Surgical Care: Will Its Signs Read '10 Million Patients Served'?

Joel C. Gordon, chief executive of Surgical Care Affiliates Inc., wants his company to become the McDonald's of outpatient-surgery centers. His strategy: Get local physicians to invest in the centers so they'll perform one-day surgeries at his clinics instead of at hospitals. Gordon then builds a facility with four operating rooms, a recovery room, and offices. Uniformity keeps startup costs at about $2 million a unit.

The formula has paid off. Nashville-based Surgical Care is now the No. 2 operator, with 33 outpatient surgery centers. Dallas-based Medical Care International Inc. is No. 1, with 71 centers. During the past four years, Surgical Care's revenues grew at a compound annual rate of 52.3%, to $124 million in 1990. Earnings rose at a compound annual rate of 121.2%, to $11.5 million.

Gordon, 62, knows something about building a health care business. He founded General Care Corp. and sold the hospital chain to Hospital Corp. of America in 1980 for nearly $120 million.

While analysts expect Surgical Care's earnings to increase 36% in 1991, growth may later ebb. Almost 50% of all surgeries, from tonsillectomies to vasectomies, are already performed on outpatients--up from 15% eight years ago. Doctor-owned clinics may also face more scrutiny because of concerns about conflicts of interest. Another note of caution: At around 33, Surgical Care's stock is trading at a stunning 79 times earnings.

Gordon is optimistic. He predicts new technology will make more procedures available to outpatients. If so, Surgical Care's centers may become as ubiquitous as the golden arches.

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