33

                  SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C. 20549
                               FORM 10-K
(Mark One)

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
                                  OR
[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________________ to ___________________

                    Commission file number  1-9913

                        KINETIC CONCEPTS, INC.
        (Exact name of registrant as specified in its charter)
                                   
        Texas                                    74-1891727
- - ---------------------                ---------------------------------
(State of incorporation)             (I.R.S. Employer Identification No.)

     8023 Vantage Drive
    San Antonio, TX  78230                  (210) 524-9000 
- - -----------------------------         --------------------------------
(Address of principal executive        (Registrant's telephone number)
     offices and zip code)
     
        Securities registered pursuant to Section 12(b) of the Act:
 
     Title of Each Class        Name of Each Exchange on Which Registered
- - ---------------------------        -----------------------------------
          None                                    None

      Securities registered pursuant to Section 12(g) of the Act:
                                   
                    Common Stock, $0.001 par value
                           (Title of Class)
                                   
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  _____

Indicate  by check mark if disclosure of delinquent filers pursuant  to
Item  405  of Regulation S-K is not contained herein, and will  not  be
contained,  to the best of registrant's knowledge, in definitive  proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendments to this Form 10-K. [  ]

The  aggregate market value of the voting stock held of record by  non-
affiliates  of  the  Registrant as of March 1, 1997  was  approximately
$298,691,592.

As  of  March 1, 1997, there were 42,818,044 shares of the Registrant's
Common Stock outstanding.

Portions of the following documents are incorporated by reference  into
the  designated  parts  of  this Form  10-K:   (a)   Annual  Report  to
Shareholders for the fiscal year ended December 31, 1996  (in  Parts  I
and  II) and  (b) Definitive Proxy Statement dated March 31, 1997  (the
"Proxy  Statement") relating to the Company's 1997  Annual  Meeting  of
Shareholders (in Part III), which Registrant intends to file not  later
than 120 days after the close of the Company's fiscal year.

                   FORM 10-K TABLE OF CONTENTS
                          PART I                            PAGE

Item 1.    Business....................................      3

Item 2.    Properties..................................     16

Item 3.    Legal Proceedings...........................     16


Item 4.    Submission of Matters to a Vote
           of Security Holders.........................     17

Item 4a.   Executive Officers of the Registrant........     17

                          PART II

Item 5.    Market for Registrant's Common Equity
           and Related Stockholder Matters.............     20

Item 6.    Selected Financial Data.....................     20

Item 7.    Management's Discussion and Analysis of
           Financial Condition and Results of Operations    20

Item 8.    Financial Statements and
           Supplementary Data..........................     20

Item 9.    Changes in and Disagreements with Accountants
           on Accounting and Financial Disclosure......     20

                          PART III

Item 10.   Directors and Executive Officers
           of the Registrant...........................     23

Item 11.   Executive Compensation......................     23

Item 12.   Security Ownership of Certain Beneficial
           Owners and Management.......................     23

Item 13.   Certain Relationships and Related
           Transactions................................     23

                          PART IV

Item 14.   Exhibits, Financial Statement Schedules,
           and Reports on Form 8-K.....................     24
                                
Signatures...............................                   29
                                

                             PART I
                                
                                
Item 1.  Business

General

      Kinetic  Concepts, Inc. (the "Company" or  "KCI")  designs,
manufactures,  markets  and  distributes  therapeutic   products,
primarily specialty hospital beds, mattress overlays and  medical
devices,  that treat and prevent the complications of immobility.
By  preventing  these complications or accelerating  the  healing
process,  the  Company's therapies and services can significantly
reduce   the  cost  of  patient  care  while  improving  clinical
outcomes.

     From an initial base of specialty hospital beds designed for
and  used almost exclusively in acute care hospitals, the Company
has   broadened  its  existing  product  line  and  expanded  its
distribution  network  to  serve  the  extended  and  home   care
settings.  More  recently,  Kinetic  Concepts  has  applied   its
therapeutic  expertise to develop innovative medical  devices  to
treat  wounds  and  prevent  deep vein  thrombosis  ("DVT").  The
Company  has also developed a product line to aid in the care  of
large or obese patients.

     Founded  by  James  R. Leininger, M.D.,  an  emergency  room
physician,  to provide better care for his patients, the  Company
was  incorporated  in  Texas  in 1976.  The  Company's  executive
offices  are  located at 8023 Vantage Drive, San  Antonio,  Texas
78230, and its telephone number is (210) 524-9000.

      The Company is organized into four operating divisions: KCI
Therapeutic   Services,  Inc.  ("KCI  Therapeutic  Services"   or
"KCTS"),   KCI   Home   Care,  KCI  International,   Inc.   ("KCI
International") and KCI New Technologies, Inc. ("NuTech").

      KCI Therapeutic Services. KCI Therapeutic Services provides
a  complete  line  of therapeutic specialty support  surfaces  to
patients  in acute and sub-acute facilities as well as  extended-
care  settings.  This  division consists  of  approximately  1000
personnel,  many  of whom have a medical or clinical  background.
Sales are generated by a sales force of more than 300 individuals
who   are  responsible  for  new  accounts  in  addition  to  the
management and expansion of existing accounts. A portion of  this
sales  force  is focused exclusively on either the extended  care
market  or  the  acute care market although the majority  of  the
sales force is responsible for sales across both settings.

      KCI  Therapeutic  Services has a national 24-hour  customer
service  communications  system which  enhances  its  ability  to
quickly and efficiently respond to its customers' needs, in  some
cases  on a  24 hours-a-day, seven days-a-week basis. The Company
distributes its specialty patient support products to  acute  and
extended  care  facilities  through a  network  of  144  domestic
service centers. The KCTS service centers are organized as profit
centers  and  the  general  managers who  supervise  the  service
centers  are  responsible for both sales and service  operations.
Each center has an inventory of specialty beds and overlays which
are delivered to the individual hospitals or nursing homes on  an
as-needed  basis.  The  service  personnel  also  assist  in  the
placement of the patient on a support surface and in the  pick-up
and maintenance of the beds, overlays, sheets and accessories.
  
      The  KCTS sales and support staff is comprised of over  300
employees  with  medical or clinical backgrounds.  The  principal
responsibility of approximately 130 of these clinicians is making
product  rounds  and participating in treatment protocols.  These
clinicians  educate  the  hospital staff  on  issues  related  to
patient  treatment, assist in the establishment of protocols  and
accumulate outcome data related to the treatment of the  patient.
The  clinical  staff makes approximately 200,000  patient  rounds
annually.   KCTS accounted for approximately 64%,  61%  and  53%,
respectively, of the Company's total revenue in the  years  ended
December 31, 1996, 1995 and 1994.

      KCI  Home Care. KCI Home Care rents and sells products that
address  the  unique demands of the home health care  market.  In
January  1995, KCI Home Care started a transition from a combined
direct/dealer  distribution system to distributing  its  products
through  home  medical equipment ("HME") providers.  The  Company
believes  that  selling  through the home care  provider  network
gives  it access to a larger patient population and improves  the
overall  contribution  from  this  business  segment  despite   a
reduction  in  per patient revenue.  KCI Home Care accounted  for
approximately 5% of the Company's total revenue in 1996.

      KCI  International. KCI International offers the  Company's
therapies   and  services  in  ten  foreign  countries  including
Germany,  Austria,  the  United  Kingdom,  Canada,  France,   the
Netherlands,  Switzerland,  Australia,  Italy  and  Denmark.  The
Denmark  office  has  recently been  expanded  to  serve  all  of
Scandinavia.   In   addition,  relationships   with   independent
distributors in Latin America, the Middle East, Asia and  Eastern
Europe  allow KCI International to serve the demands of a growing
global  market.   KCI International accounted  for  approximately
25%, 25% and 17%, respectively, of the Company's total revenue in
1996,  1995  and  1994.  (See Note 13 of  Notes  to  Consolidated
Financial Statements, included in the Company's Annual Report  to
Shareholders,   for   information   on   foreign   and   domestic
operations.)

      NuTech. NuTech manufactures and markets the PlexiPulse  and
PlexiPulse   All-in-1   System  through  an   independent   sales
representative network although this division is in  the  process
of  developing  a  dedicated sales force.  NuTech  accounted  for
approximately 6% of the Company's total revenue in 1996.
  

Therapies/Products

      The  Company's "Continuum of Care" is focused on preventing
and/or treating wound care patients, pulmonary patients, large or
obese   patients  and  patients  with  circulatory  problems   by
providing  innovative, outcome driven therapies  across  multiple
care   settings.   The  Company's  therapies   include   Pressure
Relief/Pressure  Reduction,  Kinetic  Therapy,  Bariatric   Care,
Mechanical Compression and Negative Pressure products and medical
devices.

