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Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2010
Commission File Number 000-22217
AMSURG CORP.
(Exact Name of Registrant as Specified in Its Charter)
     
Tennessee   62-1493316
(State or Other Jurisdiction of Incorporation or Organization)   (I.R.S. Employer Identification No.)
     
20 Burton Hills Boulevard, Nashville, TN   37215
(Address of Principal Executive Offices)   (Zip Code)
(615) 665-1283
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, no par value
(Title of class)
Nasdaq Global Select Market
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes þ       No o
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o       No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ       No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ       No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o (Do not check if a smaller reporting company)   Smaller reporting Company o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o       No þ
As of February 24, 2011, 31,304,626 shares of the Registrant’s common stock were outstanding. The aggregate market value of the shares of common stock of the Registrant held by nonaffiliates on June 30, 2010 (based upon the closing sale price of these shares as reported on the Nasdaq Global Select Market as of June 30, 2010) was approximately $537,000,000. This calculation assumes that all shares of common stock beneficially held by executive officers and members of the Board of Directors of the Registrant are owned by “affiliates,” a status which each of the officers and directors individually may disclaim.
Documents Incorporated by Reference
Portions of the Registrant’s Definitive Proxy Statement for its Annual Meeting of Shareholders to be held on May 20, 2011, are incorporated by reference into Part III of this Annual Report on Form 10-K.
 
 

 


 

Table of Contents to Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2010
         
       
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 EX-10.27
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 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

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Table of Contents

Part I
Item 1. Business
Our company was formed in 1992 for the purpose of developing, acquiring and operating ambulatory surgery centers, or ASCs, in partnership with physicians throughout the United States. An AmSurg surgery center is typically located adjacent to or in close proximity to the medical practices of our physician partners. Each of our surgery centers provides a narrow range of high volume, lower-risk surgical procedures and has been designed with a cost structure that enables us to charge fees which we believe are generally less than those charged by hospitals for similar services performed on an outpatient basis. As of December 31, 2010, we owned a majority interest in 204 surgery centers in 33 states and the District of Columbia and had one center under development.
We file reports with the Securities and Exchange Commission, or SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and other reports from time to time. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E., Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer and the SEC maintains an Internet site at http://www.sec.gov that contains the reports, proxy and information statements and other information filed electronically. Our website address is: http://www.amsurg.com. We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The information provided on our website is not part of this report, and is therefore not incorporated by reference unless such information is otherwise specifically referenced elsewhere in this report. Our principal executive offices are located at 20 Burton Hills Boulevard, Nashville, Tennessee 37215, and our telephone number is 615-665-1283.
Industry Overview
For many years, government programs, private insurance companies, managed care organizations and self-insured employers have implemented various cost-containment measures intended to limit the growth of healthcare expenditures. These cost-containment measures, together with technological advances, have resulted in a significant shift in the delivery of healthcare services away from traditional inpatient hospitals to more cost-effective sites, including ASCs. According to the Centers for Medicare and Medicaid Services, or CMS, there were approximately 5,300 Medicare-certified ASCs as of December 31, 2010. We believe that of those ASCs, approximately 65% performed procedures in a single specialty and 35% performed procedures in more than one specialty. Among the single specialty centers, approximately 2,000 are in our preferred specialties of gastroenterology, ophthalmology, orthopaedic, ear, nose and throat, or ENT, and urology, while the remainder are in specialties such as plastic surgery, podiatry and pain management. We believe approximately 50% of single specialty ASCs and approximately 25% of multi-specialty ASCs are independently owned.
We believe that the following factors have contributed to the growth of ambulatory surgery:
Cost-Effective Alternative. Ambulatory surgery is generally less expensive than hospital-based surgery for a number of reasons, including lower facility development costs, more efficient staffing and space utilization and a specialized operating environment focused on cost containment. Accordingly, charges to patients and payors by ASCs are generally less than hospital charges.
Physician and Patient Preference. We believe that many physicians prefer ASCs because these centers enhance physicians’ productivity by providing them with greater scheduling flexibility, more consistent nurse staffing and faster turnaround time between cases, allowing them to perform more surgeries in a defined period of time. In contrast, hospital outpatient departments generally serve a broader group of physicians, including those involved with emergency procedures, resulting in postponed or delayed surgeries. Additionally, many physicians choose to perform surgery in an ASC because their patients prefer the simplified admissions and discharge process and the less institutional atmosphere.
New Technology. New technology and advances in anesthesia, which have been increasingly accepted by physicians and payors, have significantly expanded the types of surgical procedures that can be performed in ASCs. Lasers, enhanced endoscopic techniques and fiber optics have reduced the trauma and recovery time associated with many surgical procedures. Improved anesthesia has shortened recovery time by minimizing post-operative side effects such as nausea and drowsiness, thereby avoiding, in some cases, overnight hospitalization.
Strategy
We believe we are a leader in the acquisition, development and operation of ASCs. The key components of our strategy are to:
    selectively acquire both single-specialty ASCs and multi-specialty ASCs with substantial minority physician ownership;
 
    develop new ASCs in partnership with physicians; and
 
    grow revenues and profitability at our existing surgery centers.
We also intend to pursue acquisitions of other companies that own and manage ASCs.

1


Table of Contents

Item 1. Business — (continued)
Currently, approximately 80% of our revenues are from single-specialty centers that perform gastroenterology or ophthalmology procedures. These specialties have a higher concentration of older patients than other specialties, such as orthopaedics or ENT. We believe the aging demographics of the U.S. population will be a source of procedure growth for gastroenterology and ophthalmology.
Acquisition and Development of Surgery Centers
We operate both single-specialty and multi-specialty ASCs. Our single-specialty ASCs are equipped and staffed for a single medical specialty. We have targeted ownership in single-specialty ASCs that perform gastrointestinal endoscopy, ophthalmology and orthopaedic procedures. We target these medical specialties because they generally involve a high volume of lower risk procedures that can be performed in an outpatient setting on a safe and cost-effective basis. Our multi-specialty ASCs are equipped and staffed to perform general surgical procedures, as well as procedures in more than one of the specialties listed above.
Our development staff identifies existing centers that are potential acquisition candidates and physicians who are potential partners for new center development. We begin our acquisition process with a due diligence review of the target center and its market. We use experienced teams of operations and financial personnel to conduct a review of all aspects of the center’s operations, including the following:
    quality of the physicians affiliated with the center;
 
    market position of the center and the physicians affiliated with the center;
 
    payor and case mix;
 
    competition and growth opportunities in the market;
 
    staffing and supply review;
 
    equipment assessment; and
 
    opportunities for operational efficiencies.
In presenting the advantages to physicians of developing a new ASC in partnership with us, our development staff emphasizes the proximity of a surgery center to a physician’s office, the simplified administrative procedures, the ability to schedule consecutive cases without preemption by inpatient or emergency procedures, the rapid turnaround time between cases, the high technical competency of the center’s clinical staff and the state-of-the-art surgical equipment. We also focus on our expertise in developing and operating centers, including contracting with vendors and third-party payors. In a development project, we provide services, such as financial feasibility pro forma analysis; site selection; financing for construction, equipment and build out; and architectural oversight. Capital contributed by the physicians and AmSurg plus debt financing provides the funds necessary to construct and equip a new surgery center and initial working capital.
As part of each acquisition or development transaction, we form a limited partnership or limited liability company and enter into a limited partnership agreement or operating agreement with our physician partners. We generally own 51% of the limited partnerships or limited liability companies. Under these agreements, we receive a percentage of the net income and cash distributions of the entity equal to our percentage ownership interest in the entity and have the right to the same percentage of the proceeds of a sale or liquidation of the entity. In the limited partnership structure, as the sole general partner, one of our affiliates is generally liable for the debts of the limited partnership. However, the physician partners are generally required to guarantee their pro rata share of any indebtedness or lease agreements to which the limited partnership is a party in proportion to their ownership interest in the limited partnership.
We manage each limited partnership and limited liability company and oversee the business office, marketing, financial reporting, accreditation and administrative operations of the surgery center. The physician partners provide the center with a medical director and performance improvement chairman and may provide certain other specified services such as billing and collections, transcription and accounts payable processing. In addition, the limited partnership or limited liability company may lease the services of certain non-physician personnel from entities affiliated with the physician partners, who will provide services at the center. Certain significant aspects of the limited partnership’s or limited liability company’s governance are overseen by an operating board, which is comprised of equal representation by AmSurg and our physician partners. We work closely with our physician partners to increase the likelihood of a successful partnership.
Substantially all of the limited partnership and operating agreements provide that, if certain regulatory changes take place, we will be obligated to purchase some or all of the noncontrolling interests of our physician partners. The regulatory changes that could trigger such obligations include changes that: (i) make the referral of Medicare and other patients to our surgery centers by physicians affiliated with us illegal; (ii) create the substantial likelihood that cash distributions from the limited partnerships or limited liability companies to the affiliated physicians will be illegal; or (iii) cause the ownership by the physicians of interests in the limited partnerships or limited liability companies to be illegal. There can be no assurance that our existing capital resources would be sufficient for us to meet the obligations, if they arise, to purchase these noncontrolling interests held by physicians. The determination of whether a triggering event has occurred generally would be made by the concurrence of our legal counsel and counsel for the physician partners or, in the absence of such concurrence, by independent counsel having expertise in healthcare law chosen by both parties. Such determination therefore would not be within our control. The triggering of these obligations could have a material adverse effect on our financial condition and results of operations. See “— Government Regulation.”

2


Table of Contents

Item 1. Business — (continued)
Growth in Revenues at Existing Facilities
We grow revenues in our existing facilities primarily through increasing procedure volume. We grow our procedure volume through:
    growth in the number of physicians performing procedures at our centers;
 
    obtaining new or more favorable managed care contracts for our centers;
 
    marketing our centers to referring physicians, payors and patients; and
 
    achieving efficiencies in center operations.
Growth in the number of physicians performing procedures. The most effective way to increase procedure volume and revenues at our ASCs is to increase the number of physicians that use the centers through:
    the physicians affiliated with the ASCs recruiting new physicians to their practices;
 
    identifying additional physicians to join the partnerships that own the ASCs; and
 
    recruiting non-partner physicians in the same or other specialties to use excess capacity at the ASCs.
We also work with our partners to plan for the retirement or departure of physicians who utilize our ASCs.
Obtaining new or more favorable managed care contracts. Maintaining access to physicians and patients through third-party payor contracts is important to the successful operation of our ASCs. We have a dedicated business development team that is responsible for negotiating contracts with third-party payors. They are responsible for obtaining new contracts for our ASCs with payors that do not currently contract with us and negotiating increased reimbursement rates pursuant to existing contracts.
Marketing our centers to referring physicians, payors and patients. We seek to increase procedure volume at our ASCs by marketing our ASCs to referring physicians and payors emphasizing the quality and high patient satisfaction and lower cost at our ASCs and increasing awareness of the benefits of our ASCs with employers and patients through public awareness programs, health fairs and screening programs, including programs designed to educate employers and patients as to the health and cost benefits of detecting colon cancer in its early stages through routine endoscopy procedures. We continue to increase our efforts in direct-to-consumer marketing through the expansion of our web-marketing strategy, colon cancer awareness campaigns and various local marketing programs.
Achieving efficiencies in center operations. We have dedicated teams with business and clinical expertise that are responsible for implementing best practices within our ASCs. The implementation of these best practices allows the ASCs to improve operating efficiencies through:
    physician scheduling enhancements;
 
    specially trained clinical staff focused on improved patient flow; and
 
    improved operating room turnover.
The information we gather and collect from our ASCs and team members allows us to develop best practices and identify those ASCs that could most benefit from improved operating efficiency techniques.
Surgery Center Operations
The size of our typical single-specialty ASC is approximately 3,000 to 6,000 square feet. The size of our typical multi-specialty ASC is approximately 5,000 to 10,000 square feet. Each center typically has two to three operating or procedure rooms with areas for reception, preparation, recovery and administration. Each surgery center is specifically tailored to meet the needs of its physician partners. Our surgery centers perform an average of approximately 6,300 procedures per year, though there is a wide range among centers from a low of approximately 1,200 procedures per year to a high of 31,000 procedures per year. The cost of developing a typical surgery center is approximately $2.7 million. Constructing, equipping and licensing a surgery center generally takes 12 to 15 months. As of December 31, 2010, 140 of our centers performed gastrointestinal endoscopy procedures, 37 centers performed ophthalmology surgery procedures, 19 centers were multi-specialty centers and eight centers performed orthopaedic procedures. The procedures performed at our centers generally do not require an extended recovery period. Our centers are staffed with approximately 10 to 15 clinical professionals and administrative personnel, including nurses and surgical technicians, some of whom may be leased on a full or part-time basis from entities affiliated with our physician partners.
The types of procedures performed at each center depend on the specialty of the practicing physicians. The procedures most commonly performed at our surgery centers are:
    gastroenterology — colonoscopy and other endoscopy procedures;
 
    ophthalmology — cataracts and retinal laser surgery; and
 
    orthopaedic — knee and shoulder arthroscopy and carpal tunnel repair.

