth day after a person
or group acquires a 15% Interest. At any time after a person or group acquires a
15% Interest and until such person or group acquires 50% or more of any class of
the Company's voting stock, the Company (with the approval of the Continuing
Directors) may exchange each Right for one share of Common Stock.

Certificate and By-laws

The Certificate and the By-laws provide that (i) the Board of Directors
consists of a minimum of five and a maximum of fifteen directors, divided into
three classes serving staggered three-year terms, and such provisions may not be
amended without the affirmative vote of the holders of at least 80% of the
Company's outstanding voting stock; (ii) directors may be removed only for
cause; and (iii) special meetings may be called only by the Board of Directors.
In addition, the Board of Directors is authorized, without further stockholder
approval, to establish and issue one or more series of Preferred Stock and
determine the rights, preferences and limitations thereof. The foregoing
provisions of the Certificate and By-laws, together with the ability of the
Board of Directors to issue Preferred Stock and the effects of the Rights
described above, could discourage or delay a change of control of the Company
and the removal of the Company's management.

Recent Developments

On February 15, 1994, Mellon Bank corporation ("Mellon") filed with the
Commission a report on Schedule 13G stating that Mellon and its subsidiaries, in
various fiduciary capacities, beneficially own 5,230,000 shares of Common Stock,
representing approximately 6.4% of the Common Stock outstanding on such date.

26
<PAGE> 29

CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a general summary of certain United States federal income
and estate tax consequences expected to result under current law from the
purchase, ownership, sale or other taxable disposition of Common Stock by any
person that is (as to the United States) a foreign corporation, a foreign
partnership, a nonresident alien individual, or a nonresident alien fiduciary of
an estate or trust the income of which is not subject to United States taxation
regardless of its source (a "Non-U.S. Holder"). This summary does not address
all aspects of United States federal income and estate taxes that may be
relevant to Non-U.S. Holders in light of their personal circumstances or to
certain types of Non-U.S. Holders that may be subject to special treatment under
United States federal income tax laws (for example, insurance companies, tax
exempt organizations, financial institutions or broker-dealers). Furthermore,
this summary does not discuss any aspects of foreign, state or local taxation.
This summary is based on current provisions of the Internal Revenue Service Code
of 1986, as amended (the "Code"), existing and proposed regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change. This summary does not constitute, and should not be
viewed as, legal or tax advice to prospective purchasers. Each prospective
purchaser of Common Stock is advised to consult its own tax advisor with respect
to the tax consequences of acquiring, holding and disposing of Common Stock.

DIVIDENDS

The Company does not expect to pay dividends on its Common Stock in the
foreseeable future. See "Dividend Policy." Except as described below and subject
to the discussion below regarding the Foreign Investment in Real Property Tax
Act ("FIRPTA"), dividends paid to a Non-U.S. Holder of Common Stock generally
will be subject to withholding of United States federal income tax at a 30% rate
or such lower rate as may be specified by an applicable income tax treaty. In
determining the applicability of a tax treaty that provides for a lower rate of
withholding, dividends paid to an address in a foreign country are presumed
under current Treasury regulations to be paid to a resident of that country.
Under proposed Treasury regulations, however, a Non-U.S. Holder would be
required to file certain forms in order to claim the benefit of an applicable
treaty rate. Any dividends that are effectively connected with the conduct of a
trade or business of the Non-U.S. Holder within the United States generally will
not be subject to the 30% withholding tax (provided that the required forms are
filed), but will be taxed at ordinary federal income tax rates. If the Non-U.S.
Holder is a foreign corporation, such effectively connected income may also be
subject to an additional United States "branch profits tax."

The Company must report annually to the Internal Revenue Service (the
"IRS") and to each Non-U.S. Holder the amount of dividends paid to, and tax
withheld from dividends received by, such Non-U.S. Holder. These information
reporting requirements apply even if withholding is reduced or eliminated by an
applicable tax treaty. This information also may be made available to the tax
authorities of the country in which the Non-U.S. Holder resides.

SALE OR DISPOSITION OF COMMON STOCK

Except as described below in this paragraph and subject to the discussion
below regarding FIRPTA, a Non-U.S. Holder generally will not be subject to
United States federal income tax (and no amount generally will be withheld) in
respect of any gain recognized on a sale or other taxable disposition of Common
Stock. However, capital gain that is effectively connected with the conduct of a
trade or business of the Non-U.S. Holder in the United States will be taxed at
ordinary federal income tax rates (subject to a 28% maximum tax rate for
long-term capital gains of individuals). Moreover, a Non-U.S. Holder who is a
nonresident alien individual and who holds the Common Stock as a capital asset
generally will be taxed at a rate of 30% on capital gain if (i) he is present in
the United States for 183 or more days in the taxable year of sale or other
disposition and (ii) either the gain is attributable to a fixed place of
business maintained by him in the United States or he has a "tax home" (as
defined in the Code) in the United States. An applicable treaty may provide for
different rules.

27
<PAGE> 30

FEDERAL ESTATE TAXES

Common Stock held by an individual Non-U.S. Holder at the time of death
will be included in such Non-U.S. Holder's gross estate for United States
federal estate tax purposes, unless an applicable state tax treaty provides
otherwise.

FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT

If a Non-U.S. Holder's gain or loss upon the sale, exchange or redemption
of Common Stock (including dividend distributions treated as redemptions or
partial liquidations under United States federal income tax rules) is subject to
FIRPTA, such gain or loss will be treated as effectively connected with a trade
or business engaged in by such Non-U.S. Holder within the United States and thus
will be subject to United States income tax at the ordinary rates. The FIRPTA
provisions would apply to the Common Stock only if the Company has been or
becomes a "United States real property holding corporation" within the meaning
of the Code ("USRPHC"). It is possible that the Company is or, in the future,
will be a USRPHC. However, even if the Company is a USRPHC, if the Common Stock
is regularly traded on an established securities market (as it is currently),
FIRPTA will apply only to a Non-U.S. Holder that beneficially owns, directly or
indirectly, more than 5% of the fair market value of the Common Stock at any
time during the 5-year period ending on the date of disposition (or such shorter
period that such Common Stock was held).

INFORMATION REPORTING AND BACKUP WITHHOLDING

Backup withholding (which generally is a withholding tax imposed at the
rate of 31% on certain payments to persons that fail to furnish the information
required under the United States information reporting requirements) and
information reporting with respect to backup withholding generally will not
apply to dividends paid to Non-U.S. Holders at an address outside of the United
States.

The payment of the proceeds from the disposition of Common Stock to or
through the United States office of a broker will be subject to information
reporting and backup withholding unless the payee under penalties of perjury
certifies, among other things, its status as a Non-U.S. Holder, or otherwise
establishes an exemption. The payment of the proceeds from the disposition of
Common Stock to or through a non-U.S. office of a non-U.S. broker will
generally, except as noted below, not be subject to backup withholding and
information reporting. In the case of the payment of proceeds from the
disposition of Common Stock through a non-U.S. office of a broker that is a
United States person or a "U.S. related person," existing regulations require
information reporting on the payment unless the broker has documentary evidence
in its files that the owner is a Non-U.S. Holder and the broker has no actual
knowledge to the contrary. For this purpose, a "U.S. related person" is (i) a
"controlled foreign corporation" for United States federal income tax purposes
(generally, a foreign corporation controlled by United States shareholders) or
(ii) a foreign person 50% or more of whose gross income from all sources for a
certain period is derived from activities that are effectively connected with
the conduct of a United States trade or business. Proposed regulations contain a
similar rule with respect to information reporting by a non-U.S. office of a
broker that is a United States person or a U.S. related person. However, under
the proposed regulations, such a person may only rely on documentary evidence to
avoid information reporting if the foreign office "effects" the sale at such
foreign office. The existing regulations state that payments of sale proceeds
made through a foreign office of a broker that is a United States person or a
U.S. related person will not be subject to backup withholding until provided
otherwise, and proposed regulations state that backup withholding will not apply
to such payments (absent actual knowledge that the payee is a United States
person) where the foreign office "effects" the sale at such foreign office. All
corporations are exempt payees for purposes of backup withholding and the
corresponding information reporting.

Amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund of or a credit against such Non-U.S.
Holder's United States federal income tax, provided that the required
information is furnished to the IRS.

28
<PAGE> 31

UNDERWRITING

Subject to the terms and conditions set forth in a U.S. purchase agreement
(the "U.S. Purchase Agreement") among the Company, the Selling Stockholders and
each of the underwriters named below (the "U.S. Underwriters"), and concurrently
with the sale of shares of Common Stock to the International Underwriters
(as defined below), the Company and the Selling Stockholders severally have
agreed to sell to the U.S. Underwriters, and each of the U.S. Underwriters
severally has agreed to purchase from the Company and the Selling Stockholders,
the aggregate number of shares of Common Stock set forth opposite its name
below.

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
------------------------------------------------------------------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ..............................................
Donaldson, Lufkin & Jenrette Securities Corporation.....................
---------
Total .....................................................
---------
---------
</TABLE>

Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") are acting as
representatives (the "U.S. Representatives") of the U.S. Underwriters.

The Company and the Selling Stockholders also have entered into a purchase
agreement (the "International Purchase Agreement") with certain underwriters
outside the United States (the "International Underwriters" and, together with
the U.S. Underwriters, the "Underwriters"), for whom Merrill Lynch International
Limited and DLJ are acting as representatives (the "International
Representatives"). Subject to the terms and conditions set forth in the
International Purchase Agreement, and concurrently with the sale of
shares of Common Stock to the U.S. Underwriters pursuant to the U.S. Purchase
Agreement, the Company and the Selling Stockholders have agreed to sell to the
International Underwriters, and the International Underwriters severally have
agreed to purchase from the Company and the Selling Stockholders, an aggregate
of shares of Common Stock. The initial public offering price per share
and the total underwriting discount per share are identical under the U.S.
Purchase Agreement and the International Purchase Agreement.

In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such Agreement if any of the shares of Common Stock being sold pursuant to
each such agreement are purchased. Under certain circumstances, the commitments
of non-defaulting U.S. Underwriters or International Underwriters (as the case
may be) may be increased. Sales of Common Stock to be purchased by the U.S.
Underwriters and the International Underwriters are conditioned upon one
another.

The U.S. Underwriters and the International Underwriters have entered into
an intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. The Underwriters are permitted to sell
shares of Common Stock to each other for purposes of resale at the initial
public offering price, less an amount not greater than the selling concession.
Under the terms of the Intersyndicate agreement, the U.S. Underwriters and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to persons who are non-United States persons or to
persons they believe intend to resell to persons who are non-United States
persons, and the International Underwriters and any dealer to whom they sell
shares of Common stock will not offer to sell or sell shares of Common Stock to
United States persons or to persons they believe intend to resell to United
States persons, except in each case for transactions pursuant to such agreement.

The U.S. Representatives have advised the Company that the U.S.
Underwriters propose initially to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $ per share. The U.S.

29
<PAGE> 32

Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.

The Company has granted an option to the U.S. Underwriters, exercisable
during the 30-day period after the date of this Prospectus, to purchase up to an
aggregate of additional shares of Common Stock at the initial public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. The U.S. Underwriters may exercise this option only to
cover over-allotments, if any, made on the sale of Common Stock offered hereby.
To the extent that the U.S. Underwriters exercise this option, each U.S.
Underwriter will be obligated, subject to certain conditions, to purchase the
number of additional shares of Common Stock proportionate to such U.S.
Underwriter's initial amount reflected in the foregoing table. The Company also
has granted an option to the International Underwriters, exercisable during the
30-day period after the date of this Prospectus, to purchase up to an aggregate
of additional shares of Common Stock to cover overallotments, if any, on
terms similar to those granted to the U.S. Underwriters.

The Common Stock is listed on the NYSE under the symbol "HTI."

The Company, the Selling Stockholders and the several Underwriters have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act.

Each of the U.S. Underwriters, from time to time, performs investment
banking and other financial services for the Company. Merrill Lynch and DLJ are
acting as financial advisors to the Company in connection with the Acquisition.
In addition, the Company has retained DLJ and Merrill Lynch as Dealer Managers
for the Tender Offers and as underwriters for the Subordinated Debt Offering.

LEGAL MATTERS

The validity of the Common Stock offered hereby and certain other legal
matters relating to the Offerings will be passed upon for the Company by Dewey
Ballantine, New York, New York. Certain legal matters will be passed upon for
the Underwriters by Davis Polk & Wardwell, New York, New York. Morton A. Pierce
and Robert M. Smith, both members of Dewey Ballantine, are Assistant Secretaries
of the Company. In addition, certain members of Dewey Ballantine and certain
associates of the firm beneficially own shares of Common Stock.

EXPERTS

The consolidated financial statements of Healthtrust, Inc. - The Hospital
Company, EPIC Holdings, Inc., and EPIC Healthcare Group, Inc. appearing or
incorporated by reference in this Prospectus and Registration Statement have
been audited by Ernst & Young, independent auditors, to the extent indicated in
their reports thereon also appearing elsewhere herein and in the Registration
Statement or incorporated by reference. Such consolidated financial statements
have been included herein or incorporated herein by reference in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.

30
<PAGE> 33

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), for the
registration of the securities offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in exhibits and schedules to the Registration Statement as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits thereto, and the financial
statements and notes filed as a part thereof. Statements made in this Prospectus
concerning the contents of any contract, agreement or other document referred to
herein are not necessarily complete. With respect to each such contract,
agreement or other document filed with the Commission as an exhibit, reference
is made to the exhibit for a more complete description of the matter involved,
and each such statement shall be deemed qualified in its entirety by such
reference.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; at the Commission's New York Regional Office, 7 World Trade Center,
New York, New York 10048; and at its Chicago Regional Office, Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained from the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Common Stock is listed on the
New York Stock Exchange, Inc. (the "NYSE") and such reports, proxy statements
and other information concerning the Company also can be inspected at the office
of the NYSE, 20 Broad Street, New York, New York 10005.

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

INFORMATION INCORPORATED BY REFERENCE

The following documents of the Company, which have been filed by the
Company with the Commission pursuant to the Exchange Act, are incorporated
herein by reference: (i) Annual Report on Form 10-K for the fiscal year ended
August 31, 1993; (ii) Current Report on Form 8-K dated January 10, 1994; (iii)
Quarterly Report on Form 10-Q for the quarter ended November 30, 1993; (iv) the
description of the Common Stock contained in the Registration Statement on Form
8-A dated November 5, 1991, as amended by Amendment No. 1 on Form 8 dated
December 4, 1991; and (v) the description of the Company's preferred stock
purchase rights contained in the Registration Statement on Form 8-A dated July
12, 1993.

All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the offering
of the Common Stock, shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the respective date of filing of each
such document. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference herein, other than exhibits to such
documents. Requests should be directed to Philip D. Wheeler, Esq., Senior Vice
President, General Counsel and Secretary, Healthtrust, Inc. - The Hospital
Company, 4525 Harding Road, Nashville, Tennessee 37205, telephone number (615)
383-4444.

31
<PAGE> 34

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Condensed Combined Financial Statements......... P-1
Unaudited Pro Forma Condensed Combined Balance Sheet................................ P-2
Notes to Unaudited Pro Forma Condensed Combined Balance Sheet....................... P-3
Unaudited Pro Forma Condensed Combined Statements of Operations..................... P-4
Notes to Unaudited Pro Forma Condensed Combined Statements of Operations............ P-6
EPIC HOLDINGS, INC. AND SUBSIDIARIES
THREE MONTHS ENDED DECEMBER 31, 1993:
Condensed Consolidated Balance Sheets............................................... F-1
Condensed Consolidated Statements of Operations..................................... F-3
Condensed Consolidated Statements of Cash Flows..................................... F-4
Notes to Condensed Consolidated Financial Statements................................ F-5
EPIC HOLDINGS, INC. AND SUBSIDIARIES
THREE YEARS ENDED SEPTEMBER 30, 1993:
Report of Independent Auditors...................................................... F-8
Consolidated Balance Sheets......................................................... F-9
Consolidated Statements of Operations............................................... F-11
Consolidated Statements of Stockholders' Equity (Deficit)........................... F-12
Consolidated Statements of Cash Flows............................................... F-13
Notes to Consolidated Financial Statements.......................................... F-14
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
THREE MONTHS ENDED DECEMBER 31, 1993:
Condensed Consolidated Balance Sheets............................................... F-27
Condensed Consolidated Statements of Operations..................................... F-28
Condensed Consolidated Statements of Cash Flows..................................... F-29
Notes to Condensed Consolidated Financial Statements................................ F-30
EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES
THREE YEARS ENDED SEPTEMBER 30, 1993:
Report of Independent Auditors...................................................... F-39
Consolidated Balance Sheets......................................................... F-40
Consolidated Statements of Operations............................................... F-42
Consolidated Statements of Stockholders' Equity (Deficit)........................... F-43
Consolidated Statements of Cash Flows............................................... F-44
Notes to Consolidated Financial Statements.......................................... F-45
</TABLE>

32
<PAGE> 35

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following Unaudited Pro Forma Condensed Combined Financial Statements
are based on the consolidated financial statements of the Company and EPIC
included or incorporated by reference in this Prospectus, combined and adjusted
to give effect to the Company's Acquisition of EPIC, using the purchase method
of accounting, and the related Financing Plan.

The Unaudited Pro Forma Condensed Combined Balance Sheet as of November 30,
1993 gives effect to the Acquisition and Financing Plan as if they had occurred
as of November 30, 1993. The Unaudited Pro Forma Condensed Combined Statements
of Operations for the three months ended November 30, 1993 and year ended August
31, 1993, give effect to the Acquisition and Financing Plan as if they had
occurred on September 1, 1992. The pro forma adjustments are based upon
available information and certain assumptions that management believes are
reasonable. The Unaudited Pro Forma Condensed Combined Financial Statements do
not purport to represent what the combined financial position or results of
operations would actually have been if the transactions had occurred on November
30, 1993 or September 1, 1992 or to project the combined financial position or
combined results of operations for any future period.

The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with "The Acquisition and the Financing Plan,"
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
notes of the Company and EPIC included or incorporated by reference in this
Prospectus.

P-1
<PAGE> 36

HEALTHTRUST, INC. - THE HOSPITAL COMPANY

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
NOVEMBER 30, 1993
------------------------------------------------------------
AS REPORTED AS REPORTED PRO FORMA COMBINED
HEALTHTRUST EPIC ADJUSTMENTS PRO FORMA
----------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............... $ 167.4 $ 68.4 $ 142.9(1) $ 20.0
195.0(2)
(138.2)(3)
(632.7)(4)
(277.8)(5)
504.4(6)
(9.4)(8)
Marketable securities................... 47.3 (47.3)(7) 0.0
Accounts receivable..................... 381.3 88.6 469.9
Supplies................................ 53.2 20.8 74.0
Other current assets.................... 26.6 13.5 40.1
----------- ----------- ------------ ---------
TOTAL CURRENT ASSETS............ 628.5 238.6 (263.1) 604.0
PROPERTY, PLANT AND EQUIPMENT............. 2,198.4 797.3 (226.4)(9) 2,769.3
Less accumulated depreciation........... 629.6 226.4 (226.4)(9) 629.6
----------- ----------- ------------ ---------
1,568.8 570.9 0.0 2,139.7
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED................................ 177.8 52.6 16.3(3) 693.3
121.3(4)
360.1(5)
24.5(8)
(59.3)(10)
OTHER ASSETS.............................. 113.9 39.5 5.0(2) 208.7
(1.5)(3)
(16.9)(4)
9.4(8)
59.3(10)
----------- ----------- ------------ ---------
TOTAL ASSETS.................... $ 2,489.0 $ 901.6 $ 255.1 $3,645.7
----------- ----------- ------------ ---------
----------- ----------- ------------ ---------
CURRENT LIABILITIES
Accounts payable........................ $ 79.2 $ 46.0 $ 24.5(8) $ 149.7
Other current liabilities............... 243.7 151.0 (45.0)(7) 349.7
----------- ----------- ------------ ---------
322.9 197.0 (20.5) 499.4
LONG-TERM DEBT............................ 948.3 683.0 200.0(2) 1,684.0
(123.4)(3)
(528.3)(4)
504.4(6)
DEFERRED INCOME TAXES..................... 160.1 6.0 166.1
DEFERRED PROFESSIONAL LIABILITY RISKS..... 145.2 48.0 193.2
OTHER LIABILITIES......................... 216.7 47.6 264.3
STOCKHOLDERS' EQUITY
Common stock(11)........................ 0.1 0.4 (0.4)(5) 0.1
Paid-in capital......................... 827.4 245.8 142.9(1) 970.3
(245.8)(5)
Deferred compensation................... (0.9) (137.4) 137.4(5) (0.9 )
Retained deficit........................ (130.8) (188.8) 191.1(5) (130.8 )
(2.3)(7)
----------- ----------- ------------ ---------
STOCKHOLDERS' EQUITY............ 695.8 (80.0) 222.9 838.7
----------- ----------- ------------ ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.................................. $ 2,489.0 $ 901.6 $ 255.1 $3,645.7
----------- ----------- ------------ ---------
----------- ----------- ------------ ---------
</TABLE>

See notes to unaudited pro forma condensed combined balance sheet.

P-2
<PAGE> 37

NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED BALANCE SHEET

1. To record the net proceeds from the completion of the offering of 5.2
million shares of Healthtrust Common Stock at $28.625 per share, the average
of the high and low prices for the Common Stock reported on the NYSE for
February 18, 1994.

2. To record the net proceeds from the completion of the Subordinated Debt
Offering at an assumed interest rate of 8 3/4%.

3. To record the Debt Redemption.

4. To record the completion of the Tender Offers for the Specified EPIC Debt
Securities (100% tender amount assumed). Assuming 51% of each issue of the
Specified EPIC Debt Securities are purchased in the Tender Offers,
borrowings under the 1994 Credit Agreement would be reduced by approximately
$310 million.

5. To record the payment of $7 per share for all the outstanding EPIC common
stock.

6. To record borrowings under the 1994 Credit Agreement in amounts necessary to
complete the Acquisition and Financing Plan transactions and maintain a $20
million cash balance.

7. To record EPIC's required call of the outstanding 15% Senior Subordinated
Notes of EPIC Group.

8. To record certain severance agreement liabilities and transaction costs.

9. To record EPIC's property, plant and equipment at historical net book value.
No estimate of any purchase accounting adjustments to record such property,
plant and equipment at fair value has been made at this time.

10. To record the deferred tax asset for the temporary differences related to
the above transactions (assumes a 39% statutory combined federal and state
tax rate).

11. No assumption has been made as to the exercise of all or a portion of the
Warrants to purchase 3,409,219 shares of Common Stock. If all Warrants were
exercised, net proceeds to the Company would be approximately $18 million.

P-3
<PAGE> 38

HEALTHTRUST, INC. - THE HOSPITAL COMPANY

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1993
(IN MILLIONS, EXCEPT ON SHARE DATA)

<TABLE>
<CAPTION>
AS REPORTED AS REPORTED PRO FORMA COMBINED PRO
HEALTHTRUST EPIC(1) ADJUSTMENTS FORMA(2)
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net operating revenue................... $ 622.1 $ 272.5 $ 894.6
Costs and expenses:
Hospital service costs;
Salaries and benefits.............. 232.3 119.5 351.8
Supplies........................... 88.0 32.0 120.0
Fees............................... 64.7 20.5 85.2
Other expenses..................... 65.7 44.6 110.3
Bad debt expense................... 43.6 19.6 63.2
----------- ----------- ------------ ------------
494.3 236.2 730.5
Depreciation and amortization........... 34.6 13.1 $ 3.0(3) 50.7
Interest................................ 21.6 23.9 (10.3)(4) 35.2
ESOP/pension expense(2)................. 9.9 5.6 15.5
Deferred compensation expense........... 0.3 0.7 (0.7)(5) 0.3
Other income (net)...................... (5.5) (0.8) 3.2(6) (3.1)
----------- ----------- ------------ ------------
555.2 278.7 (4.8) 829.1
Income (Loss) before minority interests,
and income taxes...................... 66.9 (6.2) 4.8 65.5
Minority interests...................... 1.4 1.7 3.1
----------- ----------- ------------ ------------
Income (Loss) before income taxes....... 65.5 (7.9) 4.8 62.4
Income tax expense (benefit)............ 26.6 0.4 (0.7)(7) 26.3
----------- ----------- ------------ ------------
NET INCOME (LOSS)............. $ 38.9 $ (8.3) $ 5.5 $ 36.1
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
(39,943,524)(8)
Weighted average common shares.......... 84,426,187 39,943,524 5,200,000(8) 89,626,187
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Net income (loss) per share... $ 0.46 $ (0.21) $ 0.40
----------- ----------- ------------
----------- ----------- ------------
</TABLE>

See notes to unaudited pro forma condensed combined statements of operations.

P-4
<PAGE> 39

HEALTHTRUST, INC. - THE HOSPITAL COMPANY

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

YEAR ENDED AUGUST 31, 1993
(IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
COMBINED
AS REPORTED AS REPORTED PRO FORMA PRO
HEALTHTRUST EPIC(1) ADJUSTMENTS FORMA(2)
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net operating revenue.................... $ 2,394.6 $ 1,019.1 $ 3,413.7
Costs and expenses:
Hospital service costs;
Salaries and benefits............... 886.7 432.5 1,319.2
Supplies............................ 347.0 122.0 469.0
Fees................................ 270.1 75.7 345.8
Other expenses...................... 239.3 162.9 402.2
Bad debt expense.................... 145.5 80.6 226.1
----------- ----------- ------------ -----------
1,888.6 873.7 2,762.3
Depreciation and amortization............ 132.7 57.9 $ 12.1(3) 202.7
Interest................................. 99.8 89.9 (38.5)(4) 151.2
ESOP/pension expense..................... 39.0 20.7 59.7
Deferred compensation expense............ 4.3 3.8 (3.8)(5) 4.3
Other income (net)....................... (7.6) (7.2) 8.0(6) (6.8)
----------- ----------- ------------ -----------
2,156.8 1,038.8 (22.2) 3,173.4
Income (Loss) before minority interests,
income taxes, and extraordinary
charges................................ 237.8 (19.7) 22.2 240.3
Minority interests....................... 11.9 3.5 15.4
----------- ----------- ------------ -----------
Income (Loss) before income taxes and
extraordinary charges.................. 225.9 (23.2) 22.2 224.9
Income tax expense....................... 90.7 2.0 2.7(7) 95.4
----------- ----------- ------------ -----------
INCOME (LOSS) BEFORE EXTRAORDINARY
CHARGES................................ $ 135.2 $ (25.2) $ 19.5 $ 129.5
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
(40,146,915)(8)
Weighted average common shares........... 83,540,815 40,146,915 5,200,000(8) 88,740,815
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Income (Loss) per share before
extraordinary
charges................................ $ 1.62 $ (0.63) $ 1.46
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See notes to unaudited pro forma condensed combined statements of operations.

