BUSINESS OF AMSURG
AmSurg was formed in April 1992 for the purpose of developing, acquiring
and operating practice-based ambulatory surgery centers, in partnerships with
physician practice groups, throughout the United States. An AmSurg surgery
center is typically located adjacent to or in the immediate vicinity of the
specialty medical practice of a physician group partner's office. Each of the
surgery centers provides a narrow range of high volume, lower-risk surgical
procedures, generally in a single specialty, and has been designed with a cost
structure that enables AmSurg to charge fees which management believes are
generally less than those charged by hospitals and freestanding outpatient
surgery centers for similar services performed on an outpatient basis. As of
March 31, 1997, AmSurg owned a majority interest in 28 surgery centers in ten
states and the District of Columbia, operated another center pursuant to a
management agreement and owned a majority interest in two physician practice
groups. As of March 31, 1997, AmSurg also had 20 centers under development and
had executed letters of intent to acquire or develop four additional centers.
AmSurg is utilizing selected surgery centers as a base to develop start-up
specialty physician networks that are designed to serve large numbers of covered
lives and thus strengthen AmSurg's position in dealing with managed care
organizations. As of March 31, 1997, AmSurg had established three start-up
specialty physician networks, located in the south Florida market and in
Knoxville, Tennessee and Montgomery, Alabama.
AmSurg was organized as a Tennessee corporation in 1992. AmSurg's principal
executive offices are located at One Burton Hills Boulevard, Suite 350,
Nashville, Tennessee 37215, and its telephone number is 615-665-1283.
In recent years, government programs, private insurance companies, managed
care organizations and self-insured employers have implemented various
cost-containment measures to limit the growth of healthcare expenditures. These
cost containment measures, together with technological advances, have resulted
in a significant shift in the delivery of healthcare services away from
traditional inpatient hospitals to more cost-effective alternate sites,
including ambulatory surgery centers.
According to estimates of SMG Marketing Group Inc. in its Freestanding
Outpatient Surgery Center Directory (May 1996), an industry publication,
outpatient surgical procedures represented approximately 60% of all surgical
procedures performed in the United States in 1995. As of December 31, 1995,
there were approximately 2,300 freestanding ambulatory surgery centers in the
U.S., of which approximately 130 were owned by hospitals and approximately 505
were owned by corporate entities. The remaining approximately 1,665 centers were
independently owned, primarily by physicians.
Managed care organizations with significant numbers of covered lives are
seeking to direct large numbers of patients to high-quality, low-cost providers
and provider groups. In order to compete for the growing number of managed care
patients, hospitals, physicians and other providers, including alternate site
outpatient providers, are forming specialty physician networks and other
provider joint ventures.
AmSurg believes that the following factors have contributed to the growth
of ambulatory surgery:
Cost-Effective Alternative. Ambulatory surgery is generally less expensive
than hospital inpatient surgery. In addition, AmSurg believes that surgery
performed at a practice-based ambulatory surgery center is generally less
expensive than hospital-based ambulatory surgery for a number of reasons,
including lower facility development costs, more efficient staffing and space
utilization and a specialized operating environment focused on cost containment.
Interest in ambulatory surgery centers has grown as managed care organizations
have sought a cost-effective alternative to inpatient services.
Physician and Patient Preference. AmSurg believes that many physicians
prefer practice-based ambulatory surgery centers. AmSurg believes that such
centers enhance physicians' productivity by providing them with greater
scheduling flexibility, more consistent nurse staffing and faster turnaround
time between cases, allowing them to perform more surgeries in a defined period
of time. In contrast, hospitals and freestanding ambulatory surgery centers
generally serve a broader group of physicians, including those involved with
emergency procedures, resulting in postponed or delayed surgeries. Additionally,
many physicians choose to