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Table of Contents

Item 1. Business — (continued)
We market our surgery centers directly to patients, referring physicians and third-party payors, including health maintenance organizations, or HMOs, preferred provider organizations, or PPOs, other managed care organizations, and employers. Marketing activities conducted by our management and center administrators emphasize the high quality of care, cost advantages and convenience of our surgery centers and are focused on making each center an approved provider under local managed care plans.
Accreditation
Managed care organizations in certain markets will only contract with a facility that is accredited by either the Accreditation Association for Ambulatory Health Care, or AAAHC, or The Joint Commission. We generally seek accreditation for all of our ASCs. Currently, 167 of our 204 surgery centers are accredited by AAAHC or The Joint Commission, and 37 of our surgery centers are scheduled for initial accreditation surveys during 2011. All of the accredited centers received three-year certifications.
Surgery Center Locations
The following table sets forth certain information relating to our surgery centers as of December 31, 2010:
                 
            Operating or
        Acquisition/   Procedure
Location   Specialty   Opening Date   Rooms
 
 
Acquired Centers:
               
 
               
Knoxville, Tennessee
  Gastroenterology   November 1992     8  
Topeka, Kansas
  Gastroenterology   November 1992     3  
Nashville, Tennessee
  Gastroenterology   November 1992     3  
Washington, D.C.
  Gastroenterology   November 1993     3  
Torrance, California
  Gastroenterology   February 1994     2  
Maryville, Tennessee
  Gastroenterology   January 1995     3  
Miami, Florida
  Gastroenterology   April 1995     5  
Panama City, Florida
  Gastroenterology   July 1996     3  
Ocala, Florida
  Gastroenterology   August 1996     3  
Columbia, South Carolina
  Gastroenterology   October 1996     4  
Wichita, Kansas
  Orthopaedic   November 1996     3  
Crystal River, Florida
  Gastroenterology   January 1997     3  
Abilene, Texas
  Ophthalmology   March 1997     2  
Fayetteville, Arkansas
  Gastroenterology   May 1997     3  
Independence, Missouri
  Gastroenterology   September 1997     1  
Kansas City, Missouri
  Gastroenterology   September 1997     1  
Phoenix, Arizona
  Ophthalmology   February 1998     2  
Denver, Colorado
  Gastroenterology   April 1998     4  
Sun City, Arizona
  Ophthalmology   May 1998     5  
Baltimore, Maryland
  Gastroenterology   November 1998     3  
Boca Raton, Florida
  Ophthalmology   December 1998     2  
Indianapolis, Indiana
  Gastroenterology   June 1999     4  
Chattanooga, Tennessee
  Gastroenterology   July 1999     3  
Mount Dora, Florida
  Ophthalmology   September 1999     2  
Oakhurst, New Jersey
  Gastroenterology   September 1999     2  
La Jolla, California
  Gastroenterology   December 1999     2  
Burbank, California
  Ophthalmology   December 1999     1  
Waldorf, Maryland
  Gastroenterology   December 1999     2  
Las Vegas, Nevada
  Ophthalmology   December 1999     2  
Glendale, California
  Ophthalmology   January 2000     1  
Las Vegas, Nevada
  Ophthalmology   May 2000     2  
Hutchinson, Kansas
  Multispecialty   June 2000     2  
New Orleans, Louisiana
  Ophthalmology   July 2000     2  
Kingston, Pennsylvania
  Ophthalmology, Pain Management   December 2000     3  
Inverness, Florida
  Gastroenterology   December 2000     3  
Columbia, Tennessee
  Multispecialty   February 2001     2  
Bel Air, Maryland
  Gastroenterology   February 2001     2  
Dover, Delaware
  Multispecialty   February 2001     3  
Sarasota, Florida
  Ophthalmology   February 2001     2  
Greensboro, North Carolina
  Ophthalmology   March 2001     4  
Ft. Lauderdale, Florida
  Ophthalmology   March 2001     3  

4


Table of Contents

Item 1. Business — (continued)
                 
            Operating or
        Acquisition/   Procedure
Location   Specialty   Opening Date   Rooms
 
 
Bloomfield, Connecticut
  Ophthalmology   July 2001     1  
Lawrenceville, New Jersey
  Multispecialty   October 2001     3  
Newark, Delaware
  Gastroenterology   October 2001     5  
Alexandria, Louisiana
  Ophthalmology   December 2001     2  
Paducah, Kentucky
  Ophthalmology   May 2002     2  
Columbia, Tennessee
  Gastroenterology   June 2002     2  
Ft. Myers, Florida
  Ophthalmology   July 2002     2  
Tulsa, Oklahoma
  Ophthalmology   July 2002     3  
Peoria, Arizona
  Multispecialty   October 2002     3  
Lewes, Delaware
  Gastroenterology   December 2002     2  
Rogers, Arkansas
  Ophthalmology   December 2002     2  
Winter Haven, Florida
  Ophthalmology   December 2002     2  
Mesa, Arizona
  Gastroenterology   December 2002     4  
Voorhees, New Jersey
  Gastroenterology   March 2003     4  
St. George, Utah
  Gastroenterology   July 2003     2  
San Antonio, Texas
  Gastroenterology   July 2003     4  
Pueblo, Colorado
  Ophthalmology   September 2003     2  
Reno, Nevada
  Gastroenterology   December 2003     4  
Edina, Minnesota
  Ophthalmology   December 2003     1  
Gainesville, Florida
  Orthopaedic   February 2004     5  
West Palm, Florida
  Gastroenterology   March 2004     2  
Raleigh, North Carolina
  Gastroenterology   April 2004     4  
Sun City, Arizona
  Gastroenterology   September 2004     2  
Casper, Wyoming
  Gastroenterology   October 2004     2  
Rockville, Maryland
  Gastroenterology   October 2004     5  
Overland Park, Kansas
  Gastroenterology   October 2004     3  
Lake Bluff, Illinois
  Gastroenterology   November 2004     3  
San Luis Obispo, California
  Gastroenterology   December 2004     2  
Templeton, California
  Gastroenterology   December 2004     2  
Lutherville, Maryland
  Gastroenterology   January 2005     2  
Tacoma, Washington
  Gastroenterology   March 2005     5  
Tacoma, Washington
  Gastroenterology   March 2005     2  
Tacoma, Washington
  Gastroenterology   March 2005     2  
Tacoma, Washington
  Gastroenterology   March 2005     2  
Orlando, Florida
  Gastroenterology   June 2005     1  
Orlando, Florida
  Gastroenterology   June 2005     4  
Scranton, Pennsylvania
  Gastroenterology   August 2005     3  
Towson, Maryland
  Gastroenterology   August 2005     4  
Yuma, Arizona
  Gastroenterology   October 2005     3  
St. Louis, Missouri
  Orthopaedic   November 2005     2  
Salem, Oregon
  Ophthalmology   December 2005     2  
West Orange, New Jersey
  Gastroenterology   December 2005     3  
St. Cloud, Minnesota
  Ophthalmology   December 2005     2  
Tulsa, Oklahoma
  Gastroenterology   December 2005     3  
Laurel, Maryland
  Gastroenterology   December 2005     3  
Torrance, California
  Multispecialty   February 2006     4  
Nashville, Tennessee
  Ophthalmology   February 2006     2  
Arcadia, California
  Gastroenterology   March 2006     2  
Towson, Maryland
  Gastroenterology   August 2006     2  
The Woodlands, Texas
  Gastroenterology   September 2006     2  
Bala Cynwyd, Pennsylvania
  Gastroenterology   September 2006     2  
Malvern, Pennsylvania
  Gastroenterology   September 2006     3  
Oakland, California
  Gastroenterology   October 2006     3  
South Bend, Indiana
  Gastroenterology   January 2007     4  
Lancaster, Pennsylvania
  Gastroenterology   January 2007     2  
Silver Spring, Maryland
  Gastroenterology   January 2007     2  
Rockville, Maryland
  Gastroenterology   January 2007     3  
New Orleans, Louisiana
  Gastroenterology   January 2007     2  
Marrero, Louisiana
  Gastroenterology   January 2007     2  

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Table of Contents

Item 1. Business — (continued)
                 
            Operating or
        Acquisition/   Procedure
Location   Specialty   Opening Date   Rooms
 
 
Metairie, Louisiana
  Gastroenterology   January 2007     3  
Tom’s River, New Jersey
  Gastroenterology   May 2007     2  
Pottsville, Pennsylvania
  Gastroenterology   June 2007     3  
Memphis, Tennessee
  Gastroenterology   July 2007     4  
Kissimmee, Florida
  Gastroenterology   July 2007     1  
Glendora, California
  Gastroenterology   August 2007     4  
Mesquite, Texas
  Gastroenterology   August 2007     2  
Conroe, Texas
  Gastroenterology   August 2007     4  
Altamonte Springs, Florida
  Gastroenterology   September 2007     3  
New Port Richey, Florida
  Multispecialty   October 2007     3  
Glendale, Arizona
  Gastroenterology   October 2007     3  
Orlando, Florida
  Gastroenterology   October 2007     1  
San Diego, California
  Orthopaedic   November 2007     4  
Poway, California
  Multispecialty   November 2007     2  
Baton Rouge, Louisiana
  Gastroenterology   December 2007     10  
Baltimore, Maryland
  Gastroenterology   January 2008     4  
Glen Burnie, Maryland
  Gastroenterology   January 2008     2  
St. Clair Shores, Michigan
  Ophthalmology   May 2008     2  
Orlando, Florida
  Gastroenterology   May 2008     4  
Greenbrae, California
  Gastroenterology   August 2008     3  
Pomona, California
  Multispecialty   September 2008     5  
Akron, Ohio
  Gastroenterology   November 2008     3  
Redding, California
  Gastroenterology   December 2008     2  
Phoenix, Arizona
  Gastroenterology   December 2008     2  
Silver Spring, Maryland
  Ophthalmology   December 2008     3  
Phoenix, Arizona
  Orthopaedic   December 2008     8  
Bryan, Texas
  Gastroenterology   December 2008     3  
Westminster, Maryland
  Gastroenterology   December 2008     2  
McKinney, Texas
  Multispecialty   December 2008     2  
Durham, North Carolina
  Gastroenterology   December 2008     4  
Dayton, Ohio
  Gastroenterology   December 2008     1  
Kettering, Ohio
  Gastroenterology   December 2008     5  
Huber Heights, Ohio
  Gastroenterology   December 2008     1  
Springboro, Ohio
  Gastroenterology   December 2008     3  
North Charleston, South Carolina
  Gastroenterology   January 2009     3  
North Knoxville, Tennessee
  Gastroenterology   January 2009     2  
West Bridgewater, Massachusetts
  Gastroenterology   February 2009     2  
Canon City, Colorado
  Multispecialty   June 2009     2  
Media, Pennsylvania
  Gastroenterology   July 2009     3  
Hermitage, Tennessee
  Gastroenterology   October 2009     3  
Phoenix, Arizona
  Orthopaedic   December 2009     5  
Dallas, Texas
  Gastroenterology   December 2009     4  
Dallas, Texas
  Gastroenterology   December 2009     3  
Bedford, Texas
  Gastroenterology   December 2009     3  
Plano, Texas
  Gastroenterology   December 2009     4  
North Richland Hills, Texas
  Gastroenterology   December 2009     4  
Waltham, Massachusetts
  Orthopaedic   March 2010     4  
Boynton Beach, Florida
  Multispecialty   May 2010     4  
Waco, Texas
  Gastroenterology   July 2010     3  
Port St. Lucie, Florida
  Ophthalmology   August 2010     2  
Port Orange, Florida
  Multispecialty   October 2010     3  
Phoenix, Arizona
  Gastroenterology   November 2010     3  
Columbus, Ohio
  Ophthalmology   December 2010     3  
 
               
Developed Centers:
               
 
               
Santa Fe, New Mexico
  Gastroenterology   May 1994     3  
Beaumont, Texas
  Gastroenterology   October 1994     5  
Abilene, Texas
  Gastroenterology   December 1994     3  

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            Operating or
        Acquisition/   Procedure
Location   Specialty   Opening Date   Rooms
 
 
Knoxville, Tennessee
  Ophthalmology   June 1996     2  
Sidney, Ohio
  Multispecialty   December 1996     4  
Montgomery, Alabama
  Ophthalmology   May 1997     2  
Willoughby, Ohio
  Gastroenterology   July 1997     2  
Milwaukee, Wisconsin
  Gastroenterology   July 1997     3  
Chevy Chase, Maryland
  Gastroenterology   July 1997     4  
Melbourne, Florida
  Gastroenterology   August 1997     2  
Hialeah, Florida
  Gastroenterology   December 1997     3  
Cincinnati, Ohio
  Gastroenterology   January 1998     3  
Evansville, Indiana
  Ophthalmology   February 1998     2  
Shawnee, Kansas
  Gastroenterology   April 1998     3  
Salt Lake City, Utah
  Gastroenterology   April 1998     2  
Oklahoma City, Oklahoma
  Gastroenterology   May 1998     4  
El Paso, Texas
  Gastroenterology   December 1998     4  
Toledo, Ohio
  Gastroenterology   December 1998     3  
Florham Park, New Jersey
  Gastroenterology   December 1999     3  
Minneapolis, Minnesota
  Ophthalmology   June 2000     2  
Crestview Hills, Kentucky
  Gastroenterology   September 2000     3  
Louisville, Kentucky
  Gastroenterology   September 2000     3  
Louisville, Kentucky
  Ophthalmology   September 2000     2  
Ft. Myers, Florida
  Gastroenterology   October 2000     3  
Seneca, Pennsylvania
  Multispecialty   October 2000     4  
Sarasota, Florida
  Gastroenterology   December 2000     2  
Inglewood, California
  Gastroenterology   May 2001     3  
Clemson, South Carolina
  Multispecialty   September 2002     3  
Middletown, Ohio
  Gastroenterology   October 2002     3  
Troy, Michigan
  Gastroenterology   August 2003     3  
Kingsport, Tennessee
  Ophthalmology   October 2003     2  
Columbia, South Carolina
  Gastroenterology   November 2003     2  
Greenville, South Carolina
  Gastroenterology   August 2004     4  
Sebring, Florida
  Ophthalmology   November 2004     2  
Temecula, California
  Gastroenterology   November 2004     2  
Escondido, California
  Gastroenterology   December 2004     2  
Tampa, Florida
  Gastroenterology   January 2005     8  
Rockledge, Florida
  Gastroenterology   May 2005     3  
Lakeland, Florida
  Gastroenterology   May 2005     4  
Liberty, Missouri
  Gastroenterology   June 2005     1  
Knoxville, Tennessee
  Gastroenterology   September 2005     2  
Sun City, Arizona
  Multispecialty   November 2005     3  
Port Huron, Michigan
  Orthopaedic   March 2006     2  
Hanover, New Jersey
  Gastroenterology   October 2006     3  
Raleigh, North Carolina
  Gastroenterology   December 2006     3  
San Antonio, Texas
  Gastroenterology   May 2007     3  
Cary, North Carolina
  Gastroenterology   November 2007     4  
El Dorado, Arkansas
  Multispecialty   December 2007     2  
Greensboro, North Carolina
  Gastroenterology   August 2008     2  
Puyallup, Washington
  Gastroenterology   May 2009     3  
Blaine, Minnesota
  Multispecialty   November 2009     3  
 
           
 
          587
 
           
Our limited partnerships and limited liability companies generally lease the real property on which our surgery centers operate, either from entities affiliated with our physician partners or from unaffiliated parties.
Revenues
Substantially all of our revenues are derived from facility fees charged for surgical procedures performed in our surgery centers. These fees vary depending on the procedure, but usually include all charges for operating room usage, special equipment usage, supplies, recovery room usage, nursing staff and medications. Facility fees do not include the charges of the patient’s surgeon,

