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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission File Number: 0-29818

LifePoint Hospitals, Inc.

(615) 372-8500
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   x   No    o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes   x   No    o

     As of July 21, 2003, the number of outstanding shares of Common Stock of LifePoint Hospitals, Inc. was 38,801,217.

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PART I-FINANCIAL INFORMATION

Item 1. Financial Statements.

LIFEPOINT HOSPITALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.

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LIFEPOINT HOSPITALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes.

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LIFEPOINT HOSPITALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.

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LIFEPOINT HOSPITALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2003
(UNAUDITED)

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

     At June 30, 2003, LifePoint Hospitals, Inc. (the “Company”) was comprised of 28 general, acute care hospitals and related healthcare entities located in non-urban communities in the states of Alabama, Florida, Kansas, Kentucky, Louisiana, Tennessee, Utah, West Virginia and Wyoming.

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 (consisting of normal recurring adjustments) and disclosures considered necessary for a fair presentation have been included. Operating results for the three months and six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

     Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications have no impact on total assets, liabilities, stockholders’ equity, net income or cash flows.

     As of January 1, 2003, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 145, a standard that addresses the classification of gains or losses from early retirement of debt. Prior to the adoption of SFAS No. 145, the Company reported losses from the early retirement of debt as extraordinary items, net of tax benefits in the consolidated statement of income. During the three months and six months ended June 30, 2002, the Company recorded a $15.6 million and $16.4 million extraordinary loss, net of tax benefits of $9.4 million and $9.9 million, respectively, that resulted from the early retirement of debt. These charges were reclassified to comply with SFAS No. 145 by reducing previously reported income before minority interest and income taxes by $25.0 million and $26.3 million and reducing income taxes by $9.4 million and $9.9 million for the three months and six months ended June 30, 2002, respectively, in the accompanying condensed consolidated statements of operations. This reclassification had no impact on reported net income.

NOTE 2 — EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted earnings (loss) per share (dollars in millions, except per share amounts, and shares in thousands):

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NOTE 3 — RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 (“FIN 46”). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period beginning after June 15, 2003. The Company does not expect this new interpretation to have a material effect on its future results of operations or financial position.

     NOTE 4 — STOCK BENEFIT PLANS

     The Company issues stock options and other stock-based awards to key employees and directors. SFAS No. 123, Accounting for Stock-Based Compensation, encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for employee stock-based compensation using the intrinsic value method as prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, under which no compensation cost related to stock options has been recognized in net income (loss) for the three months and six months ended June 30, 2003 and 2002.

     Pro forma information regarding interim net income (loss) and earnings (loss) per share is required by SFAS No. 148 and has been determined as if the Company had accounted for its employee stock options under the fair value method. The fair value for these options was estimated at the date of grant using a Black-Scholes option valuation model with the following range of weighted-average assumptions: risk-free interest rates of 1.59% to 7.60%; expected dividend yield of 0.0%; volatility factors of the expected market price of the Company’s common stock of 35.0% to 53.0%; and an expected life of the options of 3.0 to 4.7 years.

     The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. The Company’s employee stock options have characteristics significantly different from those of traded options. Changes in the subjective input assumptions can materially affect the fair value estimate. Other option valuation models may produce significantly different fair values of the Company’s employee stock options.

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     The following table illustrates the effect on net income (loss) and earnings (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based compensation (dollars in millions, except per share amounts):

     In the six months ended June 30, 2003, the Company granted options to purchase an additional 979,350 shares of common stock at a weighted average exercise price of $21.05 per share and an estimated weighted-average fair value of $7.82 per share. These options become exercisable beginning in part from the date of grant to three years after the date of grant and expire 10 years after grant. The above table includes these additional stock options for the period subsequent to their grant.

NOTE 5 — CONTINGENCIES

HCA Investigations, Litigation and Indemnification Rights

     HCA Inc. (“HCA”) has been the subject of various federal and state investigations, qui tam actions, shareholder derivative and class action suits, patient/payor actions and general liability claims. HCA has been the subject of a formal order of investigation by the SEC concerning violations of the anti-fraud, insider trading, periodic reporting and internal accounting control provisions of the federal securities laws. These investigations, actions and claims relate to HCA and its subsidiaries, including subsidiaries that, before the Company’s formation as an independent company, owned many of the facilities that the Company now owns. The description of the matters below is based on the Company’s review of HCA’s public filings.

