SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 27, 1997 Commission file number 1-12055 PARACELSUS HEALTHCARE CORPORATION (Exact name of registrant as specified in its charter) California 95-3565943 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 515 W. Greens Road, Suite 800, Houston, Texas (Address of principal executive offices) 77067 (281) 774-5100 (Zip Code) (Registrant's telephone number, including area code) ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTOR On June 27, 1997, Mr. James A. Conroy submitted his resignation as a director of Paracelsus Healthcare Corporation (the "Company"). In his resignation letter, which is hereby filed as Exhibit 17, Mr. Conroy stated " My resignation is due to my unhappiness with the unwillingness of the Special Committee to address the issue of the old Paracelsus board members' responsibility for the reporting and accounting failures found by the Special Committee, as well as my strong disagreement with the decision made by the other board members not to make full disclosure of the results of the Special Committee's investigation to the Securities and Exchange Commission." The Company's management, while accepting Mr. Conroy's resignation, does not agree with Mr. Conroy's positions on the matters addressed above because of the following: (i) The Special Committee's investigation sought to uncover all facts relevant to the responsibility of the directors of premerger Paracelsus for the reporting and accounting failures reflected in the Company's restatement of its financial statements. Based on these facts, a majority of the Special Committee members, including a completely disinterested nonmanagement director, concluded that it was not in the Company's best interests for the Special Committee to make recommendations concerning the old Paracelsus' board members at that time. The Company's position was fully supported by Wilmer, Cutler & Pickering, its outside legal counsel which firm had been retained by the Special Committee to conduct such inquiry. (ii) During the last Board Meeting, Mr. Conroy motioned that the Company should waive its attorney-client and work product privileges so as to permit disclosure of the detailed facts uncovered in the Special Committee's investigation to the Securities and Exchange Commission. During the discussion of that motion, Wilmer, Cutler & Pickering advised the Company that, given the pendency of the shareholder and derivative litigation and other factors, waiver of the privileges was not in the best interests of the Company. The Company was further reassured by Wilmer, Cutler & Pickering, that based on the available facts, all legally required public disclosures concerning the results of the Special Committee's investigation had already been made. Based on this advice, there was no second to Mr. Conroy's motion. (iii)The Board is concerned that Mr. Conroy's positions may reflect his interests as a member of a large group of former Champion shareholders, rather that the interests of the Company, its shareholders and all of its other constituent groups. ITEM 7. EXHIBIT 17 Letter re director resignation of Mr. James Conroy. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Paracelsus Healthcare Corporation (Registrant) /s/ James G. VanDevender Dated: July 7, 1997 By: ___________________________ James G. VanDevender Executive Vice President, Chief Financial Officer & Director