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anesthesiologist or other attending physicians, which are billed directly by the physicians. In limited instances, our revenues include charges for anesthesia services delivered by medical professionals employed or contracted by our centers. Revenue is recorded at the time of the patient encounter and billings for such procedures are made on or about that same date. At the majority of our centers, it is our policy to collect patient co-payments and deductibles at the time the surgery is performed. Our revenues are recorded net of estimated contractual adjustments from third-party medical service payors. Our billing and accounting systems provide us historical trends of the surgery centers’ cash collections and contractual write-offs, accounts receivable agings and established fee adjustments from third-party payors. These estimates are recorded and monitored monthly for each of our surgery centers as revenue is recognized. Our ability to accurately estimate contractual adjustments is dependent upon and supported by the fact that our surgery centers perform and bill for limited types of procedures, the range of reimbursement for those procedures within each surgery center specialty is very narrow and payments are typically received within 15 to 45 days of billing. These estimates are not, however, established from billing system generated contractual adjustments based on fee schedules for the patient’s insurance plan for each patient encounter.
ASCs depend upon third-party reimbursement programs, including governmental and private insurance programs, to pay for substantially all of the services rendered to patients. We derived approximately 31%, 33% and 34% of our revenues in the years ended December 31, 2010, 2009 and 2008, respectively, from governmental healthcare programs, primarily Medicare. The Medicare program currently pays ASCs in accordance with predetermined fee schedules. Our surgery centers are not required to file cost reports and, accordingly, we have no unsettled amounts from governmental third-party payors.
Effective January 1, 2008, CMS revised the payment system for services provided in ASCs. The key points of the revised payment system as it relates to us are:
    ASCs are paid based upon a percentage of the payments to hospital outpatient departments pursuant to the hospital outpatient prospective payment system;
 
    a scheduled phase-in of the revised rates over four years, beginning January 1, 2008; and
 
    planned annual increases in the ASC rates beginning in 2010 based on the consumer price index, or CPI.
The revised payment system has resulted in a significant reduction in the reimbursement rates for gastroenterology procedures, which comprise approximately 78% of the procedures performed by our surgery centers, and certain ophthalmology and pain procedures. Effective for fiscal year 2011 and subsequent years, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the Health Reform Law, provides for the annual CPI increases applicable to ASCs to be reduced by a productivity adjustment, which will be based on historical nationwide productivity gains. We estimate that our net earnings per share were negatively impacted by the revised payment system by $0.05 in 2008, by an additional $0.07 in 2009 and an additional $0.06 in 2010. In November 2010, CMS announced final reimbursement rates for 2011 under the revised payment system, which reflect a 1.5% CPI increase and a 1.3% productivity adjustment decrease. Based upon our current procedure mix and payor mix volume, we believe the 2011 scheduled reduction in payment rates will reduce our net earnings per diluted share in 2011 by approximately $0.05 as compared to 2010. The phase-in of the revised rates will be completed in 2011, and reimbursement rates for our ASCs should be increased annually thereafter based upon increases in the CPI. However, rates will also be subject to annual reductions based on a productivity adjustment. There can be no assurance that CMS will not further revise the payment system, or that any annual CPI increases will be material.
In March 2010, President Obama signed the Health Reform Law. The Health Reform Law represents significant change across the healthcare industry. The Health Reform Law contains a number of provisions designed to reduce Medicare program spending, including an annual productivity adjustment that will reduce payment updates to ASCs beginning in fiscal year 2011. However, the Health Reform Law also expands coverage of uninsured individuals through a combination of public program expansion and private sector health insurance reforms. For example, the Health Reform Law, as enacted expands eligibility under existing Medicaid programs, imposes financial penalties on individuals who fail to carry insurance coverage, creates affordability credits for those not enrolled in an employer-sponsored health plan, requires each state to establish a health insurance exchange and permits states to create federally funded, non-Medicaid plans for low-income residents not eligible for Medicaid. The Health Reform Law also establishes a number of private health insurance market reforms, including a ban on lifetime limits and pre-existing condition exclusions, new benefit mandates, and increased dependent coverage.
Effective for plan years beginning on or after September 23, 2010, many health plans are required to cover, without cost-sharing, certain preventive services designated by the U.S. Preventive Services Task Force, including colonoscopies. Beginning January 1, 2011, Medicare must also cover these preventive services without cost-sharing, and, beginning in 2013, states that provide Medicaid coverage of these preventive services without cost-sharing will receive a one percentage point increase in their federal medical assistance percentage for these services.
Health insurance market reforms that expand insurance coverage may result in an increased volume for certain procedures at our centers. However, many of these provisions of the Health Reform Law will not become effective until 2014 or later, and these provisions may be amended or eliminated or their impact could be offset by reductions in reimbursement under the Medicare program. More than 20 challenges to the Health Reform Law have been filed in federal courts. Some federal district courts have upheld the constitutionality of the Health Reform Law or dismissed cases on procedural grounds. Others have held the

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requirement that individuals maintain health insurance or pay a penalty to be unconstitutional and have either found the Health Reform Law void in its entirety or left the remainder of the law intact. These lawsuits are subject to appeal. Further, Congress is considering bills that would repeal or revise the Health Reform Law.
Because of the many variables involved, including the law’s complexity, lack of implementing regulations or interpretive guidance, gradual implementation, pending court challenges, and possible amendment or repeal, we are unable to predict the net effect of the reductions in Medicare spending, the expected increases in revenues from increased procedure volumes, and numerous other provisions in the law that may affect the Company. We are further unable to foresee how individuals and employers will respond to the choices afforded them by the Health Reform Law. Thus, we cannot predict the full impact of the Health Reform Law on the Company at this time.
CMS is increasing its administrative audit efforts through the nationwide expansion of the recovery audit contractor, or RAC, program. RACs are private contractors that conduct post-payment reviews of providers and suppliers that bill Medicare to detect and correct improper payments for services. The Health Reform Law expands the RAC program’s scope to include Medicaid claims by requiring all states to establish programs to contract with RACs by December 31, 2010. In addition to RACs, other contractors, such as Medicaid Integrity Contractors, perform payment audits to identify and correct improper payments. We could incur costs associated with appealing any alleged overpayments and be required to repay any alleged overpayments identified by these or other administrative audits.
We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures, to become more common and to involve a higher percentage of reimbursement amounts. Effective January 15, 2009, CMS promulgated three national coverage determinations that prevent Medicare from paying for certain serious, preventable medical errors performed in any healthcare facility, such as surgery performed on the wrong patient or the wrong site. Several commercial payors also do not reimburse providers for certain preventable adverse events. In addition, a 2006 federal law authorizes CMS to require ASCs to submit data on certain quality measures. ASCs that fail to submit the required data would face a two percentage point reduction in their annual reimbursement rate increase. CMS has not yet implemented the quality measure reporting requirement but has announced that it expects to do so in a future rulemaking. Further, the Health Reform Law required the Department of Health and Human Services, or HHS, to present a plan to Congress by January 1, 2011 for implementing a value-based purchasing system that would tie Medicare payments to ASCs to quality and efficiency measures. HHS has not yet publicly issued this plan. The Health Reform Law also requires HHS to study whether to expand to ASCs its current policy of not paying additional amounts for care provided to treat conditions acquired during an inpatient hospital stay.
In addition to payment from governmental programs, ASCs derive a significant portion of their revenues from private healthcare insurance plans. These plans include both standard indemnity insurance programs as well as managed care programs, such as PPOs and HMOs. The strengthening of managed care systems nationally has resulted in substantial competition among providers of surgery center services that contract with these systems. Exclusion from participation in a managed care network could result in material reductions in patient volume and revenue. Some of our competitors have greater financial resources and market penetration than we do. We believe that all payors, both governmental and private, will continue their efforts over the next several years to reduce healthcare costs and that their efforts will generally result in a less stable market for healthcare services. While no assurances can be given concerning the ultimate success of our efforts to contract with healthcare payors, we believe that our position as a low-cost alternative for certain surgical procedures should enable our surgery centers to compete effectively in the evolving healthcare marketplace.
Competition
We encounter competition in three separate areas: competition with other companies for acquisitions of existing centers; competition with other providers for physicians to utilize our centers, patients and managed care contracts; and competition for joint venture development of new centers.
Competition for Center Acquisitions. There are several public and private companies that compete with us for the acquisition of existing ASCs. Some of these competitors may have greater resources than we have. The principal competitive factors that affect our and our competitors’ ability to acquire surgery centers are price, experience and reputation, and access to capital.
Competition for Physicians to Utilize Our Centers, Patients and Managed Care Contracts. We compete with hospitals and other surgery centers in recruiting physicians to utilize our surgery centers, for patients and for the opportunity to contract with payors. In some of the markets in which we operate, there are shortages of physicians in certain specialties, including gastroenterology. In several of the markets in which we operate, hospitals are recruiting physicians or groups of physicians to become employed by the hospitals, including primary care physicians and physicians in certain specialties, including gastroenterology, and restricting those physicians’ ability to refer patients to physicians and facilities not affiliated with the hospital. Physicians, hospitals, payors and other providers may form accountable care organizations or similar entity arrangements that restrict the physicians who may treat certain patients or the facilities at which patients may be treated. Competition with hospitals and other surgery centers may limit our ability to contract with payors or negotiate favorable payment rates.
Competition for Joint Venture Development of Centers. We believe that we do not have a direct corporate competitor in the development of single-specialty ASCs across the specialties of gastroenterology and ophthalmology. There are, however, several

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publicly and privately held companies that develop multi-specialty surgery centers, and these companies may compete with us in the development of multi-specialty centers. Further, many physicians develop surgery centers without a corporate partner, utilizing consultants who typically perform these services for a fee and who take a small equity interest or no equity interest in the ongoing operations of the center.
Government Regulation
The healthcare industry is subject to extensive regulation by a number of governmental entities at the federal, state and local level. Government regulation affects our business activities by controlling our growth, requiring licensure and certification for our facilities, regulating the use of our properties and controlling reimbursement to us for the services we provide.
Certification. We depend on third-party programs, including governmental and private health insurance programs, to reimburse us for services rendered to patients in our ASCs. In order to receive Medicare reimbursement, each surgery center must meet the applicable conditions of participation set forth by HHS, relating to the type of facility, its equipment, personnel and standard of medical care, as well as compliance with state and local laws and regulations, all of which are subject to change from time to time. ASCs undergo periodic on-site Medicare certification surveys. Each of our existing centers is certified as a Medicare provider. Although we intend for our centers to participate in Medicare and other government reimbursement programs, there can be no assurance that these centers will continue to qualify for participation. Effective May 18, 2009, CMS revised the conditions for coverage for ASCs. The rule revised four existing conditions for coverage: (1) governing body and management; (2) surgical services; (3) evaluation of quality, which was renamed quality assessment and performance improvement; and (4) laboratory and radiologic services. The rule also added three new conditions for coverage: (i) patient rights; (ii) infection control; and (iii) patient admission, assessment and discharge. These additional conditions for coverage increase information collection requirements and other administrative obligations for ASCs.
Medicare-Medicaid Fraud and Abuse Provisions. The federal anti-kickback statute prohibits healthcare providers and others from soliciting, receiving, offering or paying, directly or indirectly, any remuneration (including any kickback, bribe or rebate) with the intent of generating referrals or orders for services or items covered by a federal healthcare program. The anti-kickback statute is very broad in scope, and many of its provisions have not been uniformly or definitively interpreted by case law or regulations. Courts have found a violation of the anti-kickback statute if just one purpose of the remuneration is to general referrals, even if there are other lawful purposes. Furthermore, the Health Reform Law provides that knowledge of the law or intent to violate the law is not required. Violations may result in criminal penalties or fines of up to $25,000 or imprisonment for up to five years, or both. Violations of the anti-kickback statute may also result in substantial civil penalties, including penalties of up to $50,000 for each violation, plus three times the amount claimed, and exclusion from participation in the Medicare and Medicaid programs. Exclusion from these programs would result in significant reductions in revenue and would have a material adverse effect on our business. The Health Reform Law provides that submission of a claim for services or items generated in violation of the anti-kickback statute constitutes a false or fraudulent claim and may be subject to additional penalties under the federal False Claims Act.
HHS has published final safe harbor regulations that outline categories of activities that are deemed protected from prosecution under the anti-kickback statute. Two of the safe harbor regulations relate to investment interests in general: the first concerning investment interests in large publicly traded companies ($50,000,000 in net tangible assets) and the second for investments in smaller entities. The safe harbor regulations also include safe harbors for investments in certain types of ASCs. The limited partnerships and limited liability companies that own our surgery centers do not meet all of the criteria of either of the investment interests safe harbors or the surgery center safe harbor. Thus, they do not qualify for safe harbor protection from government review or prosecution under the anti-kickback statute. However, a business arrangement that does not substantially comply with a safe harbor is not necessarily illegal under the anti-kickback statute.
The HHS Office of Inspector General, or OIG, is authorized to issue advisory opinions regarding the interpretation and applicability of the federal anti-kickback statute, including whether an activity constitutes grounds for the imposition of civil or criminal sanctions. We have not sought such an opinion regarding any of our arrangements. However, in February 2003, the OIG issued an advisory opinion on a proposed multi-specialty ASC joint venture involving a hospital and a multi-specialty group practice. The OIG concluded that because the group practice was comprised of a large number of physicians who were not surgeons and therefore were not in a position to personally perform the procedures referred to the surgery center, the proposed arrangement could potentially violate the federal anti-kickback statute. In October 2007, the OIG reached a similar conclusion in an advisory opinion regarding a potential investment by optometrists in an ASC owned jointly by ophthalmologists and a hospital. The OIG determined that ownership by optometrists could potentially violate the federal anti-kickback statute because the optometrists could not personally perform procedures referred to the surgery center.
Although these advisory opinions are not binding on any entity other than the parties who submitted the requests, we believe that these advisory opinions provide us with some guidance as to how the OIG would analyze joint ventures involving surgeons such as our physician partners. We believe our joint ventures are generally distinguishable from the joint ventures described in the advisory opinions because, among other things, our physician investors are surgeons who not only refer their patients to the surgery centers but also personally perform the surgical procedures.