     HCA has been a defendant in several qui tam actions brought on behalf of the United States by private parties, known as relators, which have been unsealed and served on HCA. The actions alleged, in general, that HCA and certain subsidiaries and/or affiliated partnerships violated the False Claims Act, 31 U.S.C. § 3729, et seq. by submitting improper claims for reimbursement to the government. The lawsuits generally have sought: a) restitution of amounts paid to HCA entities as a result of any Medicare or Medicaid false claims, b) a penalty in the amount of three times the restitution amount, c) civil fines of not less than $5,500 nor more than $11,000 for each such claim, and d) attorneys’ fees and costs. HCA has disclosed that, on March 15, 2001, the Department of Justice announced its decision to intervene in certain of the qui tam actions against HCA. HCA stated that, of the original 30 qui tam actions, the Department of Justice elected to intervene in eight actions. HCA has disclosed that it is aware of additional qui tam actions that remain under seal and that it also believes there may be other sealed qui tam cases of which it is unaware.

     In December 2000, HCA entered into a series of agreements with the Criminal Division of the Department of Justice and various U.S. Attorneys’ Offices and with the Civil Division of the Department of Justice which resolved all federal criminal issues outstanding against HCA and certain issues involving federal civil claims by or on behalf of the government against HCA relating to DRG coding, outpatient laboratory billing and home health issues. These December 2000 agreements related only to conduct that was the subject of the various federal investigations and did not resolve various qui tam actions filed by private parties against HCA or pending state actions.

     On July 1, 2003, HCA announced that the U.S. District Court of the District of Columbia has approved a settlement agreement signed by HCA and the Department of Justice which settled litigation brought by the Department of Justice against HCA with respect to cost reports and physician relations. Additionally, HCA has made payments to the Centers for Medicare and Medicaid Services in accordance with an agreement to resolve all Medicare cost report, home office cost statement and appeal issues. As a result of this settlement, the remaining outstanding qui tam actions include only those actions in which the Department of Justice has not intervened.

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     HCA has agreed to indemnify the Company for any losses, other than consequential damages, arising from the governmental investigations of HCA’s business practices prior to the date of the distribution and losses arising from legal proceedings, present or future, related to the investigation or actions engaged in before the distribution that relate to the investigation. HCA has also agreed to make specified payments to the Company if any hospital owned by the Company at the time of the spin-off is permanently excluded from participation in the Medicare and Medicaid programs as a result of the proceedings described above. However, the Company could be held responsible for any claims that are not covered by the agreements reached with the federal government or for which HCA is not required to, or fails to, indemnify the Company. In addition, should HCA be unable to fulfill its obligations to the federal government, the Company could ultimately be held responsible for any settlement related to the former HCA hospitals operated by the Company. If indemnified matters were asserted successfully against the Company or any of its facilities, and HCA failed to meet its indemnification obligations, such an event could have a material adverse effect on the Company’s business, financial condition, results of operations or prospects.

     The Company cannot predict with accuracy the extent to which it may or may not continue to be affected by the investigations of HCA and the initiation of additional investigations, if any. These matters, if resulting in a successful claim against the Company, could have a material adverse effect on the Company’s business, financial condition, results of operations or prospects in future periods.

Americans with Disabilities Act Claim

     On January 12, 2001, Access Now, Inc., a disability rights organization, filed a class action lawsuit against each of the Company’s hospitals alleging non-compliance with the accessibility guidelines under the Americans with Disabilities Act (the “ADA”). The lawsuit, filed in the United States District Court for the Eastern District of Tennessee, seeks injunctive relief requiring facility modification, where necessary, to meet the Americans with Disabilities Act guidelines, along with attorneys fees and costs. In January 2002, the District Court certified the class action and issued a scheduling order that requires the parties to complete discovery and inspection for approximately six facilities per year. The Company intends to vigorously defend the lawsuit, recognizing the Company’s obligation to correct any deficiencies in order to comply with the ADA.

Corporate Integrity Agreement

     In December 2000, the Company entered into a corporate integrity agreement with the Office of Inspector General and agreed to maintain its compliance program in accordance with the corporate integrity agreement. This agreement was amended in April 2002. Complying with the compliance measures and reporting and auditing requirements of the corporate integrity agreement will require additional efforts and costs. Failure to comply with the terms of the corporate integrity agreement could subject the Company to significant monetary penalties.