P-5
<PAGE> 40

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

1. The Company will continue to report its financial information on the basis of
an August 31 fiscal year. EPIC reports its financial information using a
September 30 fiscal year. Therefore, the EPIC statement of operations
information for the fiscal year ended September 30, 1993 and three months
ended December 31, 1993 have been combined with the Healthtrust statement
of operations information for the fiscal year ended August 31, 1993 and
three months ended November 30, 1993, respectively.

2. The pro forma condensed combined statements of operations do not give effect
to any overhead reductions or cost savings, if any, which may be realized
after the consummation of the Acquisition. Pension expense for EPIC
employees has been assumed to be equivalent to historical EPIC ESOP expense
(approximately 5.5% of salaries).

3. To adjust amortization as follows:

<TABLE>
<CAPTION>
THREE MONTHS YEAR
ENDED ENDED
NOVEMBER 30, 1993 AUGUST 31, 1993
----------------- ---------------
<S> <C> <C>
To record amortization related to the $515.5 million
increase in the excess of purchase price over net
assets acquired...................................... $ 3.6 $14.4
To eliminate the EPIC historical amortization of the
excess of purchase price over net assets acquired.... (.6) (2.3)
----- ------
$ 3.0 $12.1
----- ------
----- ------
</TABLE>

4. To adjust interest expense as follows:

<TABLE>
<CAPTION>
THREE MONTHS YEAR
ENDED ENDED
NOVEMBER 30, 1993 AUGUST 31, 1993
----------------- ---------------
<S> <C> <C>
To record interest expense on borrowings of $504.4
million related to the 1994 Credit Agreement (assumes
average interest rate of 5.19% and 5.43%,
respectively).......................................... $ 6.6 $ 27.4
To record interest expense related to the $200 million
Subordinated Notes (assumes an 8 3/4% interest rate)... 4.4 17.5
To eliminate historical interest expense on the
tendered Specified EPIC Debt Securities and called
EPIC Redeemable Debt................................... (21.3) (83.4)
------- -------
$ (10.3) $ (38.5)
------- -------
------- -------
</TABLE>

Assuming 51% of each issue of the Specified EPIC Debt Securities are
purchased in the Tender Offers, pro forma interest expense would be increased by
approximately $1.7 million and $3.0 million for the three months ended November
30, 1993 and year ended August 31, 1993, respectively.

5. To eliminate the compensation expense related to EPIC'S SAR Plan.

6. To eliminate interest income on excess cash.

7. To record the pro forma provision for income taxes at statutory rates of
39.0% and 38.3% for the three months ended November 30, 1993 and year ended
August 31, 1993, respectively (after excluding certain expenses that are
not deductible for tax purposes).

8. To reflect the Company's purchase of EPIC's outstanding equity and completion
of the offering of 5.2 million shares of Common Stock by the Company.

P-6
<PAGE> 41

EPIC HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1993
------------ -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents....................................... $ 45,563 $ 61,362
Cash restricted for interest payment............................ 9,573 3,820
Marketable securities........................................... 34,132 47,347
Accounts receivable, net of reserves for uncompensated care of
$31,187 and $29,286.......................................... 99,392 76,957
Supply inventories.............................................. 20,973 20,687
Prepaid expenses and other...................................... 12,898 5,074
Deferred income taxes........................................... 5,384 --
------------ -------------
TOTAL CURRENT ASSETS.............................................. 227,915 215,247
PROPERTY AND EQUIPMENT............................................ 810,055 786,798
ACCUMULATED DEPRECIATION AND AMORTIZATION......................... (231,239) (218,746)
------------ -------------
578,816 568,052
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, net of
accumulated amortization........................................ 52,461 52,965
OTHER ASSETS, net of accumulated amortization..................... 39,330 38,696
------------ -------------
TOTAL ASSETS...................................................... $ 898,522 $ 874,960
------------ -------------
------------ -------------
</TABLE>

See notes to condensed consolidated financial statements.

F-1
<PAGE> 42

EPIC HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1993
------------ -------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt............................ $ 48,049 $ 47,914
Accounts payable................................................ 45,557 44,610
Accrued liabilities............................................. 96,746 87,604
------------ -------------
TOTAL CURRENT LIABILITIES......................................... 190,352 180,128
LONG-TERM DEBT.................................................... 685,187 679,605
DEFERRED INCOME TAXES............................................. 11,378 5,994
RESERVE FOR PROFESSIONAL LIABILITY RISKS.......................... 46,557 46,612
OTHER DEFERRED LIABILITIES........................................ 42,013 42,450
COMMITMENTS AND CONTINGENT LIABILITIES............................
MINORITY INTERESTS................................................ 5,909 5,472
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value.................................... 399 401
Paid-in capital................................................. 245,759 245,757
Notes receivable from EPIC ESOP................................. (137,381) (148,214)
Retained earnings (deficit)..................................... (191,651) (183,245)
------------ -------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT).............................. (82,874) (85,301)
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT).............. $ 898,522 $ 874,960
------------ -------------
------------ -------------
</TABLE>

See notes to condensed consolidated financial statements.

F-2
<PAGE> 43

EPIC HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
DECEMBER 31,
---------------------------
1993 1992
----------- -----------
<S> <C> <C>
NET OPERATING REVENUE............................................. $ 272,451 $ 244,352
COSTS AND EXPENSES:
Salaries and wages.............................................. 99,526 84,634
Employee benefits............................................... 21,094 22,997
ESOP expense.................................................... 5,635 5,182
Supplies........................................................ 32,025 30,041
Uncompensated care.............................................. 19,618 19,048
Other........................................................... 64,653 57,909
Depreciation and amortization................................... 13,130 13,791
Interest expense................................................ 23,834 21,954
----------- -----------
TOTAL COSTS AND EXPENSES.......................................... 279,515 255,556
INTEREST INCOME................................................... 819 612
----------- -----------
LOSS BEFORE INCOME TAX EXPENSE, MINORITY INTERESTS AND
EXTRAORDINARY ITEM.............................................. (6,245) (10,592)
INCOME TAX EXPENSE, net........................................... (375) (176)
MINORITY INTERESTS IN INCOME OF CONSOLIDATED SUBSIDIARIES, net of
income tax expense.............................................. (1,667) (631)
----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM.................................... (8,287) (11,399)
EXTRAORDINARY ITEM, net of income tax expense..................... -- (570)
----------- -----------
NET LOSS.......................................................... $ (8,287) $ (11,969)
----------- -----------
----------- -----------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING....................................... 39,943,524 40,156,780
LOSS PER COMMON SHARE:
Before extraordinary item....................................... $ (.21) $ (.28)
Extraordinary item.............................................. -- (.01)
----------- -----------
Net loss........................................................ $ (.21) $ (.29)
----------- -----------
----------- -----------
</TABLE>

See notes to condensed consolidated financial statements.

F-3
<PAGE> 44

EPIC HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................................. $ (8,287) $(11,969)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization..................................... 13,130 13,791
Non-cash provision for professional liability risks............... (1,111) 437
ESOP expense...................................................... 5,635 5,182
Deferred SAR Plan compensation.................................... (274) (1,496)
Minority interests in income of consolidated subsidiaries......... 1,667 631
Non-cash interest................................................. 8,995 9,227
Extraordinary item................................................ -- 570
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable............................................... (22,435) 342
Supply inventories and other assets............................... (8,399) (10,549)
Accounts payable and other liabilities............................ 9,991 8,785
-------- --------
Net cash provided by (used in) operating activities.......... (1,088) 14,951
INVESTING ACTIVITIES
Investments in marketable securities, net............................ 13,215 6,395
Cash paid for acquisitions........................................... (960) (4,100)
Additions to property and equipment.................................. (23,431) (7,410)
Other................................................................ (661) (811)
-------- --------
Net cash used in investing activities........................ (11,837) (5,926)
FINANCING ACTIVITIES
Payments on debt obligations......................................... (1,415) (76)
Line of credit borrowings, net....................................... -- 800
Purchase of Senior ESOP Notes........................................ -- (5,616)
Purchase of treasury stock........................................... (119) (11)
Distributions and dividends to minority interests.................... (1,132) (2,340)
Payments of debt issue costs and other, net.......................... (208) (59)
-------- --------
Net cash used in financing activities........................ (2,874) (7,302)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... (15,799) 1,723
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................... 61,362 37,419
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 45,563 $ 39,142
-------- --------
-------- --------
SUPPLEMENTARY INFORMATION
Cash paid for interest............................................... $ 8,513 $ 1,598
Cash paid for income taxes........................................... $ 199 $ 176
</TABLE>

See notes to condensed consolidated financial statements.

F-4
<PAGE> 45

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of
EPIC Holdings, Inc. and Subsidiaries ("Holdings") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included and are of a normal recurring nature.
Operating results for the three month period ended December 31, 1993 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 1994. These financial statements should be read in
conjunction with the audited consolidated financial statements and footnotes
thereto included in Holdings' annual report on Form 10-K for the year ended
September 30, 1993.

Certain prior period amounts have been reclassified to conform with the
fiscal 1994 presentation.

2. SUBSEQUENT EVENT

On January 9, 1994, Holdings entered into an Agreement and Plan of Merger
(the "Merger Agreement") with HealthTrust, Inc. -- The Hospital Company, a
Delaware corporation ("HTI"), and Odyssey Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of HTI ("HTI Sub"), providing for the
merger (the "Merger") of HTI Sub with and into Holdings following which Holdings
would become a wholly-owned subsidiary of HTI. The Merger is expected to result
in a termination of the EPIC ESOP. Under the terms of the Merger Agreement,
which was unanimously approved by the Boards of Directors of both HTI and
Holdings, shareholders of Holdings will receive $7.00 per share of Holdings'
common stock.

HTI intends to offer to purchase the 12% Senior Deferred Coupon Notes due
2002, the 11.375% Class B-1 First Priority Mortgage Notes due 2001, the 11.5%
Class B-2 First Priority Mortgage Notes due 2001, the Class B-3 First Priority
Mortgage Notes, and the 10.875% Senior Subordinated Notes due 2003 and to redeem
other outstanding EPIC indebtedness in accordance with their terms. HTI also
plans to seek the consent of the holders of Holdings' indebtedness to amend
certain restrictive provisions.

Consummation of the Merger is subject to a number of conditions, including
the approval of Holdings' shareholders and the consummation of certain debt
consent solicitations. American Medical International, Inc. and the trustee of
the EPIC ESOP (who controls the unallocated shares of the EPIC ESOP) have
agreed, subject to the fulfillment of certain conditions, to vote their shares
of Holdings common stock (approximately 52% combined) in favor of the Merger.
The transaction is expected to close by May of 1994.

3. INCOME TAXES

Effective October 1, 1993, Holdings changed its method of accounting for
income taxes to the liability method as required by Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
superseded SFAS No. 96. As permitted under the rules of SFAS No. 109, prior
years' financial statements have not been restated.

Adopting SFAS No. 109 had no effect on current period operations. Due to
the uncertainty of the realization of the net deferred federal tax liability,
Holdings established a valuation allowance against the deferred federal tax
assets so that deferred federal tax assets equalled deferred federal tax
liabilities. The net deferred tax liability reported relates primarily to state
taxes.

F-5
<PAGE> 46

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

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
Holdings' deferred tax assets and liabilities as of October 1, 1993 are as
follows (in thousands):

<TABLE>
<S> <C>
Deferred tax liabilities
Property and equipment basis difference.......................... $42,908
ESOP plan fees................................................... 1,547
ESOP contribution................................................ 3,455
State taxes and other............................................ 5,994
-------
Total deferred tax liabilities................................... 53,904
-------
Deferred tax assets
Bad debt reserve differences..................................... 6,593
Professional liability reserves.................................. 15,670
SAR compensation................................................. 14,034
Health plan and workers' compensation reserves................... 3,652
Paid time off reserve............................................ 1,788
Net operating losses............................................. 24,312
Other............................................................ 700
-------
Total deferred tax assets........................................ 66,749
Valuation allowance.............................................. (18,839)
-------
Net deferred tax assets.......................................... 47,910
-------
Net deferred tax liability....................................... $ 5,994
-------
-------
</TABLE>

No tax benefit was recorded for the current net operating loss and no
federal taxes are anticipated for fiscal 1994. Current income tax expense of
$375,000 relates to state income taxes.

4. LOSS PER COMMON SHARE

Loss per common share has been computed by dividing the net loss applicable
to common shares by the weighted average number of common shares outstanding
during the period. The exercise of the outstanding common stock warrants and
other common stock equivalents has not been assumed as the effect would be
antidilutive.

5. CHANGES IN STOCKHOLDER'S EQUITY

During the three-month period ended December 31, 1993, Holdings purchased
treasury stock for $119,000 and received a principal payment on the Notes
receivable from the EPIC ESOP of $10,833,000 which was recorded as a reduction
of the Notes receivable from EPIC ESOP.

6. GUARANTOR SUBSIDIARIES

Certain subsidiaries of EPIC (the "Guarantor Subsidiaries") guarantee the
loans under the Amended Credit Agreement, the Zero Coupon Notes, the Additional
Zero Coupon Notes, the Senior ESOP Notes, the 10.875% Senior Subordinated Notes,
the 15% Senior Subordinated Notes and the 11% Junior Subordinated Pay-In-Kind
Notes. Certain other subsidiaries, including EPIC Properties, Inc. ("EPIC
Properties") are not Guarantor Subsidiaries (the "Nonguarantor Subsidiaries").
All equity interests in the Nonguarantor Subsidiaries, other than those held by
minority interests, are held by EPIC.

F-6
<PAGE> 47

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

Condensed consolidating financial information of EPIC Healthcare Group,
Inc. ("EPIC"), the Guarantor Subsidiaries, EPIC Properties and the other
Nonguarantor Subsidiaries are included in the footnotes to the unaudited
condensed consolidated financial statements of EPIC included elsewhere herein.

F-7
<PAGE> 48

REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS

The Board of Directors
EPIC Holdings, Inc.

We have audited the accompanying consolidated balance sheets of EPIC
Holdings, Inc. and subsidiaries as of September 30, 1993 and 1992, and the
related consolidated statements of operations, stockholder's equity (deficit),
and cash flows for each of the three years in the period ended September 30,
1993. 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 generally accepted auditing
standards. 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 consolidated financial position of
EPIC Holdings, Inc. and subsidiaries at September 30, 1993, and 1992, and the
results of its consolidated operations and its consolidated cash flows for each
of the three years in the period ended September 30, 1993, in conformity with
generally accepted accounting principles.

ERNST & YOUNG

Dallas, Texas
December 3, 1993

F-8
<PAGE> 49

EPIC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1993 1992
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................................ $ 61,362 $ 37,419
Cash restricted for interest payments................................ 3,820 5,768
Marketable securities................................................ 47,347 10,607
Accounts receivable, net of reserves for uncompensated care of
$29,286 and $25,837, respectively................................. 76,957 73,398
Supply inventories................................................... 20,687 20,000
Prepaid expenses and other........................................... 5,074 5,222
-------- --------
TOTAL CURRENT ASSETS................................................... 215,247 152,414
PROPERTY AND EQUIPMENT
Land................................................................. 53,030 57,492
Buildings and improvements........................................... 476,570 451,292
Equipment............................................................ 234,656 192,367
Construction in progress............................................. 22,542 9,333
-------- --------
786,798 710,484
Accumulated depreciation and amortization............................ (218,746) (173,789)
-------- --------
568,052 536,695
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED,
net of accumulated amortization...................................... 52,965 48,140
OTHER ASSETS, net of accumulated amortization.......................... 38,696 43,502
-------- --------
TOTAL ASSETS........................................................... $874,960 $780,751
-------- --------
-------- --------
</TABLE>

See notes to consolidated financial statements.

F-9
<PAGE> 50

EPIC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1993 1992
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt............................... $ 47,914 $ 2,330
Accounts payable................................................... 44,610 34,809
Accrued liabilities:
Salaries and wages.............................................. 36,475 33,031
Taxes other than on income...................................... 7,946 7,589
Interest........................................................ 11,027 7,658
Group health insurance.......................................... 4,902 5,656
Current reserve for professional liability risks................ 11,000 11,000
Other........................................................... 16,254 9,011
--------- ---------
TOTAL CURRENT LIABILITIES............................................ 180,128 111,084
LONG-TERM DEBT....................................................... 679,605 619,363
DEFERRED INCOME TAXES................................................ 5,994 5,994
RESERVE FOR PROFESSIONAL LIABILITY RISKS............................. 46,612 39,640
OTHER DEFERRED LIABILITIES........................................... 42,450 39,607
COMMITMENTS AND CONTINGENT LIABILITIES...............................
MINORITY INTERESTS................................................... 5,472 23,494
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value -- Authorized: 100,000,000 shares;
Issued: 40,319,245 shares; Outstanding: 40,099,441 and
40,154,545 shares, respectively................................. 401 401
Paid-in capital.................................................... 245,757 245,757
Notes receivable from EPIC ESOP.................................... (148,214) (168,929)
Retained earnings (deficit)........................................ (183,245) (135,660)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)................................. (85,301) (58,431)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)................. $ 874,960 $ 780,751
--------- ---------
--------- ---------
</TABLE>

See notes to consolidated financial statements.

F-10
<PAGE> 51

EPIC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------------------
1993 1992 1991
----------- ----------- ----------
<S> <C> <C> <C>
NET OPERATING REVENUE................................ $ 1,019,149 $ 941,266 $ 802,689
COSTS AND EXPENSES:
Salaries and wages................................. 354,326 319,868 271,007
Employee benefits.................................. 84,615 81,365 68,434
ESOP expense....................................... 20,715 20,714 23,076
Supplies........................................... 121,986 116,145 99,882
Uncompensated care................................. 80,643 69,308 59,425
Other.............................................. 235,924 235,009 192,633
Depreciation and amortization...................... 57,917 53,013 49,354
Interest expense................................... 89,872 79,790 68,266
----------- ----------- ----------
TOTAL COSTS AND EXPENSES............................. 1,045,998 975,212 832,077
INTEREST INCOME...................................... 3,648 3,936 5,405
GAIN (LOSS) ON SALE OF ASSETS........................ 3,521 (1,123) (543)
----------- ----------- ----------
LOSS BEFORE INCOME TAX BENEFIT
(EXPENSE), MINORITY INTERESTS AND
EXTRAORDINARY ITEM................................. (19,680) (31,133) (24,526)
INCOME TAX BENEFIT (EXPENSE), net.................... (1,984) 9,252 7,603
MINORITY INTERESTS IN INCOME OF CONSOLIDATED
SUBSIDIARIES (net of income
tax benefit of $1,008, and $1,063 in 1992 and
1991, respectively)................................ (3,499) (1,958) (2,064)
----------- ----------- ----------
LOSS BEFORE EXTRAORDINARY ITEM....................... (25,163) (23,839) (18,987)
EXTRAORDINARY ITEM (net of income tax benefit of $652
and $1,330 in 1992 and 1991, respectively)......... (21,960) (1,265) (2,581)
----------- ----------- ----------
NET LOSS............................................. (47,123) (25,104) (21,568)
REDEEMABLE PREFERRED STOCK DIVIDEND OF PREDECESSOR
COMPANY............................................ -- (11,048) (22,873)
----------- ----------- ----------
NET LOSS APPLICABLE TO COMMON SHARES................. $ (47,123) $ (36,152) $ (44,441)
----------- ----------- ----------
----------- ----------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING........................................ 40,146,915 32,576,161 24,482,803
LOSS PER COMMON SHARE:
Before extraordinary item.......................... $ (.63) $ (1.07) $ (1.71)
Extraordinary item................................. (.55) (.04) (.11)
----------- ----------- ----------
Net loss........................................... $ (1.18) $ (1.11) $ (1.82)
----------- ----------- ----------
----------- ----------- ----------
</TABLE>

See notes to consolidated financial statements.

F-11
<PAGE> 52

EPIC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NOTES RETAINED TOTAL
COMMON PAID-IN RECEIVABLE EARNINGS STOCKHOLDERS'
STOCK CAPITAL FROM EPIC ESOP (DEFICIT) EQUITY (DEFICIT)
------ -------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1990.......... $245 $219,808 $ (212,738) $ (87,241) $(79,926)
Dividends accrued and accretion of
discount on redeemable preferred
stock............................. -- (22,873) -- -- (22,873)
Principal payments received on notes
receivable from EPIC ESOP......... -- -- 23,095 -- 23,095
Treasury stock purchased............ (1) -- -- (468) (469)
Net loss............................ -- -- -- (21,568) (21,568)
------ -------- -------------- --------- ----------------
Balance at September 30, 1991....... 244 196,935 (189,643) (109,277) (101,741)
Dividends accrued and accretion of
discount on redeemable preferred
stock............................. -- (11,048) -- -- (11,048)
Principal payments received on notes
receivable from EPIC ESOP......... -- -- 20,714 -- 20,714
Treasury stock purchased............ (2) -- -- (1,279) (1,281)
Warrant conversion.................. 65 (44) -- -- 21
Preferred stock transaction costs... -- (7,063) -- -- (7,063)
Conversion of Class C Preferred
Stock............................. 94 63,842 -- -- 63,936
Net book value of Class A and Class
B Preferred Stock over cash
paid.............................. -- 3,135 -- -- 3,135
Net loss............................ -- -- -- (25,104) (25,104)
------ -------- -------------- --------- ----------------
Balance at September 30, 1992....... 401 245,757 (168,929) (135,660) (58,431)
Principal payments received on notes
receivable from EPIC ESOP......... -- -- 20,715 -- 20,715
Treasury stock purchased............ -- -- -- (462) (462)
Net loss............................ -- -- -- (47,123) (47,123)
------ -------- -------------- --------- ----------------
Balance at September 30, 1993....... $401 $245,757 $ (148,214) $(183,245) $(85,301)
------ -------- -------------- --------- ----------------
------ -------- -------------- --------- ----------------
</TABLE>

See notes to consolidated financial statements.

F-12
<PAGE> 53

EPIC HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(47,123) $(25,104) $(21,568)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 57,917 53,013 49,354
Non-cash provision for professional liability risks.... 2,641 4,131 11,291
ESOP expense........................................... 20,715 20,714 23,076
Deferred SAR Plan compensation......................... 3,249 10,805 7,137
Minority interests in income of consolidated
subsidiaries......................................... 3,499 2,966 3,127
(Gain) loss on sale of assets.......................... (3,521) 1,123 543
Non-cash interest...................................... 36,855 27,190 13,975
Extraordinary item..................................... 21,960 1,917 3,911
Deferred income tax benefit............................ -- (11,800) (9,996)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable.................................. 6,054 (35,196) (3,043)
Supply inventories and other assets.................. 4,083 (3,162) (5,291)
Accounts payable and other liabilities............... 12,172 11,395 6,444
-------- -------- --------
Net cash provided by operating activities......... 118,501 57,992 78,960
INVESTING ACTIVITIES
Investments in marketable securities, net................. (36,740) 5,167 (12,091)
Cash paid for acquisitions................................ (54,536) (12,269) --
Additions to property and equipment....................... (60,784) (47,850) (25,646)
Purchase of investment securities......................... -- (4,180) --
Proceeds from sales of assets............................. 25,148 190 361
Collection on note receivable............................. 9,349 -- --
Other..................................................... (5,925) (2,046) (48)
-------- -------- --------
Net cash used in investing activities............. (123,488) (60,988) (37,424)
FINANCING ACTIVITIES
Payments on debt obligations.............................. (117,765) (1,603) (250,647)
Proceeds from long-term borrowings........................ 180,853 140,052 227,868
Purchase of Senior ESOP Notes............................. (5,616) (20,293) --
Purchase of treasury stock................................ (462) (1,281) (469)
Purchase of Class A and B Preferred Stock................. -- (130,000) --
Preferred stock transaction costs......................... -- (7,063) --
Proceeds on warrant conversion............................ -- 21 --
Contributions from minority interests..................... 520 1,884 556
Distributions and dividends to minority interests......... (21,110) (4,065) (4,122)
Payments of debt issue costs and other, net............... (7,490) (6,056) (11,294)
-------- -------- --------
Net cash provided by (used in) financing
activities...................................... 28,930 (28,404) (38,108)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 23,943 (31,400) 3,428
Cash and cash equivalents at beginning of year............ 37,419 68,819 65,391
-------- -------- --------
Cash and cash equivalents at end of year.................. $ 61,362 $ 37,419 $ 68,819
-------- -------- --------
-------- -------- --------
SUPPLEMENTARY INFORMATION
Cash paid during the year for interest.................... $ 52,370 $ 53,343 $ 52,987
Cash paid for income taxes................................ $ 657 $ 888 $ 666
</TABLE>

See notes to consolidated financial statements.

F-13
<PAGE> 54

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

EPIC Healthcare Group, Inc. ("EPIC" or, either alone or together with its
subsidiaries, the "Company") was acquired by EPIC Holdings, Inc. ("Holdings") on
March 25, 1992, in a merger transaction (the "Merger") in which each outstanding
share of common stock of EPIC was converted into one share of Holdings common
stock. The merger was between companies under common control (i.e., a pooling of
interests for accounting purposes) and accordingly, the recorded assets and
liabilities of EPIC on an historical basis are combined with the assets and
liabilities of Holdings. Holdings had no operations prior to the merger. Results
of operations for the period prior to March 25, 1992, consist of the operations
of EPIC.

Principles of Consolidation

The consolidated financial statements include the accounts of Holdings and
its subsidiaries. Intercompany accounts and transactions have been eliminated.
Minority interests represent the minority stockholders' proportionate shares of
the equity in the income (loss) of certain consolidated subsidiaries.

Cash Equivalents, Cash Restricted for Interest Payments, and Marketable
Securities

Holdings considers all highly liquid investments with initial maturities of
three months or less from date of purchase to be cash equivalents. Cash
restricted for interest payments is cash deposited into a trust to pay principal
and interest required by the Class B-1, Class B-2 and Class B-3 First Priority
Mortgage Notes (the "Mortgage Notes"). Investments in marketable
interest-bearing securities are stated at cost which approximates market.
Holdings has $42,694,000 in cash and marketable securities restricted for the
purpose of redeeming the remaining 15% Senior Subordinated Notes (See Note 5).

Cash equivalents, cash restricted for interest payments, and marketable
securities are subject to potential concentrations of credit risk. Holdings
attempts to lessen that risk by investing only in United States Government
securities, commercial paper having at least a rating of A-1 or the equivalent,
time deposits and certificates of deposit of banks having a debt rating of at
least A, or money market funds comprised of such securities. Holdings invests in
securities with maturities no longer than 180 days and limits the amount of
credit exposure to any one commercial issuer.

