1045829--9/3/2009--VANGUARD_HEALTH_SYSTEMS

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Risks Relating to our Capital Structure Our high level of debt and significant leverage may adversely affect our operations and our ability to grow and otherwise execute our business strategy. Despite our current significant leverage, we may still be able to incur substantially more debt. This could further exacerbate the risks that we and our subsidiaries face. Operating and financial restrictions in our debt agreements limit our operational and financial flexibility. We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. Tightened credit markets and continued economic deterioration may prevent us from servicing our current debt or refinancing, replacing or otherwise obtaining a new revolving loan facility to replace our facility expiring in September 2010 or obtaining the necessary funds to repay a significant portion of our debt that will mature during September 2011. An increase in interest rates would increase the cost of servicing our debt and could reduce our profitability. We are controlled by a small number of stockholders and they may have conflicts of interest with us in the future. Risks Related to our Business If we are unable to enter into favorable contracts with managed care plans, our operating revenues may be reduced. Our revenues may decline if federal or state programs reduce our Medicare or Medicaid payments or managed care companies reduce our reimbursements. We conduct business in a heavily regulated industry, and changes in regulations or violations of regulations may result in increased costs or sanctions that could reduce our revenues and profitability. Some of our hospitals will be required to submit to CMS information on their relationships with physicians and this submission could subject such hospitals and us to liability. Providers in the healthcare industry have been the subject of federal and state investigations, whistleblower lawsuits and class action litigation, and we may become subject to investigations, whistleblower lawsuits or class action litigation in the future. Competition from other hospitals or healthcare providers (especially specialty hospitals) may reduce our patient volumes and profitability. We may be subject to liabilities from claims brought against our facilities. Our hospitals face a growth in uncompensated care as the result of the inability of uninsured patients to pay for healthcare services and difficulties in collecting patient portions of insured accounts. Our performance depends on our ability to recruit and retain quality physicians. We may be unable to achieve our acquisition and growth strategies and we may have difficulty acquiring not-for-profit hospitals due to regulatory scrutiny. Difficulties with integrating our acquisitions may disrupt our ongoing operations. The cost of our malpractice insurance and the malpractice insurance of physicians who practice at our facilities remains volatile. Successful malpractice or tort claims asserted against us, our physicians or our employees could materially adversely affect our financial condition and profitability. We are subject to uncertainties regarding healthcare reform that could materially and adversely affect our business. Our facilities are concentrated in a small number of regions. If any one of the regions in which we operate experiences a regulatory change, economic downturn or other material change, our overall business results may suffer. Year Ended June 30, 2009 If we are unable to control our healthcare costs at Phoenix Health Plan and Abrazo Advantage Health Plan, if the health plans should lose their governmental contracts or if budgetary cuts reduce the scope of Medicaid or dual-eligibility coverage, our profitability may be adversely affected. We are dependent on our senior management team and local management personnel, and the loss of the services of one or more of our senior management team or key local management personnel could have a material adverse effect on our business. Controls designed to reduce inpatient services may reduce our revenues. If we fail to continually enhance our hospitals with the most recent technological advances in diagnostic and surgical equipment, our ability to maintain and expand our markets will be adversely affected. Our hospitals face competition for staffing especially as a result of the national shortage of nurses and the increased imposition on us of nurse-staffing ratios, which has in the past and may in the future increase our labor costs and materially reduce our profitability. The current economic recession, along with difficult and volatile conditions in the capital and credit markets, could materially adversely affect our financial position, results of operations or cash flows, and we are unsure whether these conditions will improve in the near future. Compliance with section 404 of the Sarbanes-Oxley Act may negatively impact our results of operations and failure to comply may subject us to regulatory scrutiny and a loss of investors confidence in our internal control over financial reporting. A failure of our information systems would adversely affect our ability to properly manage our operations. Difficulties with current construction projects or new construction projects such as additional hospitals or major expansion projects may involve significant capital expenditures that could have an adverse impact on our liquidity. If the costs for construction materials and labor continue to rise, such increased costs could have an adverse impact on the return on investment relating to our expansion projects. State efforts to regulate the construction or expansion of hospitals could impair our ability to operate and expand our operations. If the fair value of our reporting units declines, a material non-cash charge to earnings from impairment of our goodwill could result.

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1045829--9/3/2009--VANGUARD_HEALTH_SYSTEMS_INC