THE ENDOSCOPY CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND EIGHT MONTHS ENDED AUGUST 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Endoscopy Center Inc. ("TEC") began operations in 1994 and operates two
gastrointestinal surgery centers in Independence and Kansas City, Missouri. TEC
is owned by a group of stockholders which perform gastroenterology procedures at
the centers through their related physician practice.
a. Revenue Recognition
Revenue consists of the billing for the use of TEC's facilities (the "usage
fee") directly to the patient or third-party payor. The usage fee excludes
amounts billed for physicians' services, which are billed separately by the
physicians to the patient or third-party payor. Revenues are reported at the
estimated net realizable amounts from patients, third-party payors and others,
including Medicare and Medicaid. Such revenues are recognized as the related
services are performed. Contractual adjustments resulting from agreements with
various organizations to provide services for amounts which differ from billed
charges, are recorded as deductions from patient service revenues. During the
1995, 1996 and 1997 periods, approximately 29%, 39% and 28%, respectively, of
the Centers' revenues were provided to patients covered under Medicare and
Medicaid. Amounts, which are determined to be uncollectible, are charged against
the allowance for uncollectible accounts.
Amortization of organization cost is provided on a straight-line basis over
c. Income Taxes
TEC has elected Subchapter S status of the Internal Revenue Code, and
accordingly, income taxes are the responsibility of the individual stockholders
of TEC. Therefore, no provision for income taxes has been reflected by TEC.
d. Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the estimates.
2. RELATED PARTY TRANSACTIONS
Both centers rent equipment and furniture and one center occupies space
provided by an entity which is owned by the same group of stockholders which own
TEC. Included in the statement of earnings and retained earnings is a charge of
$156,571, $200,993, $133,995 and $133,587 for the years ended December 31, 1995
and 1996 and the eight months ended August 31, 1996 and 1997, respectively,
related to these lease arrangements, which management believes reflects the fair
value of space and rental items provided. In addition, the employees of TEC are
leased from the related physician practice. Charges associated with this
arrangement are reflected as salaries and benefits in the statements of earnings
and retained earnings.
3. SUBSEQUENT EVENT
Effective September 1, 1997, AmSurg Holdings, Inc. ("Holdings"), a
subsidiary of AmSurg Corp. ("AmSurg") acquired from TEC a sixty percent
ownership interest in the assets comprising the business operations of two
gastrointestinal surgery centers.