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While several federal court decisions have aggressively applied the restrictions of the anti-kickback statute, they provide little guidance as to the application of the anti-kickback statute to our limited partnerships and limited liability companies. We believe that we are in compliance with the current requirements of applicable federal and state law because, among other factors:
    the limited partnerships and limited liability companies exist to effect legitimate business purposes, including the ownership, operation and continued improvement of high quality, cost-effective and efficient services to the patients served;
 
    the limited partnerships and limited liability companies function as an extension of the group practices of physicians who are affiliated with the surgery centers and the surgical procedures are performed personally by these physicians without referring the patients outside of their practice;
 
    our physician partners have a substantial investment at risk in the limited partnerships and limited liability companies;
 
    terms of the investment do not take into account volume of the physician partners’ past or anticipated future services provided to patients of the centers;
 
    the physician partners are not required or encouraged as a condition of the investment to treat Medicare or Medicaid patients at the centers or to influence others to refer such patients to the centers for treatment;
 
    the limited partnerships, the limited liability companies, our subsidiaries and our affiliates will not loan any funds to or guarantee any debt on behalf of the physician partners with respect to their investment; and
 
    distributions by the limited partnerships and limited liability companies are allocated uniformly in proportion to ownership interests.
The safe harbor regulations also set forth a safe harbor for personal services and management contracts. Certain of our limited partnerships and limited liability companies have entered into ancillary services agreements with our physician partners’ group practices, pursuant to which the practice may provide the center with billing and collections, transcription, payables processing, payroll and other ancillary services. The consideration payable by a limited partnership or limited liability company for certain of these services may be based on the volume of services provided by the practice, which is measured by the limited partnership’s or limited liability company’s revenues. Although these relationships do not meet all of the criteria of the personal services and management contracts safe harbor, we believe that the ancillary services agreements are in compliance with the current requirements of applicable federal and state law because, among other factors, the fees payable to the physician practices are equal to the fair market value of the services provided thereunder.
Many of the states in which we operate also have adopted laws that prohibit payments to physicians in exchange for referrals similar to the federal anti-kickback statute, some of which apply regardless of the source of payment for care. These statutes typically provide criminal and civil penalties as well as loss of licensure.
Notwithstanding our belief that the relationship of physician partners to our surgery centers should not constitute illegal remuneration under the federal anti-kickback statute or similar laws, we cannot assure you that a federal or state agency charged with enforcement of the anti-kickback statute and similar laws might not assert a contrary position or that new federal or state laws might not be enacted that would cause the physician partners’ ownership interests in our centers to become illegal, or result in the imposition of penalties on us or certain of our facilities. Even the assertion of a violation could have a material adverse effect upon us.
In addition to the anti-kickback statute, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, provides for criminal penalties for healthcare fraud offenses that apply to all health benefit programs, including the payment of inducements to Medicare and Medicaid beneficiaries in order to influence those beneficiaries to order or receive services from a particular provider or practitioner. Federal enforcement officials have numerous enforcement mechanisms to combat fraud and abuse, including the Medicare Integrity Program and an incentive program under which individuals can receive up to $1,000 for providing information on Medicare fraud and abuse that leads to the recovery of at least $100 of Medicare funds. In addition, federal enforcement officials have the ability to exclude from Medicare and Medicaid any investors, officers and managing employees associated with business entities that have committed healthcare fraud.
Evolving interpretations of current, or the adoption of new, federal or state laws or regulations could affect many of our arrangements. Law enforcement authorities, including the OIG, the courts and Congress, are increasing their scrutiny of arrangements between healthcare providers and potential referral sources to ensure that the arrangements are not designed as a mechanism to exchange remuneration for patient care referrals or opportunities. Investigators also have demonstrated a willingness to look behind the formalities of a business transaction to determine the underlying purposes of payments between healthcare providers and potential referral sources.
Prohibition on Certain Self-Referrals and Physician Ownership of Healthcare Facilities. The federal physician self-referral law, commonly referred to as the Stark Law, prohibits a physician from making a referral for a designated health service to an entity if the physician or a member of the physician’s immediate family has a financial relationship with the entity. Sanctions for violating the Stark Law include civil money penalties of up to $15,000 per prohibited service provided and exclusion from the federal healthcare programs. The Stark Law applies to referrals involving the following services under the definition of “designated health services”: clinical laboratory services; physical therapy services; occupational therapy services; radiology and

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imaging services; radiation therapy services and supplies; durable medical equipment and supplies; parenteral and enteral nutrients, equipment and supplies; prosthetics, orthotics and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services.
Through a series of rulemakings, CMS has issued final regulations interpreting the Stark Law. While the regulations help clarify the requirements of the exceptions to the Stark Law, it is difficult to determine the full effect of the regulations. Under these regulations, services that would otherwise constitute a designated health service, but that are paid by Medicare as a part of the surgery center payment rate, are not a designated health service for purposes of the Stark Law. In addition, the Stark Law contains an exception covering implants, prosthetics, implanted prosthetic devices and implanted durable medical equipment provided in a surgery center setting under certain circumstances. Therefore, we believe the Stark Law does not prohibit physician ownership or investment interests in our surgery centers to which they refer patients.
Effective January 1, 2008, CMS expanded the so-called ASC exemption to the Stark Law by excluding from the definition of “radiology and certain other imaging services” any radiology and imaging procedures that are integral to a covered ASC surgical procedure and that are performed immediately before, during, or immediately following the surgical procedure (that is, on the same day). Similarly, CMS has excluded from the Stark Law definition of “outpatient prescription drugs” any drugs that are “covered as ancillary services” under the revised ASC payment system. These drugs include those furnished during the immediate postoperative recovery period to a patient to reduce suffering from nausea or pain. CMS cautioned, however, that only those radiology, imaging and outpatient prescription drug items and services that are integral to an ASC procedure and performed on the same day as the covered surgical procedure will quality for the ASC exemption. The Stark Law prohibition will continue to prohibit a physician-owned ASC from furnishing outpatient prescription drugs for use in a patient’s home. In addition, several states in which we operate have self-referral statutes similar to the Stark Law. We believe that physician ownership of surgery centers is not prohibited by these state self-referral statutes. However, the Stark Law and similar state statutes are subject to different interpretations. Violations of any of these self-referral laws may result in substantial civil or criminal penalties, including large civil monetary penalties and exclusion from participation in the Medicare and Medicaid programs. Exclusion of our surgery centers from these programs could result in significant loss of revenues and could have a material adverse effect on us. We can give you no assurances that further judicial or agency interpretations of existing laws or further legislative restrictions on physician ownership or investment in health care entities will not be issued that could have a material adverse effect on us.
The Federal False Claims Act and Similar Federal and State Laws. We are subject to state and federal laws that govern the submission of claims for reimbursement. These laws generally prohibit an individual or entity from knowingly and willfully presenting a claim (or causing a claim to be presented) for payment from Medicare, Medicaid or other third-party payors that is false or fraudulent. The standard for “knowing and willful” often includes conduct that amounts to a reckless disregard for whether accurate information is presented by claims processors. Penalties under these statutes include substantial civil and criminal fines, exclusion from the Medicare program, and imprisonment. One of the most prominent of these laws is the federal False Claims Act, which may be enforced by the federal government directly, or by a qui tam plaintiff (or whistleblower) on the government’s behalf. When a private plaintiff brings a qui tam action under the False Claims Act, the defendant often will not be made aware of the lawsuit until the government commences its own investigation or makes a determination whether it will intervene. The Fraud Enforcement and Recovery Act of 2009 expanded the scope of the False Claim Act by, among other things, creating liability for knowingly or improperly avoiding repayment of an overpayment received from the government and broadening protections for whistleblowers. Under the Health Reform Law, civil penalties may be imposed for failure to report and return an overpayment within 60 days of identifying the overpayment. In some cases, qui tam plaintiffs and the federal government have taken the position, and some courts have held, that providers who allegedly have violated other statutes, such as the anti-kickback statute or the Stark Law, have thereby submitted false claims under the False Claims Act. The Health Reform Law clarifies this issue with respect to the anti-kickback statute by providing that submission of claims for services or items generated in violation of the anti-kickback statute constitutes a false or fraudulent claim under the False Claims Act. When a defendant is determined by a court of law to be liable under the False Claims Act, the defendant may be required to pay three times the amount of the alleged false claim, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim. The private plaintiff may receive a share of any settlement or judgment. We believe that we have procedures in place to ensure the accurate completion of claims forms and requests for payment. However, the laws and regulations defining proper Medicare or Medicaid billing are frequently unclear and have not been subjected to extensive judicial or agency interpretation. Billing errors can occur despite our best efforts to prevent or correct them, and we cannot assure you that the government will regard such errors as inadvertent and not in violation of the False Claims Act or related statutes.
Under the Deficit Reduction Act of 2005, or DEFRA, every entity that receives at least $5.0 million annually in Medicaid payments must have written policies for all employees, contractors or agents, providing detailed information about false claims, false statements and whistleblower protections under certain federal laws, including the federal False Claims Act, and similar state laws.
A number of states, including states in which we operate, have adopted their own false claims provisions as well as their own qui tam provisions whereby a private party may file a civil lawsuit in state court. DEFRA creates an incentive for states to enact false claims laws that are comparable to the federal False Claims Act.

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Item 1. Business — (continued)
Healthcare Industry Investigations. Both federal and state government agencies have heightened and coordinated civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare companies, as well as their executives and managers. These investigations relate to a wide variety of topics, including referral and billing practices. The Health Reform Law includes additional federal funding of $350 million over the next 10 years to fight health care fraud, waste and abuse, including $105 million for federal fiscal year 2011 and $65 million for federal fiscal year 2012. From time to time, the OIG and the Department of Justice have established national enforcement initiatives that focus on specific billing practices or other suspected areas of abuse. Some of our activities could become the subject of governmental investigations or inquiries. For example, we have significant Medicare billings and we have joint venture arrangements involving physician investors. In addition, our executives and managers, many of whom have worked at other healthcare companies that are or may become the subject of federal and state investigations and private litigation, could be included in governmental investigations or named as defendants in private litigation. We are not aware of any governmental investigations involving any of our facilities, our executives or our managers. A future adverse investigation of us, our executives or our managers could result in significant expense to us, as well as adverse publicity.
Privacy and Security Requirements. There are currently numerous legislative and regulatory initiatives at the state and federal levels addressing the privacy and security of patient health and other identifying information. The privacy and security regulations promulgated pursuant to HIPAA extensively regulate the use and disclosure of individually identifiable health information and require healthcare providers to implement administrative, physical and technical safeguards to protect the security of such information. Violations of the regulations may result in civil and criminal penalties. The American Recovery and Reinvestment Act of 2009, or ARRA, strengthened the requirements of the HIPAA privacy and security regulations and significantly increased the penalties for violations, with penalties of up to $50,000 per violation for a maximum civil penalty of $1.5 million in a calendar year for violations of the same requirement. Under ARRA, HHS is required to conduct periodic compliance audits of covered entities and their business associates (entities that handle identifiable health information on behalf of covered entities). In addition, ARRA authorizes State Attorneys General to bring civil actions seeking either injunction or damages in response to violations of HIPAA privacy and security regulations that threaten the privacy of state residents. ARRA also extends the application of certain provisions of the security and privacy regulations to business associates and subjects business associates to civil and criminal penalties for violation of the regulations.
As required by ARRA, HHS published an interim final rule on August 24, 2009, that requires covered entities to report breaches of unsecured protected health information to affected individuals without unreasonable delay, but not to exceed 60 days of discovery of the breach by the covered entity of its agents. Notification must also be made to HHS and, in certain situations involving large breaches, to the media.
Our facilities remain subject to any state laws that relate to privacy or the reporting of security breaches that are more restrictive than the regulations issued under HIPAA and the requirements of ARRA. For example, various state laws and regulations may require us to notify affected individuals in the event of a data breach involving certain individually identifiable health or financial information.
In addition, the Federal Trade Commission, or FTC, issued a final rule in October 2007 requiring financial institutions and creditors, which may include ASCs and other healthcare providers, to implement written identity theft prevention programs to detect, prevent, and mitigate identity theft in connection with certain accounts. The FTC delayed enforcement of this rule until December 31, 2010. In addition, on December 18, 2010, the Red Flag Program Clarification Act of 2010 became law, restricting the definition of a “creditor”. This law may exempt our ASCs and other healthcare providers from complying with this rule.
HIPAA Administrative Simplification Requirements. Pursuant to HIPAA, HHS has adopted regulations establishing electronic data transmission standards that all healthcare providers must use when submitting or receiving certain healthcare transactions electronically. In addition, HIPAA requires that each provider use a National Provider Identifier. In January 2009, CMS published a final rule regarding updated standard code sets for certain diagnoses and procedures known as ICD-10 code sets and related changes to the formats used for certain electronic transactions. While use of the ICD-10 code sets is not mandatory until October 1, 2013, we will be modifying our payment systems and processes to prepare for the implementation. Use of the ICD-10 code sets will require significant administrative changes; however, we believe that the cost of compliance with these regulations has not had and is not expected to have a material, adverse effect on our business, financial position or results of operations.
Obligations to Buy Out Physician Partners. Under many of our agreements with physician partners, we are obligated to purchase the interests of the physicians at an amount as determined by a predefined formula, as specified in the limited partnership and operating agreements, in the event that their continued ownership of interests in the limited partnerships and limited liability companies becomes prohibited by the statutes or regulations described above. The determination of such a prohibition generally is required to be made by our counsel in concurrence with counsel of the physician partners or, if they cannot concur, by a nationally recognized law firm with expertise in healthcare law jointly selected by us and the physician partners. The interest we are required to purchase will not exceed the minimum interest required as a result of the change in the law or regulation causing such prohibition.
CONs and State Licensing. Certificate of Need, or CON, statutes and regulations control the development of ASCs in certain states. CON statutes and regulations generally provide that, prior to the expansion of existing centers, the construction of new

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Item 1. Business — (continued)
centers, the acquisition of major items of equipment or the introduction of certain new services, approval must be obtained from the designated state health planning agency. In giving approval, a designated state health planning agency must determine that a need exists for expanded or additional facilities or services. Our development of ASCs focuses on states that do not require CONs. Acquisitions of existing surgery centers usually do not require CON approval.
State licensing of ASCs is generally a prerequisite to the operation of each center and to participation in federally funded programs, such as Medicare and Medicaid. Once a center becomes licensed and operational, it must continue to comply with federal, state and local licensing and certification requirements, as well as local building and safety codes. In addition, every state imposes licensing requirements on individual physicians, and many states impose licensing requirements on facilities and services operated and owned by physicians. Physician practices are also subject to federal, state and local laws dealing with issues such as occupational safety, employment, medical leave, insurance regulations, civil rights and discrimination and medical waste and other environmental issues.
Corporate Practice of Medicine. The laws of several states in which we operate or may operate in the future do not permit business corporations to practice medicine, exercise control over physicians who practice medicine or engage in various business practices, such as fee-splitting with physicians. The physicians who perform procedures at the surgery centers are individually licensed to practice medicine. In most instances, the physicians and physician group practices are not affiliated with us other than through the physicians’ ownership in the limited partnerships and limited liability companies that own the surgery centers and through the service agreements we have with some physicians. The laws in most states regarding the corporate practice of medicine have been subjected to limited judicial and regulatory interpretation, and interpretation and enforcement of these laws vary significantly from state to state. Therefore, we cannot provide assurances that our activities, if challenged, will be found to be in compliance with these laws.
Employees
As of December 31, 2010, we and our affiliated entities employed approximately 3,100 persons, approximately 1,900 of whom were full-time employees and 1,200 of whom were part-time employees. Of our employees, 280 were employed at our headquarters in Nashville, Tennessee. In addition, we lease the services of approximately 900 full-time employees and 500 part-time employees from entities affiliated with our physician partners. None of these employees are represented by a union. We believe our relationships with our employees to be good.
Legal Proceedings and Insurance
From time to time, we may be named a party to legal claims and proceedings in the ordinary course of business. We are not aware of any claims or proceedings against us or our limited partnerships and limited liability companies that we believe will have a material financial impact on us. Each of our surgery centers maintains separate medical malpractice insurance in amounts deemed adequate for its business. We also maintain insurance for general liability, director and officer liability and property. Certain policies are subject to deductibles.