Accounts Receivable

Concentration of credit risk relating to accounts receivable is limited to
some extent by the diversity and number of patients and payors and the
geographic dispersion of Holdings' hospitals. Accounts receivable (gross)
consists of amounts due from government programs (e.g., Medicare and Medicaid)
(53%) commercial insurance companies (16%), private pay patients (18%) and other
(including health maintenance organizations and other group insurance programs)
(13%). Holdings' hospitals are located throughout the southern United States,
with the largest concentration in Texas, Oklahoma, Louisiana and California.
Holdings maintains an allowance for losses (i.e., uncompensated care or bad debt
expense) based on the expected collectibility of accounts receivable.

Supply Inventories

Supply inventories are stated at the lower of cost (first-in, first-out
method) or market.

F-14
<PAGE> 55

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Property and Equipment

Property and equipment are recorded at cost (or fair value at the date of
acquisition as a result of the original purchase from American Medical
International, Inc. and its subsidiaries ("AMI")). Depreciation and amortization
is computed using the straight-line method over estimated useful lives or term
of the lease generally ranging from 25 to 30 years for buildings and
improvements, and 3 to 10 years for equipment. Maintenance costs and repairs are
expensed as incurred.

Joint Ventures

EPIC, in the ordinary course of business, enters into joint ventures with
physicians and other companies. EPIC is the majority owner and general partner
of substantially all of the joint ventures and follows the principles of
consolidation for all majority-owned joint ventures. Minority shareholders'
investments and earnings in the joint ventures are recorded as minority
interests and minority interests in income of consolidated subsidiaries,
respectively. Any interest held by the Company in non-majority owned
partnerships with at least 20% ownership is accounted for using the equity
method. Any interest held by the Company in partnerships with less than 20%
ownership is accounted for using the cost method.

On February 1, 1990, EPIC entered into a joint venture with Healthtrust,
Inc. -- The Hospital Company ("Healthtrust") for the purpose of operating
certain hospital assets in McKinney, Texas. EPIC contributed, at net book value,
a 168 bed facility to the venture and is the managing co-general partner with a
60% equity interest in the venture. Healthtrust contributed a 99 bed facility to
the venture and was the co-general partner with a 40% interest in the venture.
The assets contributed by Healthtrust to the joint venture, including property
and equipment of $15,328,000, were recorded at fair market value which
approximated net book value. Goodwill of $2,470,000 is being amortized over 40
years. On August 31, 1993, EPIC purchased Healthtrust's interest in the joint
venture for $15,656,000 which approximated Healthtrust's interest in the net
assets of the joint venture and was recorded as a reduction to minority
interests.

Intangible Assets

The excess of the purchase price over the fair value of net asset acquired
is being amortized on a straight-line basis over periods ranging from nine to 40
years. Accumulated amortization was $9,244,000 and $6,920,000 at September 30,
1993 and 1992, respectively.

Costs incurred in obtaining long term financing are deferred and are
included in other assets. Deferred financing costs are amortized using the
effective interest method over the term of the related debt, and such
amortization is included in interest expense. Accumulated amortization of
deferred financing costs was $16,993,000 and $14,401,000 at September 30, 1993
and 1992, respectively.

EPIC has purchased licenses to use various software applications. These
costs are included in other assets and have been amortized over two or five year
periods. Accumulated amortization of the software costs was $5,750,000 and
$4,750,000 at September 30, 1993 and 1992, respectively.

Income Taxes

Holdings files a consolidated federal income tax return which includes all
of its eligible subsidiaries.

Holdings accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 96, "Accounting for Income Taxes."
Under the liability method specified by SFAS No. 96, deferred tax assets and/or
liabilities are determined by multiplying the difference between the financial
reporting and tax reporting bases of assets and liabilities (collectively, the
"temporary differences," see Note 6) by tax rates (determined in accordance with
enacted tax laws) that are expected to be effective when such temporary
differences reverse. Holdings' deferred tax liabilities originated from the
accounting for the

F-15
<PAGE> 56

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

acquisition from AMI (the "Acquisitions"), and reflect the estimated tax effect
of differences between book and tax bases of assets acquired and liabilities
assumed.

In February 1992, the Financial Accounting Standards Board issued SFAS No.
109, "Accounting for Income Taxes," which supersedes SFAS No. 96. Implementation
of SFAS No. 109 for Holdings was required October 1, 1993. SFAS No. 109 requires
that temporary differences be reflected in the same balance sheet category as
the assets and liabilities that caused the temporary differences. Deferred tax
assets, which would include tax net operating loss carryforwards, would require
the determination of a related valuation allowance, based on the assets'
expected realization. The Company has completed the analysis necessary to
determine the impact of adoption of SFAS No. 109 and it is not expected to have
a material impact on Holdings' financial position or results of operations and
will not impact cash flows.

Net Operating Revenue

Net operating revenue is recorded based on established billing rates net of
allowances and discounts for patients covered by Medicare, Medicaid and other
contractual programs. Payments received under these programs, which are based on
either the costs of services or predetermined rates, are generally less than the
established billing rates of EPIC's hospitals, and the differences are recorded
as contractual allowances and/or contracted discounts. Reserves provided have
been deducted from accounts receivable pending final audit and appeal
settlement. Contractual adjustments, contracted discounts and other discounts
amounted to $627,757,000, $576,572,000, and $482,158,000 for fiscal 1993, 1992
and 1991, respectively.

It is generally EPIC's policy to attempt to collect compensation for all
services performed.

Reclassifications

Certain prior period amounts have been reclassified to conform with the
fiscal 1993 presentation.

2. ACQUISITION AND DIVESTITURES

On August 24, 1993 the Company entered into a 20-year lease agreement with
two ten-year renewal options with the County of Galveston, Texas for Mainland
Center Hospital, a 310-bed hospital in Texas City, Texas. The lease payments of
$27,535,000 were paid in full upon the execution of the lease, which has been
accounted for as a capital lease. The Company also purchased certain net current
assets and equipment of the hospital, which included $5,639,000 in cash, for
$17,965,000 which has been accounted for by the purchase method of accounting.
The Company also has a commitment for $20,000,000 in capital improvements over
the term of the lease. The Company has a purchase option beginning after the
first year of the lease. The option price ranges from $500,000 to $851,000 over
the term of the lease.

On January 6, 1993, the Company sold Westpark Community Hospital in
Hammond, Louisiana for $6,200,000. A loss of $624,000 was recorded as gain
(loss) on sale of assets in fiscal 1993. A charge of $800,000 to reflect the
anticipated loss on the sale was recorded as gain (loss) on sale of assets in
fiscal 1992. The net book value of the assets sold before the fiscal 1992
charge, less liabilities assumed by the buyer, was $7,624,000.

On March 15, 1993, the Company sold Valley Medical Center in El Cajon,
California for $16,950,000. A gain of $4,632,000 was recorded as gain (loss) on
sale of assets in fiscal 1993. The net book value of the assets sold, less
liabilities assumed by the buyer, was $12,318,000.

On October 1, 1991, the Company purchased Colonial Hospital, a 49-bed
hospital in Terrell, Texas for $10,403,000 in cash. The acquisition has been
accounted for by the purchase method of accounting. The excess of purchase price
over net assets acquired will be amortized over 40 years.

F-16
<PAGE> 57

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")

Employee-owners of EPIC have beneficial ownership of approximately 60% of
the Holdings Common Stock through their participation in the EPIC ESOP.

At EPIC's inception, the EPIC ESOP purchased 24,500,000 shares of EPIC
Common Stock with the proceeds obtained from the issuance of loans aggregating
$245 million payable to EPIC. The terms of the original ESOP loan agreement
segregated the EPIC ESOP's obligation to EPIC into two components, the terms of
the first of which mirrored the terms of the Senior ESOP Bank Debt (the "First
ESOP Loan") and the second of which mirrored the terms of the Senior ESOP Notes
(see Note 5). Concurrent with the issuance of the Mortgage Notes (see Note 5),
the First ESOP Loan was replaced by a loan agreement which provides for
mandatory principal payments in amounts that are substantially in conformance
with the remaining mandatory principal payments of the Senior ESOP Bank Debt as
if the issuance of the Mortgage Notes had not occurred (the "New ESOP Loan").
The interest rate on the New ESOP Loan is determined quarterly based on .85
times the sum of the London InterBank Offered Rates plus 2.5% (5.1% at September
30, 1993). The EPIC ESOP has pledged all of its shares of the Holdings Common
Stock as collateral for the ESOP-related borrowings. These shares are released
from the pledge as the loans are paid. The EPIC ESOP receives contributions from
EPIC to service and extinguish the loans.

The EPIC ESOP is an individual account, defined contribution plan. Nonunion
employee-owners who work a specified number of hours are eligible to participate
in the EPIC ESOP if they have attained age 21 and completed one year of service.
No employee-owner contributions are required or permitted to be made to the EPIC
ESOP. No rollover contributions are permitted to be made to the EPIC ESOP.
Allocations are made to participants' accounts in an amount which reflects each
participant's proportionate share of the contributions made by EPIC to the EPIC
ESOP, as determined on the basis of each participant's compensation.
Contributions made to the EPIC ESOP and the value of shares of common stock
allocated to the account of a participant as a result of such contributions are
intended to be treated as tax-deferred contributions. Such contributions, and
earnings thereon, generally are includable in a participant's compensation for
federal income tax purposes when distributed.

As of the plan year ended December 31, 1992, cumulative allocations of
10,650,517 shares of Holdings Common Stock at a market value of $8.00 per share
based on an independent valuation, or $85,204,136 in total have been made to
10,183 participants. Shares of Holdings Common Stock relating to the plan year
ending December 31, 1993 will be allocated during fiscal 1994.

Subject to limitations contained in the Internal Revenue Code of 1986, as
amended (the "Code"), Holdings is entitled to claim an income tax deduction for
contributions to the EPIC ESOP. Holdings has received a favorable determination
from the Internal Revenue Service that the EPIC ESOP is qualified as an
"employee stock ownership plan" within the meaning of Section 4975(e)(7) of the
Code. Contributions to the EPIC ESOP are used by the EPIC ESOP to pay interest
and principal on the loans owed to EPIC. These payments are used by EPIC to pay
interest and principal on the Class B-1 First Priority Mortgage Notes and the
Senior ESOP Notes.

EPIC recorded net ESOP expense, using the cash method, and corresponding
reductions in the EPIC ESOP notes receivable, of $20,715,000, $20,714,000, and
$23,076,000 for fiscal 1993, 1992 and 1991, respectively. Interest income
recognized on the EPIC ESOP notes receivable totaled $14,984,000, $16,885,000,
and $20,483,000 for fiscal 1993, 1992 and 1991, respectively, which in turn was
contributed to the EPIC ESOP to pay interest expense incurred on the
ESOP-related debt. Interest expense incurred on ESOP-related debt totaled
$20,856,000, $21,734,000, and $21,731,000, which included discount amortization
of $559,000, $551,000, and $511,000 for fiscal 1993, 1992 and 1991,
respectively.

F-17
<PAGE> 58

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. OPERATING LEASES

Holdings leases office space, office equipment and medical equipment.
Generally, real estate leases are for primary terms of from one to 12 years with
options to renew for additional periods, and equipment leases are for terms of
from one to seven years. Future minimum lease payments for all operating leases
having initial or remaining noncancellable lease terms in excess of one year as
of September 30, 1993 are as follows (dollars in thousands):

<TABLE>
<S> <C>
1994............................................................... $ 4,560
1995............................................................... 4,225
1996............................................................... 3,337
1997............................................................... 2,693
1998............................................................... 1,835
1999 and thereafter................................................ 3,485
-------
20,135
Sublease income.................................................... (1,116)
-------
$19,019
-------
-------
</TABLE>

Rent expense under operating leases was as follows (dollars in thousands):

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
-------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Minimum rent.................................. $18,496 $16,107 $13,609
Sublease income............................... (795) (609) (317)
------- ------- -------
$17,701 $15,498 $13,292
------- ------- -------
------- ------- -------
</TABLE>

F-18
<PAGE> 59

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Holdings' long-term debt, net of discounts, is summarized below (dollars in
thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1993 1992
-------- --------
<S> <C> <C>
12% Senior Deferred Coupon Notes, principal of $250,000 due
2002........................................................... $167,197 $148,628
11.375% Class B-1 First Priority Mortgage Notes payable in
semi-annual payments of $9,000 commencing in July 1996 with a
final payment of $10,000 in July 2001.......................... 99,579 99,500
11.5% Class B-2 First Priority Mortgage Notes payable in
semi-annual payments of $500 through July 1994, increasing to
$750 in January 1995, to $1,500 in January 1997, to $8,000 in
January 1998, to $9,000 in January 1999, with a final payment
of $15,500 in July 2001........................................ 83,112 84,046
Class B-3 First Priority Mortgage Notes payable in semi-annual
payments of $750 commencing in January 1995, increasing to
$3,000 in January 1997 through July 1998, with a fluctuating
interest rate (6.5% at September 30, 1993)..................... 15,000 15,000
Other mortgage debt and capital lease obligations with varying
maturities and interest rates ranging from 4.75% to 12.9%...... 20,651 20,351
Acquisition loan payable in quarterly installments of $1,250
commencing in October 1993 with a fluctuating interest rate
(8.0% at September, 1993)...................................... 19,542 --
Zero Coupon Notes, principal of $89,313 due 2001 with an
effective interest rate of 14.8%............................... 28,564 24,770
Additional Zero Coupon Notes, principal of $7,079 due 2001 with
an effective interest rate of 14.8%............................ 2,265 1,964
11.875% Senior ESOP Notes payable in three equal annual payments
commencing in September 1996 with an effective interest
rate of 13.03%................................................. 72,141 76,840
10.875% Senior Subordinated Notes due 2003....................... 160,000 --
15% Senior Subordinated Notes payable in three equal annual
payments commencing in 1999.................................... 40,320 104,852
11% Junior Subordinated Pay-In-Kind Notes payable in three equal
annual payments commencing in September 2001................... 19,148 45,742
-------- --------
727,519 621,693
Current maturities............................................... (47,914) (2,330)
-------- --------
$679,605 $619,363
-------- --------
-------- --------
</TABLE>

The 12% Senior Deferred Coupon Notes are reflected at their fair value of
$140,053,000 at March 25, 1992, plus accretion of discount through September 30,
1993. Interest is payable semi-annually beginning March 16, 1997.

The Mortgage Notes are the indebtedness of EPIC Properties, Inc. ("EPIC
Properties"), an indirect wholly-owned subsidiary of EPIC. The Mortgage Notes
are secured by mortgages on 24 acute care hospital complexes ("the Mortgaged
Hospitals") and the land on which such buildings are located, and by a first
priority security interest in certain furnishings and equipment located at each
of the Mortgaged Hospitals. The Mortgage Notes are fully and unconditionally
guaranteed by EPIC (see Note 18).

The interest rate on the Class B-1 First Priority Mortgage Notes (the
"Class B-1 Notes") will increase to 11.5% after September 30, 1995. If the
Internal Revenue Service determines that interest on the Class B-1 Notes does
not qualify for a 50% exclusion from federal taxable income, the interest rate
on the Class B-1 Notes will increase to 11.5% for all periods through September
30, 1995 during which such interest exclusion is not available.

EPIC incurred losses on refinancing concurrent with the issuance of the
Mortgage Notes, due primarily to the write-off of loan issue costs. These
losses, totalling $3,911,000, are recorded as an extraordinary item (net of
income tax benefit of $1,330,000) in the consolidated statement of operations
for the fiscal year ended September 30, 1991.

F-19
<PAGE> 60

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Zero Coupon Notes are reflected at their fair value of $14,008,000, as
estimated by EPIC at September 30, 1988, plus accretion of discount through
September 30, 1993. No interest or principal is payable until maturity.

Additional Zero Coupon Notes were issued under an interest rate cap
agreement with AMI (see Note 13) and are reflected at their original fair value
plus accretion of discount through September 30, 1993. No interest or principal
is payable until maturity.

A subsidiary of EPIC purchased $5,400,000 and $19,850,000 face value of the
11.875% Senior ESOP Notes on the open market for $5,616,000 and $20,293,000 plus
accrued interest in fiscal 1993 and 1992, respectively (the "Senior ESOP Note
Purchases"). Losses of $570,000 and $1,917,000 due to the write-off of debt
issue costs and unamortized discounts and the payment of a premium on the Senior
ESOP Note Purchase are recorded as extraordinary items (net of income tax
benefit of $652,000 in 1992) in the consolidated statements of operations for
the fiscal years ended September 30, 1993 and 1992.

The 11.875% Senior ESOP Notes, which carry detached stock purchase warrants
(see Note 9), have a stated principal amount of $100,000,000 and are reflected
at their fair value of $93,988,000, as estimated by EPIC at September 30, 1988,
less the Senior ESOP Note Purchases, plus accretion of discount through
September 30, 1993.

On June 18, 1993, EPIC refinanced $74,680,000 in principal of the 15%
Senior Subordinated Notes and $53,697,000 in principal of the 11% Junior
Subordinated Pay-In-Kind Notes (the "Refinancing") through the issuance of the
10.875% Senior Subordinated Notes. The 10.875% Senior Subordinated Notes are
guaranteed by certain subsidiaries of EPIC (see Note 18).

Under the terms of the Second Amended and Restated Credit Agreement dated
as of September 30, 1988, and amended and restated as of July 30, 1991, and
September 1, 1993 (the "Amended Credit Agreement"), EPIC is required to call the
remaining $40,320,000 in principal of the 15% Senior Subordinated Notes by
February 28, 1994, with the remaining proceeds of the Refinancing. The remaining
principal of the 15% Senior Subordinated Notes at September 30, 1993, has been
recorded as current maturities of long term debt in the consolidated balance
sheets.

EPIC incurred a loss before taxes of $21,390,000 on the Refinancing, which
resulted from the write-off of loan issue costs and unamortized discount on the
15% Senior Subordinated Notes and the redeemed portion of the 11% Junior
Subordinated Pay-In-Kind Notes, payments to the holders of the 15% Senior
Subordinated Notes and the 11.875% Senior ESOP Notes for waivers of certain
provisions of the respective indentures and the accrual of the call premium to
be paid on redeeming the remaining principal on the 15% Senior Subordinated
Notes. These losses are recorded as an extraordinary item in the consolidated
statements of operations.

The 15% Senior Subordinated Notes are guaranteed by certain wholly-owned
subsidiaries of EPIC (see Note 18) and are secured by a fourth pledge of the
common stock of such subsidiaries.

Interest on the 11% Junior Subordinated Pay-in-Kind Notes is payable
semiannually by the issuance of additional 11% Junior Subordinated Pay-in-Kind
Notes through September 30, 1995, and thereafter, if Holdings is prohibited from
making cash interest payments by the terms of any senior debt existing on
September 30, 1988 less the amount retired in the Refinancing. The notes, which
have a stated principal amount of $50,000,000, have been recorded at their fair
value estimated by EPIC at September 30, 1988, of $22,900,000 plus accretion of
discount through September 30, 1993, less the amount retired as a result of the
Refinancing. The effective interest rate for these notes is 18.07%.

The Amended Credit Agreement provides EPIC with revolving loan commitments
and an acquisition loan to be used for working capital and acquisition funds for
EPIC. As of September 30, 1993, revolving loan commitments aggregated $30
million. Any revolving loan commitments outstanding are due July 31, 1997.

F-20
<PAGE> 61

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Interest is generally payable monthly at the following rates per annum, at
EPIC's option: (i) 1.5% in excess of the higher of the prime rate in effect from
time to time or the annual yield on ninety-day commercial paper or (ii) 2.5% in
excess of the LIBOR rate. There were no revolving loans outstanding as of
September 30, 1993, and 1992, respectively. The acquisition term loan principal
amount outstanding is payable in quarterly installments commencing on October
31, 1993 through July 31, 1997. Interest is generally payable quarterly at the
following rates per annum, at EPIC's option: (i) 2.0% in excess of the higher of
the prime rate in effect from time to time or the annual yield on ninety-day
commercial paper or (ii) 3.0% in excess of the LIBOR rate.

In connection with the issuance of the Mortgage Notes, EPIC Properties
obtained a revolving line of credit. The line of credit can only be used for the
purpose of paying interest or principal on the Mortgage Notes. The maximum loan
amount available is the lesser of $22 million or the annual interest accrual of
the Mortgage Notes. The line of credit would bear an interest rate of the Prime
Lending Rate of AmSouth Bank plus 2%. There were no loans outstanding under the
line of credit as of September 30, 1993 and 1992, respectively.

The Amended Credit Agreement and other long-term debt agreements contain a
number of restrictive covenants, including restrictions on incurrence of debt,
sales of assets, payment of cash dividends, requirements to maintain certain
financial ratios and a specified level of net worth, as defined, and other
limitations, including limitations on the use of funds from the sale of certain
assets.

As of September 30, 1993, the maturities of long-term debt were as follows
(dollars in thousands):

<TABLE>
<S> <C>
1994.............................................................. $ 47,914
1995.............................................................. 9,498
1996.............................................................. 43,545
1997.............................................................. 58,546
1998.............................................................. 67,207
1999 and thereafter............................................... 671,160
---------
897,870
Unamortized discounts and unaccreted interest..................... (170,351)
---------
$ 727,519
---------
---------
</TABLE>

6. INCOME TAXES

The income tax benefit for fiscal 1992 and 1991 was comprised of deferred
federal benefits of $11,800,000 and $9,996,000 respectively, arising from
reported financial losses and state income tax expense of $1,984,000 and
$888,000 in fiscal 1993 and 1992, respectively. For financial reporting
purposes, Holdings has utilized all of its deferred federal tax liability and
has not recognized a benefit for the current net operating loss pursuant to the
provisions of SFAS No. 96. Taxes paid during 1993 and 1992 primarily relate to
state income taxes and estimated federal tax payments.

F-21
<PAGE> 62

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Holdings' consolidated effective federal tax rate differed from the federal
statutory rate as set forth in the following table:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
--------------------------------
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Tax benefit computed at federal statutory rate
(34%)............................................... $ 16,022 $12,547 $10,732
Amortization of excess purchase price over net assets
acquired............................................ (790) (614) (601)
Losses not subject to benefit......................... (15,089) -- --
Other, net............................................ (143) (133) (135)
-------- ------- -------
Income tax benefit.................................... $ -- $11,800 $ 9,996
-------- ------- -------
-------- ------- -------
</TABLE>

The deferred income tax benefit results from the following temporary
differences in reporting for financial and income tax purposes:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
-------------------------------
1993 1992 1991
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Book/tax difference on sale of assets................. $ 3,835 $ -- $ --
Book/tax depreciation differences..................... 475 221 (3,392)
Net operating loss recognized currently for financial
reporting........................................... 2,976 1,412 6,134
SAR compensation not currently deductible............. 968 3,673 2,426
Professional liability reserves not currently
deductible.......................................... 383 1,013 4,345
Other reserves for estimated losses and contingencies
not currently deductible............................ 1,348 2,217 508
Paid time off accrued for financial reporting, not
currently deductible................................ 339 719 89
Difference arising from ESOP loan fees initially
expensed for tax purposes but capitalized and
amortized for financial reporting purposes.......... 197 427 (480)
Difference in methods used to reserve for bad debts... 802 1,014 55
Difference in ESOP contribution deduction............. (162) 207 (1,317)
Difference in methods for reporting interest.......... 1,553 562 694
Losses not subject to benefit......................... (15,089) -- --
Other................................................. 2,375 335 934
------- ------- -------
Deferred income tax benefit........................... $ -- $11,800 $ 9,996
------- ------- -------
------- ------- -------
</TABLE>

Net operating loss carryforwards of approximately $72,106,000 (expiring in
the years 2004, 2005, 2006, 2007 and 2008) are available to offset future income
for federal and state tax purposes. The utilization of these net operating loss
carryforwards is dependent upon future taxable income. Net operating loss
carryforwards of $47,123,000 are available for financial reporting purposes.

7. DEFERRED COMPENSATION

Holdings has adopted a deferred compensation plan (the "SAR Plan") as part
of its overall executive compensation program to attract, motivate and retain
key employee-owners. As of September 30, 1993, 5,873,582 SAR Plan units, each
exchangeable for one share of Holdings Common Stock or redeemable for cash or
other property under certain circumstances, were held by certain key
employee-owners and former employee-owners. During fiscal 1993, 1992 and 1991,
309,500, 1,481,065 and 1,002,000 SAR Plan units were granted and 427,800,
218,000, and 243,000 SAR Plan units were cancelled, respectively. The
outstanding SAR Plan units vest in varying amounts at varying periods not
exceeding five years beginning on each respective grant date. A maximum of
6,587,565 SAR Plan units, reduced by all units redeemed may be

F-22
<PAGE> 63

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

outstanding at any time. During fiscal 1993, 1992, and 1991, Holdings accrued
SAR Plan compensation expense of $3,848,000, $11,805,000, and $8,135,000,
respectively.

During fiscal 1993, 123,417 SAR Plan units were redeemed for $974,994 in
cash ($7.90 per unit) and 3,125 units were redeemed for $25,000 in cash ($8.00
per unit); in October 1993, 121,874 SAR Plan units were redeemed for $974,996 in
cash ($8.00 per unit).

During fiscal 1992, 129,998 SAR Plan units were redeemed for $974,985 in
cash ($7.50 per unit) and 3,164 SAR Plan units were redeemed for $24,996 in cash
($7.90 per unit).

8. REDEEMABLE PREFERRED STOCK

Pursuant to the Merger, the EPIC Class A and Class B Preferred Stock was
converted to Holdings Preferred Stock and the EPIC Class C Preferred Stock was
converted to Holdings Common Stock. The EPIC Class A and Class B Preferred
Stock, which had a book value of $66,360,000 and $66,776,000, respectively, was
repurchased from AMI for $130,000,000. The EPIC Class C Preferred Stock, which
had a book value of $63,935,000 was converted into 9,423,075 shares of Holdings
Common Stock.

At September 30, 1988, redeemable preferred stock of EPIC was recorded at
fair value estimated by EPIC, based on an independent valuation. The recorded
amounts were less than the mandatory redemption amounts for the EPIC Class A and
Class B Preferred Stock and were increased by the recording of dividends at the
stated rate and by accretion of the discount, and reduced by the discount
recorded on declared and accrued dividends, so that the carrying amounts would
equal the mandatory redemption amounts at the mandatory redemption dates.

Dividends on the EPIC Class A and Class B Preferred Stock were cumulative
and payable quarterly at annual rates of $10.00 and $10.50 per share,
respectively, out of funds legally available. EPIC declared and paid such
dividends in like stock three quarters in arrears, however, such dividends were
accrued quarterly. For the dividend periods after September 30, 1988, to
conversion, dividends were paid in additional shares of the same class of stock
at the rate of 0.025 and 0.02625, respectively, of a share of stock. During
fiscal 1992, EPIC declared dividends of 26,144 shares of EPIC Class A Preferred
Stock and 28,182 shares of EPIC Class B Preferred Stock.

Holders of shares of EPIC Class C Preferred Stock were entitled to receive
cumulative dividends out of funds legally available at the annual rate of $8.00
per share. No dividends were declared on the EPIC Class C Preferred Stock;
however, EPIC had recorded accruals of $1,935,000 during fiscal year 1992 and
$4,000,000 during fiscal year 1991 for undeclared dividends.