      Pressure Relief/Pressure Reduction. The Company's  Pressure
Relief  products  include a variety of framed beds  and  overlays
such  as  the  KinAir  III (R), TheraPulse,  FluidAir  Elite  TM,
HomeKair  (R),  First Step (R) TriCell TM, DynaPulse  (R),  First
Step (R) Plus , First Step (R) Select and AirWorks (R) Plus.  The
KinAir  III has been shown to provide effective skin care therapy
in the treatment of pressure sores, burns and post operative skin
grafts  and flaps, and to help prevent the formation of  pressure
sores   and  certain  other  complications  of  immobility.   The
TheraPulse  provides a more aggressive form of treatment  through
continuous  pulsating action which gently massages  the  skin  to
help  promote  capillary  and lymphatic circulation  in  patients
suffering  from  severe  pressure sores, burns,  skin  grafts  or
flaps, swelling or circulation problems. The FluidAir Elite is an
air-fluidized  bead bed with a built-in patient  weighing  system
which  supports  the patient on a low-pressure  surface  of  air-
fluidized silicon beads providing pressure relief for skin grafts
or  flaps, burns and pressure sores. The HomeKair bed and TriCell
overlay  are  low-cost pressure relief products  designed  to  be
easily  transportable directly to a patient's home. The DynaPulse
is  a  pulsating mattress replacement system that  helps  prevent
pressure  ulcers in patients at high risk for skin breakdown  and
can  also  be used to treat existing pressure ulcers.  The  First
Step  family  of overlays is designed to provide pressure  relief
and  help  prevent pressure sores. AirWorks Plus  is  a  low-cost
overlay  which  has  air chambers which assist in  redistributing
pressure for better skin care.

      Kinetic  Therapy.  The  U.S. Centers  for  Disease  Control
defines  Kinetic  Therapy  as lateral rotation  of  at  least  40
degrees  on  each side. The Company believes Kinetic  Therapy  is
essential  to the prevention or effective treatment of  pneumonia
and  other  pulmonary  complications in  immobile  patients.  The
Company's  Kinetic  Therapy products  include  the  TriaDyne  TM,
RotoRest (R), RotoRest (R) Delta, BioDyne (R) II and Q2 Plus  TM.
The  TriaDyne, introduced in mid-1995, provides patients in acute
care  settings with three distinct therapies on an air suspension
surface.  The  TriaDyne applies Kinetic Therapy by  rotating  the
patient  up to 40 degrees to each side and provides an  industry-
first  feature of simultaneously turning the patient's torso  and
lower  body  in  opposite directions while  keeping  the  patient
positioned  in  the  middle of the bed.  The  TriaDyne  can  also
provide  percussion  therapy to the  patient's  chest  to  loosen
mucous  buildup  in  the lungs and pulsating therapy  to  promote
capillary   circulation.  The  TriaDyne  is  built   on   Stryker
Corporation's  critical  care frame, which  is  narrow  and  more
suited  to an ICU environment. The TriaDyne offers several  other
novel features not available on other products. The RotoRest  and
RotoRest  Delta are specialty beds which can rotate a patient  up
to  a 62 degree angle on each side for the treatment of pulmonary
complications and prevention of pneumonia. The RotoRest  products
have  been  shown to improve the care of patients suffering  from
multiple   trauma,   spinal   cord   injury,   severe   pulmonary
complications,  respiratory  failure  and  DVT.  The  BioDyne  II
combines many of the therapeutic benefits of the KinAir  III  and
the  RotoRest  and is used by patients suffering from  pneumonia,
coma, stroke and chronic neurological disorders.

      Bariatric  Care. The Company markets a line of  therapeutic
support surfaces and aids for patients suffering from obesity,  a
market  that had previously been underserved. These products  not
only  provide  the proper support needed by obese  patients,  but
also  enable  nurses to care for these patients  in  a  dignified
manner.  Moreover,  treating obese  patients  is   a  significant
staffing issue for many health care facilities because moving and
handling   these   patients  increases  the  risk   of   worker's
compensation claims by nurses. The use of the Company's Bariatric
products  enables hospital staff to treat and move obese patients
in  a safer manner while utilizing fewer hospital personnel.  The
most advanced product in this line is the BariKare (R), which can
serve  as  a  chair,  bed or X-ray table. This  product  is  used
generally for patients weighing from 300 to 500 pounds but can be
used  for  patients  who  weigh up to  850  pounds.  The  Company
believes  that the BariKare is the most advanced product  of  its
type  available today.  In 1996, the Company also introduced  the
FirstStep  Select Heavy Duty overlay which incorporates pressure-
relieving therapy in a design that supports patients weighing  up
to 850 pounds.

      Medical  Devices. The Company also rents and sells  various
products  manufactured by the Company other than patient  support
surfaces.  These products include the PlexiPulse (R),  PlexiPulse
All-in-1 System TM and The V.A.C. (R)

     Mechanical Compression. The PlexiPulse and PlexiPulse All-in-
1  System  are non-invasive vascular assistance devices that  aid
venous return by pumping blood from the lower extremities to help
prevent DVT and re-establish microcirculation. The pumping action
is created by compressing specific parts of the foot or calf with
specially  designed  inflatable cuffs that  are  connected  to  a
separate pump unit. The cuffs are wrapped around the foot  and/or
calf  and  are  inflated in timed increments  by  the  pump.  The
intermittent inflation compresses a group of veins in  the  lower
limbs  and  boosts the velocity of blood flowing back toward  the
heart.  This  increased velocity has been proven to significantly
decrease  formation  of DVT in non-ambulatory  post-surgical  and
post-trauma  patients. The PlexiPulse is effective in  preventing
DVT, reducing edema and improving lower limb blood circulation.

      Negative  Pressure.  The Company also  markets  the  Vaccum
Assisted  Closure device ( the "V.A.C."), a non-invasive,  active
wound closure therapy that utilizes negative pressure. The V.A.C.
promotes  healing  in  wounds, pressure ulcers  and  grafts  that
frequently  do  not respond to conventional treatment.  Treatment
protocols with the V.A.C. call for a proprietary foam material to
be  fitted and placed in or on top of a wound and covered with an
airtight, occlusive dressing. The foam is attached to a  separate
vacuum  pump. When activated, the vacuum pump creates a  negative
pressure in the wound that draws the tissue together. This vacuum
action  also stimulates blood flow on the surface of  the  wound,
reduces edema and decreases bacterial colonization, all of  which
stimulate  healing. The dressing material is  replaced  every  48
hours  and fitted to accommodate the decreasing size of the wound
over time. This is a significant improvement over the traditional
method  for treating wounds which requires the nursing  staff  to
clean and dress a serious wound every 8 to 12 hours.

Product Support -- The Clinical Advantage

      The elements which provide KCI a Clinical Advantage in  the
marketplace  continue to evolve to meet the changing requirements
of  today's  healthcare provider.  As both private and government
reimbursement  programs continue to move  towards  systems  where
facilities receive a fixed payment based only upon the  patient's
initial  diagnosis  to  cover  all  medical  expenses,  actuarial
information becomes more critical to predict patient outcomes and
to  develop  appropriate pricing structures.  The  collection  of
this  valuable  data is central to KCI's effort of  proving  cost
effective patient outcomes.

      At  the foundation of KCI's Clinical Advantage is an active
program  of  sponsoring  independent  clinical  research.   KCI's
portfolio  of  over 50 active and completed studies supports  the
medical efficacy and cost effectiveness of utilizing our products
and protocols as part of the healing and prevention process.   In
addition,  KCI research is focused on providing the outcome  data
demanded by today's health care provider.

      Health  care  providers around the world  who  utilize  KCI
products   and  services  experience  aspects  of  The   Clinical
Advantage every day.  Whether it be an emergency placement  of  a
KCI  TriaDyne  or the V.A.C.; the participation in  developing  a
wound  care management program; or daily patient rounds to assist
facility  staff  and collect clinical outcome data,  trained  KCI
team  members  make  more  than 200,000  regular  patient  rounds
annually.   This  staff is comprised of over 1000 employees  with
more  than 30% having a medical or clinical background.  In order
for  the  hospital and KCI to collect and process the  data,  the
Company   has   developed  Genesis,  Odyssey,  and  PAO2,   three
proprietary software programs.

      Genesis  is  utilized  by KCI staff  clinicians  to  assist
customers  in  tracking asset utilization and  patient  outcomes.
Using hand held computers, KCI clinicians make regular rounds  to
document  the  effect  of  KCI products on  a  patient's  overall
outcome.   At  the  facility's  direction,  this  information  is
entered  into  a central database and analyzed to  determine  the
effectiveness of specific treatment protocols.

     Odyssey and PAO2 are sold to KCI customers to enable them to
standardize  the information collected on their Wound  Management
and  Pulmonary Management Protocols, respectively.   Health  care
providers utilize both Odyssey and PAO2 as tools to document  and
track complete wound and pulmonary management programs, including
the  resultant  patient outcome and the cost  of  achieving  that
outcome.   Facilities collect data on their wound  and  pulmonary
patients,  and periodically share this information with  KCI  for
inclusion  in a national database.  KCI compiles the  information
and  can  generate  reports comparing  a  facility's  program  or
patient results with those of similar programs or patients on  an
internal,  regional or national basis.  This information  enables
each  facility  to continuously improve its wound  and  pulmonary
management  programs, achieving the best outcome  at  the  lowest
total cost of care.