General Liability Claims

     The Company is, from time to time, subject to claims and suits arising in the ordinary course of business, including claims for damages for personal injuries, medical malpractice, breach of management contracts, wrongful restriction of or interference with physicians’ staff privileges and employment related claims. In certain of these actions, plaintiffs request punitive or other damages against the Company which may not be covered by insurance. The Company is currently not a party to any proceeding which, in management’s opinion, would have a material adverse effect on the Company’s business, financial condition or results of operations.

Physician Commitments

     The Company has committed to provide certain financial assistance pursuant to recruiting agreements with various physicians practicing in the communities it serves. In consideration for a physician relocating to one of its communities and agreeing to engage in private practice for the benefit of the respective community, the Company may loan certain amounts of money to a physician, normally over a period of one year, to assist in establishing his or her practice. The Company had committed to advance amounts of approximately $22.6 million at June 30, 2003. The actual amount of such commitments to be subsequently advanced to physicians often depends upon the financial results of a physician’s private practice during the guaranteed period. Generally, amounts advanced under the recruiting agreements may be forgiven pro rata over a period of 48 months contingent upon the physician continuing to practice in the respective community.

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Capital Expenditure Commitments

     The Company is reconfiguring some of its facilities to accommodate more effectively inpatient and outpatient services and restructuring existing surgical capacity in some of its hospitals to permit additional patient volume and a greater variety of services. The Company had incurred approximately $33.1 million in uncompleted projects as of June 30, 2003, which is included in construction in progress in its accompanying condensed consolidated balance sheet. At June 30, 2003, the Company had projects under construction with an estimated additional cost to complete and equip of approximately $45.7 million.

     Pursuant to the asset purchase agreement for Ville Platte Medical Center, the Company has agreed to make certain capital improvements, the cost of which, together with the initial cash payment, defeasement of certain bonds and liabilities assumed, is not required to exceed $25.0 million. The capital improvements must be completed by December 1, 2004. The initial cash payment and liabilities assumed totaled $15.1 million, which leaves $9.9 million required for capital improvements. The Company had incurred approximately $2.7 million of the required capital improvements as of June 30, 2003.

     Pursuant to the asset purchase agreement for Logan Regional Medical Center, the Company has agreed to expend, regardless of the results of the hospital’s operations, at least $20.0 million in the aggregate for capital expenditures and improvements during the ten-year period following the date of acquisition of December 1, 2002. The Company had incurred approximately $0.2 million of the required capital improvements as of June 30, 2003.

Prior Period Cost Report Settlements

     Hospitals participating in the Medicare and some Medicaid programs, whether paid on a reasonable cost basis or under a Prospective Payment System, are required to meet certain financial reporting requirements. Federal and, where applicable, state regulations require submission of annual cost reports identifying medical costs and expenses associated with the services provided by each hospital to Medicare beneficiaries and Medicaid recipients. The Company is current in filing its Medicare cost reports.

     Net adjustments to estimated third-party payor settlements resulted in an increase to the Company’s revenues of $4.3 million for the six months ended June 30, 2003 compared to $2.1 million for the same period last year. The Company had net adjustments to estimated third-party payor settlements that increased revenues by $1.4 million and $2.1 million during the three months ended June 30, 2003 and 2002, respectively. The adjustments had a favorable diluted earnings per share effect of $0.06 and $0.03 for the six months ended June 30, 2003 and 2002, respectively. The adjustments had a favorable diluted earnings per share effect of $0.02 and $0.03 for the three months ended June 30, 2003 and 2002, respectively.

Acquisitions

     The Company has acquired and will continue to acquire businesses with prior operating histories. Acquired companies may have unknown or contingent liabilities, including liabilities for failure to comply with healthcare laws and regulations, such as billing and reimbursement, fraud and abuse and similar anti-referral laws. Although the Company institutes policies designed to conform practices to its standards following completion of acquisitions, there can be no assurance that the Company will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. Although the Company generally seeks to obtain indemnification from prospective sellers covering such matters, there can be no assurance that any such matter will be covered by indemnification, or if covered, that such indemnification will be adequate to cover potential losses and fines.

