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Outpatient surgery centers show much higher profits
Wednesday, August 20, 2003

Financial difficulties that besieged many of the state and region's general acute care hospitals last year didn't stunt profits at free-standing outpatient surgery centers.

The state's 101 stand-alone surgery centers -- 88 of which are for-profit entities, in many cases owned by physicians -- posted average total profits $298,620 on average revenues of $2.52 million, or roughly 11.85 cents for each dollar they saw.

The results -- released yesterday in an annual survey from the Pennsylvania Health Care Cost Containment Council -- are a stark contrast to those posted by the state's general hospitals, which took in an average of just a little more than two cents for each dollar of revenue.

The double-digit profitability "certainly does stand out," said Joe Martin, spokesman for PHC4, as the council is commonly known.

Martin said he didn't know whether the free-standing surgery centers, which account for only a sliver of overall health care services, were the most profitable niche in the industry, adding, "But it is a very profitable one."

Some of the most profitable were among the 20 operating in the region, including the Southwestern Pennsylvania Eye Surgery Center in Washington County and Three Rivers Endoscopy in Moon, according to the PHC4 survey. The eye surgery center earned nearly 53 cents on each dollar of the $2.95 million in revenue it reported for 2002, and the endoscopy center earned roughly 41 cents on each dollar of the $3.6 million in revenue it collected last year.

Five of the 20 stand-alone surgery centers in southwestern Pennsylvania are operated by hospitals. The remainder are for-profit businesses, in many cases operated by physicians.

Some hospital executives have complained that competition from free-standing surgery centers was one of several factors that squeezed their 2002 profit margins -- taking away some of the lucrative kinds of services they depend on to subsidize other kinds of care on which they lose money.

Martin, PHC4's spokesman, said the centers "don't seem to have impacted the overall admissions of hospitals."

"But whether the lucrative ones are being drained is a much more difficult problem to tease out" of the data the council collects, he said.

Whatever the case, free-standing surgical centers are becoming more of a factor in the industry.

The PHC4 survey said the number of stand-alone surgery facilities operating in the state grew by 30 percent last year and has more than doubled since 1995, from 39 to last year's 101. The number of visits to the centers quadrupled, PHC4 said.

First published on August 20, 2003 at 12:00 am
Pamela Gaynor can be reached at pgaynor@post-gazette.com or 412-263-1613.