       KCI's  integrated  clinical  database  consisting  of  the
Genesis, Odyssey, an PAO2 information platforms combined with  an
extensive   clinical  field  presence,  and   clinically   proven
therapies  and  protocols  define KCI's  unique  product  support
advantage in the marketplace, The Clinical Advantage.
  

Competition

      The Company believes that the principal competitive factors
within  the  patient  support surfaces  marketplace  are  product
efficacy,  clinical  outcomes, service  and  cost  of  care.  The
Company  believes that a national presence with full distribution
capabilities is important to serve large, sophisticated  national
and  regional health care group purchasing organizations ("GPOs")
and providers.

      The  Company contracts with both proprietary and  voluntary
GPOs.  Proprietary  GPOs  own all of  the  hospitals  which  they
represent  and, as a result, can ensure complete compliance  with
an   executed   national  agreement.  Voluntary  GPOs   negotiate
contracts  on behalf of member hospital organizations but  cannot
ensure  that  their  members will comply with  the  terms  of  an
executed  national agreement. Approximately 47% of the  Company's
total revenue during 1996 was generated under national agreements
with GPOs.

      In  November 1996, the Company announced that it  had  been
advised by  Premier Purchasing Partners, L.P., that its bid to be
the  primary  supplier  for the newly  combined  group  had  been
awarded  to  another  vendor.  Premier is a new  voluntary  group
purchasing  organization which was formed  as  a  result  of  the
merger of three separate group purchasing organizations.  Revenue
from   hospitals   within   Premier  for   1996   accounted   for
approximately  10%  of  the  Company's  total  revenue.   Because
facilities  within Premier are not committed to do business  with
the  group's  primary  vendor, it is  difficult  to  predict  the
ultimate  effect  of the new agreement on revenue  and  operating
profits.   Management expects that a portion of the revenue  will
be retained.

      The  Company  competes on a national level  with  Hill-Rom,
Kendall  and  Invacare  and on a regional and  local  level  with
numerous other companies.   The Company competes principally with
Invacare  in  the  home  care segment. In  certain  international
markets,  the Company competes principally with Hill-Rom.  NuTech
competes primarily with Kendall International in the foot and leg
compression market.

Market Outlook

      The  Company  believes that it is well positioned  to  take
advantage  of  the  following factors affecting  the  market  for
health care products and services:

      Continuing  pressure  on health care providers  to  control
costs  and  improve  patient outcomes. The  pressure  to  control
health  care costs has intensified since 1993 as a result of  the
health  care reform debate and continues as Congress attempts  to
slow the rate of growth of health care costs as part of an effort
to  balance the federal budget. While the exact amount and nature
of  any  health  care  budget cuts are not  yet  determined,  the
Company  believes  that health care providers  will  continue  to
experience increased cost control pressures.

       Accelerating  migration  of  patients  from   acute   care
facilities into extended and home care settings. Prompted by cost
reduction   pressures  from  government  reimbursement  programs,
private  insurers and managed care organizations, health care  is
now  readily available in a wide variety of settings with a broad
variety of cost structures. The role of traditional hospitals has
been  somewhat reduced to specific acute care functions  such  as
emergency and specialty units. Most rehabilitation now occurs  in
extended  care settings which currently account for approximately
8%  of  all  U.S. health care expenditures. U.S. expenditures  on
this  market  segment are currently in excess of $70 billion  and
have  grown at an average rate of approximately 9% per year since
1990.

      The home care setting has also gained tremendous importance
in  health care. Costs associated with treating a patient in  the
home  are  typically  40% to 70% less than if  the  patient  were
treated in a hospital or nursing home. Total U.S. expenditures on
home  health care are in excess of $25 billion annually and  have
grown  at  an  annual  rate  of 19%  per  year  since  1990.  The
accelerating  migration of patients from  acute  care  facilities
into  extended  and  home care settings has  created  demand  for
products  which  conform  to the physical  constraints  of  these
settings   and  match  the  relative  acuity  levels   and   cost
structures.

      Consolidation  of health care providers  and  national  and
regional group purchasing organizations. Consolidation of  health
care   providers  and  national  and  regional  group  purchasing
organizations  within  the  health  care  industry  has   greatly
increased  the  number of patients whose care  is  covered  by  a
national  organization which, in turn, has  resulted  in  greater
purchasing   leverage   for   national   health   care   provider
organizations.  In  order to minimize costs, these  organizations
actively  seek to place patients in the most cost effective  care
setting.  Serving a national account generally  requires  that  a
vendor  provide goods and services suitable for all care settings
across a broad regional or national area.

      Growing  demand  for clinically proven and  cost  effective
therapies.  Cost  containment  efforts  have  spread  across  all
aspects  of the health care industry. Both private and government
reimbursement  programs are moving toward systems  which  feature
prospective  payment.  Under this system, health  care  providers
receive  a  fixed payment determined by historical cost to  cover
all  expenses  associated with a specific illness. Expenses  that
exceed  the amount reimbursed must be borne by the provider.  The
risk  of bearing these expenses has prompted providers to  demand
documentation  that  a  product or  procedure  will  deliver  the
desired  clinical  outcome  at a cost  savings  over  traditional
therapies.

     Patient demographics. U.S. Census Bureau statistics indicate
that  the 65-and-over age group is the fastest growing population
segment  and is expected to exceed 75 million by the  year  2010.
Management  of  wounds and circulatory problems  is  crucial  for
elderly   patients.   These  patients  frequently   suffer   from
deteriorating  physical conditions and their wound  problems  are
often exacerbated by incontinence and poor nutrition.

      Obesity  is  increasingly being  recognized  as  a  serious
medical complication. In 1994, approximately 650,000 patients  in
U.S. hospitals had a principal or secondary diagnosis of obesity.
Obese patients tend to have limited mobility and thus are at risk
for  circulatory  problems  and skin  breakdown.  Treating  obese
patients  is  also a significant staffing issue for  many  health
care facilities and a cause of worker's compensation claims among
nurses.

      Growth  in  international markets. Health care  systems  in
established economies are increasingly seeking methods to provide
improved care at a reduced cost and are thereby becoming aware of
the   benefits  of  therapeutic  patient  support  surfaces.  The
delivery  of  improved levels of health care is also  growing  in
certain emerging economies.

     Emergence of disease state niche markets. The industry trend
toward  consolidation has yielded additional leverage to national
health care provider networks and these networks are beginning to
request  packages  of  products and  services  that  offer  total
solutions  to specific diseases such as diabetes or  cancer.  The
process  of  bundling  disease state packages  may  create  niche
markets  for providers of specialty products and services.  Those
providers with the appropriate logistical capabilities  may  have
the  opportunity  to  serve  these growing  niche  markets  on  a
national scale.

Research and Development

      The focus of the Company's research and development program
has   been   to  develop  new  products  and  make  technological
improvements  to  existing  products.  Since  January  1994,  the
Company  has  introduced a number of new products including:  the
TriaDyne, the BariKare,  the TriCell, the First Step Select Heavy
Duty, the FluidAir Elite, the PlexiPulse All-in-1 System and  The
V.A.C.,  a  product  developed from technology  licensed  to  the
Company.  Expenditures  for research and development  represented
approximately 2% of the Company's total expenditures in 1996. The
Company intends to continue its research and development efforts.
  

Manufacturing
  
      The  Company's  manufacturing processes for  its  specialty
beds, mattress overlays, mattress replacement systems and medical
devices  include  the  manufacture  of  certain  components,  the
purchase  of  certain  other components from  suppliers  and  the
assembly of these components into a completed product. Mechanical
components such as blower units, electrical displays and air flow
controls  consist of a variety of customized subassemblies  which
are  purchased from suppliers and assembled by the  Company.  The
Company believes it has an adequate source of supply for each  of
the components used to manufacture its products.

Patents and Trademarks
     The Company seeks patent protection in the United States and
abroad.  As of December 31, 1996, the Company had 36 issued  U.S.
patents  relating to its specialized beds, mattresses and related
products.   The   Company  also  has  18  pending   U.S.   Patent
applications.   Many of the Company's specialized beds,  products
and  services are offered under trademarks and service marks. The
Company  has  27 registered trademarks and service marks  in  the
United States Patent and Trademark Office.

Employees

     As of December 31, 1996, the Company had approximately 2,066
employees. The Company's employees are not represented  by  labor
unions  and  the Company considers its employee relations  to  be
good.

Government Regulation

      United  States.  The  Company's  products  are  subject  to
regulation by numerous governmental authorities, principally  the
Food and Drug Administration ("FDA") and corresponding state  and
foreign regulatory agencies. Pursuant to the Federal Food,  Drug,
and Cosmetic Act, and the regulations promulgated thereunder, the
FDA   regulates  the  clinical  testing,  manufacture,  labeling,
distribution and promotion of medical devices. Noncompliance with
applicable requirements can result in, among other things, fines,
injunctions,  civil  penalties, recall or  seizure  of  products,
total  or  partial  suspension  of  production,  failure  of  the
government to grant premarket clearance or premarket approval for
devices,  withdrawal of marketing clearances  or  approvals,  and
criminal  prosecution. The FDA also has the authority to  request
repair,  replacement  or  refund  of  the  cost  of  any   device
manufactured or distributed by the Company.

