endoscopy procedures, four centers performed ophthalmology procedures, one
center performed orthopaedic procedures, one center performed otolaryngology
procedures, and one center performed ophthalmology, urology, general surgery and
otolaryngology procedures. The procedures performed at the AmSurg centers
generally do not require an extended recovery period following the procedures.
AmSurg centers are typically staffed with three to five clinical professionals
and administrative personnel who are shared with the physician practice group.
The clinical staff includes nurses and surgical technicians.
The types of procedures performed at each center depend on the specialty of
the practicing physicians. The typical procedures performed or to be performed
most commonly at AmSurg centers in operation or under development within each
- Gastroenterology -- colonoscopy and endoscopy procedures
- Ophthalmology -- cataracts and retinal laser surgery
- Orthopaedics -- knee arthroscopy and carpal tunnel repair
- Urology -- cystoscopy and biopsy
- Otolaryngology -- myringotomy and tonsillectomy
AmSurg markets its surgery centers and networks directly to third-party
payors, including HMOs, PPOs, other managed care organizations and employers.
Payor-group marketing activities conducted by AmSurg's management and center
administrators emphasize the high quality of care, cost advantages and
convenience of AmSurg's surgery centers and are focused on making each center an
approved provider under local managed care plans. In addition, AmSurg is
pursuing relationships with selected physician groups in its markets in order to
market a comprehensive specialty physician network that includes its surgery
centers to managed care payors.
SPECIALTY PHYSICIAN NETWORKS AND PRACTICES
Provider networks are primarily oriented to local markets. Physician groups
may be members of several networks in a locale. Most networks are either
multi-specialty or primary care based. AmSurg believes that its single specialty
networks, designed around the ambulatory surgery centers and designed to match
the membership base geography of the managed care payors, will be a more
competitive model than networks that do not have those advantages. AmSurg also
has the advantage of being introduced to prospective network members by its
existing practice partners who have already had a positive experience working
with AmSurg in joint ownership of the surgery centers. Pursuant to agreements
with the network, the physicians in these networks also will have the
opportunity to perform their surgical procedures in AmSurg's surgery centers or
develop additional centers with AmSurg as needed. Following the establishment of
a network, AmSurg will provide management services and marketing services to the
network to secure patient service contracts with managed care payors. Fees paid
by these networks to AmSurg are nominal and generally are intended to cover
AmSurg's cost in providing such services.
AmSurg further believes that the specialty physician network development
will expand services available to managed care organizations. AmSurg believes
that the specialty physician networks with practice-based surgery centers are
attractive to managed care organizations because of the geographic coverage of
the network, the lower costs associated with treatment, the availability of the
complete delivery system for a specific specialty and high levels of patient
satisfaction. As a result, AmSurg believes the development of such networks will
capture an increased volume of managed care contracts, including capitated
contracts, and will increase the market share and profitability of the practices
and the AmSurg surgery centers.
It is not expected that the specialty physician networks in themselves will
be a significant source of income for AmSurg. These networks were and will be
formed primarily as a contracting vehicle to generate revenues for AmSurg's
practice-based surgery centers and physician practices.
As of March 31, 1997, AmSurg had established and was the majority owner and
operator of three start-up specialty physician networks. These networks have not
yet generated any revenues. Each specialty physician network is formed as either
a limited partnership or limited liability company in which AmSurg owns a
majority interest. Individual physicians who practice in the medical specialty
on which the network is