     NOTE 6 — STOCK REPURCHASE PROGRAM

     On April 28, 2003, the Company announced that its Board of Directors authorized the repurchase of up to $100 million of its outstanding shares of common stock either in the open market or through privately negotiated transactions, subject to market conditions, regulatory constraints and other factors. The Company, which had approximately 38.7 million shares of common stock outstanding as of June 30, 2003, is not obligated to repurchase any specific number of shares under the program. The Company expects its purchases to be

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funded with a portion of the Company’s available cash and funds available under the Company’s amended and restated credit facility. The Company intends to seek approvals under the credit facility, as necessary.

     During the three months ended June 30, 2003, the Company used available cash to purchase 873,800 shares for an aggregate of approximately $17.0 million.

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

     You should read this discussion together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report.

Overview

     At June 30, 2003, we operated 28 general, acute care hospitals and related healthcare entities located in non-urban communities in the states of Alabama, Florida, Kansas, Kentucky, Louisiana, Tennessee, Utah, West Virginia and Wyoming.

Forward-Looking Statements

     This report and other materials we have filed or may file with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made, or to be made, by us, contain, or will contain, disclosures which are “forward-looking statements.” Forward-looking statements include all statements that do not relate solely to historical or current facts and can be identified by the use of words such as “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan” or “continue.” These forward-looking statements are based on the current plans and expectations of our management and are subject to a number of uncertainties and risks that could significantly affect our current plans and expectations and future financial condition, results of operations and cash flows. These factors include, but are not limited to:

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     As a consequence, current plans, anticipated actions and future financial conditions and results may differ from those expressed in any forward-looking statements made by or on behalf of our company. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to rely unduly on such forward-looking statements when evaluating the information presented in this report.

Results of Operations

     The key metrics we use internally to evaluate our revenues are equivalent admissions, which equates to volume, and revenues per equivalent admission, which relates to pricing and acuity. The growth in outpatient revenues lowers our growth in revenues per equivalent admission, as revenues from outpatient services are generally lower than inpatient revenues. We continue to receive pressures from payors to shift to more outpatient procedures.

Revenue/Volume Trends

     We anticipate that our patient volumes and related revenues will increase as a result of the following factors:

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     Although we anticipate our patient volumes to increase, the resulting revenues will likely be offset in part by the following factors:

Cost Containment

     We seek to control costs by, among other things, reducing labor costs by improving labor productivity and attempting to decrease the use of contract labor, when appropriate, controlling supply expenses through the use of a group purchasing organization and reducing uncollectible revenues. We have implemented cost control initiatives including adjusting staffing levels according to patient volumes, modifying supply purchases according to usage patterns and providing training to hospital staff in more efficient billing and collection processes. We believe that as our company grows, we will likely benefit from our ability to spread fixed administrative costs over a larger base of operations.

     There is no assurance that we can contain certain costs in the future. As a result of the general shortage of nurses and medical technicians in the healthcare industry, we may experience an increase in salaries and benefits expense as we may be forced to hire additional contract health professionals or increase salaries to attract and retain our clinical employees.

     In addition, the healthcare industry has recently experienced an increase in the cost of all insurance lines, especially professional and general liability insurance. We currently have no information that would lead us to believe that this trend is only temporary in nature. Accordingly, there is no assurance that these costs will not have a material adverse effect on our future operating results.

     Pressure on payment levels, the increase in outpatient services and the large number of our patients who participate in discounted plans will present ongoing challenges for us. These challenges are intensified by our inability to control these trends and the associated risks. To maintain or improve operating margins in the future, we must, among other things, increase patient volumes while controlling the costs of providing services.

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Impact of Acquisitions

     Because of the relatively small number of hospitals we own, each hospital acquisition can materially affect our overall operating margin. We typically take a number of steps to lower operating costs when we acquire a hospital. The impact of our actions may be offset by other cost increases to expand services, strengthen medical staff and attract additional patients to our facilities. The benefits of our investments and of other activities to improve operating margins generally do not occur immediately. Consequently, the financial performance of a newly acquired hospital may adversely affect our overall operating margins in the short term. As we acquire additional hospitals, this effect may be mitigated by the expanded financial base of our existing hospitals and the allocation of corporate overhead among a larger number of hospitals.

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Operating Results Summary

     The following is a summary of results of operations for the three months and six months ended June 30, 2003 and 2002 (dollars in millions, except for revenues per equivalent admission):