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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the persons serving as our executive officers as of December 31, 2010. Our executive officers serve at the pleasure of the Board of Directors.
             
Name   Age   Experience
 
Christopher A. Holden
    46     Chief Executive Officer and Director since October 2007; Senior Vice President and a Division President of Triad Hospitals Inc. from May 1999 to July 2007; President — West Division of the Central Group of Columbia/HCA Healthcare Corporation from January 1998 to May 1999.
 
Claire M. Gulmi
    57     Executive Vice President since February 2006; Chief Financial Officer since September 1994; Director since May 2004; Senior Vice President from March 1997 to February 2006; Secretary since December 1997; Vice President from September 1994 through March 1997.
 
David L. Manning
    61     Executive Vice President and Chief Development Officer since February 2006; Senior Vice President of Development from April 1992 to February 2006.
 
Phillip A. Clendenin
    46     Senior Vice President of Corporate Services since March 2009; Chief Executive Officer of River Region Health System from July 2001 to July 2008; Chief Executive Officer of Greenview Regional Hospital from November 1997 to June 2001.
 
Kevin D. Eastridge
    45     Senior Vice President of Finance since July 2008; Vice President of Finance from April 1998 to July 2008; Chief Accounting Officer since July 2004; Controller from March 1997 to June 2004.
 
Billie A. Payne
    59     Senior Vice President of Operations since December 2007; Vice President of Operations from March 1998 to December 2007.

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Item 1A. Risk Factors
The following factors affect our business and the industry in which we operate. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also have an adverse effect on us. If any of the matters discussed in the following risk factors were to occur, our business, financial condition, results of operations, cash flows or prospects could be materially adversely affected.
We depend on payments from third-party payors, including government healthcare programs. If these payments decrease or do not increase as our costs increase, our operating margins and profitability would be adversely affected. We depend on private and governmental third-party sources of payment for the services provided to patients in our surgery centers. We derived approximately 31% of our revenues in 2010 from U.S. government healthcare programs, primarily Medicare. The amount our surgery centers receive for their services may be adversely affected by market and cost factors as well as other factors over which we have no control, including future changes to the Medicare and Medicaid payment systems and the cost containment and utilization decisions of third-party payors. Although the Health Reform Law, as enacted, expands coverage of preventive care and the number of individuals with healthcare coverage, the law also provides for reductions to Medicare and Medicaid program spending. It is impossible to predict how the various components of the Health Reform Law, many of which do not take effect for several years, will affect our business and the businesses of our physician partners. Several states are also considering healthcare reform measures. This focus on healthcare reform at the federal and state levels may increase the likelihood of significant changes affecting government healthcare programs in the future.
Managed care plans have increased their market share in some areas in which we operate, which has resulted in substantial competition among healthcare providers for inclusion in managed care contracting and may limit the ability of healthcare providers to negotiate favorable payment rates. In addition, managed care payors may lower reimbursement rates in response to increased obligations on payors imposed by the Health Reform Law or future reductions in Medicare reimbursement rates. We can give you no assurances that future changes to reimbursement rates by government healthcare programs, cost containment measures by private third-party payors, including fixed fee schedules and capitated payment arrangements, or other factors affecting payments for healthcare services will not adversely affect our future revenues, operating margins or profitability.
Our business may be adversely affected by changes to the medical practices of our physician partners or if we fail to maintain good relationships with the physician partners who use our surgery centers. Our business depends on, among other things, the efforts and success of the physician partners who perform procedures at our surgery centers and the strength of our relationship with these physicians. The medical practices of our physician partners may be negatively impacted by general economic conditions, changes in payment rates or systems by payors (including Medicare), actions taken by referring physicians, other providers and payors, and other factors impacting their practices. Adverse economic conditions, including high unemployment rates, could cause patients of our physician partners and our ASC to cancel or delay procedures. Our physician partners may perform procedures at other facilities and are not required to use our surgery centers. From time to time, we may have disputes with physicians who use or own interests in our surgery centers. Our revenues and profitability would be adversely affected if a physician or group of physicians stopped using or reduced their use of our surgery centers as a result of changes in their physician practice, changes in payment rates or systems, or a disagreement with us. In addition, if the physicians who use our surgery centers do not provide quality medical care or follow required professional guidelines at our facilities or there is damage to the reputation of a physician or group of physicians who use our surgery centers, our business and reputation could be damaged.
If we fail to acquire and develop additional surgery centers on favorable terms, our future growth and operating results could be adversely affected. Our growth strategy includes increasing our revenues and earnings by acquiring existing surgery centers and developing new surgery centers. Our efforts to execute our acquisition and development strategy may be affected by our ability to identify suitable acquisition and development opportunities and negotiate and close transactions in a timely manner and on favorable terms. The surgery centers we develop typically incur losses during the initial months of operation. We can give you no assurances that we will be successful in acquiring and developing additional surgery centers, that the surgery centers we acquire and develop will achieve satisfactory operating results or that newly developed centers will not incur greater than anticipated operating losses.
If we are unable to increase procedure volume at our existing centers, our operating margins and profitability could be adversely affected. Our growth strategy includes increasing our revenues and earnings primarily by increasing the number of procedures performed at our surgery centers. Because we expect the amount of the payments we receive from third-party payors to remain fairly consistent, our operating margins will be adversely affected if we do not increase the procedure volume of our surgery centers and generate increased revenue to offset increases in our operating costs. We seek to increase procedure volume at our surgery centers by increasing the number of physicians performing procedures at our centers, obtaining new or more favorable managed care contracts, improving patient flow at our centers, promoting screening programs and increasing patient and physician awareness of our centers. During 2010, procedure growth at our ASCs was adversely impacted by adverse economic conditions, including high unemployment rates, that caused patients to cancel and delay procedures. We believe economic conditions will continue to negatively impact our business in 2011. We can give you no assurances that we will be successful at increasing procedure volumes or maintaining current revenues and operating margins at our centers.
If we are unable to manage the growth in our business, our operating results could be adversely affected. To accommodate our past and anticipated future growth, we will need to continue to implement and improve our management, operational and financial information systems and to expand, train, manage and motivate our workforce. We can give you no assurances that our

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Item 1A. Risk Factors — (continued)
personnel, systems, procedures or controls will be adequate to support our operations in the future or that the costs and management attention related to the expansion of our operations will not adversely affect our results of operations.
If we do not have sufficient capital resources to complete acquisitions and develop new surgery centers, our growth and results of operations could be adversely affected. We will need capital to acquire, develop, integrate, operate and expand surgery centers. We may finance future acquisition and development projects through debt or equity financings. To the extent that we undertake these financings, our shareholders may experience ownership dilution. To the extent we incur debt, we may have significant interest expense and may be subject to covenants in the related debt agreements that affect the conduct of our business. If we do not have sufficient capital resources, our growth could be limited and our results of operations could be adversely impacted. Our credit agreement requires that we comply with financial covenants and may not permit additional borrowing or other sources of debt financing if we are not in compliance with those covenants. We can give you no assurances that we will be able to obtain financing necessary for our acquisition and development strategy or that, if available, the financing will be available on terms acceptable to us.
If we are unable to effectively compete for physician partners, managed care contracts, patients and strategic relationships, our business would be adversely affected. The healthcare business is highly competitive. We compete with other healthcare providers, primarily hospitals and other surgery centers, in recruiting physicians to utilize our surgery centers, for patients and in contracting with managed care payors. In some of the markets in which we operate, there are shortages of physicians in certain specialties, including gastroenterology. In several of the markets in which we operate, hospitals are recruiting physicians or groups of physicians to become employed by the hospitals, including primary care physicians and physicians in certain specialties, including gastroenterology, and restricting those physicians’ ability to refer patients to physicians and facilities not affiliated with the hospital. Physicians, hospitals, payors and other providers may form accountable care organizations or similar entity arrangements that restrict the physicians who may treat certain patients or the facilities at which patients may be treated. These restrictions may impact our surgery centers and the medical practices of our physician partners. Some of our competitors may have greater resources than we do, including financial, marketing, staff and capital resources, have or may develop new technologies or services that are attractive to physicians or patients, or have established relationships with physicians and payors.
We compete with public and private companies in the development and acquisition of ASCs. Further, many physician groups develop ASCs without a corporate partner. We can give you no assurances that we will be able to compete effectively in any of these areas or that our results of operations will not be adversely impacted.
Our surgery centers may be negatively impacted by weather and other factors beyond our control. The results of operations of our surgery centers may be adversely impacted by adverse weather conditions, including hurricanes, or other factors beyond our control that cause disruption of patient scheduling, displacement of our patients, employees and physician partners, and force certain of our surgery centers to close temporarily. In certain markets, we have a large concentration of surgery centers that may be simultaneously affected by adverse weather conditions or events. Our future financial and operating results may be adversely affected by weather and other factors that disrupt the operation of our surgery centers.
Our business may be adversely affected by current and future economic conditions. Financial markets around the world have been experiencing extreme volatility in the prices of securities, severely diminished liquidity and credit availability, and other adverse events. While these conditions have not impaired our ability to finance our operations and our acquisition activities in 2010, we cannot assure you that there will not be further disruptions to financial markets or other adverse economic conditions that would have an adverse impact on us. Adverse economic conditions could prompt the federal government to reduce reimbursement rates or make other changes in the Medicare program, result in the inability or refusal of the lenders under our credit agreements to lend additional monies to us to fund our operations or force persons with whom we have relationships to seek bankruptcy protection or cease operations. Although we believe economic conditions will adversely impact us during 2011, we are unable to predict the likely duration or severity of the current adverse economic conditions or the severity of the effect of those conditions on our business and results of operations.
If we fail to comply with applicable laws and regulations, we could suffer penalties or be required to make significant changes to our operations. We are subject to many laws and regulations at the federal, state and local government levels in the jurisdictions in which we operate. These laws and regulations require that our surgery centers and our operations meet various licensing, certification and other requirements, including those relating to:
    physician ownership of our surgery centers;
 
    our relationships with physicians and other referral sources;
 
    CON approvals and other regulations affecting the construction or acquisition of centers, capital expenditures or the addition of services;
 
    the adequacy of medical care, equipment, personnel, and operating policies and procedures;
 
    qualifications of medical and support personnel;
 
    maintenance and protection of records;
 
    billing for services by healthcare providers, including appropriate treatment of overpayments and credit balances;
 
    privacy and security of individually identifiable health information; and
 
    environmental protection.

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Item 1A. Risk Factors — (continued)
If we fail to comply with applicable laws and regulations, we could suffer civil or criminal penalties, including the loss of our licenses to operate and our ability to participate in Medicare, Medicaid and other government sponsored and third-party healthcare programs. CMS has enacted additional conditions for coverage that ASCs must meet to enroll and remain enrolled in Medicare, and a number of states have adopted or are considering legislation or regulations imposing additional restrictions on or otherwise affecting ASCs, including expansion of CON requirements, restrictions on ownership, taxes on gross receipts, data reporting requirements and restrictions on the enforceability of covenants not to compete affecting physicians. Different interpretations or enforcement of existing or new laws and regulations could subject our current practices to allegations of impropriety or illegality, or require us to make changes in our operations, facilities, equipment, personnel, services, capital expenditure programs or operating expenses. We can give you no assurances that current or future legislative initiatives, government regulation or judicial or regulatory interpretations thereof will not have a material adverse effect on us or reduce the demand for our services.
If a federal or state agency asserts a different position or enacts new laws or regulations regarding illegal remuneration or other forms of fraud and abuse, we could suffer penalties or be required to make significant changes to our operations. The federal anti-kickback statute prohibits healthcare providers and others from soliciting, receiving, offering or paying, directly or indirectly, any remuneration with the intent of generating referrals or orders for services or items covered by a federal healthcare program. The anti-kickback statute is very broad in scope and many of its provisions have not been uniformly or definitively interpreted by case law or regulations. Courts have found a violation of the anti-kickback statute if just one purpose of the remuneration is to general referrals, even if there are other lawful purposes. Furthermore, the Health Reform Law provides that knowledge of the law or intent to violate the law is not required. Violations of the anti-kickback statute may result in substantial civil or criminal penalties and exclusion from participation in the Medicare and Medicaid programs. Exclusion from these programs would result in significant reductions in revenue and would have a material adverse effect on our business.
HHS has published regulations that outline categories of activities that are deemed protected from prosecution under the anti-kickback statute. Three of the safe harbors apply to business arrangements similar to those used in connection with our surgery centers: the “surgery centers,” “investment interest” and “personal services and management contracts” safe harbors. The structure of the limited partnerships and limited liability companies operating our surgery centers, as well as our various business arrangements involving physician group practices, does not satisfy all of the requirements of any safe harbor. Nevertheless, a business arrangement that does not substantially comply with a safe harbor is not necessarily illegal under the anti-kickback statute. In addition, many of the states in which we operate also have adopted laws, similar to the anti-kickback statute, that prohibit payments to physicians in exchange for referrals, some of which apply regardless of the source of payment for care. These statutes typically impose criminal and civil penalties as well as loss of license.
In addition to the anti-kickback statute, HIPAA provides for criminal penalties for healthcare fraud offenses that apply to all health benefit programs, including the payment of inducements to Medicare and Medicaid beneficiaries in order to influence those beneficiaries to order or receive services from a particular provider or practitioner. Federal enforcement officials have numerous enforcement mechanisms to combat fraud and abuse, including the Medicare Integrity Program and an incentive program under which individuals can receive up to $1,000 for providing information on Medicare fraud and abuse that leads to the recovery of at least $100 of Medicare funds. In addition, DEFRA creates an incentive for states to enact false claims laws that are comparable to the federal False Claims Act. Federal enforcement officials have the ability to exclude from Medicare and Medicaid any investors, officers and managing employees associated with business entities that have committed healthcare fraud.
Providers in the healthcare industry have been the subject of federal and state investigations, and we may become subject to investigations in the future. Both federal and state government agencies have heightened and coordinated civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare companies, as well as their executives and managers. These investigations relate to a wide variety of topics, including referral and billing practices. Further, the federal False Claims Act permits private parties to bring “qui tam” whistleblower lawsuits against companies. Some states have adopted similar state whistleblower and false claims provisions.
From time to time, the OIG and the Department of Justice have established national enforcement initiatives that focus on specific billing practices or other suspected areas of abuse. Some of our activities could become the subject of governmental investigations or inquiries. For example, we have significant Medicare billings and we have joint venture arrangements involving physician investors. In addition, our executives and managers, some of whom have worked at other healthcare companies that are or may become the subject of federal and state investigations and private litigation, could be included in governmental investigations or named as defendants in private litigation. A governmental investigation of us, our executives or our managers could result in significant expense to us, as well as adverse publicity.
We are unable to predict the impact of the Health Reform Law, which represents significant change across the health care industry. The Health Reform Law represents significant change to the healthcare industry. As enacted, it will change how healthcare services are covered, delivered, and reimbursed through expanded coverage of previously uninsured individuals and reduced government healthcare spending, reform certain aspects of health insurance, expand existing efforts to tie Medicare and Medicaid payments to performance and quality and strengthen fraud and abuse enforcement. It is not clear at this time what all of the impacts of the Health Reform Law will be and what effect the legislation will have on ASCs or the healthcare industry as a whole. Implementation of the Health Reform Law could be delayed or even blocked due to court challenges and efforts to repeal