9. COMMON STOCK WARRANTS AND OPTIONS

The Senior ESOP Notes and 15% Senior Subordinated Notes carried detachable
stock purchase warrants to purchase 1,884,615 and 3,795,000 shares of EPIC
Common Stock for $.01 and $.001 per share, subject to anti-dilution adjustments.
The aggregate fair values of these warrants estimated by EPIC, based on an
independent valuation, at date of issuance were $6,012,000 and $12,103,000,
respectively. In addition, EPIC agreed to issue to AMI certain warrants to
purchase 925,129 shares of EPIC Common Stock at an exercise price of $.001 per
share. Immediately prior to the Merger, 6,306,395 of the warrants outstanding
were exercised for 63,064 shares of EPIC Common Stock. In conjunction with the
Merger, all of the remaining warrants outstanding became warrants to acquire the
same number of shares of Holdings Common Stock. During fiscal 1992, after the
Merger, 152,692 of the warrants outstanding were exercised for Holdings Common
Stock. During fiscal 1993, 3,300 of the warrants outstanding were exercised.
Warrants to purchase 142,357 shares of Holdings Common Stock were outstanding at
September 30, 1993.

F-23
<PAGE> 64

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On December 14, 1988, EPIC adopted the EPIC Healthcare Group, Inc. Stock
Option Plan (the "Stock Option Plan"). Under the Stock Option Plan, the Board of
Directors is authorized to grant options to EPIC directors, officers and
salaried employee-owners to purchase up to 500,000 shares of Holdings Common
Stock. Options granted vest in five equal annual installments. No options were
granted during fiscal 1993, 1992 or 1991. At September 30, 1993, options for
32,000 shares were exercisable.

10. COMMON STOCK

Prior to the Merger, warrants were exercised for 63,064 shares of EPIC
Common Stock and 1,452 shares were repurchased by EPIC from participants of the
EPIC ESOP. Pursuant to the Merger, 30,739,378 shares of EPIC Common Stock were
converted to Holdings Common Stock and the EPIC Class C Preferred Stock was
converted to 9,423,075 shares of Holdings Common Stock. Since the Merger,
warrants have been exercised for 155,992 shares of Holdings Common Stock.
Additionally, 219,004 shares have been distributed to participants of the EPIC
ESOP, which were repurchased by Holdings.

Holdings has reserved 142,357 shares of Holdings Common Stock for issuance
upon the exercise of outstanding warrants to purchase Holdings Common Stock and
5,902,116 shares have been reserved for future issuance under the SAR Plan.

11. LOSS PER COMMON SHARE

Loss per common share has been computed by dividing the net loss to common
stockholders by the average number of common shares outstanding during the
period. The exercise of the outstanding common stock warrants and other common
stock equivalents has not been assumed as the effect would be antidilutive.

Assuming conversion of the EPIC redeemable preferred stock as of October 1,
1991, the net loss per common share of Holdings would have been $32,645,000 as a
result of the elimination of the redeemable preferred stock dividend of
$11,048,000 and additional interest expense of $8,806,000 on the Holdings Notes
(from the period from October 1, 1991, to March 24, 1992). The weighted average
number of common shares outstanding would have been 40,183,036 shares. As a
result, the net loss per common share in fiscal 1992 would have been $0.84.

12. PROFESSIONAL AND GENERAL LIABILITY RISKS

Holdings is self-insured for its professional and general liability risks.
As of September 30, 1993, the unfunded reserve for this self insurance was
$45,130,000 of which $11,000,000 was included in current liabilities. EPIC has
funded $12,482,000 of the reserves through a wholly-owned captive insurance
company at September 30, 1993. The reserves for losses and related expenses are
discounted to their present value based on expected loss reporting patterns
determined by independent actuaries using a rate of 9%. AMI has retained the
liability for all professional liability claims with a date of occurrence prior
to October 1, 1988.

13. RELATED PARTY TRANSACTIONS

EPIC and AMI entered into an interest rate cap agreement (the "Senior
Interest Cap Agreement") whereby AMI agreed to pay to EPIC the amounts by which
EPIC's interest costs under certain tranches of indebtedness exceeded, during
each of the three fiscal years after September 30, 1988, certain specified
rates, net of the effect of any reimbursement to EPIC by Medicare, Medicaid, or
Blue Cross for any interest expense incurred by EPIC in excess of such rates in
connection with such loans.

On August 28, 1991, EPIC and AMI agreed that it was mutually in their best
interest to terminate the Senior Interest Cap Agreement prior to its scheduled
expiration of October 1, 1991. EPIC and AMI further agreed that each party had
fully performed all of its obligations under the Senior Interest Cap Agreement
and each party released the other from future obligations thereunder.

F-24
<PAGE> 65

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pursuant to the terms of the Senior Interest Cap Agreement, EPIC issued
Additional Zero Coupon Notes to AMI in the principal amounts of $1,612,000 and
$2,844,000 during fiscal 1990 and 1989, respectively, in exchange for cash of a
like amount paid to EPIC by AMI during such years. In fiscal 1991, EPIC paid to
AMI $2,864,000 and issued Additional Zero Coupon Notes to AMI with a present
value of $626,000 in exchange for the cancellation of the zero coupon notes
issued in 1989. AMI has sold their interest in the Additional Zero Coupon Notes.
Net interest expense of $839,000 was recognized during fiscal 1991 relating to
this agreement.

EPIC and AMI have entered into certain other agreements, including a
registration rights agreement pursuant to which EPIC has agreed to register the
securities issued to AMI under the Securities Act of 1933. AMI has also agreed
to indemnify EPIC against certain liabilities associated with the breach of
representations and warrants made by AMI, certain tax liabilities that may
arise, certain reimbursements still pending related to the Acquisitions and
certain fees, costs, and expenses.

During fiscal 1993, AMI reimbursed $1,621,000 relating to AMI's
indemnifications of EPIC for certain intermediary adjustments to reimburse costs
relating to cost report years that preceded the formation of EPIC.

EPIC entered into a three year group purchasing agreement, effective
September 1, 1993, with a subsidiary of AMI, which allows the Company to
purchase supplies at lower group rates. The Company expects to purchase more
than $30,000,000 per year of supplies under terms of the agreement. The Company
will pay $180,000 per year to participate in this program.

David R. Belle-Isle, a former officer of EPIC, borrowed $181,000 from EPIC
in December 1988 in connection with his relocation to Texas. The loan was
interest free until it was restructured in October 1990. Effective as of the
30th day of September 1991, this debt, totalling $160,000, was forgiven. The
Company reimbursed Mr. Belle-Isle for the tax liability associated with the
forgiveness of the loan.

EPIC has a consulting agreement with The Elder Group, of which Thomas H.
Elder, who formerly served as EPIC's Management Services Officer, is the
Managing Principal. EPIC paid The Elder Group approximately $1,300,000 and
$1,000,000 in fiscal 1992 and 1991, respectively.

EPIC has an investment in the preferred stock of the Compucare Company
("Compucare"), who is developing and installing one of EPIC's new information
systems. The chief executive officer of EPIC is on the board of directors of
Compucare. Payments to Compucare for fiscal 1993 totalled $5,651,000.

14. FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 107 "Disclosures about Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in any cases, could not be realized in immediate
settlement of the instrument. SFAS No. 107 excluded certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of Holdings. The following methods and assumptions were used by
Holdings in estimating its fair value disclosures for financial instruments.

Cash Equivalents, Cash Restricted for Interest Payments, and Marketable
Securities

The carrying amounts reported in the consolidated balance sheets for cash
equivalents, cash restricted for interest payments, and marketable interest
bearing securities approximates their fair values.

F-25
<PAGE> 66

EPIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Long-Term Debt (Including Current Maturities)

The fair values of Holdings' long-term debt, except the Class B-1 and Class
B-2 First Priority Mortgage Notes, are estimated using quoted market prices or
the call price. The fair value of the Class B-1 and Class B-2 First Priority
Mortgage Notes are estimated using discounted cash flow analysis based on
Holdings' incremental borrowing rate for similar types of borrowing
arrangements.

The carrying amounts and estimated fair values of Holdings' financial
instruments at September 30, 1993 are as follows (in thousands):

<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Cash equivalents, cash restricted for interest payments, and
marketable securities.......................................... $112,529 $112,529
Long-term debt................................................... $727,519 $772,006
</TABLE>

15. EXTRAORDINARY ITEMS

Extraordinary items of $21,960,000 in 1993, $1,265,000 ($1,917,000, net of
income tax benefit of $652,000) in 1992 and $2,581,000 ($3,911,000, net of
income tax benefit of $1,330,000) in 1991 were primarily due to the write-offs
of loan issue costs and unamortized discounts on retirements of long-term debt
(see Note 5).

16. SUPPLEMENTARY INCOME STATEMENT INFORMATION

Maintenance and repair expense was $17,101,000, $17,564,000, and
$16,159,000 for fiscal 1993, 1992, and 1991, respectively.

17. CONTINGENCIES

Final determination of amounts earned under prospective payment and
cost-reimbursement programs is subject to review by appropriate governmental
authorities or their agents. In the opinion of management, adequate provision
has been made for any adjustments that could result from such reviews.

Holdings is currently, and from time to time is expected to be, subject to
claims and suits arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of such matters will not have a material
effect on Holding's results of operations, financial position, or liquidity.
Pursuant to the terms of the Acquisitions, claims relating to litigation,
medical benefits, and workers' compensation occurring prior to October 1, 1988,
remain the obligation of AMI.

18. GUARANTOR SUBSIDIARIES

Certain subsidiaries of EPIC (the "Guarantor Subsidiaries") guarantee the
loans under the Bank Credit Agreement, AMI Zero Coupon Notes, Additional AMI
Zero Coupon Notes, 11.875% Senior ESOP Notes, 10.875% Senior Subordinated Notes,
15% Senior Subordinated Notes and 11% Junior Subordinated Pay-In-Kind Notes.
Certain other subsidiaries, including EPIC Properties, are not Guarantor
Subsidiaries (the Nonguarantor Subsidiaries) (see Note 5). All equity interests
in the Nonguarantor Subsidiaries, other than those held by minority interests,
are held by EPIC.

Condensed consolidating financial information of EPIC, the Guarantor
Subsidiaries, EPIC Properties and the other Nonguarantor Subsidiaries are
included in the footnotes to the consolidated financial statements of EPIC
included elsewhere herein.

F-26
<PAGE> 67

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1993 1993
------------ -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents......................................... $ 40,940 $ 56,756
Cash restricted for interest payment.............................. 9,573 3,820
Marketable securities............................................. 34,132 47,347
Accounts receivable, net of reserves for uncompensated care of
$31,187 and $29,286............................................ 99,392 76,957
Supply inventories................................................ 20,973 20,687
Prepaid expenses and other........................................ 12,398 4,574
Deferred income taxes............................................. 5,384 --
TOTAL CURRENT ASSETS................................................ 222,792 210,141
PROPERTY AND EQUIPMENT.............................................. 810,055 786,798
ACCUMULATED DEPRECIATION AND AMORTIZATION........................... (231,239) (218,746)
------------ -------------
578,816 568,052
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, net of
accumulated amortization.......................................... 52,461 52,965
OTHER ASSETS, net of accumulated amortization....................... 34,551 33,818
------------ -------------
TOTAL ASSETS........................................................ $ 888,620 $ 864,976
------------ -------------
------------ -------------
</TABLE>

LIABILITIES AND STOCKHOLDER'S EQUITY

<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt.............................. $ 48,049 $ 47,914
Accounts payable.................................................. 45,551 44,610
Accrued liabilities............................................... 96,636 87,531
------------ -------------
TOTAL CURRENT LIABILITIES........................................... 190,236 180,055
LONG-TERM DEBT...................................................... 512,999 512,408
DEFERRED INCOME TAXES............................................... 11,378 5,994
RESERVE FOR PROFESSIONAL LIABILITY RISKS............................ 46,557 46,612
OTHER DEFERRED LIABILITIES.......................................... 42,013 42,450
COMMITMENTS AND CONTINGENT LIABILITIES..............................
MINORITY INTERESTS.................................................. 5,909 5,472
STOCKHOLDER'S EQUITY
Common stock, $.01 par value...................................... -- --
Paid-in capital................................................... 373,719 373,838
Notes receivable from EPIC ESOP................................... (137,381) (148,214)
Retained earnings (deficit)....................................... (156,810) (153,639)
------------ -------------
TOTAL STOCKHOLDER'S EQUITY.......................................... 79,528 71,985
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.......................... $ 888,620 $ 864,976
------------ -------------
------------ -------------
</TABLE>

See notes to condensed consolidated financial statements.

F-27
<PAGE> 68

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED DECEMBER 31,
-----------------------
1993 1992
-------- --------
<S> <C> <C>
NET OPERATING REVENUE................................................ $272,451 $244,352
COSTS AND EXPENSES:
Salaries and wages................................................. 99,526 84,634
Employee benefits.................................................. 21,094 22,997
ESOP expense....................................................... 5,635 5,182
Supplies........................................................... 32,025 30,041
Uncompensated care................................................. 19,618 19,048
Other.............................................................. 64,613 57,871
Depreciation and amortization...................................... 13,130 13,791
Interest expense................................................... 18,745 17,426
-------- --------
TOTAL COSTS AND EXPENSES............................................. 274,386 250,990
INTEREST INCOME...................................................... 806 636
-------- --------
LOSS BEFORE INCOME TAX BENEFIT (EXPENSE), MINORITY INTERESTS AND
EXTRAORDINARY ITEM................................................. (1,129) (6,002)
INCOME TAX BENEFIT (EXPENSE)......................................... (375) 431
MINORITY INTERESTS IN INCOME OF CONSOLIDATED SUBSIDIARIES, net of
income tax benefit (expense)....................................... (1,667) (556)
-------- --------
LOSS BEFORE EXTRAORDINARY ITEM....................................... (3,171) (6,127)
EXTRAORDINARY ITEM, net of income tax benefit........................ -- (503)
-------- --------
NET LOSS............................................................. $ (3,171) $ (6,630)
-------- --------
-------- --------
</TABLE>

See notes to condensed consolidated financial statements.

F-28
<PAGE> 69

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
DECEMBER 31,
-----------------------
1993 1992
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss........................................................... $ (3,171) $ (6,630)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization................................... 13,130 13,791
Non-cash provision for professional liability risks............. (1,111) 437
ESOP expense.................................................... 5,635 5,182
Deferred SAR Plan compensation.................................. (274) (1,496)
Minority interests in income of consolidated subsidiaries....... 1,667 631
Non-cash interest............................................... 3,906 4,698
Deferred income tax benefit..................................... -- (749)
Extraordinary item.............................................. -- 570
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable............................................. (22,435) 342
Supply inventories and other assets............................. (8,390) (10,549)
Accounts payable and other liabilities.......................... 9,938 8,747
-------- --------
Net cash provided by (used in) operating activities........ (1,105) 14,974
INVESTING ACTIVITIES
Investments in marketable securities, net.......................... 13,215 6,395
Cash paid for acquisitions......................................... (960) (4,100)
Additions to property and equipment................................ (23,431) (7,410)
Other.............................................................. (661) (811)
-------- --------
Net cash used in investing activities...................... (11,837) (5,926)
FINANCING ACTIVITIES
Payments on debt obligations....................................... (1,415) (76)
Line of credit borrowings, net..................................... -- 800
Purchase of Senior ESOP Notes...................................... -- (5,616)
Dividends paid to EPIC Holdings.................................... (119) (11)
Distributions and dividends to minority interests.................. (1,132) (2,340)
Payments of debt issue costs and other, net........................ (208) (59)
-------- --------
Net cash used in financing activities...................... (2,874) (7,302)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................... (15,816) 1,746
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..................... 56,756 32,641
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................... $ 40,940 $ 34,387
-------- --------
-------- --------
SUPPLEMENTARY INFORMATION
Cash paid for interest............................................. $ 8,513 $ 1,598
Cash paid for income taxes......................................... $ 199 $ 176
</TABLE>

See notes to condensed consolidated financial statements.

F-29
<PAGE> 70

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1) BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of
EPIC Healthcare Group, Inc. and Subsidiaries (the "Company" or "EPIC"), a
wholly-owned subsidiary of EPIC Holdings, Inc. ("Holdings"), have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included and are of a normal
recurring nature. Operating results for the three month period ended December
31, 1993 are not necessarily indicative of the results that may be expected for
the fiscal year ending September 30, 1994. These financial statements should be
read in conjunction with the audited consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended September 30, 1993.

Certain prior period amounts have been reclassified to conform with the
fiscal 1994 presentation.

2) SUBSEQUENT EVENT

HTI intends to offer to purchase Holdings' 12% Senior Deferred Coupon Notes
due 2002, and EPIC's 11.375% Class B-1 First Priority Mortgage Notes due 2001,
11.5% Class B-2 First Priority Mortgage Notes due 2001, Class B-3 First Priority
Mortgage Notes, and 10.875% Senior Subordinated Notes due 2003 and to redeem
other outstanding EPIC indebtedness in accordance with their terms. HTI also
plans to seek the consent of the holders of Holdings' and EPIC's indebtedness to
amend certain restrictive provisions.

3) INCOME TAXES

Effective October 1, 1993, the Company changed its method of accounting for
income taxes to the liability method as required by Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
superseded SFAS No. 96. As permitted under the rules of SFAS No. 109, prior
years' financial statements have not been restated.

Adoption of SFAS No. 109 had no effect on current period operations. Due to
the uncertainty of the realization of the net deferred federal tax liability,
the Company established a valuation allowance against the deferred federal tax
assets so that deferred federal tax assets equalled deferred federal tax
liabilities. The net deferred tax liability reported relates primarily to state
taxes.

F-30
<PAGE> 71

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

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 as of October 1, 1993 are as
follows (in thousands):

<TABLE>
<S> <C>
DEFERRED TAX LIABILITIES
Property and equipment basis difference....................... $ 42,908
Loan fees.................................................... 1,547
ESOP contribution............................................ 3,455
State taxes and other........................................ 5,994
--------
Total deferred tax liabilities............................... 53,904
--------
DEFERRED TAX ASSETS
Bad debt reserve differences.................................. 6,593
Professional liability reserves.............................. 15,670
SAR compensation............................................. 14,034
Health plan and workers' compensation reserve................ 3,652
Paid time off reserve........................................ 1,788
Net operating losses......................................... 24,312
Other........................................................ 700
--------
Total deferred tax assets.................................... 66,749
Valuation allowance.......................................... (18,839)
--------
--------
Net deferred tax assets...................................... 47,910
--------
Net deferred tax liability................................... $ 5,994
--------
</TABLE>

No tax benefit was recorded for the current net operating loss and no
federal taxes are anticipated for fiscal 1994. Current income tax expense of
$375,000 relates to state income taxes.

4) CHANGES IN STOCKHOLDER'S EQUITY

During the three-month period ended December 31, 1993, the Company paid
dividends of $119,000 to Holdings, which were recorded as a reduction in paid-in
capital, and received a principal payment on the Notes receivable from the EPIC
ESOP of $10,833,000, which was recorded as a reduction of the Notes receivable
from EPIC ESOP.

5) GUARANTOR SUBSIDIARIES

Certain subsidiaries of EPIC (the "Guarantor Subsidiaries") guarantee the
loans under the Amended Credit Agreement, the Zero Coupon Notes, the Additional
Zero Coupon Notes, the 11.875% Senior ESOP Notes, the 10.875% Senior
Subordinated Notes, the 15% Senior Subordinated Notes and the 11% Junior
Subordinated Pay-In-Kind Notes. Certain other subsidiaries, including EPIC
Properties, Inc. ("EPIC Properties") are not Guarantor Subsidiaries (the
"Nonguarantor Subsidiaries"). All equity interests in the Nonguarantor
Subsidiaries, other than those held by minority interests, are held by EPIC.

F-31
<PAGE> 72

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

Following is condensed consolidating financial information of EPIC, the
Guarantor Subsidiaries, EPIC Properties and the other Nonguarantor Subsidiaries:

CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
EPIC
HEALTHCARE
EPIC OTHER GROUP, INC.
HEALTHCARE GUARANTOR EPIC NONGUARANTOR AND
GROUP, INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
----------- ------------ ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.............. $ 4,948 $ 29,826 $ 1,918 $ 4,248 $ -- $ 40,940
Cash restricted for interest payment... -- -- 9,573 -- -- 9,573
Marketable securities.................. -- 22,672 -- 11,460 -- 34,132
Accounts receivable, net............... 558 72,307 470 31,320 (5,263) 99,392
Supply inventories..................... -- 16,820 -- 4,153 -- 20,973
Prepaid expenses and other............. 5,931 5,044 237 1,186 -- 12,398
Deferred income taxes.................. 5,384 -- -- -- -- 5,384
Receivables from affiliates............ 160,997 34,140 -- 5,930 (201,067) --
----------- ------------ ----------- ------------ ------------ -------------
TOTAL CURRENT ASSETS............. 177,818 180,809 12,198 58,297 (206,330) 222,792
PROPERTY AND EQUIPMENT................... -- 283,970 444,673 81,412 -- 810,055
ACCUMULATED DEPRECIATION AND
AMORTIZATION........................... -- (55,974) (146,387) (28,878) -- (231,239)
----------- ------------ ----------- ------------ ------------ -------------
-- 227,996 298,286 52,534 -- 578,816
INVESTMENTS IN SUBSIDIARIES.............. 64,684 89,641 -- -- (154,325) --
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net.......................... -- 38,107 -- 14,354 -- 52,461
OTHER ASSETS, net........................ 11,844 89,786 895 3,427 (71,401) 34,551
RECEIVABLES FROM AFFILIATES.............. 297,673 4,117 -- -- (301,790) --
----------- ------------ ----------- ------------ ------------ -------------
TOTAL ASSETS..................... $ 552,019 $630,456 $ 311,379 $128,612 $ (733,846) $ 888,620
----------- ------------ ----------- ------------ ------------ -------------
----------- ------------ ----------- ------------ ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt... $ 45,332 $ 686 $ 1,020 $ 1,011 $ -- $ 48,049
Accounts payable....................... 235 41,308 (71) 6,301 (2,222) 45,551
Accrued liabilities.................... 9,602 69,137 12,417 8,521 (3,041) 96,636
Payables to affiliates................. -- 166,927 -- 34,140 (201,067) --
----------- ------------ ----------- ------------ ------------ -------------
TOTAL CURRENT LIABILITIES........ 55,169 278,058 13,366 49,973 (206,330) 190,236
LONG-TERM DEBT........................... 322,906 8,879 241,964 10,651 (71,401) 512,999
DEFERRED INCOME TAXES.................... 11,378 -- -- -- -- 11,378
RESERVE FOR PROFESSIONAL LIABILITY
RISKS.................................. -- 32,011 -- 13,054 1,492 46,557
OTHER DEFERRED LIABILITIES............... -- 40,786 -- 1,227 -- 42,013
MINORITY INTERESTS....................... -- 5,226 -- 683 -- 5,909
PAYABLES TO AFFILIATES................... 1,363 297,673 564 1,330 (300,930) --
STOCKHOLDERS' EQUITY
Common stock......................... -- -- 1 -- (1) --
Paid-in capital...................... 373,719 61,855 92,865 5,434 (160,154) 373,719
Notes receivable from EPIC ESOP...... (100,000) -- (37,381) -- -- (137,381)
Retained earnings (deficit).......... (112,516) (94,032) -- 46,260 3,478 (156,810)
----------- ------------ ----------- ------------ ------------ -------------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT)...................... 161,203 (32,177) 55,485 51,694 (156,677) 79,528
----------- ------------ ----------- ------------ ------------ -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)...................... $ 552,019 $630,456 $ 311,379 $128,612 $ (733,846) $ 888,620
----------- ------------ ----------- ------------ ------------ -------------
----------- ------------ ----------- ------------ ------------ -------------
</TABLE>

F-32
<PAGE> 73

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1993
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............. $ 8,944 $ 40,846 $ 2,062 $ 4,904 $ -- $ 56,756
Cash restricted for interest
payment............................. -- -- 3,820 -- -- 3,820
Marketable securities................. -- 35,972 -- 11,375 -- 47,347
Accounts receivable, net.............. 474 56,000 1,071 21,321 (1,909) 76,957
Supply inventories.................... -- 16,589 -- 4,098 -- 20,687
Prepaid expenses and other............ 777 2,714 -- 1,083 -- 4,574
Receivables from affilaites........... 156,437 29,013 -- 13,663 (199,113) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT ASSETS.................... 166,632 181,134 6,953 56,444 (201,023) 210,141
PROPERTY AND EQUIPMENT.................. -- 264,044 444,673 78,081 -- 786,798
ACCUMULATED DEPRECIATION AND
AMORTIZATION.......................... -- (50,548) (140,665) (27,533) -- (218,746)
---------- ------------ ---------- ------------ ------------ ------------
-- 213,496 304,008 50,548 -- 568,052
INVESTMENTS IN SUBSIDIARIES............. 64,684 109,474 -- -- (174,158) --
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net......................... -- 38,577 -- 14,388 -- 52,965
OTHER ASSETS, net....................... 12,440 89,314 936 2,529 (71,401) 33,818
RECEIVABLES FROM AFFILIATES............. 297,673 -- -- -- (297,673) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL ASSETS............................ $ 541,429 $631,995 $ 311,897 $123,909 $ (744,254) $864,976
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt................................ $ 45,333 $ 643 $ 1,020 $ 918 $ -- $ 47,914
Accounts payable...................... 236 39,225 (65) 5,450 (236) 44,610
Accrued liabilities................... 9,294 64,070 5,624 10,216 (1,673) 87,531
Payables to affiliates................ -- 164,963 -- 34,150 (199,113) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT LIABILITIES............... 54,863 268,901 6,579 50,734 (201,022) 180,055
LONG-TERM DEBT.......................... 321,895 8,948 241,927 11,039 (71,401) 512,408
DEFERRED INCOME TAXES................... 5,994 -- -- -- -- 5,994
RESERVE FOR PROFESSIONAL LIABILITY
RISKS................................. -- 34,053 -- 11,206 1,353 46,612
OTHER DEFERRED LIABILITIES.............. -- 41,258 -- 1,192 -- 42,450
MINORITY INTERESTS...................... -- 4,947 -- 525 -- 5,472
PAYABLES TO AFFILIATES.................. -- 297,673 -- -- (297,673) --
STOCKHOLDERS' EQUITY
Common stock.......................... -- -- 1 -- (1) --
Paid-in capital....................... 373,838 61,855 111,604 5,434 (178,893) 373,838
Notes receivable from EPIC ESOP....... (100,000) -- (48,214) -- -- (148,214)
Retained earnings (deficit)........... (115,161) (85,640) -- 43,779 3,383 (153,639)
---------- ------------ ---------- ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT).... 158,677 (23,785) 63,391 49,213 (175,511) 71,985
---------- ------------ ---------- ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
(DEFICIT)............................. $ 541,429 $631,995 $ 311,897 $123,909 $ (744,254) $864,976
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>

F-33
<PAGE> 74

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
EPIC
HEALTHCARE
EPIC GROUP,
HEALTHCARE OTHER INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
NET OPERATING REVENUE............... $ -- $212,740 $ 13,649 $ 62,212 $(16,150) $272,451
COSTS AND EXPENSES:
Operating expenses................ 11 203,002 11 55,420 (15,933) 242,511
Depreciation and amortization..... -- 5,935 5,669 1,603 (77) 13,130
Interest expense.................. 12,617 17,454 6,962 840 (19,128) 18,745
---------- ------------ ---------- ------------ ------------ ----------
TOTAL COSTS AND EXPENSES............ 12,628 226,391 12,642 57,863 (35,138) 274,386
INTEREST INCOME..................... 16,636 2,536 652 110 (19,128) 806
---------- ------------ ---------- ------------ ------------ ----------
INCOME (LOSS) BEFORE INCOME TAX
BENEFIT (EXPENSE), MINORITY
INTERESTS AND EXTRAORDINARY
ITEM.............................. 4,008 (11,115) 1,659 4,459 (140) (1,129)
INCOME TAX BENEFIT (EXPENSE)........ (1,363) 3,503 (564) (1,657) (294) (375)
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES, net of
income tax benefit (expense)...... -- (780) -- (321) (566) (1,667)
---------- ------------ ---------- ------------ ------------ ----------
NET INCOME (LOSS)................... $ 2,645 $ (8,392) $ 1,095 $ 2,481 $ (1,000) $ (3,171)
---------- ------------ ---------- ------------ ------------ ----------
---------- ------------ ---------- ------------ ------------ ----------
</TABLE>

F-34
<PAGE> 75

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1992
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARATOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
NET OPERATING REVENUE.......... $ -- $178,988 $ 13,649 $ 69,156 $(17,441) $ 244,352
COST AND EXPENSES:
Operating expenses........... 50 172,362 40 64,553 (17,232) 219,773
Depreciation and
amortization............... 407 4,463 7,281 1,747 (107) 13,791
Interest expense............. 11,911 12,520 6,961 1,504 (15,470) 17,426
---------- ------------ ---------- ------------ ------------ -----------
TOTAL COSTS AND EXPENSES....... 12,368 189,345 14,282 67,804 (32,809) 250,990
INTEREST INCOME................ 12,500 2,480 1,025 101 (15,470) 636
---------- ------------ ---------- ------------ ------------ -----------
INCOME (LOSS) BEFORE INCOME TAX
BENEFIT (EXPENSE), MINORITY
INTERESTS AND EXTRAORDINARY
ITEM......................... 132 (7,877) 392 1,453 (102) (6,002)
INCOME TAX BENEFIT (EXPENSE)... 607 (122) -- (54) -- 431
MINORITY INTERESTS IN INCOME OF
CONSOLIDATED SUBSIDIARIES,
net of income tax benefit
(expense).................... 75 (552) -- (79) -- (556)
---------- ------------ ---------- ------------ ------------ -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM........... 814 (8,551) 392 1,320 (102) (6,127)
EXTRAORDINARY ITEM,
net of income tax benefit
(expense).................. (503) -- -- -- -- (503)
---------- ------------ ---------- ------------ ------------ -----------
NET INCOME (LOSS).............. $ 311 $ (8,551) $ 392 $ 1,320 $ (102) $ (6,630)
---------- ------------ ---------- ------------ ------------ -----------
---------- ------------ ---------- ------------ ------------ -----------
</TABLE>

F-35
<PAGE> 76

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)

F-36
<PAGE> 77

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1992
(DOLLARS IN THOUSANDS)

F-37
<PAGE> 78

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

NOTES TO CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The subsidiaries comprising the Guarantor Subsidiaries change from year to
year due to new and/or revised agreements relating to the various subsidiaries
of the Company. As a result, the investment in subsidiaries is presented on the
cost basis.