      In  the United States, medical devices are classified  into
one  of  three classes (Class I, II or III) on the basis  of  the
controls  deemed necessary by the FDA to reasonably ensure  their
safety  and effectiveness. Class I devices are subject to general
controls  (e.g., labeling, premarket notification, and  adherence
to  GMPs) and Class II devices are subject to general and special
controls  (e.g., performance standards, postmarket  surveillance,
patient  registries,  and FDA guidelines). Generally,  Class  III
devices  are those devices which must receive premarket  approval
by  the FDA to ensure their safety and effectiveness (e.g., life-
sustaining,  life-  supporting and implantable  devices,  or  new
devices  which have been found not to be substantially equivalent
to  legally  marketed  devices). All  of  the  Company's  current
products  have  been classified as Class I or Class  II  devices.
Before  a  new  device  can  be introduced  in  the  market,  the
manufacturer  must generally file an application for  and  obtain
FDA clearance of a 510(k) notification or approval of a Premarket
Approval ("PMA") Application. A 510(k) clearance will be  granted
if the submitted information establishes that the proposed device
is  "substantially equivalent" to a legally marketed Class  I  or
Class II medical device or to certain Class III devices. The  FDA
recently  has  been  requiring a more rigorous  demonstration  of
substantial equivalence than in the past.

      All devices manufactured or distributed by the Company  are
subject  to  pervasive and continuing regulation by the  FDA  and
certain state agencies, including record keeping requirements and
mandatory reporting of certain adverse experiences resulting from
use  of  the  devices.  Labeling and promotional  activities  are
subject to scrutiny by the FDA and, in certain circumstances,  by
the  Federal  Trade  Commission. Current FDA  enforcement  policy
prohibits   the  marketing  of  approved  medical   devices   for
unapproved uses.

      Fraud and Abuse Laws. The Company is subject to federal and
state  laws  pertaining  to  health  care  fraud  and  abuse.  In
particular,    certain   federal   and   state   laws    prohibit
manufacturers, suppliers, and providers from giving or  receiving
kickbacks  or other remuneration in connection with the  purchase
or rental of health care items and services. The federal Medicare
and  Medicaid  anti-kickback  statute  provides  both  civil  and
criminal  penalties for, among other things, offering  or  paying
any  remuneration to induce someone to refer patients to,  or  to
purchase,  lease,  or  order (or arrange  for  or  recommend  the
purchase,  lease,  or order of), any item or  service  for  which
payment may be made by Medicare or certain federally-funded state
health   care  programs  (e.g.,  Medicaid).  This  statute   also
prohibits  soliciting or receiving any remuneration  in  exchange
for  engaging in any of these activities. The prohibition applies
whether  the  remuneration is provided  directly  or  indirectly,
overtly  or covertly, in cash or in kind. Violations of  the  law
can  result  in  numerous  sanctions, including  criminal  fines,
imprisonment,  and exclusion from participation in  the  Medicare
and Medicaid programs.

      These provisions have been broadly interpreted to apply  to
certain  relationships between manufacturers/suppliers,  such  as
the  Company, and hospitals, skilled nursing facilities ("SNFs"),
and  other  potential purchasers or sources  of  referral.  Under
current  law, courts and the Office of Inspector General  ("OIG")
of  the  United  States Department of Health and  Human  Services
("HHS") have stated, among other things, that the law is violated
where  even one purpose (as opposed to a primary or sole purpose)
of  a  particular arrangement is to induce purchases  or  patient
referrals.

      The  OIG  has  taken  recent  actions  which  suggest  that
relationships between manufacturers/suppliers of durable  medical
equipment  or  medical  supplies and SNFs  (or  other  providers)
currently  may be under scrutiny. In May 1995, the OIG  announced
an   enforcement  initiative,  "Operation  Restore  Trust,"  that
targeted  investigation of fraud and abuse in a number of  states
(i.e.,  California,  Florida, Illinois,  New  York,  and  Texas),
focusing  specifically on the long-term care,  home  health,  and
durable  medical  equipment ("DME") industries.  Furthermore,  in
August  1995,  the  OIG issued a Special Fraud  Alert  describing
certain  relationships between SNFs and suppliers  that  the  OIG
viewed as abusive under the statute.

      Several states also have anti-remuneration or other similar
laws that may restrict the payment or receipt of remuneration  in
connection with the purchase or rental of medical supplies. State
laws  vary  in  scope and have been infrequently  interpreted  by
courts  and  regulatory  agencies, but may  apply  regardless  of
whether Medicaid or Medicaid funds are involved.

      The  Company  is  also subject to federal  and  state  laws
prohibiting the presentation (or the causing to be presented)  of
claims  for payment (by Medicare, Medicaid, or other third  party
payors)  that are determined to be false, fraudulent, or  for  an
item or service that was not provided as claimed. In one case,  a
major  DME  manufacturer  paid more than  $4  million  to  settle
allegations  that it had "caused to be presented" false  Medicare
claims  through  advice that its sales force  allegedly  gave  to
customers concerning the appropriate reimbursement coding for its
products.

     Other Laws. The Company also is subject to numerous federal,
state  and  local laws relating to such matters as  safe  working
conditions,  manufacturing  practices, environmental  protection,
fire  hazard  control  and disposal of hazardous  or  potentially
hazardous substances.

      International.  Sales  of medical devices  outside  of  the
United  States are subject to regulatory requirements  that  vary
widely  from country to country. Premarket clearance or  approval
of  medical  devices is required by certain countries.  The  time
required  to obtain clearance or approval for sale in  a  foreign
country may be longer or shorter than that required for clearance
or  approval by the FDA and the requirements may vary. Failure to
comply with applicable regulatory requirements can result in loss
of  previously received approvals and other sanctions  and  could
have  a  material  adverse  effect  on  the  Company's  business,
financial condition or results of operations.


Reimbursement

      The  Company's products are rented and sold principally  to
hospitals, Extended Care facilities and HME providers who receive
reimbursement  for  the products and services they  provide  from
various  public  and  private third-party payors,  including  the
Medicare and Medicaid programs and private insurance plans. As  a
result, demand for the Company's products is dependent in part on
the  reimbursement policies of these payors. The manner in  which
reimbursement  is  sought and obtained for any of  the  Company's
products  varies  based upon the type of payor involved  and  the
setting  in  which  the  product is  furnished  and  utilized  by
patients.

      Medicare.  Medicare  is  a  federally-funded  program  that
reimburses  the costs of health care furnished primarily  to  the
elderly and disabled. Medicare is composed of two parts:  Part  A
and  Part B. The Medicare program has established guidelines  for
the coverage and reimbursement of certain equipment, supplies and
support  services.  In  general, in order  to  be  reimbursed  by
Medicare,  a health care item or service furnished to a  Medicare
beneficiary must be reasonable and necessary for the diagnosis or
treatment  of an illness or injury or to improve the  functioning
of  a malformed body part. This has been interpreted to mean that
the  item or service must be safe and effective, not experimental
or  investigational  (except under certain limited  circumstances
involving devices furnished pursuant to an FDA-approved  clinical
trial),  and appropriate. Specific Medicare guidelines  have  not
currently  been  established addressing under what circumstances,
if  any, Medicare coverage would be provided for the use  of  the
PlexiPulse or the V.A.C.

      The  methodology  for determining the  amount  of  Medicare
reimbursement of the Company's products varies based upon,  among
other  things,  the  setting  in  which  a  Medicare  beneficiary
receives  health care items and services. Most of  the  Company's
products  are  furnished in a hospital, SNF or the  beneficiary's
home.

      Hospital Setting. With the establishment of the prospective
payment  system in 1983, acute care hospitals are  now  generally
reimbursed  by Medicare for inpatient operating costs based  upon
prospectively  determined rates. Under  the  prospective  payment
system  ("PPS"),  acute  care hospitals receive  a  predetermined
payment rate based upon the Diagnosis-Related Group ("DRG") which
is  assigned  to  each Medicare beneficiary  who  is  a  hospital
inpatient,  regardless  of  the  actual  cost  of  the   services
provided. Certain additional or "outlier" payments may be made to
a  hospital for cases involving unusually long lengths of stay or
high  costs. However, outlier payments based upon length of  stay
are  gradually being phased out and will be eliminated  effective
with  fiscal  year  1998.  Furthermore, pursuant  to  regulations
issued in 1991, and subject to a ten-year transition period,  the
capital  costs  of  acute care hospitals (such  as  the  cost  of
purchasing  or  renting the Company's specialty  beds)  are  also
reimbursed  by  Medicare pursuant to an add-on to  the  DRG-based
payment  amount. Accordingly, acute care hospitals  generally  do
not  receive  direct Medicare reimbursement  under  PPS  for  the
distinct  costs incurred in purchasing or renting  the  Company's
products. Rather, reimbursement for these costs is deemed  to  be
included within the DRG-based payments made to hospitals for  the
treatment   of  Medicare-eligible  inpatients  who  utilize   the
products.  Since PPS rates are predetermined, and generally  paid
irrespective  of  a hospital's actual costs in  furnishing  care,
acute  care  hospitals have incentives to lower  their  inpatient
operating  costs  by utilizing equipment and supplies  that  will
reduce  the  length  of  inpatient  stays,  decrease  labor,   or
otherwise lower their costs.

