8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Date of Report (Date of earliest event reported): December 29, 2005

MEDCATH CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	000-33009	56-2248952
(State or other jurisdiction of	(Commission File Number)	(IRS Employer Identification No.)
incorporation or organization)

10720 Sikes Place
Charlotte, North Carolina 28277
(Address of principal executive offices, including zip code)

(704) 708-6600
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13d-4(c))

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of the Company

On January 4, 2006, MedCath Corporation (“MedCath” or the “Company”) issued a press release announcing that a third-party health system made a $20.0 million convertible debt investment in Harlingen Medical Center (“HMC”), one of the Company’s majority owned subsidiaries. In addition, on December 29, 2005, HMC entered into a new mortgage loan with a third-party lender in the amount of $40.0 million. The total proceeds received by HMC were primarily used to repay existing intercompany debt with the Company.

A summary of the significant terms of the new debt agreements is as follows:

Convertible Debt

• The convertible debt is in the form of two $10.0 million convertible notes. The first note will automatically be converted into an ownership interest in HMC upon the occurrence of certain events, up until the third anniversary date of the agreement or the fourth anniversary date of the agreement, if extended by HMC. The second note is convertible, in part or in full, at the discretion of the health system after the conversion of the first note. The ownership interest in HMC by the health system is capped at 49%.

• The notes bear interest at 5% up until the third anniversary date, after which time the interest rate increases to 8% if the notes have not been converted. Interest payments are due quarterly.

• If the notes are not converted, the notes are then payable annually in equal principal payments, plus quarterly interest payments, over 5 years.

Mortgage Loan

• A $40.0 million, 10 year mortgage loan with a third-party lender.

• The loan requires quarterly, interest-only payments until the maturity date. The interest rate is on the loan is 8 ³/4 %.

• The loan is secured by substantially all the assets of HMC.

• The loan is subject to certain financial and other restrictive covenants. In addition, MedCath guarantees $10.0 million of the loan balance.

A copy of the press release is furnished as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits

Exhibit 99.1      Press Release dated January 4, 2006

SIGNATURES

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 hereunto duly authorized.

	MEDCATH CORPORATION
Date: January 5, 2006	By:	/s/James E. Harris
		James E. Harris Executive Vice President and Chief Financial Officer

Page 2

EX-99.1

EXHIBIT 99.1

MEDCATH CONTACTS:
John Casey	Jamie Harris
Chairman & Chief Executive Officer	Chief Financial Officer
(704) 708-6600	(704) 708-6600

MEDCATH CORPORATION FORGES NEW AGREEMENT
WITH TEXAS NOT-FOR-PROFIT HEALTHCARE NETWORK

     CHARLOTTE, N.C., Jan. 4, 2006 – MedCath Corporation (Nasdaq: MDTH) announced today that its Harlingen Medical Center, located in Harlingen, Texas, has received a significant economic investment from Valley Baptist Health System, a Harlingen-based community health system. As part of this investment, Harlingen Medical Center will become a provider of services to the Valley Baptist Health Plan.

     “We’re delighted to have this relationship with a not-for-profit healthcare network that has been serving the Rio Grande Valley so well for 80 years,” said John Casey, MedCath’s Chairman and Chief Executive Officer. “We are hopeful that this is the beginning of a relationship with Valley Baptist that will allow us to work together to meet the healthcare needs of the community.”

     As part of the agreement announced today, Valley Baptist has made a $20 million convertible debt investment in Harlingen Medical Center, one-half of which will automatically convert to a minority ownership stake in Harlingen Medical Center upon the occurrence of certain events, and the remainder of which is convertible at the option of Valley Baptist after three years. Harlingen Medical Center, in turn, will become a provider of services under certain parts of the Valley Baptist Health Plan, one of the largest in South Texas. Proceeds from the Valley Baptist investment, together with a new mortgage loan provided by a third party lender, were used by Harlingen Medical Center to repay existing debt. The Harlingen Medical Center and the hospitals of Valley Baptist will each continue to independently operate as in the past.

     MedCath, together with local physicians who collectively have a minority ownership in Harlingen Medical Center, opened the hospital in October 2002. The 112-bed facility includes an 18-bed Women’s Center, a 32-bed Critical Care Unit and a 64-bed Medical-Surgical Unit.

     “We are pleased about our strategic investment in Harlingen Medical Center and adding that fine organization to our provider network,” said James G. Springfield, President and Chief Executive Officer for Valley Baptist Health System in Harlingen, Texas. “I firmly believe the opportunity for us to work more closely with Harlingen Medical Center, MedCath, and particularly the local physician investors, will prove invaluable to the citizens of South Texas, as Valley Baptist continues to be a leader in the healthcare community.”

     MedCath Corporation, headquartered in Charlotte, N.C., develops, owns and operates hospitals in partnership with physicians, most of whom are cardiologists and cardiovascular surgeons. While each of its hospitals is licensed as a general acute care hospital, MedCath

focuses on serving the unique needs of patients suffering from cardiovascular disease. Together with its physician partners who own equity interests in them, MedCath owns and operates 12 hospitals with a total of 727 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, Ohio, South Dakota and Texas. In addition to its hospitals, MedCath provides cardiovascular care services in diagnostic and therapeutic facilities located in various states and through mobile cardiac catheterization laboratories.

     Valley Baptist Health System, one of the largest and most respected integrated healthcare systems in South Texas with 850 licensed beds, has hospitals in Harlingen and Brownsville, and has been serving the Rio Grande Valley community with distinction since 1925.

# # #

     Parts of this announcement contain forward-looking statements that involve risks and uncertainties. Although management believes that these forward- looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic, regulatory and competitive uncertainties and contingencies that are difficult or impossible to predict accurately and are beyond our control. Actual results could differ materially from those projected in these forward-looking statements. We do not assume any obligation to update these statements in a news release or otherwise should material facts or circumstances change in ways that would affect their accuracy.

     Risks and uncertainties that should be considered prior to making an investment decision with respect to securities issued by MedCath Corporation are described in detail in Exhibit 99.1 to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 14, 2005. A copy of this report, including exhibits, is available on the Internet site of the Commission at http://www.sec.gov. These risks and uncertainties include, among others, the impact of proposed legislation to extend the provisions of the Medicare Prescription Drug Improvement Act of 2003 and other healthcare reform initiatives, possible reductions or changes in reimbursements from government or third party payors that would decrease our revenue, greater than anticipated losses at new hospitals during the ramp up period, a negative finding by a regulatory organization with oversight of one of our hospitals, and changes in medical or other technology and reimbursement rates for new technologies.