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Item 1A. Risk Factors — (continued)
or amend the law. Although some federal district courts have upheld the constitutionality of the Health Reform Law, other courts have held the requirement that individuals maintain health insurance or pay a penalty to be unconstitutional and have either left the remainder of the law intact or struck down the law in its entirety. It is unclear how these lawsuits will be resolved or what the outcome of Congressional efforts to repeal or amend the law will be.
If regulations or regulatory interpretations change, we may be obligated to buy out interests of physicians who are minority owners of the surgery centers. Substantially all of our limited partnership and operating agreements provide that if certain regulations or regulatory interpretations change, we will be obligated to purchase some or all of the noncontrolling interests of our physician partners. The regulatory changes that could trigger such obligations include changes that:
    make the referral of Medicare and other patients to our surgery centers by physicians affiliated with us illegal;
 
    create the substantial likelihood that cash distributions from the limited partnerships or limited liability companies to the affiliated physicians will be illegal; or
 
    cause the ownership by the physicians of interests in the limited partnerships or limited liability companies to be illegal.
The cost of repurchasing these noncontrolling interests would be substantial if a triggering event were to result in simultaneous purchase obligations at a substantial number or at all of our surgery centers. The purchase price to be paid in such event would be determined by a predefined formula, as specified in each of the limited partnership and operating agreements, which also provide for the payment terms, generally over four years. There can be no assurance, however, that our existing capital resources would be sufficient for us to meet the obligations, if they arise, to purchase these noncontrolling interests held by physicians. The determination of whether a triggering event has occurred generally would be made by the concurrence of our legal counsel and counsel for the physician partners or, in the absence of such concurrence, by a nationally recognized law firm having an expertise in healthcare law jointly selected by both parties. Such determinations therefore would not be within our control. The triggering of these obligations could have a material adverse effect on our financial condition and results of operations. While we believe physician ownership of ASCs as structured within our limited partnerships and limited liability companies is in compliance with applicable law, we can give no assurances that legislative or regulatory changes would not have an adverse impact on us. From time to time, the issue of physician ownership in ASCs is considered by some state legislatures and federal and state regulatory agencies.
We are liable for the debts and other obligations of the limited partnerships that own and operate certain of our surgery centers. In the limited partnerships in which one of our affiliates is the general partner, our affiliate is liable for 100% of the debts and other obligations of the limited partnership; however, the physician partners are generally required to guarantee their pro rata share of any indebtedness or lease agreements to which the limited partnership is a party in proportion to their ownership interest in the limited partnership. We also have primary liability for the bank debt that may be incurred for the benefit of the limited liability companies, and in turn, lend funds to these limited liability companies, although the physician members also guarantee this debt. There can be no assurance that a third-party lender or lessor would seek performance of the guarantees rather than seek repayment from us of any obligation of the limited partnership or limited liability company if there is a default, or that the physician partners or members would have sufficient assets to satisfy their guarantee obligations.
We may be subject to liabilities for claims brought against our facilities. We are subject to litigation related to our business practices, including claims and legal actions by patients and others in the ordinary course of business alleging malpractice, product liability or other legal theories. See “Business — Legal Proceedings.” These actions could involve large claims and significant defense costs. If payments for claims exceed our insurance coverage or are not covered by insurance or our insurers fails to meet their obligations, our results of operations and financial position could be adversely affected.
We have a legal responsibility to the minority owners of the entities through which we own our surgery centers, which may conflict with our interests and prevent us from acting solely in our own best interests. As the owner of majority interests in the limited partnerships and limited liability companies that own our surgery centers, we owe a fiduciary duty to the noncontrolling interest holders in these entities and may encounter conflicts between our interests and that of the minority holders. In these cases, our representatives on the governing board of each joint venture are obligated to exercise reasonable, good faith judgment to resolve the conflicts and may not be free to act solely in our own best interests. In our role as manager of the limited partnership or limited liability company, we generally exercise our discretion in managing the business of the surgery center. Disputes may arise between us and the physician partners regarding a particular business decision or the interpretation of the provisions of the limited partnership agreement or limited liability company operating agreement. The agreements provide for arbitration as a dispute resolution process in some circumstances. We cannot assure you that any dispute will be resolved or that any dispute resolution will be on terms satisfactory to us.
We may write-off intangible assets, such as goodwill. As a result of purchase accounting for our various acquisition transactions, our balance sheet at December 31, 2010 contained an intangible asset designated as goodwill totaling approximately $894.5 million. Additional purchases of interests in surgery centers that result in the recognition of additional intangible assets would cause an increase in these intangible assets. On an ongoing basis, we evaluate whether facts and circumstances indicate any impairment of the value of intangible assets. As circumstances change, we cannot assure you that the value of these intangible assets will be realized by us. If we determine that a significant impairment has occurred, we will be required to write-off the

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Item 1A. Risk Factors — (continued)
impaired portion of intangible assets, which could have a material adverse effect on our results of operations in the period in which the write-off occurs.
The IRS may challenge tax deductions for certain acquired goodwill. For federal income tax purposes, goodwill and other intangibles acquired as part of the purchase of a business after August 10, 1993 are deductible over a 15-year period. We have been claiming and continue to take tax deductions for goodwill obtained in our acquisition of assets of and ownership interests in ASCs. In 1997, the IRS published proposed regulations that applied “anti-churning” rules to call into question the deductibility of goodwill purchased in transactions structured similarly to some of our acquisitions. The anti-churning rules are designed to prevent taxpayers from converting existing goodwill for which a deduction would not have been allowable prior to 1993 into an asset that could be deducted over 15 years, such as by selling a business some of the value of which arose prior to 1993 to a related party. On January 25, 2000, the IRS issued final regulations that continue to call into question the deductibility of goodwill purchased in transactions structured similarly to some of our acquisitions. This uncertainty applies only to goodwill that arose in part prior to 1993, so the tax deductions we have taken with respect to interests acquired in surgery centers that were formed after August 10, 1993 are not affected. In response to these final regulations, in 2000 we changed our methods of acquiring interests in ASCs so as to comply with guidance found in the final regulations. There is a risk that the IRS could challenge tax deductions for pre-1993 goodwill in acquisitions we completed prior to changing our approach. Loss of these tax deductions would increase the amount of our tax payments and could subject us to interest and penalties.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our principal executive offices are located in Nashville, Tennessee and contain an aggregate of approximately 78,000 square feet of office space, which we lease from a third-party pursuant to an agreement that expires in 2014. We have the option to renew our lease for two additional terms of five years following the expiration of the current term. We also lease office space for our regional offices in Miami, Florida, Tempe, Arizona, Dallas, Texas and Wayne, Pennsylvania. Our affiliated limited partnerships and limited liability companies generally lease space for their surgery centers. Of the centers in operation at December 31, 2010, 204 leased space ranging from 1,000 to 24,000 square feet, with expected remaining lease terms ranging from one to 20 years.
Item 3. Legal Proceedings
Not applicable.
Item 4. [Removed and Reserved]

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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock trades under the symbol “AMSG” on the Nasdaq Global Select Market. The following table sets forth the high and low sales prices per share for the common stock for each of the quarters in 2009 and 2010, as reported on the Nasdaq Global Select Market:
                                 
    1st     2nd     3rd     4th  
    Quarter     Quarter     Quarter     Quarter  
2009:
                               
High
  $ 24.03     $ 21.71     $ 22.65     $ 23.61  
Low
  $ 12.23     $ 15.18     $ 18.95     $ 20.25  
 
                               
2010:
                               
High
  $ 22.94     $ 23.30     $ 19.87     $ 21.68  
Low
  $ 20.00     $ 17.76     $ 16.35     $ 17.07  
At February 24, 2011, there were 204 shareholders of record. We have never declared or paid a cash dividend on our common stock. We intend to retain our earnings to finance the growth and development of our business and do not expect to declare or pay any cash dividends in the foreseeable future. The declaration of dividends is within the discretion of our Board of Directors.

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Item 6. Selected Financial Data
                                         
    Year Ended December 31,  
    2010     2009     2008     2007     2006  
    (Dollars in thousands, except per share data)  
Consolidated Statement of Earnings Data:
                                       
Revenues
  $ 710,409     $ 658,223     $ 588,658     $ 506,493     $ 426,685  
Operating expenses
    481,126       436,101       381,415       328,502       277,329  
     
Operating income
    229,283       222,122       207,243       177,991       149,356  
Interest expense
    13,371       7,647       9,704       9,461       7,314  
     
Earnings from continuing operations before income taxes
    215,912       214,475       197,539       168,530       142,042  
Income tax expense
    34,324       35,067       32,472       26,450       22,010  
     
Net earnings from continuing operations
    181,588       179,408       165,067       142,080       120,032  
Discontinued operations:
                                       
Earnings from operations of discontinued interests in surgery centers, net of income tax expense
    1,640       2,644       2,632       6,511       10,356  
(Loss) gain on disposal of discontinued interests in surgery centers, net of income tax
    (2,732 )     (702 )     (1,773 )     1,712       (463 )
     
Net (loss) gain earnings from discontinued operations
    (1,092 )     1,942       859       8,223       9,893  
     
Net earnings
    180,496       181,350       165,926       150,303       129,925  
Less net earnings attributable to noncontrolling interests
    130,671       129,202       118,880       106,128       92,186  
     
Net earnings attributable to AmSurg Corp. common shareholders
  $ 49,825     $ 52,148     $ 47,046     $ 44,175     $ 37,739  
     
Amounts attributable to AmSurg Corp. common shareholders:
                                       
Earnings from continuing operations, net of tax
  $ 51,947     $ 51,826     $ 48,600     $ 40,852     $ 33,784  
Discontinued operations, net of tax
    (2,122 )     322       (1,554 )     3,323       3,955  
     
Net earnings attributable to AmSurg Corp. common shareholders
  $ 49,825     $ 52,148     $ 47,046     $ 44,175     $ 37,739  
     
Basic earnings per common share:
                                       
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
  $ 1.72     $ 1.69     $ 1.54     $ 1.33     $ 1.13  
Net earnings attributable to AmSurg Corp. common shareholders
  $ 1.65     $ 1.71     $ 1.49     $ 1.44     $ 1.27  
Diluted earnings per common share:
                                       
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
  $ 1.69     $ 1.68     $ 1.52     $ 1.31     $ 1.11  
Net earnings attributable to AmSurg Corp. common shareholders
  $ 1.62     $ 1.69     $ 1.47     $ 1.42     $ 1.24  
Weighted average number of shares and share equivalents outstanding (in thousands):
                                       
Basic
    30,255       30,576       31,503       30,619       29,822  
Diluted
    30,689       30,862       31,963       31,102       30,398  
 
Operating and Other Financial Data:
                                       
Continuing centers at end of year
    204       197       183       163       139  
Procedures performed during year
    1,276,231       1,215,784       1,085,941       930,845       779,383  
Same-center revenue (decrease) increase
    (2 %)     0 %     3 %     4 %     5 %
Cash flows provided by operating activities
  $ 230,575     $ 232,584     $ 209,696     $ 182,916     $ 162,689  
Cash flows used in investing activities
    (72,905 )     (112,792 )     (131,780 )     (179,368 )     (71,794 )
Cash flows used in financing activities
    (152,900 )     (121,963 )     (76,321 )     (6,322 )     (91,308 )
                                         
    At December 31,
    2010     2009     2008     2007     2006  
    (In thousands)  
Consolidated Balance Sheet Data:
                                       
Cash and cash equivalents
  $ 34,147     $ 29,377     $ 31,548     $ 29,953     $ 20,083  
Working capital
    89,393       80,161       85,497       83,792       66,591  
Total assets
    1,165,878       1,066,831       905,879       781,634       590,032  
Long-term debt and other long-term liabilities
    307,619       318,819       288,251       232,223       127,821  
Non-redeemable and redeemable noncontrolling interests (1)
    160,539       128,618       66,079       62,006       52,341  
AmSurg Corp. shareholders’ equity
    564,068       505,116       460,429       411,225       343,108  
 
(1)   See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies.”

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This report contains certain forward-looking statements (all statements other than statements with respect to historical fact) within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve known and unknown risks and uncertainties including, without limitation, those described in Item 1A. Risk Factors, some of which are beyond our control. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate. Therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. Actual results could differ materially and adversely from those contemplated by any forward-looking statement. In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to publicly release any revisions to any forward-looking statements in this discussion to reflect events and circumstances occurring after the date hereof or to reflect unanticipated events. Forward-looking statements and our liquidity, financial condition and results of operations may be affected by the risks set forth in Item 1A. Risk Factors or by other unknown risks and uncertainties.
Overview
We acquire, develop and operate ambulatory surgery centers, or ASCs, in partnership with physicians. As of December 31, 2010, we owned a majority interest (51% or greater) in 204 ASCs. The following table presents the number of procedures performed at our continuing centers in operation and changes in the number of ASCs in operation, under development and under letter of intent for the years ended December 31, 2010, 2009 and 2008. An ASC is deemed to be under development when a limited partnership or limited liability company has been formed with the physician partners to develop the ASC.
                         