       Certain   specialty  hospitals  (e.g.,   long-term   care,
rehabilitation  and childrens hospitals) also use  the  Company's
products. Such specialty hospitals currently are exempt from  the
PPS  and,  subject  to certain cost ceilings, are  reimbursed  by
Medicare  on a reasonable cost basis for inpatient operating  and
capital   costs  incurred  in  treating  Medicare  beneficiaries.
Consequently,  long-term  care  hospitals  may  receive  separate
Medicare   reimbursement  for  reasonable   costs   incurred   in
purchasing or renting the Company's products.

      Skilled  Nursing Facility Setting. SNFs which  purchase  or
rent  the  Company's  products may be reimbursed  directly  under
Medicare  Part  A  for  some  portion of  their  incurred  costs.
Generally speaking, only the costs of treatment during the  first
100 days of a qualifying spell of illness are subject to Medicare
reimbursement. The costs incurred by SNFs in furnishing  care  to
Medicare beneficiaries are categorized as either routine costs or
ancillary costs. Routine costs are those costs which are incurred
for items and services routinely furnished to all patients (e.g.,
general   nursing  services,  items  stocked  in  gross  supply).
Ancillary costs are considered those costs which are incurred for
items  or  services ordered to treat a condition  of  a  specific
patient  and which are not generally furnished to most  patients.
Ancillary costs are not subject to the routine cost limits. Given
the  current  routine cost limits, SNFs may be more  inclined  to
purchase  or  rent products which are reimbursed by  Medicare  as
ancillary   items  or  services  than  if  these  products   were
reimbursed  as  routine  items  or  services.  At  present,   the
Company's specialty beds are classified under Medicare Part A  as
ancillary  items.  HCFA currently interprets  the  definition  of
ancillary items to include certain support surfaces such  as  low
air  loss  mattress  replacements, bed overlay  systems  and  air
fluidized therapy. Neither The V.A.C. nor the PlexiPulse have yet
been  classified  as  ancillary items when  furnished  in  a  SNF
setting.

      Home  Setting. The Company's products are also provided  to
Medicare  beneficiaries in the home settings. Medicare reimburses
beneficiaries,  or  suppliers  accepting  assignment,   for   the
purchase or rental of DME for use in the beneficiary's home or  a
home  for  the aged (as opposed to use in a hospital  or  skilled
nursing facility setting). Provided that various Medicare Part  B
coverage  criteria  are met, certain of the  Company's  products,
including  air  fluidized beds, air-powered  flotation  beds  and
alternating  air mattresses, are reimbursed in the  home  setting
under  the DME category known as "Capped Rental Items."  Pursuant
to  the  fee  schedule  payment methodology  for  this  category,
Medicare  pays a monthly rental fee (for a period not  to  exceed
fifteen  months)  equal  to  80%   of the  established  allowable
charge   for   the   item.  Guidelines  concerning   under   what
circumstances,  if  any,  The V.A.C. or the  PlexiPulse  will  be
covered and reimbursed by DME have not been established.

       Medicaid.   The   Medicaid  program   is   a   cooperative
federal/state  program that provides medical assistance  benefits
to  qualifying  low  income  and medically-needy  persons.  State
participation  in Medicaid is optional and each  state  is  given
discretion  in  developing  and administering  its  own  Medicaid
program,  subject to certain federal requirements  pertaining  to
payment  levels, eligibility criteria and minimum  categories  of
services. The Medicaid program finances approximately 50% of  all
care  provided  in  skilled  nursing facilities  nationwide.  The
Company sells or rents its products to SNFs for use in furnishing
care  to Medicaid recipients. SNFs, or the Company, may seek  and
receive  Medicaid  reimbursement directly  from  states  for  the
incurred  costs. However, the method and level of  reimbursement,
which generally reflects regionalized average cost structures and
other factors, varies from state to state.

      Private  Payors.  Many private payors, including  indemnity
insurers,  employer group health insurance programs  and  managed
care  plans,  presently provide coverage  for  the  purchase  and
rental  of  the  Company's products. The scope  of  coverage  and
payment  policies varies among private payors. Furthermore,  many
such  payors  are  investigating  or  implementing  methods   for
reducing  health  care  costs,  such  as  the  establishment   of
capitated or prospective payment systems.

      Uncertainty  of  Health Care Reform. There  are  widespread
efforts  to  control health care costs in the U.S. and worldwide.
Various  federal  and  state  legislative  initiatives  regarding
health  care  reform and similar issues continue  to  be  at  the
forefront  of  social and political discussion. For example,  the
United   States   Congress  is  currently   considering   various
legislative  proposals  to  reform  the  Medicare  and   Medicaid
programs.  Some  current proposals call for reduced  payments  to
hospitals  under the prospective payment system,  limitations  on
payment  for  and  recognition of ancillary  items  or  services,
establishment of a PPS for Medicare reimbursement of  SNF  costs,
freezes   in   DME   fee  schedule  payment  amounts,   and   the
establishment  of  new programs that would  give  states  greater
discretion   in   designing  and  administering  state   Medicaid
programs.  If  enacted  into law, any of  these  proposals  could
affect  future  demand  for and reimbursement  of  the  Company's
products.  The  Company  believes  that  government  and  private
efforts  to  contain or reduce health care costs  are  likely  to
continue.  These trends may lead third-party payors  to  deny  or
limit  reimbursement  for  the Company's  products,  which  could
negatively  impact the pricing and profitability  of,  or  demand
for, the Company's products.


Item 2.  Properties

      The  Company's corporate headquarters are currently located
in a 170,000 square foot building in San Antonio, Texas which was
purchased  by  the Company in January 1992. The Company  utilizes
89,000 square feet of the building with the remaining space being
leased to unrelated entities.

      The Company conducts its manufacturing, shipping, receiving
and  storage activities in a 153,000 square foot facility in  San
Antonio,  Texas,  which was purchased by the Company  in  January
1988. In 1989, the Company completed the construction of a 17,000
square  foot addition to the facility which is utilized as office
space. The Company also owns a 37,000 square foot building in San
Antonio, Texas which houses the Company's engineering center  and
currently  serves as NuTech division headquarters. In  1992,  the
Company  purchased a 35,000 square foot facility in San  Antonio,
Texas which is used for storage. The Company maintains additional
storage at two leased facilities in San Antonio, Texas. In  1994,
the  Company purchased a facility in San Antonio, Texas which  is
being  used  to provide housing for families of cancer  patients.
The  facility  is  built on 6.7 acres and consists  of  a  15,000
square foot building and 2,500 square foot house.

      The  Company leases approximately 144 domestic distribution
centers, including each of its seven regional headquarters, which
range in size from 1,500 to 18,000 square feet.


Item 3.  Legal Proceedings

      On February 21, 1992, Novamedix Limited ("Novamedix") filed
a lawsuit against the Company in the United States District Court
for  the  Western  District of Texas. Novamedix manufactures  the
principal  product which directly competes with  the  PlexiPulse.
The  suit  alleges that the PlexiPulse infringes several  patents
held  by  Novamedix,  that  the Company breached  a  confidential
relationship  with  Novamedix and a variety of ancillary  claims.
Novamedix  seeks injunctive relief and monetary damages.  Initial
discovery in this case has been substantially completed. Although
it  is not possible to predict the outcome of this litigation  or
the damages which could be awarded, the Company believes that its
defenses  to these claims are meritorious and that the litigation
will  not  have  a  material  adverse  effect  on  the  Company's
business, financial condition or results of operations.

      On  August  16,  1995, the Company filed a civil  antitrust
lawsuit  against  Hillenbrand Industries, Inc.  and  one  of  its
subsidiaries,  Hill-Rom. The suit was filed in the United  States
District  Court  for  the Western District  of  Texas.  The  suit
alleges  that  Hill-Rom used its monopoly power in  the  standard
hospital  bed  business  to  gain  an  unfair  advantage  in  the
specialty  hospital bed business. Specifically,  the  allegations
set  forth  in  the  suit include a claim that Hill-Rom  required
hospitals  and  purchasing groups to agree  to  exclusively  rent
specialty  beds  in  order  to receive substantial  discounts  on
products over which they have monopoly power -- hospital beds and
head  wall units. The suit further alleges that Hill-Rom  engaged
in  activities which constitute predatory pricing and refusals to
deal. Hill-Rom has filed an answer denying the allegations in the
suit. Although discovery is just beginning and it is not possible
to  predict  the outcome of this litigation or the damages  which
might  be  awarded,  the Company believes  that  its  claims  are
meritorious.


      On  October  31, 1996 the Company received  a  counterclaim
which  had  been  filed by Hillenbrand Industries,  Inc.  in  the
antitrust   lawsuit  which  the  Company  filed  in  1995.    The
counterclaim  alleges  that the Company's antitrust  lawsuit  and
other  actions were designed to enable KCI to monopolize the  bed
market.   Although it is not possible to predict the  outcome  of
this  litigation, the Company believes that the  counterclaim  is
without merit.

