Durango doctors cut their own deal: state's first surgical center arouses mixed feelings.

• Author: George, Mary
• Position: Animas Surgical Center

When eight dissatisfied surgeons at Mercy Medical Center in Durango approached hospital management a decade ago about a joint-venture surgical center, they got the brush-off. Operating-room schedules grew more crowded, however, and the surgeons grew more frustrated.

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Two more proposals--and several years--later, the Mercy surgeons struck out on their own. Using their own money, they built, and now manage the outpatient Animas Surgical Center, two blocks from Mercy. Investors in the surgical center, all but two of them physicians, now number 18, and the same group is building the new Animas Surgical Hospital, which will offer inpatient as well as outpatient surgery.

The surgical center originally had Mercy's blessings, said Animas CEO Brett Gosney, who'd managed Mercy's surgery department before joining the new venture. "They agreed that Mercy's operating rooms were very busy and that the department needed some decompression. They wanted us to take the less profitable cases--the ear-nose-and-throat, the urology cases." But when an orthopedist added his lucrative specialty to the new surgical center's roster, Mercy officials began fearing for their own revenue stream and about a cost-shifting business model that requires a hospital to care for those who can't pay.

Since then, Animas has taken half of Mercy's outpatient surgical business, or about a quarter of all the hospital's surgical cases, said Bill Willson, Mercy's director of managed care and planning. When Animas starts doing inpatient surgery this fall, it will be skimming $3 million to $5 million annually from Mercy's business. "That exceeds any surplus we've generated in the past few years. It's hard to not see Mercy losing ground as a direct response."

Such upsets are becoming familiar stories. In Wichita, Sioux Falls, rural Ohio, California's Central Valley and other locations, specialists fed up with falling professional fees, unresponsive hospital administrators and inadequate facilities have invested in "limited-service" or "boutique" medical facilities. The physicians own, manage, and practice in the facilities, competing with departments of full-service hospitals, often while maintaining hospital privileges. The only thing unique about the Durango breakaway: It's a Colorado first.

The hospital lobby, whose industry accounts for a third of the U.S. health-care budget, has responded in force. This year, it helped introduce two bills in the Colorado General...