Receivables from (payables to) affiliates include cash transfers between
entities on collection of accounts receivable and payment of accounts payable
and are included in cash flows provided by (used in) operating activities. Cash
flows from operating, financing and investing activities for each subisidary are
presented in the consolidating statements of cash flows based on that
subsidiary's designation as a guarantor or nonguarantor subsidiary at the end of
the period.

Deferred income taxes and deferred income tax benefit (expense) were
recorded in the accounts of EPIC Healthcare Group, Inc. and were not allocated
to the subsidiaries in fiscal 1993. SFAS No. 109, "Accounting for Income Taxes"
requires that the consolidated amount of current and deferred tax expense for a
group that files a consolidated tax return shall be allocated among the members
of the group when those members issue separate financial statements on a basis
consistent with SFAS No. 109. The Company adopted SFAS No. 109, including
allocation of taxes within the consolidating financial statements, effective
October 1, 1993. For fiscal 1994, deferred income tax benefit (expense) is
allocated to the subsidiaries using the effective tax rate applicable and
deferred income taxes for the subsidiaries are included in receivables from
(payables to) affiliates.

F-38
<PAGE> 79

REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS

The Board of Directors
EPIC Holdings, Inc.

We have audited the accompanying consolidated balance sheets of EPIC
Healthcare Group, Inc. and subsidiaries (a wholly-owned subsidiary of EPIC
Holdings, Inc.) as of September 30, 1993 and 1992, and the related consolidated
statements of operations, stockholder's equity (deficit), and cash flows for
each of the three years in the period ended September 30, 1993. 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.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
EPIC Healthcare Group, Inc. and subsidiaries at September 30, 1993, and 1992,
and the results of its consolidated operations and its consolidated cash flows
for each of the three years in the period ended September 30, 1993, in
conformity with generally accepted accounting principles.

ERNST & YOUNG

Dallas, Texas
December 3, 1993

F-39
<PAGE> 80

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1993 1992
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................................ $ 56,756 $ 32,641
Cash restricted for interest payment................................. 3,820 5,768
Marketable securities................................................ 47,347 10,607
Accounts receivable, net of reserves for uncompensated care of
$29,286 and $25,837............................................... 76,957 73,398
Supply inventories................................................... 20,687 20,000
Prepaid expenses and other........................................... 4,574 5,222
--------- ---------
TOTAL CURRENT ASSETS......................................... 210,141 147,636
PROPERTY AND EQUIPMENT
Land................................................................. 53,030 57,492
Buildings and improvements........................................... 476,570 451,292
Equipment............................................................ 234,656 192,367
Construction in progress............................................. 22,542 9,333
--------- ---------
786,798 710,484
Accumulated depreciation and amortization............................ (218,746) (173,789)
--------- ---------
568,052 536,695
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, net of accumulated
amortization......................................................... 52,965 48,140
OTHER ASSETS, net of accumulated amortization.......................... 33,818 38,315
--------- ---------
TOTAL ASSETS................................................. $ 864,976 $ 770,786
--------- ---------
--------- ---------
</TABLE>

See notes to consolidated financial statements.

F-40
<PAGE> 81

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

LIABILITIES AND STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1993 1992
-------- --------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt................................. $ 47,914 $ 2,330
Accounts payable..................................................... 44,610 34,809
Accrued liabilities:
Salaries and wages................................................ 36,475 33,031
Taxes other than on income........................................ 7,874 7,476
Interest.......................................................... 11,027 7,658
Group health insurance............................................ 4,902 5,656
Current reserve for professional liability risks.................. 11,000 11,000
Other............................................................. 16,253 9,011
-------- --------
TOTAL CURRENT LIABILITIES.............................................. 180,055 110,971
LONG-TERM DEBT......................................................... 512,408 470,735
DEFERRED INCOME TAXES.................................................. 5,994 8,988
RESERVE FOR PROFESSIONAL LIABILITY RISKS............................... 46,612 39,640
OTHER DEFERRED LIABILITIES............................................. 42,450 39,607
COMMITMENTS AND CONTINGENT LIABILITIES.................................
MINORITY INTERESTS..................................................... 5,472 23,494
STOCKHOLDER'S EQUITY
Common stock, $.01 par value -- Authorized: 100,000,000 shares;
Issued and outstanding: 1,000 shares.............................. -- --
Paid-in capital...................................................... 373,838 374,860
Notes receivable from EPIC ESOP...................................... (148,214) (168,929)
Retained earnings (deficit).......................................... (153,639) (128,580)
-------- --------
TOTAL STOCKHOLDER'S EQUITY............................................. 71,985 77,351
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............................. $864,976 $770,786
-------- --------
-------- --------
</TABLE>

See notes to consolidated financial statements.

F-41
<PAGE> 82

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
NET OPERATING REVENUE................................... $ 1,019,149 $ 941,266 $ 802,689
COSTS AND EXPENSES:
Salaries and wages.................................... 354,326 319,868 271,007
Employee benefits..................................... 84,615 81,365 68,434
ESOP expense.......................................... 20,715 20,714 23,076
Supplies.............................................. 121,986 116,145 99,882
Uncompensated care.................................... 80,643 69,308 59,425
Other................................................. 235,770 234,879 192,633
Depreciation and amortization......................... 57,917 53,013 49,354
Interest expense...................................... 70,934 71,000 68,266
----------- ----------- -----------
TOTAL COSTS AND EXPENSES...................... 1,026,906 966,292 832,077
INTEREST INCOME......................................... 3,627 3,822 5,405
GAIN (LOSS) ON SALE OF ASSETS........................... 3,521 (1,123) (543)
----------- ----------- -----------
LOSS BEFORE INCOME TAX BENEFIT, MINORITY INTERESTS AND
EXTRAORDINARY ITEM.................................... (609) (22,327) (24,526)
INCOME TAX BENEFIT, net................................. 243 6,258 7,603
MINORITY INTERESTS IN INCOME OF CONSOLIDATED
SUBSIDIARIES (net of income tax benefit of $106,
$1,008 and $1,063, respectively)...................... (3,394) (1,958) (2,064)
----------- ----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM.......................... (3,760) (18,027) (18,987)
EXTRAORDINARY ITEM (net of income tax benefit of $661,
$652 and $1,330, respectively......................... (21,299) (1,265) (2,581)
----------- ----------- -----------
NET LOSS...................................... $ (25,059) $ (19,292) $ (21,568)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See notes to consolidated financial statements.

F-42
<PAGE> 83

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NOTES RETAINED TOTAL
COMMON PAID-IN RECEIVABLE EARNINGS STOCKHOLDERS'
STOCK CAPITAL FROM EPIC ESOP (DEFICIT) EQUITY (DEFICIT)
------ -------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1990......... $ 245 $219,808 $ (212,738) $ (87,241) $ (79,926)
Dividends accrued and accretion of
discount on redeemable preferred
stock............................ -- (22,873) -- -- (22,873)
Principal payments received on
notes receivable from EPIC
ESOP............................. -- -- 23,095 -- 23,095
Treasury stock purchased........... (1 ) -- -- (468) (469)
Net loss........................... -- -- -- (21,568) (21,568)
------ -------- -------------- --------- ----------------
Balance at September 30, 1991...... 244 196,935 (189,643) (109,277) (101,741)
Dividends accrued and accretion of
discount on redeemable preferred
stock............................ -- (11,048) -- -- (11,048)
Principal payments received on
notes receivable from EPIC
ESOP............................. -- -- 20,714 -- 20,714
Treasury stock purchased........... -- -- -- (11) (11)
Warrant conversion................. 63 (42) -- -- 21
Contribution of redeemable
preferred stock, net of
expenses......................... -- 190,008 -- -- 190,008
Exchange of common stock in
connection with merger........... (307 ) 307 -- -- --
Dividends paid to EPIC Holdings.... -- (1,300) -- -- (1,300)
Net loss........................... -- -- -- (19,292) (19,292)
------ -------- -------------- --------- ----------------
Balance at September 30, 1992...... -- 374,860 (168,929) (128,580) 77,351
Principal payments received on
notes receivable from EPIC
ESOP............................. -- -- 20,715 -- 20,715
Dividends paid to EPIC Holdings.... -- (1,022) -- -- (1,022)
Net loss........................... -- -- -- (25,059) (25,059)
------ -------- -------------- --------- ----------------
Balance at September 30, 1993...... $ -- $373,838 $ (148,214) $(153,639) $ 71,985
------ -------- -------------- --------- ----------------
------ -------- -------------- --------- ----------------
</TABLE>

See notes to consolidated financial statements.

F-43
<PAGE> 84

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
---------------------------------
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $ (25,059) $ (19,292) $ (21,568)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 57,917 53,013 49,354
Non-cash provision for professional liability risks.... 2,641 4,131 11,291
ESOP expense........................................... 20,715 20,714 23,076
Deferred SAR Plan compensation......................... 3,249 10,805 7,137
Minority interests in income of consolidated
subsidiaries......................................... 3,499 2,966 3,127
(Gain) loss on sale of assets.......................... (3,521) 1,123 543
Non-cash interest...................................... 18,286 18,417 13,975
Extraordinary item..................................... 21,960 1,917 3,911
Deferred federal income tax benefit.................... (2,994) (8,806) (9,996)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable.................................. 6,054 (35,196) (3,043)
Supply inventories and other assets.................. 4,284 (3,162) (5,291)
Accounts payable and other liabilities............... 12,202 11,282 6,444
--------- --------- ---------
Net cash provided by operating activities......... 119,233 57,912 78,960
INVESTING ACTIVITIES
Investments in marketable securities, net................. (36,740) 5,167 (12,091)
Cash paid for acquisitions................................ (54,536) (12,269) --
Additions to property and equipment....................... (60,784) (47,850) (25,646)
Purchase of investment securities......................... -- (4,180) --
Proceeds from sales of assets............................. 25,148 190 361
Collection on note receivable............................. 9,349 -- --
Other..................................................... (5,925) (2,046) (48)
--------- --------- ---------
Net cash used in investing activities............. (123,488) (60,988) (37,424)
FINANCING ACTIVITIES
Payments on debt obligations.............................. (117,765) (1,603) (250,647)
Proceeds from long-term borrowings........................ 180,853 -- 227,868
Purchase of Senior ESOP Notes............................. (5,616) (20,293) --
Purchase of treasury stock................................ -- (11) (469)
Dividends paid to EPIC Holdings........................... (1,022) (1,300) --
Preferred stock transaction costs......................... -- (7,063) --
Proceeds of warrant conversion............................ -- 21 --
Contributions from minority interests..................... 520 1,884 556
Distributions and dividends to minority interests......... (21,110) (4,065) (4,122)
Payments of debt issue costs and other, net............... (7,490) (672) (11,294)
--------- --------- ---------
Net cash provided by (used in) financing
activities...................................... 28,370 (33,102) (38,108)
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 24,115 (36,178) 3,428
Cash and cash equivalents at beginning of year............ 32,641 68,819 65,391
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ 56,756 $ 32,641 $ 68,819
SUPPLEMENTARY INFORMATION
Cash paid during the year for interest.................... $ 52,370 $ 53,343 $ 52,987
Cash paid for income taxes................................ $ 657 $ 888 $ 666
</TABLE>

See notes to consolidated financial statements

F-44
<PAGE> 85

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

EPIC Healthcare Group, Inc. ("EPIC" or, either alone or together with its
subsidiaries, the "Company") was acquired by EPIC Holdings, Inc. ("Holdings") on
March 25, 1992, in a merger transaction (the "Merger") in which each outstanding
share of common stock of EPIC was converted into one share of Holdings common
stock. Because the Merger was between companies under common ownership, and as
EPIC is a wholly-owned subsidiary of Holdings, the recorded assets and
liabilities of EPIC have retained their historical cost basis.

Principles of Consolidation

The consolidated financial statements include the accounts of EPIC and its
subsidiaries. Intercompany accounts and transactions have been eliminated.
Minority interests represent the minority stockholders' proportionate shares of
the equity in the income (loss) of certain consolidated subsidiaries.

Cash Equivalents, Cash Restricted for Interest Payments, and Marketable
Securities

The Company considers all highly liquid investments with initial maturities
of three months or less from date of purchase to be cash equivalents. Cash
restricted for interest payments is cash deposited into a trust to pay principal
and interest required by the Class B-1, Class B-2 and Class B-3 First Priority
Mortgage Notes (the "Mortgage Notes"). Investments in marketable
interest-bearing securities are stated at cost which approximates market. The
Company has $42,694,000 in cash and marketable securities restricted for the
purpose of redeeming the remaining 15% Senior Subordinated Notes (See Note 5).

Cash equivalents, cash restricted for interest payments, and marketable
securities are subject to potential concentrations of credit risk. The Company
attempts to lessen that risk by investing only in United States Government
securities, commercial paper having at least a rating of A-1 or the equivalent,
time deposits and certificates of deposit of banks having a debt rating of at
least A, or money market funds comprised of such securities. The Company invests
in securities with maturities no longer than 180 days and limits the amount of
credit exposure to any one commercial issuer.

Accounts Receivable

Concentration of credit risk relating to accounts receivable is limited to
some extent by the diversity and number of patients and payors and the
geographic dispersion of the Company's hospitals. Accounts receivable (gross)
consists of amounts due from government programs (e.g., Medicare and Medicaid)
(53%), commercial insurance companies (16%), private pay patients (18%) and
other (including health maintenance organizations and other group insurance
programs) (13%). The Company's hospitals are located throughout the southern
United States, with the largest concentration in Texas, Oklahoma, Louisiana and
California. The Company maintains an allowance for losses (i.e., uncompensated
care or bad debt expense) based on the expected collectibility of accounts
receivable.

Supply Inventories

Supply inventories are stated at the lower of cost (first-in, first-out
method) or market.

Property and Equipment

F-45
<PAGE> 86

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and amortization is computed using the straight-line method over estimated
useful lives or the term of the lease generally ranging from 25 to 30 years for
buildings and improvements, and 3 to 10 years for equipment. Maintenance costs
and repairs are expensed as incurred.

Joint Ventures

The Company, in the ordinary course of business, enters into joint ventures
with physicians and other companies. The Company is the majority owner and
general partner of substantially all of the joint ventures and follows the
principles of consolidation for all majority-owned joint ventures. Minority
shareholders' investments and earnings in the joint ventures are recorded as
minority interests and minority interests in income of consolidated
subsidiaries, respectively. Any interest held by the Company in non-majority
owned partnerships with at least 20% ownership is accounted for using the equity
method. Any interest held by the Company in partnerships with less than 20%
ownership is accounted for using the cost method.

On February 1, 1990, the Company entered into a joint venture with
Healthtrust, Inc. - The Hospital Company ("Healthtrust") for the purpose of
operating certain hospital assets in McKinney, Texas. The Company contributed,
at net book value, a 168 bed facility to the venture and was the managing
co-general partner with a 60% equity interest in the venture. Healthtrust
contributed a 99 bed facility to the venture and was the co-general partner with
a 40% interest in the venture. The assets contributed by Healthtrust to the
joint venture, including property and equipment of $15,328,000, were recorded at
fair market value which approximated net book value. Goodwill of $2,470,000, is
being amortized over 40 years. On August 31, 1993, the Company purchased
Healthtrust's interest in the joint venture for $15,656,000, which approximated
Healthtrust's interest in the net assets of the joint venture and was recorded
as a reduction to minority interests.

Intangible Assets

The excess of the purchase price over the fair value of net assets acquired
is being amortized on a straight-line basis over periods ranging from nine to 40
years. Accumulated amortization was $9,244,000 and $6,920,000 at September 30,
1993 and 1992, respectively.

Costs incurred in obtaining long term financing are deferred and are
included in other assets. Deferred financing costs are amortized using the
effective interest method over the term of the related debt, and such
amortization is included in interest expense. Accumulated amortization of
deferred financing costs was $16,427,000 and $14,203,000 at September 30, 1993
and 1992, respectively.

The Company has purchased licenses to use various software applications.
These costs are recorded as other assets and have been amortized over two or
five year periods. Accumulated amortization of the software costs was $5,750,000
and $4,750,000 at September 30, 1993 and 1992, respectively.

Income Taxes

The Company is included in the consolidated federal income tax return of
Holdings. The Company's tax provision is determined as if the Company, along
with its subsidiaries, prepared its tax return on a separate return basis.

EPIC accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 96, "Accounting for Income Taxes."
Under the liability method specified by SFAS No. 96, deferred tax assets and/or
liabilities are determined by multiplying the difference between the financial
reporting and tax reporting bases of assets and liabilities (collectively, the
"temporary differences," see Note 6) by tax rates (determined in accordance with
enacted tax laws) that are expected to be effective when such temporary
differences reverse. EPIC's deferred tax liabilities originated from the
accounting for the

F-46
<PAGE> 87

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

acquisition from AMI (the "Acquisitions"), and reflect the estimated tax effect
of differences between book and tax bases of assets acquired and liabilities
assumed.

In February 1992, the Financial Accounting Standards Board issued SFAS No.
109, "Accounting for Income Taxes," which supersedes SFAS No. 96. Implementation
of SFAS No. 109 for the Company was required October 1, 1993. SFAS No. 109
requires that temporary differences be reflected in the same balance sheet
category as the assets and liabilities that caused the temporary differences.
Deferred tax assets, which would include tax net operating loss carryforwards,
would require the determination of a related valuation allowance, based on the
assets' expected realization. The Company has completed the analysis necessary
to determine the impact of adoption of SFAS No. 109 and it is not expected to
have a material impact on the Company's financial position or results of
operations and will not impact cash flows.

Net operating revenue

Net operating revenue is recorded based on established billing rates net of
allowances and discounts for patients covered by Medicare, Medicaid and other
contractual programs. Payments received under these programs, which are based on
either the costs of services or predetermined rates, are generally less than the
established billing rates of the Company's hospitals, and the differences are
recorded as contractual allowances and/or contracted discounts. Reserves
provided have been deducted from accounts receivable pending final audit and
appeal settlement. Contractual adjustments, contracted discounts and other
discounts amounted to $627,757,000, $576,572,000, and $482,158,000 for fiscal
1993, 1992 and 1991, respectively.

It is generally the Company's policy to attempt to collect compensation for
all services performed.

Reclassifications

Certain prior period amounts have been reclassified to conform with the
fiscal 1993 presentation.

2. ACQUISITIONS AND DIVESTITURES

On August 24, 1993, the Company entered into a 20-year lease agreement with
two ten year renewal options, with the County of Galveston, Texas for Mainland
Center Hospital, a 310-bed hospital in Texas City, Texas. The lease payment of
$27,535,000 was paid in full upon the execution of the lease, which has been
accounted for as a capital lease. The Company also purchased certain net current
assets and equipment of the hospital, which included $5,639,000 in cash, for
$17,965,000 which has been accounted for by the purchase method of accounting.
The Company also has a commitment to carry out $20,000,000 of capital
improvements over the term of the lease. The lease agreement contains a purchase
option which becomes effective on August 24, 1994. The option price ranges from
$500,000 to $851,000 over the term of the lease.

On January 6, 1993, the Company sold Westpark Community Hospital in
Hammond, Louisiana for $6,200,000. A charge of $624,000 to reflect the loss on
the sale was recorded in fiscal 1993. A charge of $800,000 to reflect the
anticipated loss on the sale was recorded in fiscal 1992. The net book value of
the assets sold before the fiscal 1992 charge, less liabilities assumed by the
buyer, was $7,624,000.

On March 15, 1993, the Company sold Valley Medical Center in El Cajon,
California for $16,950,000. A gain on the sale of $4,632,000 was recorded in
fiscal 1993. The net book value of the assets sold, less liabilities assumed by
the buyer, was $12,318,000.

3. EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")

Employee-owners of EPIC have beneficial ownership of approximately 60% of
the Holdings Common Stock through their participation in the EPIC ESOP.

F-47
<PAGE> 88

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At the Company's inception, the EPIC ESOP purchased 24,500,000 shares of
the EPIC Common Stock with the proceeds obtained from the issuance of loans
aggregating $245 million payable to the Company. The terms of the original ESOP
loan agreement segregated the EPIC ESOP's obligation to the Company into two
components, the terms of the first of which mirrored the terms of the Senior
ESOP Bank Debt (the "First ESOP Loan") and the second of which mirrored the
terms of the Senior ESOP Notes (see Note 5). Concurrent with the issuance of the
Mortgage Notes (see Note 5), the First ESOP Loan was replaced by a loan
agreement which provides for mandatory principal payments in amounts that are
substantially in conformance with the remaining mandatory principal payments of
the Senior ESOP Bank Debt as if the issuance of the Mortgage Notes had not
occurred (the "New ESOP Loan"). The interest rate on the New ESOP Loan is
determined quarterly based on .85 times the sum of the London InterBank Offered
Rates plus 2.5% (5.1% at September 30, 1993). The EPIC ESOP has pledged all of
its shares of the Holdings Common Stock as collateral for the ESOP-related
borrowings. These shares are released from the pledge as the loans are paid. The
EPIC ESOP receives contributions from the Company to service and extinguish the
loans.

The EPIC ESOP is an individual account, defined contribution plan. Nonunion
employee-owners who work a specified number of hours are eligible to participate
in the EPIC ESOP if they have attained age 21 and completed one year of service.
No employee-owner contributions are required or permitted to be made to the EPIC
ESOP. No rollover contributions are permitted to be made to the EPIC ESOP.
Allocations are made to participants' accounts in an amount which reflects each
participant's proportionate share of the contributions made by the Company to
the EPIC ESOP, as determined on the basis of each participant's compensation.
Contributions made to the EPIC ESOP and the value of shares of common stock
allocated to the account of a participant as a result of such contributions are
intended to be treated as tax-deferred contributions. Such contributions, and
earnings thereon, generally are includable in a participant's compensation for
federal income tax purposes when distributed.

Subject to limitations contained in the Internal Revenue Code of 1986, as
amended (the "Code"), Holdings is entitled to claim an income tax deduction for
contributions to the EPIC ESOP. The Company has received a favorable
determination from the Internal Revenue Service that the EPIC ESOP is qualified
as an "employee stock ownership plan" within the meaning of Section 4975(e)(7)
of the Code. Contributions to the EPIC ESOP are used by the EPIC ESOP to pay
interest and principal on the loans owed to the Company. The Company uses
payments from the EPIC ESOP to pay interest and principal on the Class B-1 First
Priority Mortgage Notes and the Senior ESOP Notes.

The Company recorded net ESOP expense, using the cash method, and
corresponding reductions in the EPIC ESOP notes receivable, of $20,715,000,
$20,714,000, and $23,076,000 for fiscal 1993, 1992 and 1991, respectively.
Interest income recognized on the EPIC ESOP notes receivable totaled
$14,984,000, $16,885,000, and $20,483,000 for fiscal 1993, 1992 and 1991,
respectively, which in turn was contributed to the EPIC ESOP to pay interest
expense incurred on the ESOP-related debt. Interest expense incurred on ESOP-
related debt totaled $20,856,000, $21,734,000, and $21,731,000 which included
discount amortization of $559,000, $551,000, and $511,000 for fiscal 1993, 1992
and 1991, respectively.