     In late December 1996, Hill-Rom, a subsidiary of Hillenbrand
Industries,  Inc., filed a lawsuit against the  Company  alleging
that the Company's TriaDyne bed infringes a patent issued to Hill-
Rom  December 24, 1996.  This suit was filed in the United States
District  Court for the District of South Carolina.   Substantive
discovery  in the case has not begun.  Based upon its preliminary
investigation, the Company does not believe that the TriaDyne bed
infringes  the Hill-Rom patent or that this lawsuit will  have  a
material adverse impact on the marketing of the TriaDyne bed.
  
      The  Company is a party to several lawsuits arising in  the
ordinary  course  of  its business and is contesting  adjustments
proposed  by  the  Internal Revenue Service to prior  years'  tax
returns.  Provisions  have been made in the  Company's  financial
statements for estimated exposures related to these lawsuits  and
adjustments.  In  the opinion of management, the  disposition  of
these  matters  will not have a material adverse  effect  on  the
Company's business, financial condition or results of operations.

       The   manufacturing  and  marketing  of  medical  products
necessarily entails an inherent risk of product liability claims.
The  Company  currently  has  certain  product  liability  claims
pending  for  which  provision has been  made  in  the  Company's
financial  statements.  Management believes  that  resolution  of
these  claims  will  not have a material adverse  effect  on  the
Company's business, financial condition or results of operations.
The  Company  has not experienced any significant losses  due  to
product   liability  claims  and  currently  maintains   adequate
liability insurance coverage.

Item 4.  Submission of Matters to a Vote of Security Holders

      No matter was submitted to a vote of the Company's security
holders during the fourth fiscal quarter of 1996.


Item 4a.  Executive Officers of the Registrant

      Certain  information  is  set forth  below  concerning  the
executive officers of the Company, each of whom has been  elected
to serve until the 1997 annual meeting of directors and until his
successor is duly elected and qualified.  The executive  officers
of  the Company and their ages and positions as of March 1,  1997
are as follows:

     Name                      Age        Position
                                    
Raymond R. Hannigan             57  Director, President and
                                    Chief Executive Officer

Peter A. Leininger, M.D.        54  Director and Executive Vice
                                    President

Bianca A. Rhodes                38  Senior Vice President,
                                    Finance and Chief Financial
                                    Officer
                               
                                
Dennis E. Noll                  42  Senior Vice President,
                                    General Counsel and
                                    Secretary

Frank DiLazzaro                 38  President, KCI
                                    International
                                    
Christopher M. Fashek           47  President, KCI Therapeutic
                                    Services

Richard C. Vogel                43  Vice President and General
                                    Manager, NuTech

Michael C. Wells                44  Vice President and General
                                    Manager, KCI Home Care

John H. Vrzalik, Sr             54  Vice President, Engineering

Martin J. Landon                37  Vice President, Accounting
                                    and Corporate Controller
                                    
Michael J. Burke                49  Vice President,
                                    Manufacturing

Scott S. Brooks                 48  Vice President, National
                                    Accounts

Larry P. Baker                  43  Vice President, Corporate
                                    Services

George P. Peace                 41  Vice President, Information
                                    Systems


      Raymond R. Hannigan joined the Company as its President and
Chief  Executive  Officer in November 1994 and has  served  as  a
director of the Company since 1994. From January 1991 to November
1994,  Mr.  Hannigan  was  the  President  of  the  International
Division   of   Sterling  Winthrop  Consumer  Health   Group   (a
pharmaceutical company with operations in over 40  countries),  a
wholly-owned  subsidiary  of Eastman  Kodak.  From  May  1989  to
January  1991,  Mr. Hannigan was the President of  Sterling  Drug
International.

      Peter  A. Leininger, M.D., joined the Company as  its  Vice
President,  Medical in 1978, became Chief Administrative  Officer
and  Senior Vice President of the Company in January 1994 and was
named  Executive  Vice  President in September  1995.  Dr.  Peter
Leininger became a member of the Company's Board of Directors  in
1980.  Prior  to 1978, Dr. Peter Leininger maintained  a  private
medical   practice  and  functioned  as  the  southeast  regional
distributor for the Company's products. Peter A. Leininger,  M.D.
is the brother of James R. Leininger, M.D.

      Bianca  A.  Rhodes joined the Company as  its  Senior  Vice
President, Finance and Chief Financial Officer in September 1993.
From  July  1992 to April 1993, Ms. Rhodes served as Senior  Vice
President,   Finance,  Chief  Financial  Officer  and   Corporate
Treasurer of Intelogic Trace, Inc. (a national computer  services
company).  From  1990  to June 1992, Ms. Rhodes  served  as  Vice
President,  Finance and Corporate Treasurer of  Intelogic  Trace,
Inc.  and prior to 1990, Ms. Rhodes served as Corporate Treasurer
of Intelogic Trace, Inc.

      Dennis E. Noll joined the Company in February 1992  as  its
Senior  Corporate  Counsel  and  was  appointed  Vice  President,
General  Counsel  and Secretary in January  1993.  Mr.  Noll  was
promoted  to  Senior Vice President in September 1995.  Prior  to
joining  the Company in February 1992, Mr. Noll was a shareholder
of the law firm of Cox & Smith Incorporated.


      Frank  DiLazzaro  joined the Company  in  1988  as  General
Manager,  KCI  Medical  Canada.  Mr.  DiLazzaro  served  as  Vice
President,  KCI  International, Inc. from June 1989  to  December
1992.   Mr. DiLazzaro has served as President, KCI International,
Inc.  since  January 1993 and was Vice President, Marketing  from
April 1993 to September 1995.

     Christopher M. Fashek joined the Company in February 1995 as
President,  KCTS.   Prior to joining the Company,  he  served  as
General  Manager, Sterling Winthrop, New Zealand  since  February
1993,  and served as Vice President Sales of Sterling Health  USA
from 1989 until February 1993.
  
      Richard  C. Vogel joined the Company as its Vice  President
and General Manager, NuTech on  July 1, 1996.  From 1989 to 1996,
Mr.  Vogel served as Executive Vice President of Vestar, Inc.,  a
California-based biotechnology company.
  
      Michael  C.  Wells  joined  the Company  as  Regional  Vice
President,  KCTS, in August 1994 and served in  that  role  until
June  1996 when he was promoted to the position of Vice President
and  General  Manager,  KCI  Home Care.   Prior  to  joining  the
Company,  he  served in Sales Management and Infusion  Management
roles  from  1988  to August 1994 with Homedco,  which  currently
operates today as the Apria Healthcare Group.  From 1978 to 1988,
Mr.  Wells  held  Marketing and Sales Management  positions  with
Baxter Healthcare, formerly American Hospital Supply Corporation.
  
      John  H.  Vrzalik,  Sr. joined the  Company  in  1977,  was
promoted to Vice President, Engineering in 1979 and has served in
that position since that time.
  
      Martin  J. Landon joined the Company in May 1994 as  Senior
Director  of  Corporate  Development and  was  promoted  to  Vice
President,  Accounting and Corporate Controller in October  1994.
From  1987  to  May 1994, Mr. Landon worked for Intelogic  Trace,
Inc.,  most  recently serving as Vice President, Chief  Financial
Officer.

      Michael  J. Burke joined the Company in September  1995  as
Vice President, Manufacturing. Prior to joining the Company,  Mr.
Burke  worked for Sterling Winthrop, Inc., a Division of  Eastman
Kodak  Company,  for 25 years, most recently serving  as  General
Manager, Sterling Health HK/China since 1992.

      Scott  S. Brooks, Vice President, National Accounts, joined
the  Company  in June 1990 as Director of Sales and Marketing  of
KCI  Medical Services. From April 1991 to March 1993, Mr.  Brooks
served  as  Regional Vice President of KCI Therapeutic  Services,
Inc.  From April 1993 to February 1994, Mr. Brooks served as Vice
President, National Accounts of the Company. From March  1994  to
March  1995, Mr. Brooks served as the President of Medical  Retro
Design,  a  subsidiary of the Company.  Prior to June  1990,  Mr.
Brooks served as Vice President of Simmons Healthcare.
  
     Larry P. Baker joined the Company in 1987 as the Director of
Human Resources.  Since 1993, Mr. Baker has held the position  of
Vice President, Corporate Services.
  
  
      George P. Peace joined the Company in November 1994 as Vice
President  of Information Systems.  From October 1992 to  October
1994,  Mr. Peace served as Vice President of Information  Systems
of  La  Quinta Inns Inc.  Prior to October 1992, Mr. Peace served
as  Director of Information Systems Operations of La Quinta  Inns
Inc.
  


                             PART II
                                
                                
Item 5.  Market for Registrant's Common Equity and Related
         Stockholder Matters

      The  Company's common stock ("Common Stock") trades on  The
Nasdaq  Stock  Market under the symbol: KNCI.  The range  of  the
high  and  low  bid prices of the Common Stock for  each  of  the
quarters  during the 1996 and 1995 fiscal years is  contained  on
the  inside  back  cover of the Company's 1996 Annual  Report  to
Shareholders  under the caption "Market Prices of  Common  Stock"
and is  incorporated  herein by reference.