    2010     2009     2008  
     
 
Procedures
    1,276,231       1,215,784       1,085,941  
Continuing centers in operation, end of year
    204       197       183  
Average number of continuing centers in operation, during year
    200       188       167  
New centers added during year
    7       14       20  
Centers discontinued during year
    5       1       6  
Centers under development, end of year
    1       1       3  
Centers under letter of intent, end of year
    8       1       5  
Of the continuing centers in operation at December 31, 2010, 140 centers performed gastrointestinal endoscopy procedures, 37 centers performed ophthalmology surgery procedures, 19 centers performed procedures in multiple specialties and eight centers performed orthopaedic procedures. We intend to expand primarily through the acquisition and development of additional single-specialty and multi-specialty ASCs and through future same-center growth. Our growth targets for 2011 include the acquisition or development of 13 to 16 surgery centers. We expect our same-center revenue to be flat to a 1% decline in 2011. Our expectation is primarily based on reductions in Medicare reimbursement rates for 2011, as well as the continuing poor economic outlook and high unemployment rate, which we believe will result in limited incremental patient visits and thus surgical procedures.
While we generally own 51% of the entities that own the surgery centers, our consolidated statements of earnings include 100% of the results of operations of the entities, reduced by the noncontrolling partners’ share of the net earnings or loss of the surgery center entities. The noncontrolling ownership interest in each limited partnership or limited liability company is generally held directly or indirectly by physicians who perform procedures at the center.
Sources of Revenues
Substantially all of our revenues are derived from facility fees charged for surgical procedures performed in our surgery centers. This fee varies depending on the procedure, but usually includes all charges for operating room usage, special equipment usage, supplies, recovery room usage, nursing staff and medications. Facility fees do not include the charges of the patient’s surgeon, anesthesiologist or other attending physicians, which are billed directly by the physicians. In limited instances, our revenues include charges for anesthesia services delivered by medical professionals employed or contracted by our centers. Our revenues are recorded net of estimated contractual adjustments from third-party medical service payors.
ASCs depend upon third-party reimbursement programs, including governmental and private insurance programs, to pay for services rendered to patients. The amount of payment a surgery center receives for its services may be adversely affected by market and cost factors as well as other factors over which we have no control, including changes to the Medicare and Medicaid payment systems and the cost containment and utilization decisions of third-party payors. We derived approximately 31%, 33% and 34% of our revenues in the years ended December 31, 2010, 2009 and 2008, respectively, from governmental healthcare programs, primarily Medicare, and the remainder from a wide mix of commercial payors and patient co-pays and deductibles. The Medicare program currently pays ASCs in accordance with predetermined fee schedules.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)
Effective January 1, 2008, CMS revised the payment system for services provided in ASCs. The key points of the revised payment system as it relates to us are:
    ASCs are paid based upon a percentage of the payments to hospital outpatient departments pursuant to the hospital outpatient prospective payment system;
    a scheduled phase-in of the revised rates over four years, beginning January 1, 2008; and
    planned annual increases in the ASC rates beginning in 2010 based on the consumer price index, or CPI.
The revised payment system has resulted in a significant reduction in the reimbursement rates for gastroenterology procedures, which comprise approximately 78% of the procedures performed by our surgery centers, and certain ophthalmology and pain procedures. Effective for fiscal year 2011 and subsequent years, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the Health Reform Law, provides for the annual CPI increases applicable to ASCs to be reduced by a productivity adjustment, which will be based on historical nationwide productivity gains. We estimate that our net earnings per share were negatively impacted by the revised payment system by $0.05 in 2008, by an additional $0.07 in 2009 and an additional $0.06 in 2010. In November 2010, CMS announced final reimbursement rates for 2011 under the revised payment system, which reflect a 1.5% CPI increase and a 1.3% productivity adjustment decrease. Based on our current procedure mix and payor mix volume, we believe the 2011 scheduled reduction in payment rates will reduce our net earnings per diluted share in 2011 by approximately $0.05 as compared to 2010. The scheduled phase-in of the revised rates will be completed in 2011, and reimbursement rates for our ASCs should be increased annually thereafter based upon increases in the CPI. However, rates will also be subject to annual reductions based on a productivity adjustment. There can be no assurance, that CMS will not further revise the payment system, or that any annual CPI increases will be material.
The Health Reform Law represents significant change across the healthcare industry. The Health Reform Law contains a number of provisions designed to reduce Medicare program spending, including an annual productivity adjustment that will reduce payment updates to ASCs beginning in fiscal year 2011. However, the Health Reform Law also expands coverage of uninsured individuals through a combination of public program expansion and private sector health insurance reforms. For example, the Health Reform Law, as enacted, expands eligibility under existing Medicaid programs, imposes financial penalties on individuals who fail to carry insurance coverage, creates affordability credits for those not enrolled in an employer-sponsored health plan, requires each state to establish a health insurance exchange and permits states to create federally funded, non-Medicaid plans for low-income residents not eligible for Medicaid. The Health Reform Law also establishes a number of private health insurance market reforms, including a ban on lifetime limits and pre-existing condition exclusions, new benefit mandates, and increased dependent coverage.
Effective for plan years beginning on or after September 23, 2010, many health plans are required to cover, without cost-sharing, certain preventive services designated by the U.S. Preventive Services Task Force, including colonoscopies. Beginning January 1, 2011, Medicare must also cover these preventive services without cost-sharing, and, beginning in 2013, states that provide Medicaid coverage of these preventive services without cost-sharing will receive a one percentage point increase in their federal medical assistance percentage for these services.
Health insurance market reforms that expand insurance coverage may result in an increased volume for certain procedures at our centers. However, many of these provisions of the Health Reform Law will not become effective until 2014 or later, and these provisions may be amended or eliminated or their impact could be offset by reductions in reimbursement under the Medicare program. More than 20 challenges to the Health Reform Law have been filed in federal courts. Some federal district courts have upheld the constitutionality of the Health Reform Law or dismissed cases on procedural grounds. Others have held the requirement that individuals maintain health insurance or pay a penalty to be unconstitutional and have either found the Health Reform Law void in its entirety or left the remainder of the law intact. These lawsuits are subject to appeal. Further, Congress is considering bills that would repeal or revise the Health Reform Law.
Because of the many variables involved, including the law’s complexity, lack of implementing regulations or interpretive guidance, gradual implementation, pending court challenges, and possible amendment or repeal, we are unable to predict the net effect of the reductions in Medicare spending, the expected increases in revenues from increased procedure volumes, and numerous other provisions in the law that may affect the Company. We are further unable to foresee how individuals and employers will respond to the choices afforded them by the Health Reform Law. Thus, we cannot predict the full impact of the Health Reform Law on the Company at this time.
CMS is increasing its administrative audit efforts through the nationwide expansion of the recovery audit contractor, or RAC, program. RACs are private contractors that conduct post-payment reviews of providers and suppliers that bill Medicare to detect and correct improper payments for services. The Health Reform Law expands the RAC program’s scope to include Medicaid claims by requiring all states to establish programs to contract with RACs by December 31, 2010. In addition to RACs, other contractors, such as Medicaid Integrity Contractors, perform payment audits to identify and correct improper payments. We could incur costs associated with appealing any alleged overpayments and be required to repay any alleged overpayments identified by these or other administrative audits.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)
We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures, to become more common and to involve a higher percentage of reimbursement amounts. Effective January 15, 2009, CMS promulgated three national coverage determinations that prevent Medicare from paying for certain serious, preventable medical errors performed in any healthcare facility, such as surgery performed on the wrong patient or the wrong site. Several commercial payors also do not reimburse providers for certain preventable adverse events. In addition, a 2006 federal law authorizes CMS to require ASCs to submit data on certain quality measures. ASCs that fail to submit the required data would face a two percentage point reduction in their annual reimbursement rate increase. CMS has not yet implemented the quality measure reporting requirement but has announced that it expects to do so in a future rulemaking. Further, the Health Reform Law required the Department of Health and Human Services, or HHS, to present a plan to Congress by January 1, 2011 for implementing a value-based purchasing system that would tie Medicare payments to ASCs to quality and efficiency measures. HHS has not yet publicly issued this plan. The Health Reform Law also requires HHS to study whether to expand to ASCs its current policy of not paying additional amounts for care provided to treat conditions acquired during an inpatient hospital stay.
In addition to payment from governmental programs, ASCs derive a significant portion of their revenues from private healthcare insurance plans. These plans include both standard indemnity insurance programs as well as managed care programs, such as PPOs and HMOs. The strengthening of managed care systems nationally has resulted in substantial competition among providers of surgery center services that contract with these systems. Exclusion from participation in a managed care network could result in material reductions in patient volume and revenue. Some of our competitors have greater financial resources and market penetration than we do. We believe that all payors, both governmental and private, will continue their efforts over the next several years to reduce healthcare costs and that their efforts will generally result in a less stable market for healthcare services. While no assurances can be given concerning the ultimate success of our efforts to contract with healthcare payors, we believe that our position as a low-cost alternative for certain surgical procedures should enable our surgery centers to compete effectively in the evolving healthcare marketplace.
Critical Accounting Policies
Our accounting policies are described in note 1 of our consolidated financial statements. We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. We consider the following policies to be most critical in understanding the judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition and cash flows.
Principles of Consolidation. The consolidated financial statements include the accounts of AmSurg and our subsidiaries and the majority owned limited partnerships and limited liability companies in which our wholly owned subsidiaries are the general partner or majority member. Consolidation of such limited partnerships and limited liability companies is necessary, as our wholly owned subsidiaries have 51% or more of the financial interest of each entity, are the general partner or majority member with all the duties, rights and responsibilities thereof, are responsible for the day-to-day management of the limited partnership or limited liability company and have control of the entity. The responsibilities of our noncontrolling partners are to supervise the delivery of medical services, with their rights being restricted to those that protect their financial interests, such as approval of the acquisition of significant assets or the incurrence of debt that they are required to guarantee on a pro rata basis based upon their respective ownership interests. Intercompany profits, transactions and balances have been eliminated.
We identify and present ownership interests in subsidiaries held by noncontrolling parties in our consolidated financial statements within the equity section but separate from our equity. However, in instances in which certain redemption features that are not solely within our control are present, classification of noncontrolling interests outside of permanent equity is required. The amounts of consolidated net income attributable to us and to the noncontrolling interests are identified and presented on the face of the consolidated statements of earnings; changes in ownership interests are accounted for as equity transactions; and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary is measured at fair value. Lastly, the cash flow impact of certain transactions with noncontrolling interests is classified within financing activities.
Upon the occurrence of various fundamental regulatory changes, we would be obligated under the terms of our partnership and operating agreements to purchase the noncontrolling interests related to substantially all of our partnerships. While we believe that the likelihood of a change in current law that would trigger such purchases was remote as of December 31, 2010, and the occurrence of such regulatory changes is outside of our control. As a result, these noncontrolling interests that are subject to this redemption feature are not included as part of our equity and are classified as noncontrolling interests — redeemable on our consolidated balance sheets.
Center profits and losses are allocated to our partners in proportion to their ownership percentages and reflected in the aggregate as net earnings attributable to noncontrolling interests. The partners of our center partnerships typically are organized as general partnerships, limited partnerships or limited liability companies that are not subject to federal income tax. Each partner shares in the pre-tax earnings of the center in which it is a partner. Accordingly, the earnings attributable to noncontrolling interests in each of our partnerships are generally determined on a pre-tax basis. Total net earnings attributable to noncontrolling interests

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)
are presented after net earnings. However, we consider the impact of the net earnings attributable to noncontrolling interests on earnings before income taxes in order to determine the amount of pre-tax earnings on which we must determine our tax expense. In addition, distributions from the partnerships are made to both our wholly owned subsidiaries and the partners on a pre-tax basis.
We operate in one reportable business segment, the ownership and operation of ASCs.
Revenue Recognition. Center revenues consist of billing for the use of the centers’ facilities, or facility fees, directly to the patient or third-party payor, and in limited instances, billing for anesthesia services. Such revenues are recognized when the related surgical procedures are performed. Revenues exclude any amounts billed for physicians’ surgical services, which are billed separately by the physicians to the patient or third-party payor.
Allowance for Contractual Adjustments and Bad Debt Expense. Our revenues are recorded net of estimated contractual adjustments from third-party medical service payors, which we estimate based on historical trends of the surgery centers’ cash collections and contractual write-offs, accounts receivable agings, established fee schedules, contracts with payors and procedure statistics. In addition, we must estimate allowances for bad debt expense using similar information and analysis. These estimates are recorded and monitored monthly for each of our surgery centers as additional revenue is recognized. Our ability to accurately estimate contractual adjustments is dependent upon and supported by the fact that our surgery centers perform and bill for limited types of procedures, that the range of reimbursement for those procedures within each surgery center specialty is very narrow and that payments are typically received within 15 to 45 days of billing. In addition, our surgery centers are not required to file cost reports, and therefore, we have no risk of unsettled amounts from governmental third-party payors. These estimates are not, however, established from billing system-generated contractual adjustments based on fee schedules for the patient’s insurance plan for each patient encounter. While we believe that our allowances for contractual adjustments and bad debt expense are adequate, if the actual contractual adjustments and write-offs are in excess of our estimates, our results of operations may be overstated. During the years ended December 31, 2010, 2009 and 2008, we had no significant adjustments to our allowances for contractual adjustments and bad debt expense related to prior periods. At December 31, 2010 and 2009, net accounts receivable reflected allowances for contractual adjustments of $118.5 million and $100.1 million, respectively, and allowances for bad debt expense of $13.1 million and $12.4 million, respectively. The increase in our contractual allowance and allowances for bad debt expense is primarily related to allowances established for new centers acquired and increases in standard rates at existing centers during 2010. At December 31, 2010 and 2009, we had 31 and 32 days outstanding, respectively, reflected in our gross accounts receivable.
Purchase Price Allocation. We allocate the respective purchase price of our acquisitions by first determining the fair value of net tangible and identifiable intangible assets acquired. Secondly, the excess amount of purchase price is allocated to unidentifiable intangible assets (goodwill). The fair value of goodwill attributable to noncontrolling interests in centers acquired subsequent to December 31, 2008, is also reflected in the allocation and is based on significant inputs that are not observable in the market. Key inputs used to determine the fair value include financial multiples used in the purchase of noncontrolling interests in centers. Such multiples, based on earnings, are used as a benchmark for the discount to be applied for the lack of control or marketability. A significant portion of each surgery center’s purchase price historically has been allocated to goodwill due to the nature of the businesses acquired, the pricing and structure of our acquisitions and the absence of other factors indicating any significant value that could be attributable to separately identifiable intangible assets.
Goodwill. We evaluate goodwill for impairment at least on an annual basis. Impairment of carrying value will also be evaluated more frequently if certain indicators are encountered. Goodwill is required to be tested at the reporting unit level, defined as an operating segment or one level below an operating segment (referred to as a component), with the fair value of the reporting unit being compared to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired. We have determined that we have one operating, as well as one reportable, segment. For impairment testing purposes, our centers each qualify as components of that operating segment. Because they have similar economic characteristics, they are aggregated and deemed a single reporting unit. We completed our annual impairment test as required as of December 31, 2010, and have determined that it is not necessary to recognize impairment in our goodwill.
Results of Operations
Our revenues are directly related to the number of procedures performed at our surgery centers. Our overall growth in procedure volume is impacted directly by the increase in the number of surgery centers in operation and the growth in procedure volume at existing centers. We increase our number of surgery centers through both acquisitions and developments. Procedure growth at an existing center may result from additional contracts entered into with third-party payors, increased market share of our physician partners, additional physicians utilizing the center and/or scheduling and operating efficiencies gained at the surgery center. A significant measurement of how much our revenues grow from year to year for existing centers is our same-center revenue percentage. We define our same-center group each year as those centers that contain full year-to-date operations in both comparable reporting periods, including the expansion of the number of operating centers associated with a limited partnership or limited liability company. Our 2010 same-center group is comprised of 187 centers and experienced a 2% revenue decline. We believe this decline is primarily related to the adverse economic environment and high unemployment, which we believe has