F-48
<PAGE> 89

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. OPERATING LEASES

The Company leases office space, office equipment and medical equipment.
Generally, real estate leases are for primary terms of from one to 12 years with
options to renew for additional periods, and equipment leases are for terms of
from one to seven years. Future minimum lease payments for all operating leases
having initial or remaining noncancellable lease terms in excess of one year as
of September 30, 1993 are as follows (dollars in thousands):

<TABLE>
<S> <C>
1994....................................................................... $ 4,560
1995....................................................................... 4,225
1996....................................................................... 3,337
1997....................................................................... 2,693
1998....................................................................... 1,835
1999 and thereafter........................................................ 3,485
-------
20,135
Sublease income............................................................ (1,116)
-------
$19,019
-------
-------
</TABLE>

Rent expense under operating leases was as follows (dollars in thousands):

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
---------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Minimum rent.............................................. $18,496 $16,107 $13,609
Sublease income........................................... (795) (609) (317)
------- ------- -------
$17,701 $15,498 $13,292
------- ------- -------
------- ------- -------
</TABLE>

F-49
<PAGE> 90

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT

The Company's long-term debt, net of discounts, is summarized below
(dollars in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1993 1992
--------- ---------
<S> <C> <C>
11.375% Class B-1 First Priority Mortgage Notes payable in
semi-annual payments of $9,000 commencing in July 1996 with
a final payment of $10,000 in July 2001.................... $ 99,579 $ 99,500
11.5% Class B-2 First Priority Mortgage Notes payable in
semi-annual payments of $500 through July 1994, increasing
to $750 in January 1995, to $1,500 in January 1997, to
$8,000 in January 1998, to $9,000 in January 1999, with a
final payment of $15,500 in July 2001...................... 83,112 84,046
Class B-3 First Priority Mortgage Notes payable in
semi-annual payments of $750 commencing in January 1995,
increasing to $3,000 in January 1997 through July 1998,
with a fluctuating interest rate (6.5% at September 30,
1993)...................................................... 15,000 15,000
Other mortgage debt and capital lease obligations with
varying maturities and interest rates ranging from 4.75% to
12.9%...................................................... 20,651 20,351
Acquisition Loan, payable in quarterly installments of $1,250
commencing in October, 1993 with a fluctuating interest
rate (8.0% at September 30, 1993).......................... 19,542 --
Zero Coupon Notes, principal of $89,313 due 2001 with an
effective interest rate of 14.8%........................... 28,564 24,770
Additional Zero Coupon Notes, principal of $7,079 due 2001
with an effective interest rate of 14.8%................... 2,265 1,964
11.875% Senior ESOP Notes payable in three equal annual
payments commencing in September 1996 with an effective
interest rate of 13.03%.................................... 72,141 76,840
10.875% Senior Subordinated Notes due 2003................... 160,000 --
15% Senior Subordinated Notes payable in three equal annual
payments commencing in 1999................................ 40,320 104,852
11% Junior Subordinated Pay-In-Kind Notes payable in three
equal annual payments commencing in September 2001......... 19,148 45,742
--------- ---------
560,322 473,065
Current maturities........................................... (47,914) (2,330)
--------- ---------
$ 512,408 $ 470,735
--------- ---------
--------- ---------
</TABLE>

The Mortgage Notes are the indebtedness of EPIC Properties, Inc. ("EPIC
Properties"), an indirect wholly-owned subsidiary of EPIC. The Mortgage Notes
are secured by mortgages on 24 acute care hospital complexes (the "Mortgaged
Hospitals") and the land on which such buildings are located, and by a first
priority security interest in certain furnishings and equipment located at each
of the Mortgaged Hospitals. The Mortgage Notes are fully and unconditionally
guaranteed by EPIC (see Note 17).

F-50
<PAGE> 91

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company incurred losses on refinancing concurrent with the issuance of
the Mortgage Notes due primarily to the write-off of loan issue costs. These
losses, totalling $3,911,000, are recorded as an extraordinary item (net of
income tax benefit of $1,330,000) in the consolidated statement of operations
for the fiscal year ended September 30, 1991.

The Zero Coupon Notes are reflected at their fair value of $14,008,000, as
estimated by the Company at September 30, 1988, plus accretion of discount
through September 30, 1993. No interest or principal is payable until maturity.

Additional Zero Coupon Notes were issued under an interest rate cap
agreement with AMI (see Note 12) and are reflected at their original fair value
plus accretion of discount through September 30, 1993. No interest or principal
is payable until maturity.

A subsidiary of EPIC purchased $5,400,000 and $19,850,000 face value of the
11.875% Senior ESOP Notes on the open market for $5,616,000 and $20,293,000 plus
accrued interest in fiscal 1993 and 1992, respectively (the "Senior ESOP Note
Purchases"). Losses of $570,000 and $1,917,000 due to the write-off of debt
issue costs and unamortized discounts and the payment of a premium on the Senior
ESOP Note Purchases are recorded as extraordinary items (net of income tax
benefit of $17,000 and $652,000, respectively) in the consolidated statements of
operations for the fiscal years ended September 30, 1993 and 1992, respectively.

The 11.875% Senior ESOP Notes, which carry detachable stock purchase
warrants (see Note 9), have a stated principal amount of $100,000,000 and are
reflected at their fair value of $93,988,000, as estimated by the Company at
September 30, 1988, less the Senior ESOP Note Purchases, plus accretion of
discount through September 30, 1993.

On June 18, 1993, the Company refinanced $74,680,000 in principal of the
15% Senior Subordinated Notes and $53,697,000 in principal of the 11% Junior
Subordinated Pay-In-Kind Notes (the "Refinancing") through the issuance of the
10.875% Senior Subordinated Notes. The 10.875% Senior Subordinated Notes are
guaranteed by certain subsidiaries of the Company (see Note 17).

Under the terms of the Second Amended and Restated Credit Agreement dated
as of September 30, 1988, and amended and restated as of July 30, 1991, and
September 1, 1993 (the "Amended Credit Agreement"), the Company is required to
call the remaining $40,320,000 in principal of the 15% Senior Subordinated Notes
by February 28, 1994, with the remaining proceeds of the Refinancing. The
remaining principal of the 15% Senior Subordinated Notes at September 30, 1993,
has been recorded as current maturities of long term debt in the consolidated
balance sheets.

The Company incurred a loss before taxes of $21,390,000 on the Refinancing,
which resulted from the write-off of loan issue costs and unamortized discount
on the 15% Senior Subordinated Notes and the redeemed portion of the 11% Junior
Subordinated Pay-In-Kind Notes, payments to the holders of the 15% Senior
Subordinated Notes and the 11.875% Senior ESOP Notes for waivers of certain
provisions of the respective indentures and the accrual of the call premium to
be paid on redeeming the remaining principal on the 15% Senior Subordinated
Notes. These losses are recorded as an extraordinary item (net of income tax
benefit of $644,000) in the consolidated statements of operations.

The 15% Senior Subordinated Notes are guaranteed by certain wholly-owned
subsidiaries of the Company (see Note 17) and are secured by a fourth pledge of
the common stock of such subsidiaries.

Interest on the 11% Junior Subordinated Pay-in-Kind Notes is payable
semi-annually by the issuance of additional 11% Junior Subordinated Pay-in-Kind
Notes through September 30, 1995, and thereafter, if the Company is prohibited
from making cash interest payments by the terms of any senior debt existing on
September 30, 1988, less the amount retired in the Refinancing. The notes, which
have a stated principal amount of $50,000,000, have been recorded at their fair
value estimated by the Company at September 30,

F-51
<PAGE> 92

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1988, of $22,900,000 plus accretion of discount through September 30, 1993, less
the amount retired as a result of the Refinancing. The effective interest rate
for these notes is 18.07%.

The Amended Credit Agreement provides the Company with revolving loan
commitments and an acquisition loan to be used for working capital and
acquisition funds for the Company. As of September 30, 1993, revolving loan
commitments aggregated $30 million. Any revolving loan commitments outstanding
are due July 31, 1997. Interest is generally payable monthly at the following
rates per annum, at the Company's option: (i) 1.5% in excess of the higher of
the prime rate in effect from time to time or the annual yield on ninety-day
commercial paper or (ii) 2.5% in excess of the LIBOR rate. There were no
revolving loans outstanding as of September 30, 1993, and 1992, respectively.
The acquisition term loan principal amount outstanding is payable in quarterly
installments commencing on October 31, 1993 through July 31, 1997. Interest is
generally payable quarterly at the following rates per annum, at the Company's
option: (i) 2.0% in excess of the higher of the prime rate in effect from time
to time or the annual yield on ninety-day commercial paper or (ii) 3.0% in
excess of the LIBOR rate.

In connection with the issuance of the Mortgage Notes, EPIC Properties
obtained a revolving line of credit. The line of credit can only be used for the
purpose of paying interest or principal on the Mortgage Notes. The maximum loan
amount available is the lesser of $22 million or the annual interest accrual of
the Mortgage Notes. The line of credit bears an interest rate of the Prime
Lending Rate of AmSouth Bank plus 2%. There were no loans outstanding under the
line of credit as of September 30, 1993, and 1992, respectively.

As of September 30, 1993, the maturities of long-term debt were as follows
(dollars in thousands):

<TABLE>
<S> <C>
1994..................................................................... $ 47,914
1995..................................................................... 9,498
1996..................................................................... 43,545
1997..................................................................... 58,546
1998..................................................................... 67,207
1999 and thereafter...................................................... 421,160
---------
647,870
Unamortized discounts and unaccreted interest............................ (87,548)
---------
$ 560,322
---------
---------
</TABLE>

6. INCOME TAXES

Subsequent to the Merger, the Company files a consolidated federal income
tax return with Holdings. The Company's income tax benefit for fiscal 1993, 1992
and 1991 was comprised of deferred federal benefits of $2,994,000, $8,806,000
and $9,996,000, respectively, arising from reported financial losses and state
income tax expense of $1,984,000 and $888,000 in fiscal 1993 and 1992,
respectively. For financial reporting purposes, Holdings has utilized
substantially all of its deferred federal tax liability and has limited the
benefit recognized for the current net operating loss pursuant to the provisions
of SFAS No. 96. Taxes paid during 1993 and 1992 primarily relate to state income
taxes and estimated federal tax payments.

F-52
<PAGE> 93

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's consolidated effective federal tax rate differed from the
federal statutory rate as set forth in the following table:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30
---------------------------
1993 1992 1991
-------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Tax benefit computed at federal statutory rate (34%)...... $ 9,538 $9,553 $10,732
Amortization of excess purchase price over net assets
acquired................................................ (790) (614) (601)
Losses not subject to benefit............................. (5,611) -- --
Other, net................................................ (143) (133) (135)
-------- ------ -------
Deferred income tax benefit............................... $ 2,994 $8,806 $ 9,996
-------- ------ -------
-------- ------ -------
</TABLE>

The deferred income tax benefit results from the following temporary
differences in reporting for financial and income tax purposes:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
------------------------------
1993 1992 1991
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Book/tax difference on sale of assets.................. $ 3,835 $ -- $ --
Book/tax depreciation differences...................... 475 221 (3,392)
Net operating (benefit) loss recognized currently for
financial reporting.................................. (3,508) (1,582) 6,134
SAR compensation not currently deductible.............. 968 3,673 2,426
Professional liability reserves not currently
deductible........................................... 383 1,013 4,345
Other reserves for estimated losses and contingencies
not currently deductible............................. 1,348 2,217 508
Paid time off accrued for financial reporting, not
currently deductible................................. 339 719 89
Difference arising from ESOP loan fees initially
expensed for tax purposes but capitalized and
amortized for financial reporting purposes........... 197 427 (480)
Difference in methods used to reserve for bad debts.... 802 1,014 55
Difference in ESOP contribution deduction.............. (162) 207 (1,317)
Difference in methods for reporting interest........... 1,553 562 694
Losses not subject to benefit.......................... (5,611) -- --
Other.................................................. 2,375 335 934
-------- ------- -------
Deferred income tax benefit............................ $ 2,994 $ 8,806 $ 9,996
-------- ------- -------
-------- ------- -------
</TABLE>

7. DEFERRED COMPENSATION

The Company has adopted a deferred compensation plan (the "SAR Plan") as
part of its overall executive compensation program to attract, motivate and
retain key employee-owners. As of September 30, 1993, 5,873,582 SAR Plan units,
each exchangeable for one share of Holdings Common Stock or redeemable for cash
or other property under certain circumstances, were held by certain key
employee-owners and former employee-owners. During fiscal 1993, 1992 and 1991,
309,500, 1,481,065, and 1,002,000 SAR Plan units were granted and 427,800,
218,000, and 243,000 SAR Plan units were cancelled, respectively. The
outstanding SAR Plan units vest in varying amounts at varying periods not
exceeding five years beginning on each respective grant date. A maximum of
6,587,565 SAR Plan units, reduced by all units redeemed, may be

F-53
<PAGE> 94

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

outstanding at any time. During fiscal 1993, 1992 and 1991, the Company accrued
SAR Plan compensation expense of $4,249,000, $11,805,000, and $8,135,000,
respectively.

During fiscal 1992, 129,998 SAR Plan units were redeemed for $974,985 in
cash ($7.50 per unit) and 3,164 SAR Plan units were redeemed for $24,996 in cash
($7.90 per unit).

8. COMMON STOCK OPTIONS

On December 14, 1988, the Company adopted the EPIC Healthcare Group, Inc.
Stock Option Plan (the "Stock Option Plan"). Under the Stock Option Plan, the
Board of Directors is authorized to grant options to EPIC directors, officers
and salaried employee-owners to purchase up to 500,000 shares of Holdings Common
Stock. Options granted vest in five equal annual installments. No options were
granted during fiscal 1993, 1992 or 1991. At September 30, 1993, options for
32,000 shares were exercisable.

9. COMMON STOCK AND COMMON STOCK WARRANTS

The Company sold 24,500,000 shares of EPIC Common Stock to the EPIC ESOP on
September 30, 1988. Since that time through the Merger, 69,445 shares were
distributed to participants in the EPIC ESOP, of which 66,684 shares were
repurchased by the Company. In addition, immediately prior to the Merger,
6,306,395 of warrants outstanding were exercised for 63,064 shares of EPIC
Common Stock. Pursuant to the Merger, each share of EPIC Common Stock was
converted to Holdings Common Stock and the Company issued 1,000 shares of EPIC
Common Stock to Holdings.

10. LOSS PER COMMON SHARE

Because EPIC is a wholly-owned subsidiary of Holdings, loss per common
share is not meaningful and, therefore, is not presented.

11. PROFESSIONAL AND GENERAL LIABILITY RISKS

The Company is self-insured for its professional and general liability
risks. As of September 30, 1993, the unfunded reserve for this self insurance
was $45,130,000 of which $11,000,000 was included in current liabilities. The
Company has funded $12,482,000 of the reserves through a wholly-owned captive
insurance company at September 30, 1993. The reserves for losses and related
expenses are discounted to their present value based on expected loss reporting
patterns determined by independent actuaries using a rate of 9%. AMI has
retained the liability for all professional liability claims with a date of
occurrence prior to October 1, 1988.

12. RELATED PARTY TRANSACTIONS

F-54
<PAGE> 95

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pursuant to the terms of the Senior Interest Cap Agreement, EPIC issued
Additional Zero Coupon Notes to AMI in the principal amounts of $1,612,000 and
$2,844,000 during fiscal 1990 and 1989, respectively, in exchange for cash of a
like amount paid to EPIC by AMI during such years. In fiscal 1991, EPIC paid to
AMI $2,864,000 and issued Additional Zero Coupon Notes to AMI with a present
value of $626,000 in exchange for the cancellation of the Zero Coupon Notes
issued in 1989. AMI has sold their interest in the Additional Zero Coupon Notes.
Net interest expense of $839,000 was recognized during fiscal 1991 relating to
this agreement.

The Company and AMI have entered into certain other agreements, including a
registration rights agreement pursuant to which EPIC has agreed to register the
securities issued to AMI under the Securities Act of 1933. AMI has also agreed
to indemnify the Company against certain liabilities associated with the breach
of representations and warrants made by AMI, certain tax liabilities that may
arise, certain reimbursements still pending related to the Acquisitions, and
certain fees, costs, and expenses.

The Company entered into a three year group purchasing agreement, effective
September 1, 1993, with a subsidiary of AMI, which allows the Company to
purchase supplies at lower group rates. The Company expects to purchase more
than $30,000,000 per year of supplies under the terms of the agreement. The
Company will pay $180,000 per year to participate in this program.

The Company has a consulting agreement with The Elder Group, of which
Thomas H. Elder, who formerly served as the Company's Management Services
Officer, is the Managing Principal. The Company paid The Elder Group
approximately $1,300,000 and $1,000,000 in fiscal 1992 and 1991, respectively.

The Company has an investment in the preferred stock of the Compucare
Company ("Compucare"), who is developing and installing one of the Company's new
information systems. The chief executive officer of the Company is on the board
of directors of Compucare. Payments to Compucare for fiscal 1993 totalled
$5,651,000.

13. FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. SFAS No. 107 excluded certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company. The following methods and assumptions were used
by the Company in estimating its fair value disclosures for financial
instruments.

F-55
<PAGE> 96

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cash Equivalents, Cash Restricted for Interest Payments, and Marketable
Securities

Long-Term Debt (Including Current Maturities)

The fair values of the Company's long-term debt, except the Class B-1 and
B-2 First Priority Mortgage Notes, are estimated using quoted market prices or
the call price. The fair values of the Class B-1 and B-2 First Priority Mortgage
Notes are estimated using discounted cash flow analysis, based on the Company's
incremental borrowing rate for similar types of borrowing arrangements.

The carrying amounts and estimated fair values of the Company's financial
instruments at September 30, 1993 are as follows (in thousands):

<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Cash equivalents, cash restricted for interest payments, and
marketable securities.......................................... $107,923 $107,923
Long-term debt................................................... 560,322 605,131
</TABLE>

14. EXTRAORDINARY ITEMS

Extraordinary items of $21,299,000 ($21,960,000, net of income tax benefit
of $661,000) in 1993, $1,265,000 ($1,917,000, net of income tax benefit of
$652,000) in 1992 and $2,581,000 ($3,911,000, net of income tax benefit of
$1,330,000) in 1991 were primarily due to the write-offs of loan issue costs and
unamortized discounts on retirements of long-term debt (see Note 5).

15. SUPPLEMENTARY INCOME STATEMENT INFORMATION

Maintenance and repair expense was $17,101,000, $17,564,000, and
$16,159,000 for fiscal 1993, 1992 and 1991, respectively.

16. CONTINGENCIES

The Company is currently, and from time to time expects to be, subject to
claims and suits arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of such matters will not have a material
effect on the Company's results of operations, financial position, or liquidity.
Pursuant to the terms of the Acquisitions, claims relating to litigation,
medical benefits, and workers' compensation occurring prior to October 1, 1988,
remain the obligation of AMI.

17. GUARANTOR SUBSIDIARIES

Certain subsidiaries of EPIC (the "Guarantor Subsidiaries") guarantee the
loans under the Amended Credit Agreement, Zero Coupon Notes, Additional Zero
Coupon Notes, 11.875% Senior ESOP Notes, 10.875% Senior Subordinated Notes, 15%
Senior Subordinated Notes and 11% Junior Subordinated Pay-In-Kind Notes. Certain
other subsidiaries, including EPIC Properties, are not Guarantor Subsidiaries
(the "Nonguarantor Subsidiaries") (see Note 5). All equity interests in the
Nonguarantor Subsidiaries, other than those held by minority interests, are held
by EPIC.

F-56
<PAGE> 97

Following is condensed consolidating financial information of EPIC, the
Guarantor Subsidiaries, EPIC Properties and the other Nonguarantor Subsidiaries:

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1993
(DOLLARS IN THOUSANDS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ASSETS

<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............... $ 8,944 $ 40,846 $ 2,062 $ 4,904 $ -- $ 56,756
Cash restricted for interest payment.... -- -- 3,820 -- -- 3,820
Marketable securities................... -- 35,972 -- 11,375 -- 47,347
Accounts receivable, net................ 474 56,000 1,071 21,321 (1,909) 76,957
Supply inventories...................... -- 16,589 -- 4,098 -- 20,687
Prepaid expenses and other.............. 777 2,714 -- 1,083 -- 4,574
Receivables from affiliates............. 156,437 29,013 -- 13,663 (199,113) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT ASSETS.............. 166,632 181,134 6,953 56,444 (201,022) 210,141
---------- ------------ ---------- ------------ ------------ ------------
PROPERTY AND EQUIPMENT.................... -- 264,044 444,673 78,081 -- 786,798
ACCUMULATED DEPRECIATION AND
AMORTIZATION............................ -- (50,548) (140,665) (27,533) -- (218,746)
---------- ------------ ---------- ------------ ------------ ------------
-- 213,496 304,008 50,548 -- 568,052
---------- ------------ ---------- ------------ ------------ ------------
INVESTMENTS IN SUBSIDIARIES............... 64,684 109,474 -- -- (174,158) --
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net........................... -- 38,577 -- 14,388 -- 52,965
OTHER ASSETS, net......................... 12,440 89,314 936 2,529 (71,401) 33,818
RECEIVABLES FROM AFFILIATES............... 297,673 -- -- -- (297,673) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL ASSETS...................... $ 541,429 $631,995 $ 311,897 $123,909 $ (744,254) $ 864,976
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt.... $ 45,333 $ 643 $ 1,020 $ 918 $ -- $ 47,914
Accounts payable........................ 236 39,225 (65) 5,450 (236) 44,610
Accrued liabilities..................... 9,294 64,070 5,624 10,216 (1,673) 87,531
Payables to affiliates.................. -- 164,963 -- 34,150 (199,113) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT LIABILITIES......... 54,863 268,901 6,579 50,734 (201,022) 180,055
---------- ------------ ---------- ------------ ------------ ------------
LONG-TERM DEBT............................ 321,895 8,948 241,927 11,039 (71,401) 512,408
DEFERRED INCOME TAXES..................... 5,994 -- -- -- -- 5,994
RESERVE FOR PROFESSIONAL LIABILITY
RISKS................................... -- 34,053 -- 11,206 1,353 46,612
OTHER DEFERRED LIABILITIES................ -- 41,258 -- 1,192 -- 42,450
MINORITY INTERESTS........................ -- 4,947 -- 525 -- 5,472
PAYABLES TO AFFILIATES.................... -- 297,673 -- -- (297,673) --
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock............................ -- -- 1 -- (1) --
Paid-in capital......................... 373,838 61,855 111,604 5,434 (178,893) 373,838
Notes receivable from EPIC ESOP......... (100,000 ) -- (48,214) -- -- (148,214)
Retained earnings (deficit)............. (115,161 ) (85,640) -- 43,779 3,383 (153,639)
---------- ------------ ---------- ------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT)....................... 158,677 (23,785) 63,391 49,213 (175,511) 71,985
---------- ------------ ---------- ------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)....................... $ 541,429 $631,995 $ 311,897 $123,909 $ (744,254) $ 864,976
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>

F-57
<PAGE> 98

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1992
(DOLLARS IN THOUSANDS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ASSETS

<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents.............. $ 86 $ 22,381 $ 4,506 $ 5,668 $ -- $ 32,641
Cash restricted for interest payment... -- -- 5,768 -- -- 5,768
Marketable securities.................. -- 4,468 -- 6,139 -- 10,607
Accounts receivable, net............... 352 35,530 1,455 38,601 (2,540) 73,398
Supply inventories..................... -- 15,345 -- 4,655 -- 20,000
Prepaid expenses and other............. 240 8,447 259 826 (4,550) 5,222
Receivables from affiliates............ 132,015 26,543 -- 12,023 (170,581) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT ASSETS............. 132,693 112,714 11,988 67,912 (177,671) 147,636
---------- ------------ ---------- ------------ ------------ ------------
PROPERTY AND EQUIPMENT................... -- 185,431 450,259 74,794 -- 710,484
ACCUMULATED DEPRECIATION AND
AMORTIZATION........................... -- (34,377) (116,355 ) (23,057) -- (173,789)
---------- ------------ ---------- ------------ ------------ ------------
-- 151,054 333,904 51,737 -- 536,695
---------- ------------ ---------- ------------ ------------ ------------
INVESTMENTS IN SUBSIDIARIES.............. 66,219 146,521 -- 11,502 (224,242) --
EXCESS OF PURCHASE PRICE OVER NET ASSETS
ACQUIRED, net.......................... -- 35,576 -- 12,564 -- 48,140
OTHER ASSETS, net........................ 21,387 77,466 1,102 4,362 (66,002) 38,315
RECEIVABLES FROM AFFILIATES.............. 229,544 12,113 -- -- (241,657) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL ASSETS..................... $ 449,843 $535,444 $ 346,994 $148,077 $ (709,572) $ 770,786
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt... $ -- $ 597 $ 1,018 $ 715 $ -- $ 2,330
Accounts payable....................... -- 29,440 260 5,350 (241) 34,809
Accrued liabilities.................... 4,323 53,190 10,016 13,152 (6,849) 73,832
Payables to affiliates................. -- 140,007 -- 30,574 (170,581) --
---------- ------------ ---------- ------------ ------------ ------------
TOTAL CURRENT LIABILITIES........ 4,323 223,234 11,294 49,791 (177,671) 110,971
---------- ------------ ---------- ------------ ------------ ------------
LONG-TERM DEBT........................... 274,018 9,363 242,803 10,553 (66,002) 470,735
DEFERRED INCOME TAXES.................... 8,988 -- -- -- -- 8,988
RESERVE FOR PROFESSIONAL LIABILITY
RISKS.................................. -- 32,095 -- 6,749 796 39,640
OTHER DEFERRED LIABILITIES............... -- 37,492 -- 2,115 -- 39,607
MINORITY INTERESTS....................... -- 3,847 -- 19,647 23,494 --
PAYABLES TO AFFILIATES................... -- 199,942 -- 41,715 (241,657) --
STOCKHOLDER'S EQUITY (DEFICIT)
Common stock........................... -- -- 1 -- (1) --
Paid-in capital........................ 374,860 51,853 159,351 13,037 (224,241) 374,860
Notes receivable from EPIC ESOP........ (100,000 ) -- (68,929 ) -- -- (168,929)
Retained earnings (deficit)............ (112,346 ) (22,382) 2,474 4,470 (796) (128,580)
---------- ------------ ---------- ------------ ------------ ------------
TOTAL STOCKHOLDER'S EQUITY
(DEFICIT)...................... 162,514 29,471 92,897 17,507 (225,038) 77,351
---------- ------------ ---------- ------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY
(DEFICIT)...................... $ 449,843 $535,444 $ 346,994 $148,077 $ (709,572) $ 770,786
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>