      The  Company's  Board of Directors declared quarterly  cash
dividends  on  the  Common  Stock in 1996  and  1995.   The  cash
dividends  totaled $0.15 per common share in  each  of  1996  and
1995.   The  Company's  Board of Directors will  consider  future
dividends  on a quarterly basis.  The Company's credit  agreement
contains  certain covenants which limit the Company's ability  to
declare and pay cash dividends.

      As  of March 1, 1997, the approximate number of holders  of
record of the Common Stock was 417.

Item 6.  Selected Financial Data

      Incorporated in this Item 6, by reference, is that  portion
of  the Company's 1996 Annual Report to Shareholders appearing on
page 13 under the caption "Selected Consolidated Financial Data."


Item 7.  Management's Discussion and Analysis of Financial
         Condition  and Results of Operations

      Incorporated in this Item 7, by reference, is that  portion
of  the Company's 1996 Annual Report to Shareholders appearing on
pages  14  to  22 under the caption "Management's Discussion  and
Analysis of Financial Condition and Results of Operations."


Item 8.  Financial Statements and Supplementary Data

       Incorporated  in  this  Item  8,  by  reference,  are  the
Consolidated  Balance Sheets and related Consolidated  Statements
of  Earnings, Cash Flows, Shareholders' Equity and notes  thereto
and  Independent Auditors' Report appearing on pages 23 to 39  in
the Company's 1996 Annual Report to Shareholders. (See Item 14(a)
of this Report.)


Item 9.  Changes in and Disagreements with Accountants on
         Accounting Matters and Financial Disclosure
         
       KPMG   Peat  Marwick  LLP  was  the  Company's  certifying
accountant for the year ended December 31, 1996.  On February 18,
1997,   the  Board  of  Directors  of  the  Company,   upon   the
recommendation  of  the  Audit Committee,  voted  to  engage  the
accounting  firm of Ernst & Young LLP as the Company's certifying
accountant  for  the   year  ending  December   31,  1997.    The
Company's previous certifying  accountant, KPMG Peat Marwick LLP,
was  notified  on February  21, 1997 that it will be dismissed
effective  upon  the completion and filing of the Company's 1996
Annual Report on Form 10-K.   On February 24, 1997, the Company
notified Ernst &  Young LLP  that  it  would  be  engaged  as  the
Company's  certifying accountant for the 1997 fiscal year.

      The  reports  of  KPMG Peat Marwick LLP  on  the  Company's
financial statements for the two fiscal years ended December  31,
1995 and 1996 did not contain an adverse opinion or disclaimer of
opinion  and  were not qualified or modified as  to  uncertainty,
audit scope or accounting principles.

      In  connection  with the audits of the Company's  financial
statements  for each of the two fiscal years ended  December  31,
1995  and  1996 and in the subsequent interim period through  the
date  of  dismissal, there were no disagreements with  KPMG  Peat
Marwick  LLP  on any matters of accounting principles,  financial
statement disclosure or audit scope and procedures which, if  not
resolved to the satisfaction of KPMG Peat Marwick LLP would  have
caused the firm to make reference to the matter in their report.

      The  change in certifying accountant came as the conclusion
to  a  Request for Proposal issued by the Company in  1996.   The
newly  engaged  firm,  Ernst  & Young  LLP,  has  been  providing
property  and  income tax planning services to the Company  since
1995.

     The Company has requested KPMG Peat Marwick LLP to furnish a
letter  addressed  to  the  Securities  and  Exchange  Commission
stating  whether it agrees with the above statements.  A copy  of
the letter is attached as Exhibit 16 to this report.


                                
                                
                            PART III
                                
Item 10. Directors and Executive Officers of the Registrant

      Incorporated  in  this  Item 10, by  reference,  are  those
portions of the Company's definitive Proxy Statement for the 1997
Annual  Meeting of Shareholders appearing on pages 1 to 3 therein
under  the caption "Election of Directors" and on page 17 therein
under the caption "Timeliness of Certain SEC Filings."  See  also
the information in Item 4a of Part I of this Report.


Item 11. Executive Compensation

      Incorporated in this Item 11, by reference, is that portion
of  the  Company's definitive Proxy Statement for the 1997 Annual
Meeting  of  Shareholders appearing on pages 7 to  10  under  the
caption "Executive Compensation" and on page 3 therein under  the
caption "Director Compensation" and also on page 4 therein  under
the   caption  "Compensation  Committee  Interlocks  and  Insider
Participation."


Item 12. Security Ownership of Certain Beneficial Owners
         and Management

      Incorporated in this Item 12, by reference, is that portion
of  the  Company's definitive Proxy Statement for the 1997 Annual
Meeting  of  Shareholders appearing on pages 4  to  6  under  the
caption "Securities Holdings of Principal Shareholders, Directors
and Officers."


Item 13. Certain Relationships and Related Transactions
                                
                                
     Incorporated in this  Item 13, by reference, is that portion
of  the  Company's definitive Proxy Statement for the 1997 Annual
Meeting  of Shareholders, appearing on page 11 under the  caption
"Certain Transactions."



                             PART IV
                                
Item 14. Exhibits, Financial Statement Schedules, and Reports
         on Form 8-K

(a)  The following documents are filed as part of this report:

     1.  Financial Statements

         The   following   consolidated   financial   statements,
         incorporated  herein by reference to the Company's  1996
         Annual  Report to Shareholders, are filed as a  part  of
         this report:
         
              Consolidated Balance Sheets as of December 31, 1996
              and 1995
              
              Consolidated Statements of Earnings for the three
              years ended December 31, 1996, 1995 and 1994
              
              Consolidated Statements of Cash Flows for the three
              years `ended December 31, 1996, 1995 and 1994

              Consolidated Statements of Shareholders' Equity for
              the three years ended December 31, 1996, 1995 and
              1994
 
              Notes to Consolidated Financial Statements

              Independent Auditors' Report


     2.  Financial Statement Schedules

         The following consolidated financial statement schedules
         for  each  of  the years in the three-year period  ended
         December 31, 1996 are filed as part of this Report:
         
              Independent Auditors' Report

              Schedule VIII - Valuation and Qualifying Accounts -
              Years ended December 31, 1996, 1995 and 1994
              
         All  other  schedules have been omitted as the  required
         information is not present or is not present in  amounts
         sufficient  to  require submission of the  schedule,  or
         because  the  information required is  included  in  the
         financial statements and notes thereto.

     3.  Exhibits

   The following exhibits are filed as a part of this Report:

                                

         Exhibit                   Description
                  
            3.1   Restatement of Articles of Incorporation
                  (filed as Exhibit 3.2 to the Company's
                  Registration Statement on Form S-1, as
                  amended (Registration No. 33-21353), and
                  incorporated herein by reference).
                  
            3.2   Restated By-Laws of the Company (filed as
                  Exhibit 3.3 to the Company's Registration
                  Statement on Form S-1, as amended
                  (Registration No. 33-21353), and incorporated
                  herein by reference).
                  
            4.1   Specimen Common Stock Certificate of the
                  Company (filed as Exhibit 4.1 to the Annual
                  Report on Form 10-K for the year ended
                  December 31, 1988, and incorporated herein by
                  reference).
                  
            10.1  Agreement dated September 29, 1987, by and
                  between the Company and Hill-Rom Company,
                  Inc. (filed as Exhibit 10.7 to the Company's
                  Registration Statement on Form S-1, as
                  amended (Registration No. 33-21353), and
                  incorporated herein by reference).
                  
            10.2  Employment and Non-Competition Agreement
                  dated December 26, 1986, by and between the
                  Company and James R. Leininger, M.D. (filed
                  as Exhibit 10.10 to the Company's
                  Registration Statement on Form S-1, as
                  amended (Registration No. 33-21353), and
                  incorporated herein by reference).
                  
            10.3  Contract dated September 30, 1985, by and
                  between Ryder Truck Rental, Inc. and the
                  Company regarding the rental of delivery
                  trucks (filed as Exhibit 10.23 to the
                  Company's Registration Statement on Form S-1,
                  as amended (Registration No. 33-21353), and
                  incorporated herein by reference).
                  
            10.4  1988 Kinetic Concepts, Inc. Directors Stock
                  Option Plan (filed as Exhibit 10.26 to the
                  Company's Registration Statement on Form S-1,
                  as amended (Registration No. 33-21353), and
                  incorporated herein by reference).
                  
            10.5  Kinetic Concepts, Inc. Employee Stock
                  Ownership Plan and Trust dated January 1,
                  1989 (filed as Exhibit 10.2 to the Company's
                  Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1989, and incorporated herein
                  by reference).
                  
            10.6  1987 Key Contributor Stock Option Plan, as
                  amended, dated October 27, 1989 (filed as
                  Exhibit 10.9 to the Company's Annual Report
                  on Form 10-K for the year ended December 31,
                  1989, and incorporated herein by reference).
                             Exhibits (continued)

                  
            10.7  Amendment No. 1 to Asset Purchase Agreement
                  dated September 30, 1994 by and among Kinetic
                  Concepts, Inc., a Texas corporation, KCI
                  Therapeutic Services, Inc., a Delaware
                  corporation, MEDIQ Incorporated, a Delaware
                  corporation, PRN Holdings, Inc., a Delaware
                  corporation and MEDIQ/PRN Life Support
                  Services-I, Inc., a Delaware corporation
                  (filed as Exhibit 2.2 to the Company's Form 8-
                  K dated October 17, 1994, and incorporated
                  herein by reference).
                  
