- 71 -
that hospitals face “strong competition” in this market. It
cites economic advantages that freestanding ambulatory surgery
centers enjoy over hospitals. These advantages include, among
other things, higher turn-over of operating rooms that increases
the number of “fee-generating procedures” surgeons can do; lower
nurse compensation that in turn leads to “higher margins”; and
the “general tendency for private payers to account for a high
percentage of a surgery center’s mix, since most procedures
performed in outpatient settings are elective (nonemergency) and
are done on younger, non-Medicare patients.” The report cites
physician relations and capital as two major barriers to entering
this market.
The Shearson Lehman Brothers investment summary, see supra
note 18, contains similar facts and conclusions. The report
indicates that SCA and Medical Care International are the two
main surgical center chains, that they are highly profitable, and
that their margins are likely to continue moving higher. The
report notes that one reason for the high profitability of these
chains is that “they typically shadow-price hospitals, which tend
21(...continued)
outpatient surgeries grew from 3 million in 1980 to 11 million in
1990, and that nonhospital-based surgery volume increased even
faster, experiencing a 21.1-percent growth in procedures between
1989 and 1990 alone. The report projects continued growth in
this industry, stating: “The expansion of ambulatory surgery
service centers is likely to be accelerated by economic
incentives * * * as well as new technological developments.”
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