F-58
<PAGE> 99

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1993
(DOLLARS IN THOUSANDS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

F-59
<PAGE> 100

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1992
(DOLLARS IN THOUSANDS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

F-60
<PAGE> 101

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1991
(DOLLARS IN THOUSANDS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

F-61
<PAGE> 102

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1993
(DOLLARS IN THOUSANDS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................. $ (46,950 ) $125,482 $ 28,428 $ 12,273 $ -- $119,233
INVESTING ACTIVITIES
Investments in marketable securities,
net.................................. -- (31,504) -- (5,236) -- (36,740)
Cash paid for acquisitions............. -- (50,835) -- (3,701) -- (54,536)
Additions to property and equipment.... -- (57,957) (6,432) (2,827) 6,432 (60,784)
Proceeds from sale of assets........... -- 31,580 -- -- (6,432) 25,148
Collection on note receivable.......... -- 9,349 -- -- -- 9,349
Principal collected on note receivable
from EPIC ESOP....................... -- -- 20,715 -- (20,715) --
Other.................................. -- (5,925) -- -- -- (5,925)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
investing activities................. -- (105,292) 14,283 (11,764) (20,715) (123,488)
FINANCING ACTIVITIES
Payments on debt obligations........... (115,180 ) (498) (1,018) (1,069) -- (117,765)
Proceeds from long-term borrowings..... 179,500 1,353 -- -- -- 180,853
Purchase of Senior ESOP Notes.......... -- (5,616) -- -- -- (5,616)
Dividends paid to EPIC Holdings........ (1,022 ) -- -- -- -- (1,022)
Contribution to EPIC ESOP.............. -- (20,715) -- -- 20,715 --
Dividends and capital distributions
received from EPIC Properties........ -- 44,137 -- -- (44,137) --
Dividends and capital distributions
paid by EPIC Properties.............. -- -- (44,137) -- 44,137 --
Contributions from minority
interests............................ -- 520 -- -- -- 520
Distributions and dividends to minority
interests............................ -- (20,906) -- (204) -- (21,110)
Payment of debt issue costs and other,
net.................................. (7,490 ) -- -- -- -- (7,490)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities................. 55,808 (1,725) (45,155) (1,273) 20,715 28,370
---------- ------------ ---------- ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 8,858 18,465 (2,444) (764) -- 24,115
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR................................... 86 22,381 4,506 5,668 -- 32,641
---------- ------------ ---------- ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................... $ 8,944 $ 40,846 $ 2,062 $ 4,904 $ -- $ 56,756
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>

F-62
<PAGE> 103

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1992
(DOLLARS IN THOUSANDS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
EPIC
EPIC HEALTHCARE
HEALTHCARE OTHER GROUP, INC.
GROUP, GUARANTOR EPIC NONGUARANTOR AND
INC. SUBSIDIARIES PROPERTIES SUBSIDIARIES ELIMINATIONS SUBSIDIARIES
---------- ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities............................. $ 9,427 $ (3,682) $ 34,846 $ 17,321 $ -- $ 57,912
INVESTING ACTIVITIES
Investments in marketable securities,
net.................................. -- 11,306 -- (6,139) -- 5,167
Cash paid for acquisitions............. -- (9,903) -- (2,366) -- (12,269)
Additions to property and equipment.... -- (31,503) (9,764) (6,583) -- (47,850)
Purchase of investment securities...... (4,180) -- -- -- -- (4,180)
Principal collected on note receivable
from EPIC ESOP....................... -- -- 20,714 -- (20,714) --
Other.................................. 612 (2,704) 236 -- -- (1,856)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
investing activities................. (3,568) (32,804) 11,186 (15,088) (20,714) (60,988)
FINANCING ACTIVITIES
Payments on debt obligations........... -- (76) (516) (1,011) -- (1,603)
Purchase of Senior ESOP Notes.......... -- (20,293) -- -- -- (20,293)
Contribution to EPIC ESOP.............. -- (20,714) -- -- 20,714 --
Dividends paid to EPIC Holdings........ (1,300) -- -- -- -- (1,300)
Dividends and capital distributions
received from EPIC Properties........ -- 54,519 -- 2,844 (57,363) --
Dividends and capital distributions
paid by EPIC Properties.............. -- -- (57,363) -- 57,363 --
Preferred stock transaction costs...... (7,063) -- -- -- -- (7,063)
Contributions from minority
interests............................ -- -- -- 1,884 -- 1,884
Distributions and dividends to minority
interests............................ -- (335) -- (3,730) -- (4,065)
Contribution to subsidiary............. (1,500) -- -- -- 1,500 --
Issuance of capital stock by
subsidiary........................... -- -- -- 1,500 (1,500) --
Payment of debt issue costs and other,
net.................................. (294) (236) (132) -- -- (662)
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in)
financing activities................. (10,157) 12,865 (58,011) 1,487 20,714 (33,102)
---------- ------------ ---------- ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ (4,298) (23,621) (11,979) 3,720 -- (36,178)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR................................... 4,384 46,002 16,485 1,948 -- 68,819
---------- ------------ ---------- ------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................... $ 86 $ 22,381 $ 4,506 $ 5,668 $ -- $ 32,641
---------- ------------ ---------- ------------ ------------ ------------
---------- ------------ ---------- ------------ ------------ ------------
</TABLE>

F-63
<PAGE> 104

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1991
(DOLLARS IN THOUSANDS)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

F-64
<PAGE> 105

EPIC HEALTHCARE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Intercompany receivables/payables relate to cash transfers between entities
on collection of accounts receivable and payment of accounts payable and are
included in cash flows provided by (used in) operating activities. Cash flows
from operating, financing, and investing activities for each subsidiary are
presented in the consolidating statement of cash flows based on that
subsidiary's designation as a guarantor or nonguarantor subsidiary at the end of
the period.

Deferred income taxes and deferred income tax benefit are recorded in the
accounts of EPIC Healthcare Group, Inc. and are not allocated to the
subsidiaries. SFAS No. 109, "Accounting for Income Taxes," requires that the
consolidated amount of current and deferred tax expense for a group that files a
consolidated tax return shall be allocated among the members of the group when
those members issue separate financial statements on a basis consistent with
SFAS No. 109. The Company will adopt SFAS No. 109, including allocation of taxes
within the consolidating financial statements, effective October 1, 1993.

Certain prior period amounts have been reclassified or restated for
intercompany transactions to conform with the fiscal 1993 presentation. In
addition, certain amounts have been reclassified for a change made in the fourth
quarter of 1992 in the method of allocating interest income from the EPIC ESOP
for intercompany purposes.

F-65
<PAGE> 106

- ---------------------------------------------------------
- ---------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY HEALTHTRUST, INC. - THE HOSPITAL COMPANY OR ANY UNDERWRITER,
DEALER OR AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF HEALTHTRUST, INC. - THE HOSPITAL COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS

PROSPECTUS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Company.............................. 3
The Offerings............................ 4
Investment Considerations................ 5
The Acquisition and the Financing Plan... 10
Use of Proceeds.......................... 12
Capitalization........................... 13
Selected Historical Financial
Information............................ 14
Selected Pro Forma Financial
Information............................ 17
Selected Operating Statistics............ 18
Description of EPIC...................... 19
Properties............................... 19
Price Range of Common Stock.............. 24
Dividend Policy.......................... 25
Selling Stockholders..................... 25
Description of Capital Stock............. 26
Certain United States Tax Consequences to
Non-United States Holders.............. 27
Underwriting............................. 29
Legal Matters............................ 30
Experts.................................. 30
Available Information.................... 31
Information Incorporated by Reference.... 31
Index to Financial Statements............ 32
</TABLE>

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

- ---------------------------------------------------------
- ---------------------------------------------------------
SHARES

HEALTHTRUST INC.
The Hospital Company

COMMON STOCK

----------------
PROSPECTUS
----------------

MERRILL LYNCH & CO.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

, 1994
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 107

[Alternate Page for International Prospectus]

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 25, 1994

PROSPECTUS

HEALTHTRUST INC.
The Hospital Company

COMMON STOCK
------------------------

Of the shares of Common Stock (par value $.001 per share) offered
hereby, shares are being offered hereby outside the United States by the
International Underwriters and shares are being offered in a concurrent
offering in the United States by the U.S. Underwriters. The offering price and
the aggregate underwriting discount per share are identical for both offerings.
See "Underwriting."

FOR INFORMATION CONCERNING CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "INVESTMENT CONSIDERATIONS."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Stockholders
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
- --------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $ $
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities under the Securities Act
of 1933. See "Underwriting."
(2) Before deducting expenses of the offerings payable by the Company estimated
at $ .
(3) The Company has granted the International Underwriters and the U.S.
Underwriters options exercisable within 30 days after the date hereof to
purchase up to and additional shares, respectively, solely to
cover over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Company will
be $ , $ , and $ , respectively. See "Underwriting."
------------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to various prior conditions, including their right to reject orders in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made in New York, New York on or about , 1994.

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

MERRILL LYNCH INTERNATIONAL LIMITED DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
------------------------

The date of this Prospectus is , 1994.
<PAGE> 108

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

UNDERWRITING

Subject to the terms and conditions set forth in an international purchase
agreement (the "International Purchase Agreement") among the Company, the
Selling Stockholders and each of the underwriters named below (the
"International Underwriters"), and concurrently with the sale of
shares of Common Stock to the U.S. Underwriters (as defined below), the Company
and the Selling Stockholders severally have agreed to sell to the International
Underwriters, and each of the International Underwriters severally has agreed to
purchase from the Company and the Selling Stockholders, the aggregate number of
shares of Common Stock set forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL UNDERWRITERS SHARES
------------------------------------------------------------------ ---------
<S> <C>
Merrill Lynch International Limited...............................
Donaldson, Lufkin & Jenrette Securities Corporation...............
---------
Total...................................................
---------
---------
</TABLE>

Merrill Lynch International Limited and Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") are acting as representatives (the "International
Representatives") of the International Underwriters.

The Company and the Selling Stockholders also have entered into a purchase
agreement (the "U.S. Purchase Agreement") with certain underwriters in the
United States (the "U.S. Underwriters" and, together with the International
Underwriters, the "Underwriters"), for whom Merrill Lynch,Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and DLJ are acting as representatives (the "U.S.
Representatives"). Subject to the terms and conditions set forth in the U.S.
Purchase Agreement, and concurrently with the sale of shares of Common
Stock to the International Underwriters pursuant to the International Purchase
Agreement, the Company and the Selling Stockholders have agreed to sell to the
U.S. Underwriters, and the U.S. Underwriters severally have agreed to purchase
from the Company and the Selling Stockholders, an aggregate of shares of
Common Stock. The initial public offering price per share and the total
underwriting discount per share are identical under the International Purchase
Agreement and the U.S. Purchase Agreement.

In the International Purchase Agreement and the U.S. Purchase Agreement,
the several International Underwriters and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such Agreement if any of the shares of Common Stock being sold pursuant to
each such Agreement are purchased. Under certain circumstances, the commitments
of non-defaulting U.S. Underwriters or International Underwriters (as the case
may be) may be increased. Sales of Common Stock to be purchased by the
International Underwriters and the U.S. Underwriters are conditioned upon one
another.

The International Underwriters and the U.S. Underwriters have entered into
an intersyndicate agreement (the "Intersyndicate Agreement") that provides for
the coordination of their activities. The Underwriters are permitted to sell
shares of Common Stock to each other for purposes of resale at the initial
public offering price, less an amount not greater than the selling concession.
Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to persons who are non-United States persons or to
persons they believe intend to resell to persons who are non-United States
persons, and the International Underwriters and any dealer to whom they sell
shares of Common Stock will not offer to sell or sell shares of Common Stock to
United States persons or to persons they believe intend to resell to United
States persons, except in each case for transactions pursuant to such agreement.

Each International Underwriter has agreed that (i) it has not offered or
sold, and it will not offer or sell, directly or indirectly, any shares of
Common Stock offered hereby in the United Kingdom by means of any document
except in circumstances which do not constitute an offer to the public within
the meaning of the Companies Act of 1985, (ii) it has complied and will comply
with all applicable provisions of the Financial Services Act of 1986 (the
"Financial Services Act") with respect to anything done by it in the United

International-

<PAGE> 109

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

Kingdom and (iii) it has only issued or passed on and will only issue or pass on
to any person in the United Kingdom any document received by it in connection
with the issuance of Common Stock if that person is of a kind who files with
Article 9(3) of the Financial Services Act of 1986 (Investment Advertisements)
(Exemptions) Order 1988.

Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practice of the country of
purchase, in addition to the offering price set forth in the cover page hereby.

The International Representatives have advised the Company that the
International Underwriters propose initially to offer the shares of Common Stock
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and to certain dealers at such price less a concession not
in excess of $ per share. The International Underwriters may allow, and
such dealers may reallow, a discount not in excess of $ per share on sales
to certain other dealers. After the initial public offering, the public offering
price, concession and discount may be changed.

The Company has granted an option to the International Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to an aggregate of additional shares of Common Stock at the
initial public offering price set forth on the cover page of this Prospectus,
less the underwriting discount. The International Underwriters may exercise this
option only to cover over-allotments, if any, made on the sale of Common Stock
offered hereby. To the extent that the International Underwriters exercise this
option, each International Underwriter will be obligated, subject to certain
conditions, to purchase the number of additional shares of Common Stock
proportionate to such International Underwriter's initial amount reflected in
the foregoing table. The Company also has granted an option to the U.S.
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to an aggregate of additional shares of Common
Stock to cover over-allotments, if any, on terms similar to those granted to the
International Underwriters.

The Common Stock is listed on the NYSE under the symbol "HTI."

The Company, the Selling Stockholders and the several Underwriters have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act.

Affiliates of each of the International Underwriters, from time to time,
perform investment banking and other financial services for the Company. Merrill
Lynch and DLJ are acting as financial advisors to the Company in connection with
the Acquisition. In addition, the Company has retained DLJ and Merrill Lynch as
Dealer Managers for the Tender Offers and as underwriters for the Subordinated
Debt Offering.

International-
<PAGE> 110

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

PROSPECTUS

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

- ---------------------------------------------------------
- ---------------------------------------------------------
SHARES

HEALTHTRUST INC.
The Hospital Company

COMMON STOCK

----------------
PROSPECTUS
----------------

MERRILL LYNCH INTERNATIONAL LIMITED

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

, 1994
- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 111

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 92,729
National Association of Securities Dealers fee............................
NYSE listing fee..........................................................
Printing and engraving....................................................
Accounting services.......................................................
Legal services............................................................
Expenses of qualification under state blue sky laws.......................
Miscellaneous.............................................................
--------
Total...........................................................
</TABLE>

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

* Estimated

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law (the "DGCL") provides
for the indemnification of officers and directors under certain circumstances
against expenses (including attorneys' fees, judgments, fines and amounts paid
in settlement) actually and reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceedings in which
he is involved by reason of the fact that he is or was a director or officer of
the Company if he acted in good faith and in a manner that he reasonably
believed to be in or not opposed to the best interests of the Company, and, in
respect to the criminal actions or proceedings, if he had no reasonable cause to
believe that his conduct was unlawful. Pursuant to Section 102(b)(7) of the
DGCL, the Certificate provides that the directors of the Company, individually
or collectively, shall not be held personally liable to the Company or its
stockholders for monetary damages for breaches of fiduciary duty as directors,
except that any director shall remain liable (i) for any breach of the
director's fiduciary duty of loyalty to the Company or its stockholders, (ii)
for acts or omissions not in good faith or involving intentional misconduct or a
knowing violation of law, (iii) for liability under Section 174 of the DGCL or
(iv) for any transaction from which the director derived an improper personal
benefit. The Certificate and By-laws of the Company provide for indemnification
of its officers and directors to the full extent authorized by law.

The Company maintains officers' and directors' liability insurance which
insures against liabilities that the officers and directors of the Company may
incur in such capacities.

ITEM 16. EXHIBITS.

<TABLE>
<S> <C> <C>
**1.1 -- Form of U.S. Purchase Agreement
**1.2 -- Form of International Purchase Agreement.
2.1 -- Agreement and Plan of Merger, dated as of January 9, 1994, among the Registrant,
Odyssey Acquisition Corp. and EPIC Holdings, Inc. Incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated January 10, 1994.
*2.2 -- ESOP Agreement, dated as of January 9, 1994, among the Registrant, Odyssey
Acquisition Corp., EPIC Holdings, Inc., EPIC Healthcare Group, Inc., U.S. Trust
Company of California, N.A. and the ESOP Committee.
**2.3 -- Form of Purchase Agreement among the Registrant, Donaldson, Lufkin & Jenrette
Securities Corporation and Merrill Lynch & Co. with respect to the Subordinated Debt
Offering.
4.1 -- Rights Agreement, dated as of July 8, 1993, between the Registrant and First Union
National Bank of North Carolina, as Rights Agent. Incorporated by reference to
Exhibit 1 to the Registrant's Registration Statement on Form 8-A dated July 12,
1993.
**5.1 -- Opinion of Dewey Ballantine as to legality of the Common Stock being registered,
including consent.
</TABLE>

II-1
<PAGE> 112

<TABLE>
<S> <C> <C>
*23.1 -- Consent of Ernst & Young with respect to the financial statements of the Registrant.
*23.2 -- Consent of Ernst & Young with respect to the financial statements of EPIC Holdings,
Inc. and EPIC Healthcare Group, Inc.
*24.1 -- Powers of Attorney.
</TABLE>

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

* Filed herewith.
** To be filed by amendment.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions 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.

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.

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
a 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.

II-2
<PAGE> 113

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Nashville, State of Tennessee, on February 24, 1994.

HEALTHTRUST, INC. - THE HOSPITAL
COMPANY

By: /s/ MICHAEL A. KOBAN, JR.
------------------------------------
Michael A. Koban, Jr.
Senior Vice President

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>
* Chairman of the Board, Chief February 24, 1994
- ------------------------------------------ Executive Officer and
R. Clayton McWhorter President; Director
(Principal Executive Officer)
* Senior Vice President and Chief February 24, 1994
- ------------------------------------------ Operating Officer; Director
W. Hudson Connery, Jr.

/s/ MICHAEL A. KOBAN, JR. Senior Vice President; Director February 24, 1994
- ------------------------------------------ (Principal Financial Officer)
Michael A. Koban, Jr.

* Director February 24, 1994
- ------------------------------------------
Donald S. MacNaughton

* Director February 24, 1994
- ------------------------------------------
Richard W. Hanselman

* Director February 24, 1994
- ------------------------------------------
Robert F. Dee

* Director February 24, 1994
- ------------------------------------------
Alethea O. Caldwell

* Director February 24, 1994
- ------------------------------------------
William T. Hjorth

* Director February 24, 1994
- ------------------------------------------
Harry N. Beaty, M.D.

* Senior Vice President and February 24, 1994
- ------------------------------------------ Controller (Principal
Kenneth C. Donahey Accounting Officer)

*By: /s/ MICHAEL A. KOBAN, JR.
- ------------------------------------------
Michael A. Koban, Jr.
(Attorney-in-Fact)
</TABLE>

II-3

<PAGE> 1

ESOP AGREEMENT

This ESOP Agreement (the "Agreement") is made this 9th day of
January, 1994, by and among U.S. Trust Company of California, N.A., as trustee
(the "Trustee") for the trust (the "Trust") established pursuant to the EPIC
Healthcare Group, Inc. Employee Stock Ownership Plan (the "ESOP") of Epic
Healthcare Group, Inc., ("Group"), the Committee (as defined in the ESOP)
administering the ESOP, Epic Holdings, Inc. ("Company"), HealthTrust, Inc. -
The Hospital Company ("Parent") and Odyssey Acquisition Corp. ("Sub").
Capitalized terms used herein but not defined herein shall have the definitions
assigned to them in that certain Agreement and Plan of Merger, dated as of the
date hereof, among Parent, Sub and Company (the "Merger Agreement"), a copy of
which is attached hereto as Exhibit "A".

RECITALS

A. Effective as of September 30, 1988, Group established the ESOP;

B. Group and the Trustee, in its capacity as trustee, entered
into the Trust Agreement dated as of September 30, 1988 (the "Trust
Agreement"), establishing the Trust pursuant to which Group makes contributions
to the ESOP, to be invested primarily in shares of Company common stock and
held by the Trustee on behalf of ESOP participants;

C. The Trustee purchased 24,500,000 shares of Group common stock,
par value $.001 per share, from Group pursuant to the terms of the Agreement,
dated as of September 30, 1988, between Group and the Trustee (the
"Subscription Agreement"), which shares were

<PAGE> 2
subsequently exchanged for an equal number of shares of Company common stock
(such Company common stock is referred to herein as "Company Common Stock");

D. The Trustee financed the purchase of such stock by borrowing
an aggregate of $245,000,000 from Group (the "ESOP Loans") pursuant to the
terms of certain loan agreements between Group and the Trustee dated September
30, 1988, which were subsequently refinanced (such loan agreements are referred
to herein as the "ESOP Loan Agreements");

E. As security for the portion of the ESOP Loans that remains
outstanding, the Trustee pledged to Group the shares of Company Common Stock
that have not been released from pledge as a result of payments of the ESOP
Loans and allocated to the accounts of ESOP participants pursuant to the terms
of the ESOP Pledge Agreement, dated as of September 30, 1988, between Group and
the Trustee (the "Pledge Agreement");

F. Concurrently with the execution of this Agreement, Company,
Parent and Sub are entering into the Merger Agreement, pursuant to which
Company will become a wholly-owned subsidiary of Parent;

G. In connection with the Merger Agreement, Company has agreed to
amend the ESOP to convert the ESOP to a profit sharing or stock bonus plan
following consummation of the transactions contemplated hereunder;

H. The Trustee has received preliminary confirmation from its
financial advisors that the consideration to be received by the

- 2 -

<PAGE> 3
ESOP pursuant to this Agreement will result in the receipt of fair market value
for Company Common Stock transferred by the ESOP pursuant to this Agreement;
and

I. The parties hereto desire to set forth their understanding and
agreement with respect to the ESOP and the actions that each shall take in
connection therewith;

NOW, THEREFORE, the parties hereto agree as follows:

1. Stock Transfer; Satisfaction of Indebtedness. As of the
Closing Date of the Merger Agreement and after giving effect to the
transactions contemplated under Section 2, the Trustee shall release all right,
title and interest of the Trustee in the shares of Company Common Stock that
have not been allocated to the accounts of ESOP participants (the "Unallocated
Shares") (after giving effect to any such allocations required as a result of
contributions previously made), free and clear of any Trustee claims, liens,
pledges, options, charges, security interests, mortgages, deeds of trust,
encumbrances or other rights of the Trustee of any nature whatsoever, and
Company and Group shall accept the Unallocated Shares from the Trustee in full
satisfaction of the ESOP Loans.

2. Certain Covenants and Agreements.

(a) ESOP Provisions. Prior to the conversion of the ESOP
to a stock bonus or profit sharing plan, Company and/or Group shall contribute
cash to the ESOP, or shall forgive ESOP Loans (which forgiveness of
indebtedness shall be treated as a contribution to the ESOP), to the extent
necessary to cause there

- 3 -

<PAGE> 4
to be on the Closing Date a total of 17,571,429 shares of the Company Common
Stock that have been allocated or will be allocable to the accounts of ESOP
participants (excluding the shares allocated pursuant to clause (b) below);
provided, however, that the contribution shall not exceed the amount reasonably
determined in good faith by Parent (i) to be deductible pursuant to Code
Section 404 for the ESOP plan years beginning January 1, 1993, and/or January
1, 1994, and (ii) to be permissibly allocable, for purposes of Code Section
415, during the "limitation year" (as defined in Code Section 415 and
hereinafter referred to as the "Limitation Year") applicable to the ESOP plan
years beginning January 1, 1993, and/or January 1, 1994, subject to Section
2(f) below. The Company and Group shall amend the ESOP and the Trust Agreement
(i) effective as of the Closing Date, to convert the ESOP to a profit sharing
or stock bonus plan, to preclude participation in the ESOP by persons not
employed by the Company or a Subsidiary of the Company as of the Closing Date,
to eliminate the requirement of the ESOP that participants be employed on the
last date of the plan year to receive an allocation of previously Unallocated
Shares for the plan year, to vest full fiduciary authority in the Trustee with
respect to any right of the Trustee or the ESOP under the Merger Agreement and
this Agreement and the actions contemplated thereby and hereby and to eliminate
any directions or limitations as to the discretion the Trustee may exercise in
exercising that authority, and (ii) effective as of December 31, 1994, to
permanently discontinue contributions to the ESOP.

- 4 -

<PAGE> 5
(b) Additional Allocation. Prior to the Closing Date, Parent
shall compute, or cause to be computed, an aggregate dollar amount (the
"Interim Amount") equal to 4% of the "compensation" (as defined in Parent's
401(k) Plan) of the ESOP participants employed by Company or any of its
Subsidiaries immediately prior to the Closing Date (the "ESOP Participants")
earned for each month or portion thereof included in the period beginning March
1, 1994, and ending on the Closing Date. For purposes of determining the
Interim Amount described in the immediately preceding sentence, a portion of a
month shall be taken into account and result in an increase in such
contribution or forgiveness of indebtedness if the Merger Date occurs on or
after the fifteenth day of such month. Immediately prior to the Closing Date,
Company shall contribute cash to the ESOP, or shall forgive ESOP Loans (which
forgiveness of indebtedness shall be treated as a contribution to the ESOP), in
an amount which shall result in the allocation of the number of shares of
Company Common Stock to the accounts of ESOP Participants as is equal to the
Interim Amount, divided by the Merger Consideration per share; provided,
however, that the contribution shall not exceed the amount reasonably
determined in good faith by Parent to be (i) deductible pursuant to Code
Section 404 for the ESOP plan year beginning January 1, 1994, and, (ii) the
amount permissibly allocable, for purposes of Code Section 415, during the
Limitation Year applicable to the ESOP plan year beginning January 1, 1994,
subject to Section 2(f). To the extent that the contribution obligations set
forth in clauses (a), (b) or (d) cannot be met due

- 5 -

<PAGE> 6
to operation of Code Section 404 or 415, as determined in good faith by Parent,
in a subsequent plan year or plan years Parent shall make or shall cause Sub to
make contributions to a plan established pursuant to clause (d)(iii) below in
an amount equal to the contribution that cannot be made in an earlier plan
year, plus earnings at a rate equal to the greater of (i) 300 basis points in
excess of the 3 month United States Treasury Bill Rate, adjusted and compounded
quarterly, or (ii) the percentage change in the fair market value of the assets
of the ESOP (or, if the ESOP is merged into another plan, the plan into which
the ESOP is merged, or, in the event the ESOP is terminated, the qualified plan
or plans in which the employees of the Company are eligible to participate)
over the "measuring period" described below (determined by including changes in
value attributable to realized and unrealized income, gains and losses) for the
period from the Closing Date to the date of contribution (the "measuring
period"); provided, however, that the contribution to be made for any given
plan year shall not exceed the amount reasonably determined in good faith by
Parent, (i) to be deductible for such plan year pursuant to Code Section 404
and (ii) to be permissibly allocable for purposes of Code Section 415, during
the Limitation Year applicable to such plan year. For purposes of this
provision, the "3 month United States Treasury Bill Rate" shall be the rate
published in the Wall Street Journal for thirteen week short-term U.S.
government bills as of the last day of each calendar quarter. The ESOP
Committee

- 6 -

<PAGE> 7
shall make the allocations necessary to comply with this Section 2(b).