         10.17    Credit Agreement dated as of May 8, 1995 by
                  and among the Company and Bank of America
                  National Trust and Savings Association, as
                  Agent (filed as Exhibit 10 to the Company's
                  Quarterly Report on Form 10-Q for the quarter
                  ended March 31, 1995, and incorporated herein
                  by reference).
                  
         10.18    Purchasing Agreement, dated February 1, 1994,
                  between the Company, KCI Therapeutic
                  Services, Inc. and Voluntary Hospitals of
                  America, Inc.
                  
         10.19    Rental/Purchasing Agreement, dated April 1,
                  1993 between the Company, KCI Therapeutic
                  Services, Inc. and AmHS Purchasing Partners,
                  L.P.
                  
         10.20    KCI Management 1994 Incentive Program
         
                  
         10.21    KCI Employee Benefits Trust Agreement
         
                  
         10.22    Letter, dated September 19, 1994, from the
                  Company to Raymond R. Hannigan outlining the
                  terms of his employment.
                  
         10.23    Letter, dated November 22, 1994, from the
                  Company to Christopher M. Fashek outlining
                  the terms of his employment.
                  
         10.24    Option Agreement, dated November 21, 1994,
                  between Dr. James R. Leininger, Cecilia
                  Leininger and Raymond R. Hannigan.
                  
         10.25    Option Agreement, dated August 23, 1995,
                  between Dr. James R. Leininger, Cecilia
                  Leininger and Bianca A. Rhodes.
                  
         10.26    Stock Purchase Agreement dated June 15, 1995
                  among KCI Financial Services, Inc., Kinetic
                  Concepts, Inc., Cura Capital Corporation, MG
                  Acquisition Corporation and the Principal
                  Shareholders of Cura Capital Corporation
                  (filed as Exhibit 10 to the Company's
                  Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1995, and incorporated herein
                  by reference).

                  
         10.27    Promissory Note dated August 21, 1995 in the
                  principal amount of $10,000,000 payable to
                  James R. Leininger, M.D. to the order of
                  Kinetic Concepts, Inc., a Texas corporation
                  (filed as Exhibit 2.2 to the Company's
                  Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 1995, and incorporated
                  herein by reference).
                  
         10.28    Stock Pledge Agreement dated August 21, 1995
                  by and between James R. Leininger, M.D. and
                  Kinetic Concepts, Inc., a Texas corporation
                  (filed as Exhibit 2.3 to the Company's
                  Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 1995, and incorporated
                  herein by reference).
                  
         10.29    Executive Committee Stock Ownership Plan
                  (filed as Exhibit 10 to the Company's
                  Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 1995, and incorporated herein
                  by reference).
                  
         10.30    Deferred Compensation Plan (filed as Exhibit
                  99.2 to the Company's Quarterly Report on
                  Form 10-Q for the quarter ended September 30,
                  1995 and incorporated herein by reference).
                  
        *10.31    Kinetic Concepts, Inc. Senior Executive Stock
                  Option Plan.
                  
        *10.32    Form of Option Instrument with respect to
                  Senior Executive Stock Option Plan
                  
        * 11.1    Earnings Per Share Computation.
                  
        * 13.1    Kinetic Concepts, Inc. 1996 Annual Report to
                  Shareholders (furnished for the information
                  of the Commission and not deemed to be
                  "filed," except for those portions expressly
                  incorporated herein by reference)
                  
        * 16.1    Letter from KPMG Peat Marwick LLP to the
                  Securities and Exchange Commission regarding
                  agreement with statements made by Registrant
                  under Item 9 of its Form 10-K dated March 28,
                  1997.
                  
        * 22.1    List of Subsidiaries.
                  
        * 23.1    Consent by KPMG Peat Marwick dated March 28,
                  1997 to incorporation by reference of their
                  reports dated February 5, 1996 in
                  Registration Statements on Form S-8
                  previously filed by the Company.
                  
        * 27.1    Financial Data Schedule
                  
                                
Note: (*) Exhibits filed herewith.
                                
                                
                                
                 (b)  Reports on Form 8-K
                                
          No reports on Form 8-K have been filed during the last
          quarter of the period covered by this report.
                                
                                
                                
                                
                             
                                
                                
                           SIGNATURES
                                
                                
Pursuant  to  the  requirements of Section 13  or  15(d)  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, in the City of San Antonio,  State  of
Texas on March 28, 1997.



                                   KINETIC CONCEPTS, INC.

                                   By: /s/ JAMES R. LEININGER,M.D.
                                      ----------------------------
                                      James R. Leininger,M.D..
                                      Chairman of the
                                      Board of Directors
                                            


Pursuant  to the requirements of the Securities Exchange  Act  of
1934,  as  amended, this Registration Statement has  been  signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.


       Signatures                  Title                  Date
                                               
/s/ JAMES R. LEININGER, M.D.    Chairman of the       March 28, 1997
- - ---------------------------     Board of Directors
James R. Leininger, M.D.      
                                               
/s/ RAYMOND R. HANNINGAN        Chief Executive       March 28, 1997
- - --------------------------      Officer and
Raymond R. Hannigan             President           


/s/ BIANCA A. RHODES            Chief Financial        March 28, 1997 
- - --------------------------      Officer and          
Bianca A. Rhodes                Senior Vice President
                                (Principal Accounting
                                  Officer) 

     
/s/ PETER A. LEININGER, M.D.    Director               March 28, 1997
- - ----------------------------          
Peter A. Leininger, M.D.        
                        

/s/ SAM A. BROOKS               Director               March 28, 1997
- - ----------------------------
Sam A. Brooks                 
                           
                    
/s/ FRANK A. EHMANN            Director                March 28, 1997
- - ---------------------------
Frank A. Ehmann         

                                               
/s/ WENDY L. GRAMM, PhD        Director                March 28, 1997
- - ---------------------------          
Wendy L. Gramm, PhD      


/s/ BERNHARD T. MITTEMEYER,M.D. Director               March 28, 1997
- - -------------------------------          
Bernhard T. Mittemeyer,M.D.


                                
                                
                                
                  Independent Auditors' Report
                                
                                

The Board of Directors and Shareholders
Kinetic Concepts, Inc.:

Under  date  of February 5, 1997, we reported on the consolidated
balance sheets of Kinetic Concepts, Inc. and subsidiaries  as  of
December   31,  1996  and  1995,  and  the  related  consolidated
statements of earnings, shareholders' equity, and cash flows  for
each  of  the  years in the three-year period ended December  31,
1996,  as  contained in the 1996 annual report  to  shareholders.
These  consolidated financial statements and our  report  thereon
are  incorporated by reference in the annual report on Form  10-K
for  the  year  1996.   In  connection with  our  audits  of  the
aforementioned consolidated financial statements,  we  also  have
audited  the  related financial statement schedule as  listed  in
Item 14(a)(2) of Form 10-K.  This financial statement schedule is
the    responsibility   of   the   Company's   management.    Our
responsibility  is  to  express  an  opinion  on  this  financial
statement schedule based on our audits.

In   our   opinion,  such  financial  statement  schedule,   when
considered  in  relation  to  the  basic  consolidated  financial
statements  taken as a whole, presents fairly,  in  all  material
respects, the information set forth therein.


                                    /s/ KPMG PEAT MARWICK LLP
                                   ---------------------------
                                        KPMG Peat Marwick LLP


San Antonio, Texas
February 5, 1997








Schedule VIII


             KINETIC CONCEPTS, INC. AND SUBSIDIARIES
                VALUATION AND QUALIFYING ACCOUNTS
                         (in thousands)
                                
               Three years ended December 31, 1996






                Balance    Additions    Additions                12/31/94
                  at       Charged to    Charged                  Balance
               Beginning   Costs and    to Other                 at End of
Description    of Period    Expenses    Accounts  Deductions       Period
- - -----------   ----------  ----------   --------   -----------    ---------    
               
Allowance for                                              
doubtful
accounts        $7,500     $1,429       $    -      $  329        $8,600
               =======     ======       =======     ======        =======








                Balance    Additions    Additions                 12/31/95
                  at       Charged to    Charged                   Balance
                Beginning  Costs and     to Other                 at End of
Description     of Period  Expenses     Accounts   Deductions      Period
- - -----------    ----------  --------     --------   ----------    ----------    
                 
Allowance for                                              
doubtful
accounts         $8,600     $1,883       $    -      $4,306        $6,177
                 ======     ======      =======      ======        ======









                Balance    Additions    Additions                12/31/96
                 at       Charged to     Charged                  Balance
               Beginning  Costs and     to Other                 at End of
Description    of Period   Expenses     Accounts   Deductions      Period
- - ----------    ----------  ----------    ---------  ----------    ----------
Allowance for                                              
doubtful  
accounts        $6,177     $2,457       $    -      $1,102        $7,532
                ======     ======       ========    =======       =======