Investing in Surgery

Physician's Money Digest, December31 2003, Volume 10, Issue 24

Convenience. That's the reason many physicians give for investing in surgery centers. Whatever the rationale, the growing number of surgery centers is having an effect on the revenues of big players like the Hospital Corporation of America (HCA). In the first and second quarters of this year, HCA has seen a drop in the number of outpatient surgeries performed in its outpatient surgery center.

Although the loss of cash flow from outpatient surgeries is not as much to blame for HCA's fiscal performance as the economy and managed care insurers, the huge hospital chain is fighting back. One way HCA is doing this is by going in with doctors to expand the number of outpatient surgery centers under its corporate umbrella.

Doctors who put money into outpatient surgery centers say they often get less out of their investment than they put in. Because of federal anti-kickback laws, any payout the doctor receives is linked to their investment, rather than to the number of patients the doctor refers to the center. What doctors do like is the convenience of being able to schedule surgeries without long waiting periods and the familiarity that comes from working with a permanent staff. According to the AMA, the number of outpatient surgery centers has climbed by nearly 50% to 3570 since 1996.

Managed care insurance carriers also like the idea of outpatient surgery centers, whether they're owned by medical doctors or by big corporations. According to the American Surgical Hospital Association (ASHA; www.surgicalhospital.org), a procedure done in a freestanding outpatient surgery center can cost 10% to 25% less than the same procedure performed in a hospital.

"Physicians have found that investing in surgical hospitals enhances their control of their work environment and is beneficial to their patients," the ASHA reports on this growing practice. "The physician-owner has a vital interest in providing a superior service to patients and an environment where patients are happier, staff is friendlier, and the surgical day runs more smoothly. It's a win for the consumers, the payers, the employees, and the physicians."