(c) Termination of Agreements. Effective as of the
Closing Date, each of the Subscription Agreement, the ESOP Loan Agreements and
the Pledge Agreement is terminated and cancelled and shall be of no further
force or effect, and the Trustee, Company, Group, and the ESOP Committee shall
take all steps necessary to comply with this covenant.

(d) Plan Provisions Post-Closing. Following the
consummation of the transactions contemplated hereby, (i) the Trust and the
Trust Agreement shall continue in full force and effect, as amended pursuant to
Section 2(a) hereinabove, until such time as all distributions have been made
in accordance with the terms of the ESOP as amended pursuant to Section 2(a)
hereinabove; (ii) the interests of each ESOP Participant in any amount, if any,
credited to his ESOP account (including any amount credited or to be credited
as a result of the transactions contemplated hereby) shall become
nonforfeitable from and after the Closing Date in accordance with Code Section
411 and the Treasury Regulations thereunder; and (iii) the ESOP Participants
who continue to be employed by Parent or Sub shall be entitled to participate
in Parent's 401(k) plan or a similar plan to be established by Parent. Such
plan shall provide (A) a profit sharing contribution (the "Profit Sharing
Contribution") on behalf of the ESOP Participants of 4% of the "compensation"
of the ESOP Participants (as defined in such plan for participants generally)
for the period beginning on the day

- 7 -

<PAGE> 8
following the Closing Date and ending December 31, 1994, and (B) a matching
contribution (the "Matching Contribution") by Parent of 100% of each ESOP
Participant's deferrals under such plan, not in excess of 3% of "compensation"
(as defined in such plan for participants generally) made with respect to the
period beginning on the Closing Date and ending December 31, 1998. In
addition, it is the present intention of Parent to provide the Profit Sharing
Contribution described in clause (A) above to ESOP Participants during the plan
years beginning in the calendar years ending December 31, 1995, through
December 31, 1998; provided, however, that the parties hereto acknowledge and
agree that Parent is under no obligation to the Trustee or ESOP Participants
under this Agreement to provide any such Profit Sharing Contribution for years
after 1994. The parties hereto further acknowledge and agree that the
contributions of Parent referred to in this Section 2(d) are (i) conditioned
upon qualification of Parent's plan under Code Section 401(a), and shall be
returned to Parent if the Internal Revenue Service does not issue a
determination letter reasonably acceptable to Parent with respect to such plan,
(ii) that such contribution for any plan year, after having taken into account
the contribution obligation set forth in Section 2(b) above, shall not exceed
the amount reasonably determined in good faith by Parent (a) to be deductible
pursuant to Code Section 404 for the applicable plan year, and (b) not to
exceed the amount permissibly allocable for purposes of Code Section 415 for
the applicable Limitation Year, subject to Section 2(f) below. Parent shall
act

- 8 -

<PAGE> 9
in good faith and use its best efforts to secure such determination letter,
including the adoption of changes reasonably requested by the Internal Revenue
Service.

(e) Contribution and Allocation Restructuring. The
parties expect that the obligations of Parent to make and allocate
contributions to plans pursuant to this Agreement may be fulfilled without loss
of qualification of the ESOP or of any plan established or continued by Parent
for the benefit of employees of Parent and/or its subsidiaries. If in the
opinion of counsel to Parent, the qualification of any such plan could be
jeopardized by Parent's contributions and/or allocations in compliance with
this Agreement, the Trustee shall in good faith enter into an agreement with
Parent to accept the consideration contemplated by this Agreement in another
form or manner, as the Trustee shall determine, in its sole and absolute
discretion, is permitted under ERISA and as mutually agreed to by Parent and
the Trustee. No such agreement shall result in any reduction of the then net
present value of the contribution and allocation obligations of Parent under
this Agreement. If counsel to the Trustee does not concur with counsel to
Parent that the qualification of any such plan could be jeopardized by Parent's
contributions and/or allocations in compliance with this Agreement, Parent and
the Trustee shall select nationally recognized counsel experienced in ERISA and
the Code, especially with respect to ESOPs, mutually agreeable to them to
review the issue and make an independent determination whether the
qualification of the ESOP or any Parent plan could be

- 9 -

<PAGE> 10
jeopardized. If deemed necessary by the independent counsel, a financial
adviser mutually agreeable to Parent and the Trustee shall be selected. Parent
shall pay all reasonable fees and costs of the Trustee, the Trustee's counsel
and financial advisor, the independent counsel and the independent counsel's
financial advisor. The determination of the Interim Amount described in
Section 2(b) and the application of the limitations of Code Sections 404 and
415 to be determined by Parent pursuant to Sections 2(b) and (d) shall be
provided by Parent to the Trustee and the ESOP Committee for the purposes of
allowing either or both to provide comment with respect thereto.

(f) Code Section 415 Priorities. In calculating the Code
Section 415(c) limitation for the ESOP Limitation Year applicable to the ESOP
plan year beginning January 1, 1994, and the Limitation Years applicable to the
plan years beginning or on after January 1, 1994, of the plan described in
Section 2(d) hereinabove in which ESOP Participants will participate after the
Closing Date, contributions (and forgiveness of indebtedness treated as
contributions) described in this Section 2 shall be charged against such
limitation in the following order:

(i) First, the Matching Contribution in Section
2(d) hereof;

(ii) Second, the contribution or forgiveness
of indebtedness described in Section 2(a) hereof;

(iii) Third, the contribution or forgiveness of
indebtedness described in Section 2(b) hereof; and

- 10 -

<PAGE> 11
(iv) Fourth, the Profit Sharing Contribution
described in Section 2(d) hereof.

(g) Contributions by Parent or Sub. Any contribution to
be made by Parent or Sub pursuant to clauses (b) or (d) hereunder may be made,
at Parent or Sub's election, in cash or in stock of Parent that is publicly
traded, freely transferable (not subject to a securities or trading limitation)
and equal in fair market value to the amount of the contribution obligation.

(h) Indemnification. For a period of six years from and
after the Effective Time (as defined in the Merger Agreement), Parent and Sub
shall indemnify U.S. Trust Company of California, N.A., as the Trustee and its
financial advisors, Duff & Phelps Financial Consulting Company ("Duff &
Phelps"), to the extent Group or Company would have been so required under the
Trust Agreement and/or under any engagement letters with the Trustee and Duff &
Phelps to which Company and/or any of its Subsidiaries is a signatory, without
regard to termination of the ESOP or removal of U.S. Trust Company of
California, N.A., as the Trustee. Such indemnification shall be made only to
the extent that such indemnification would be required had Company survived the
Merger as an independent entity and the indemnification obligation had also
survived the Merger, and only in accordance with the terms of the Trust
Agreement and/or such engagement letters.

3. Conditions to Closing. The respective obligations of the
parties to consummate the transactions contemplated by Sections 1 and 2 shall
be conditioned upon (i) the prior or simultaneous

- 11 -

<PAGE> 12
consummation of the Merger in accordance with the terms of the Merger
Agreement, and (ii) the Trustee having been duly authorized by all necessary
corporate action on the part of the Trustee to consummate the transactions
contemplated hereunder, and no other corporate proceedings on the part of the
Trustee being necessary to consummate the transactions contemplated hereby.

4. Delivery of Documents at the Closing.

(a) Documents Delivered by the Trustee. At the Closing,
the Trustee shall deliver to Company the following documents:

(i) A written waiver of all right, title and
interest of the Trustee in the Unallocated Shares, in accordance
with Section 1 hereinabove; and

(ii) a certificate of the Trustee setting
forth the resolutions of the Trustee authorizing and approving this
Agreement and the transactions contemplated hereby, and certifying
that such resolutions were duly adopted and remain in full force and
effect, not having been altered, amended or repealed.

(b) Documents Delivered by Company and Group. At the
Closing, Company or Group shall deliver to the Trustee the following documents:

(i) the cancelled promissory notes evidencing
the ESOP Loans;

(ii) a certificate of the Secretaries of Company
and Group setting forth the resolutions of the board of directors of
each, respectively, authorizing the execution and delivery

- 12 -

<PAGE> 13
of this Agreement and the consummation of the transactions
contemplated hereby, and certifying that such resolutions were duly
adopted and remain in full force and effect, not having been altered,
amended or repealed;

(iii) duly executed amendments to the ESOP and the
Trust Agreement, as required hereinabove; and

(iv) the opinion of Johnson & Gibbs, P.C., counsel
to Company, to the effect that none of (i) the discharge of the
portion of the principal amount of the ESOP Loans that exceeds the
fair market value of the shares of Company Common Stock transferred by
the ESOP Trustee to Company pursuant to Section 1, or (ii), the
transfer by the ESOP Trustee to Company of shares of Company Common
Stock unallocated under the ESOP in satisfaction of the ESOP Loans,
each as contemplated by this Agreement, will result in a violation of
the requirements of the prohibited transaction exemption of Section
4975(d)(3) of the Code and Section 408(b)(3) of ERISA, as expressed in
Treas. Reg. Section 54.4975-7(b)(4), (5) and (6), and DOL Reg.
Section 2550.408b-3(d), (e) and (f), assuming in each case that the
fiduciaries undertaking such transactions are complying with the
applicable fiduciary responsibility requirements of ERISA and that the
ESOP has received no less than adequate consideration.

(c) Documents Delivered by Parent. At the Closing,
Parent shall deliver to the Trustee a certificate of the Secretary of Parent
setting forth the resolutions of Parent authorizing the

- 13 -

<PAGE> 14
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and certifying that such resolutions were
duly adopted and remain in full force and effect, not having been altered,
amended or repealed.

(d) Opinion of Trustee's Counsel. The Trustee agrees
that prior to the Closing Date it will obtain from its counsel, Gardere &
Wynne, L.L.P., an opinion that Gardere & Wynne, L.L.P. concurs in the opinion
of Johnson & Gibbs, P.C., provided pursuant to the provisions of section
4(b)(iv) hereinabove. A copy of such opinion shall be provided to the Company
prior to Closing Date; provided, however, that the parties hereto agree that
the opinion rendered by Gardere & Wynne, L.L.P., may only be relied upon by the
Trustee and may not be relied upon by any other party to this Agreement.

5. Voting Agreement. At such time as Company conducts any
meeting of or otherwise seeks a vote of its stockholders for the purpose of
approving the Merger, the Trustee shall vote the Unallocated Shares and shares
of Company Common Stock allocated to the accounts of ESOP Participants with
respect to which no voting instructions are received from the applicable ESOP
participants, in favor of the Merger and the consummation of the transactions
contemplated by the Merger Agreement, unless the Trustee, in its sole
discretion, reasonably determines in good faith that such vote would violate
the applicable requirements of ERISA.

- 14 -

<PAGE> 15
6. Company, Group, Trustee and Parent Representations and
Warranties.

(a) Company, Group and Related Company Organization.
Company represents and warrants that each of Company and its Subsidiaries is,
if a corporation, a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation (or, if a
partnership or other legal entity, is duly organized, is validly existing under
the laws of the jurisdiction of its organization and has completed the filing
of any certificates required and by such jurisdiction for the organization and
continued existence thereof) and has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except when the failure to be so organized, existing and in good
standing or to make such filings or to have such power and authority would not,
individually or in the aggregate, have a material adverse effect on the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) or results of operations of Company and its Subsidiaries, taken as a
whole (a "Material Adverse Effect"). Each of Company and its Subsidiaries is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not, individually or in the aggregate, have a Material
Adverse Effect.

- 15 -

<PAGE> 16
(b) Company and Group Authority. Company and Group
represent and warrant that Company and Group have the requisite corporate power
and authority to execute and deliver this Agreement and to carry out their
obligations hereunder. The execution, delivery and performance of this
Agreement and the consummation of the Merger and of the other transactions
contemplated hereunder have been duly authorized by all necessary corporation
action on the part of Company and Group and no other corporate proceedings on
the part of Company and Group are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Company and Group and constitutes the valid and
binding obligation of Company and Group enforceable against Company and Group
in accordance with its terms, except as may be limited by or subject to any
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally, and
subject to general principles of equity.

(c) Parent Organization. Parent represents and warrants
that Parent is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and has all requisite power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted, except when the failure to be so organized, existing and in
good standing or to have such power and authority would not, individually or in
the aggregate, prevent or delay in any material respect the consummation of the
transactions contemplated by this Agreement.

- 16 -

<PAGE> 17
(d) Parent Authority. Parent represents and warrants
that Parent has the requisite corporate power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement and the consummation of
the Merger and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Parent
and no other corporate proceedings on the part of Parent are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by Parent and constitute
the valid and binding obligation of Parent, enforceable against Parent in
accordance with its terms, except as may be limited by or subject to any
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally,
and subject to general principles of equity.

(e) Trustee Organization. The Trustee represents and
warrants the Trustee is a national association duly organized, validly existing
and in good standing under the jurisdiction of its incorporation and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not, individually or in the aggregate, prevent or delay in any material
respect the consummation of the transactions contemplated by this Agreement.

- 17 -

<PAGE> 18
(f) Trustee Authority. The Trustee represents and
warrants that the Trustee has the requisite power and authority to execute and
deliver this Agreement and to carry out its obligations hereunder. The
execution of this Agreement has been duly authorized by all necessary corporate
action on the part of the Trustee and no other corporate proceedings on the
part of the Trustee are necessary to authorize this Agreement. This Agreement
has been duly executed and delivered by the Trustee and constitutes the valid
and binding obligation of the Trustee, enforceable against the Trustee in
accordance with its terms, except as may be limited by or subject to any
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally,
and subject to general principles of equity. All authority exercised hereunder
by the Trustee is solely in its fiduciary capacity as the Trustee under the
Trust Agreement, and in no other capacity.

(g) ESOP Committee Organization. The ESOP Committee
represents and warrants that the ESOP Committee has been validly appointed
under the ESOP, and has all requisite power and authority to exercise its
duties under the ESOP.

(h) ESOP Committee Authority. The ESOP Committee
represents and warrants that the ESOP Committee has the requisite power and
authority to execute and deliver this Agreement and to carry out its
obligations hereunder. The execution of this Agreement has been duly
authorized by all necessary action on the part of the ESOP Committee and no
other proceedings on the part of

- 18 -

<PAGE> 19
the ESOP Committee are necessary to authorize this Agreement. This Agreement
has been duly executed and delivered by the ESOP Committee and constitutes the
valid and binding obligation of the ESOP Committee, enforceable against the
ESOP Committee in accordance with its terms, except as may be limited by or
subject to any bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws affecting the enforcement of creditors rights
generally and subject to general principles of equity.

(i) Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Section 6 shall survive the
Closing Date or termination of the Merger Agreement.

7. Amendments. This Agreement contains the entire understanding
of the parties with respect to the ESOP and may be amended only by an agreement
in writing signed by each party hereto.

8. Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.

9. Counterparts. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by one or more parties hereto
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.

10. Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or

- 19 -

<PAGE> 20
served, if in writing and delivery personally, or sent by facsimile or
registered mail, postage prepaid, if:

TO THE TRUSTEE:

U.S. Trust Company of California, N.A.
555 South Flower Street, Suite 2700
Los Angeles, California 90071-2429
Attention: Charles E. Wert, Sr.

With a copy to: Gardere & Wynne, L.L.P.
1601 Elm Street
Suite 2800
Dallas, Texas 75201
Attention: William W. McClure, Jr., Esq.

TO COMPANY, GROUP OR ESOP COMMITTEE:

EPIC Holdings, Inc.
EPIC Center
3333 Lee Parkway, Suite 900
Dallas, Texas 75219
Attention: Stanley Baldwin, Esq.

With a copy to: Johnson & Gibbs, P.C.
900 Jackson Street
Dallas, Texas 75202
Attention: Jim A. Watson, Esq.

TO PARENT OR SUB:

Healthtrust, Inc. - The Hospital Company
4525 Harding Road
Nashville, Tennessee 37205
Attention: Philip D. Wheeler, Esq.

With a copy to: Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Morton A. Pierce, Esq.

or to such other address as any party hereto may, from time to time, designate
in a written notice given in a like manner. Notice delivered personally shall
be deemed delivered on the date of delivery. Notice given by facsimile shall
be deemed delivered on

- 20 -

<PAGE> 21
the date on which receipt is acknowledged. Notice given by mail as set out
above shall be deemed delivered three days after the date the same is
postmarked.

11. Law Application. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without regard to principles of conflict of laws; provided, however, that the
law governing any fiduciary duties of each party hereto and, in the case of
Company, Parent and Sub, their respective boards of directors and the law
governing any other matters of internal corporate governance of Company, Parent
or Sub shall be the law of their respective jurisdictions of incorporation (in
the case of Company, Parent and Sub, Delaware) or the law specifically
applicable to them (in the case of the Trustee, the laws of the State of
California, ERISA or other applicable federal or state law).

- 21 -

<PAGE> 22
12. Successor and Assigns. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the successor and assigns of
the parties hereto.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.

HEALTHTRUST, INC. - U.S. TRUST COMPANY OF
THE HOSPITAL COMPANY CALIFORNIA, N.A.

By: /s/ Micheal A. Koban, Jr. By: /s/ Charles E. Wert
---------------------------- ----------------------------
Name: Micheal A. Koban, Jr. Name: Charles E. Wert
-------------------------- --------------------------
Title: Senior Vice President Title: Executive Vice President and
------------------------- -------------------------
Senior Trust Officer

ODYSSEY ACQUISITION CORP. ESOP COMMITTEE
(acting solely in the capacity
as members of the ESOP
Committee)

By: /s/ Micheal A. Koban, Jr. /s/ Kenn S. George
---------------------------- --------------------------------
Name: Micheal A. Koban, Jr. /s/ Stanley F. Baldwin
-------------------------- --------------------------------
Title: Vice President /s/ Thomas T. Schleck
------------------------- --------------------------------
/s/ Gary E. Griffith
--------------------------------

EPIC HOLDINGS, INC. EPIC HEALTHCARE GROUP, INC.

By: /s/ Kenn S. George By: /s/ Kenn S. George
---------------------------- ----------------------------
Name: Kenn S. George Name: Kenn S. George
-------------------------- --------------------------
Title: Chairman, President Title: Chairman, President
------------------------- -------------------------
and CEO and CEO

- 22 -

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected Historical
Financial Information" and "Experts" in the Registration Statement (Form S-3)
and related Prospectus of Healthtrust, Inc. - The Hospital Company for the
registration of its common stock and to the incorporation by reference therein
of our report dated October 15, 1993, with respect to the consolidated financial
statements and schedules of Healthtrust, Inc. - The Hospital Company included in
its Annual Report (Form 10-K) for the year ended August 31, 1993, filed with the
Securities and Exchange Commission.

Ernst & Young

Nashville, Tennessee
February 23, 1994

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected Historical
Financial Information" and "Experts" and to the use of our reports dated
December 3, 1993, with respect to the consolidated financial statements of EPIC
Holdings, Inc. and subsidiaries and EPIC Healthcare Group, Inc. and subsidiaries
included in the Registration Statement (Form S-3) and related Prospectus of
Healthtrust, Inc. -- The Hospital Company for the registration of its common
stock.

Ernst & Young

Dallas, Texas
February 23, 1994

<PAGE> 1

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints R. Clayton McWhorter, Chairman
and Chief Executive Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company") Michael A. Koban, Jr., Senior
Vice-President of the Company, and Philip D. Wheeler, Senior Vice-President,
Secretary and General Counsel of the Company, and each of them, jointly and
severally, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter referred to as the
"Commission") the Company's S-3 Registration Statement in connection with the
offering of Common Stock, and all amendments thereto, and all matters required
by the Commission in connection with such report under The Securities Exchange
Act of 1933, as amended, 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
said attorneys-in-fact and agents, and each of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<S> <C>
/s/ W. Hudson Connery, Jr. 2/11/94
- ------------------------------------------- --------------------------
W. Hudson Connery, Jr. Date
Senior Vice-President, Chief
Operating Officer and Director
</TABLE>
<PAGE> 2

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints R. Clayton McWhorter, Chairman
and Chief Executive Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), and Philip D. Wheeler, Senior
Vice-President, Secretary and General Counsel of the Company, and each of them,
jointly and severally, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to execute and file, or cause to be
filed, with the Securities and Exchange Commission (hereinafter referred to as
the "Commission") the Company's S-3 Registration Statement in connection with
the offering of Common Stock, and all amendments thereto, and all matters
required by the Commission in connection with such report under The Securities
Exchange Act of 1933, as amended, 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 said attorneys-in-fact and agents, and each of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<S> <C>
/s/ Michael A. Koban, Jr. 2/3/94
- ------------------------------------------- --------------------------
Michael A. Koban, Jr. Date
Senior Vice-President and Director
(Principal Financial Officer)
</TABLE>

<PAGE> 3

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints R. Clayton McWhorter, Chairman
and Chief Executive Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A. Koban, Jr., Senior
Vice-President of the Company, and Philip D. Wheeler, Senior Vice-President,
Secretary and General Counsel of the Company, and each of them, jointly and
severally, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter referred to as the
"Commission") the Company's S-3 Registration Statement in connection with the
offering of Common Stock, and all amendments thereto, and all matters required
by the Commission in connection with such report under The Securities Exchange
Act of 1933, as amended, 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
said attorneys-in-fact and agents, and each of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<S> <C>
/s/ William T. Hjorth 2/3/94
- ------------------------------------------- --------------------------
William T. Hjorth Date
Director
</TABLE>

<PAGE> 4

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

<TABLE>
<S> <C>
/s/ Donald S. MacNaughton 2/11/94
- ------------------------------------------- --------------------------
Donald S. MacNaughton Date
Director
</TABLE>

<PAGE> 5

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints R. Clayton McWhorter, Chairman
and Chief Executive Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A. Koban, Jr., Senior
Vice-President of the Company, and Philip D. Wheeler, Senior Vice-President,
Secretary and General Counsel of the Company, and each of them, jointly and
severally, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter referred to as the
"Commission") the Company's S-3 Registration Statement in connection with the
offering of Common Stock, and all amendments thereto, and all matters required
by the Commission in connection with such report under The Securities Exchange
Act of 1933, as amended, 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
said attorneys-in-fact and agents, and each of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<S> <C>
/s/ Alethea O. Caldwell 2/8/94
- ------------------------------------------- --------------------------
Alethea O. Caldwell Date
Director
</TABLE>

<PAGE> 6

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints R. Clayton McWhorter, Chairman
and Chief Executive Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A. Koban, Jr., Senior
Vice-President of the Company, and Philip D. Wheeler, Senior Vice-President,
Secretary and General Counsel of the Company, and each of them, jointly and
severally, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter referred to as the
"Commission") the Company's S-3 Registration Statement in connection with the
offering of Common Stock, and all amendments thereto, and all matters required
by the Commission in connection with such report under The Securities Exchange
Act of 1933, as amended, 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
said attorneys-in-fact and agents, and each of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<S> <C>
/s/ Richard W. Hanselman 2/6/94
- ------------------------------------------- --------------------------
Richard W. Hanselman Date
Director
</TABLE>

<PAGE> 7

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints R. Clayton McWhorter, Chairman
and Chief Executive Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A. Koban, Jr., Senior
Vice-President of the Company, and Philip D. Wheeler, Senior Vice-President,
Secretary and General Counsel of the Company, and each of them, jointly and
severally, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter referred to as the
"Commission") the Company's S-3 Registration Statement in connection with the
offering of Common Stock, and all amendments thereto, and all matters required
by the Commission in connection with such report under The Securities Exchange
Act of 1933, as amended, 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
said attorneys-in-fact and agents, and each of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<S> <C>
/s/ Harry N. Beaty, M.D. 2/10/94
- ------------------------------------------- --------------------------
Harry N. Beaty, M.D. Date
Director
</TABLE>

<PAGE> 8

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints R. Clayton McWhorter, Chairman
and Chief Executive Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A. Koban, Jr., Senior
Vice-President of the Company, and Philip D. Wheeler, Senior Vice-President,
Secretary and General Counsel of the Company, and each of them, jointly and
severally, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter referred to as the
"Commission") the Company's S-3 Registration Statement in connection with the
offering of Common Stock, and all amendments thereto, and all matters required
by the Commission in connection with such report under The Securities Exchange
Act of 1933, as amended, 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
said attorneys-in-fact and agents, and each of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<S> <C>
/s/ Robert F. Dee 2/8/94
- --------------------------------------------------- -------------------------
Robert F. Dee Date
Director
</TABLE>

<PAGE> 9

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Michael A. Koban, Jr., Senior
Vice-President of Healthtrust, Inc. - The Hospital Company (hereinafter
referred to as the "Company") and Philip D. Wheeler, Senior Vice-President,
Secretary and General Counsel of the Company, and each of them, jointly and
severally, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter referred to as the
"Commission") the Company's S-3 Registration Statement in connection with the
offering of Common Stock, and all amendments thereto, and all matters required
by the Commission in connection with such report under The Securities Exchange
Act of 1933, as amended, 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
said attorneys-in-fact and agents, and each of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<S> <C>
/s/ R. Clayton McWhorter 2/10/94
- ------------------------------------------- --------------------------
R. Clayton McWhorter Date
Chairman of the Board, President,
Chief Executive Officer and Director
(Principal Executive Officer)
</TABLE>

<PAGE> 10

POWER OF ATTORNEY

S-3 REGISTRATION STATEMENT
FOR
HEALTHTRUST, INC. - THE HOSPITAL COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints R. Clayton McWhorter, Chairman
and Chief Executive Officer of Healthtrust, Inc. - The Hospital Company
(hereinafter referred to as the "Company"), Michael A. Koban, Jr., Senior
Vice-President of the Company, and Philip D. Wheeler, Senior Vice-President,
Secretary and General Counsel of the Company, and each of them, jointly and
severally, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to execute and file, or cause to be filed, with the
Securities and Exchange Commission (hereinafter referred to as the
"Commission") the Company's S-3 Registration Statement in connection with the
offering of Common Stock, and all amendments thereto, and all matters required
by the Commission in connection with such report under The Securities Exchange
Act of 1933, as amended, 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
said attorneys-in-fact and agents, and each of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

<TABLE>
<S> <C>
/s/ Kenneth C. Donahey 2/17/94
- ------------------------------------------- --------------------------
Kenneth C. Donahey Date
Senior Vice-President (Principal
Accounting Officer)
</TABLE>