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to charge very high rates for outpatient surgery so they can
shift costs to the private sector and spread out their overhead.”
The report states that “one might expect hospitals to fight hard
for this business by starting up their own FASCs [freestanding
ambulatory surgery centers]”, but that this had not happened to
date because it is very hard for hospitals to do so, due partly
to problems hospitals face in throwing off their own “culture”
and creating an autonomous unit that is small, friendly, and
efficient. The report states: “[SCA’s] strategy of developing
three-way joint ventures--consisting of a local hospital,
surgeons, and the company--represents an attractive opportunity
to address these cultural problems.” The report notes:
the FASC niche of the health care services industry has the
further attraction of considerable consolidation
opportunity. We believe that multispecialty, nonhospital
FASCs currently number 600-700, with perhaps another 100
opening each year. Yet there are currently only two chains,
Medical Care International and [SCA] affiliates, which have
a total of 109 units. * * *
Once a surgical group decides to sell its center, there is
generally only one bidder (Medical Care or [SCA]), with the
price typically five to seven times pretax income. * * * The
key issue for MDs is not the modest amount of cash that
comes from a sale but the operating environment for them
once the center changes hands.
In the instant case, the Surgery Center had not one but two
bidders, the General Partnership, offering four to five times
earnings, and another unrelated, for-profit bidder, otherwise
unidentified in the record, offering approximately six times
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