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)
caused patients to delay or cancel surgical procedures. This trend was generally experienced throughout our same-center base, without significant variations in any particular geography or surgical specialty. Our same-center group in 2011 will be comprised of 197 centers, which constitutes approximately 97% of our total number of centers. We expect flat to a 1% decline in our same-center revenue for 2011 due to reductions in Medicare reimbursement rates for 2011, as well as the continuing poor economic outlook and high unemployment rates, which we believe will continue to limit the incremental patient visits and thus surgical procedures.
Expenses directly and indirectly related to procedures performed at our surgery centers include clinical and administrative salaries and benefits, supply cost and other operating expenses such as linen cost, repair and maintenance of equipment, billing fees and bad debt expense. The majority of our corporate salary and benefits cost is associated directly with the number of centers we own and manage and tends to grow in proportion to the growth of our centers in operation. Our centers and corporate offices also incur costs that are more fixed in nature, such as lease expense, legal fees, property taxes, utilities and depreciation and amortization.
Surgery center profits are allocated to our noncontrolling partners in proportion to their individual ownership percentages and reflected in the aggregate as total net earnings attributable to noncontrolling interests and are presented after net earnings. The noncontrolling partners of our center limited partnerships and limited liability companies typically are organized as general partnerships, limited partnerships or limited liability companies that are not subject to federal income tax. Each noncontrolling partner shares in the pre-tax earnings of the center of which it is a partner. Accordingly, net earnings attributable to the noncontrolling interests in each of our center limited partnerships and limited liability companies are generally determined on a pre-tax basis, and pre-tax earnings are presented before net earnings attributable to noncontrolling interests have been subtracted.
Accordingly, the effective tax rate on pre-tax earnings as presented has been reduced to approximately 16%. However, the effective tax rate based on pre-tax earnings attributable to AmSurg Corp. common shareholders, on an annual basis, will remain near the historical percentage of 40%. We file a consolidated federal income tax return and numerous state income tax returns with varying tax rates. Our income tax expense reflects the blending of these rates.
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders are disclosed on the consolidated statements of earnings.
Our interest expense results primarily from our borrowings used to fund acquisition and development activity, as well as interest incurred on capital leases. We refinanced our revolving credit facility in May 2010, which resulted in the payment of additional fees and has increased our interest expense as a result of higher interest rates under our new credit facilities. See “— Liquidity and Capital Resources.”

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)
The following table shows certain statement of earnings items expressed as a percentage of revenues for the years ended December 31, 2010, 2009 and 2008:
                         
    2010   2009   2008
     
 
Revenues
    100.0 %     100.0 %     100.0 %
 
                       
Operating expenses:
                       
Salaries and benefits
    30.0       30.0       29.0  
Supply cost
    13.2       12.4       11.8  
Other operating expenses
    21.0       20.5       20.6  
Depreciation and amortization
    3.5       3.4       3.4  
     
 
                       
Total operating expenses
    67.7       66.3       64.8  
     
 
                       
Operating income
    32.3       33.7       35.2  
Interest expense
    1.9       1.2       1.6  
     
 
                       
Earnings from continuing operations before income taxes
    30.4       32.5       33.6  
 
                       
Income tax expense
    4.8       5.3       5.6  
     
 
                       
Net earnings from continuing operations, net of income tax
    25.6       27.2       28.0  
 
                       
Discontinued operations:
                       
 
                       
Net (loss) gain from discontinued operations
    (0.2 )     0.3       0.2  
     
 
                       
Net earnings
    25.4       27.5       28.2  
 
                       
Less net earnings attributable to noncontrolling interests:
                       
Net earnings from continuing operations
    18.2       19.4       19.8  
Net earnings from discontinued operations
    0.2       0.2       0.4  
     
 
                       
Total net earnings attributable to noncontrolling interests
    18.4       19.6       20.2  
     
 
                       
Net earnings attributable to AmSurg Corp. common shareholders
    7.0 %     7.9 %     8.0 %
     
 
                       
Amounts attributable to AmSurg Corp. common shareholders:
                       
Earnings from continuing operations, net of income tax
    7.3       7.8       8.3  
Discontinued operations, net of income tax
    (0.3 )     0.1       (0.3 )
     
 
                       
Net earnings attributable to AmSurg Corp. common shareholders
    7.0 %     7.9 %     8.0 %
     
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
The number of procedures performed in our ASCs increased by 60,447, or 5%, to 1,276,231 in 2010 from 1,215,784 in 2009. Revenues increased $52.2 million, or 8%, to $710.4 million in 2010 from $658.2 million in 2009. The additional revenue growth over procedure growth is primarily due to a higher level of acuity of procedure mix due to the type of centers acquired in 2009 and 2010. Our same-center revenue declined approximately 2% during the period ended December 31, 2010, primarily due to the adverse economic conditions and high unemployment, which we believe has resulted in reduced patient visits and surgical procedures. The increase in procedure and revenue growth is attributable to the additional centers acquired in 2009 and 2010 as follows:
    centers acquired or opened in 2009, which contributed $43.3 million of additional revenues due to having a full period of operations in 2010; and
 
    centers acquired and opened in 2010, which generated $17.4 million in revenues.
Salaries and benefits increased by 8% to $213.3 million in 2010 from $197.6 million in 2009. Salaries and benefits as a percentage of revenues were 30% in both periods. Staff at newly acquired and developed centers, as well as the additional staffing required at existing centers, resulted in a 10% increase in salaries and benefits at our surgery centers in 2010. However, we experienced a 1% decrease in salaries and benefits at our corporate offices during 2010 over 2009, primarily due to lower bonus expense.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)
Supply cost was $94.1 million in 2010, an increase of $12.5 million, or 15%, over supply cost in 2009. This increase was primarily the result of additional procedure volume. Our average supply cost per procedure in 2010 increased by approximately $7. This increase is related to greater use of premium cataract lenses at our ophthalmology centers, the migration from reusable to disposable supplies, the temporary increase in certain drug costs at our gastroenterology centers, and procedures with greater acuity performed at our multi-specialty centers, which had a higher weighted average supply cost.
Other operating expenses increased $14.3 million, or 11%, to $148.9 million in 2010 from $134.6 million in 2009. The additional expense in the 2010 period resulted primarily from:
    centers acquired or opened during 2009, which resulted in an increase of $6.9 million in other operating expenses;
 
    an increase of $2.7 million in other operating expenses at our 2010 same-center group resulting primarily from general inflationary cost increases and additional procedure volume; and
 
    centers acquired or opened during 2010, which resulted in an increase of $2.6 million in other operating expenses.
Depreciation and amortization expense increased $2.6 million, or 11%, in 2010 from 2009, primarily as a result of centers acquired in 2009 now having a full year of operations. In addition, the Company recorded additional depreciation expense of approximately $1.1 million associated with the acceleration of scheduled leasehold improvement depreciation at a center that will be relocated in 2011, prior to the expiration of its original expected lease term.
We anticipate further increases in operating expenses in 2011, primarily due to additional acquired centers and an additional start-up center expected to be placed in operation. Typically, a start-up center will incur start-up losses while under development and during its initial months of operation, and will experience lower revenues and operating margins than an established center. This typically continues until the case load at the center grows to a more normal operating level, which generally is expected to occur within 12 months after the center opens. At December 31, 2010, we had one center under development.
Interest expense increased $5.7 million, or 75%, to $13.4 million from $7.6 million in 2010. We refinanced our revolving credit facility in May 2010, which resulted in an increase in interest expense of approximately $5.5 million due to higher interest rates under our new credit agreements and the write-off of remaining unamortized deferred financing costs. See “— Liquidity and Capital Resources.”
We recognized income tax expense of $34.3 million in 2010 compared to $35.1 million in 2009. Our effective tax rate in 2010 was 15.9% of earnings from continuing operations before income taxes. This differs from the federal statutory income tax rate of 35.0% primarily due to the exclusion of the noncontrolling interests share of pre-tax earnings and the impact of state income taxes. Because we deduct goodwill amortization for tax purposes only, approximately 50% to 60% of our income tax expense is deferred and our deferred tax liability continues to increase, which would only be due in part or in whole upon the disposition of a portion or all of our surgery centers.
During 2010, we sold our interest in one surgery center and classified five additional surgery centers as discontinued in 2010, following management’s assessment of limited growth opportunities at these centers. In 2009, we disposed our interests in one surgery center, and classified one surgery center as discontinued. These centers’ results of operations and gains and losses associated with their dispositions have been classified as discontinued operations in all periods presented. We recognized an after tax loss on the disposition of discontinued interests in surgery centers of $1.1 million during 2010 and an after tax loss for the disposition of discontinued interests in surgery centers of $1.9 million in 2009. The net earnings derived from the operations of the discontinued surgery centers was $1.6 million for 2010 and $2.6 million for 2009.
Net earnings from continuing operations attributable to noncontrolling interests in 2010 increased $2.1 million, or 2%, to $129.6 million from the comparable 2009 period, primarily as a result of net earnings associated with surgery centers recently added to operations. As a percentage of revenues, net earnings attributable to noncontrolling interests decreased to 18.2% from 19.4% during the 2009 period as a result of reduced center profit margins caused by lower same-center revenue. The net earnings from discontinued operations attributable to noncontrolling interests were $1.0 million and $1.6 million in 2010 and 2009, respectively.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
Revenues increased $69.6 million, or 12%, to $658.2 million in 2009 from $588.7 million in 2008. The number of procedures performed in our ASCs increased by 129,843, or 12%, to 1,215,784 in 2009 from 1,085,941 in 2008. The additional revenues resulted primarily from:
    centers acquired or opened in 2008, which contributed $59.7 million of additional revenues due to having a full period of operations in 2009; and
 
    centers acquired and opened in 2009, which generated $8.6 million in revenues.
While our same-center procedure growth was approximately 1% in 2009, due to reductions in reimbursement from CMS, adverse economic conditions and high unemployment, our same-center revenue was flat. Staff at newly acquired and developed centers, as well as the additional staffing required at certain existing centers, resulted in a 13% increase in salaries and benefits at our surgery centers in 2009. We experienced a 32% increase in salaries and benefits at our corporate offices during 2009 over 2008. The increase in corporate office salaries and benefits was primarily due to higher bonus expense incurred during the 2009 period, year over year salary increases, investment gains associated with our supplemental retirement plan, which are allocated to salaries and benefits because the gains are attributable to the participants’ self-directed investments, and additional employees, primarily in our information technology area. Salaries and benefits increased in total by 16% to $197.6 million in 2009 from $170.5 million in 2008. Salaries and benefits as a percentage of revenues increased in 2009 compared to 2008, primarily due to the impact of flat revenue growth within our same center group against the increase in corporate salaries and benefits in 2009, as described above.
Supply cost was $81.6 million in 2009, an increase of $12.4 million, or 18%, over supply cost in 2008. This increase was primarily the result of additional procedure volume. Our average supply cost per procedure in 2009 increased by approximately $3. This increase is related to a combination of higher utilization of disposable supplies at our gastroenterology centers, greater use of premium cataract lenses at our ophthalmology centers and a greater percentage of non-gastroenterology procedures performed at our multispecialty and orthopaedic centers, which had a higher weighted average cost.
Other operating expenses increased $13.0 million, or 11%, to $134.6 million in 2009 from $121.6 million in 2008. The additional expense in the 2009 period resulted primarily from:
    centers acquired or opened during 2008, which resulted in an increase of $10.4 million in other operating expenses;
 
    centers acquired or opened during 2009, which resulted in an increase of $2.2 million in other operating expenses; and
 
    an increase of $2.3 million in other operating expenses at our 2009 same-center group resulting primarily from general inflationary cost increases and additional procedure volume.
Other operating expenses at our corporate offices decreased during 2009 from 2008 by approximately $1.9 million primarily due to changes in the gains and losses of the Company’s supplemental employee retirement plan investments, which offset the corresponding increases in salary cost.
Depreciation and amortization expense increased $2.2 million, or 11%, in 2009 from 2008, primarily as a result of centers acquired since 2008 and newly developed surgery centers in operation, which have an initially higher level of depreciation expense due to their construction costs.
Although our average debt outstanding was approximately 28% higher in 2009 over 2008, interest expense decreased $2.1 million in 2009, or 21%, from 2008, due to a reduced average interest rate in 2009 on our variable interest debt.
We recognized income tax expense of $35.1 million in 2009 compared to $32.5 million in 2008. Our effective tax rate in 2009 was 16.4% of earnings from continuing operations before income taxes. This differs from the federal statutory income tax rate of 35.0%, primarily due to the exclusion of the noncontrolling interests share of pre-tax earnings and the impact of state income taxes. Because we deduct goodwill amortization for tax purposes only, approximately 40% of our income tax expense is deferred and our deferred tax liability continues to increase, which would only be due in part or in whole upon the disposition of a portion or all of our surgery centers.
During 2009, we sold our interests in one surgery center following management’s assessment of limited growth opportunities at this center. In 2008, we sold our interests in three surgery centers, closed three surgery centers and classified one surgery center as discontinued. These centers’ results of operations and gains and losses associated with their dispositions have been classified as discontinued operations in all periods presented along with the results of operations of the centers classified as discontinued during 2010. We recognized an after tax loss for the disposition of discontinued interests in surgery centers of $702,000 during 2009 and $1.8 million in 2008. The net earnings derived from the operations of the discontinued surgery centers was $2.6 million for 2009 and 2008, respectively.
Net earnings from continuing operations attributable to noncontrolling interests in 2009 increased $11.1 million, or 10%, to $127.6 million from the comparable 2008 period, primarily as a result of net earnings associated with surgery centers recently

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)
added to operations. As a percentage of revenues, net earnings attributable to noncontrolling interests decreased to 19.4% from 19.8% during the 2008 period as a result of reduced center profit margins caused by lower same-center revenue. The net earnings from discontinued operations attributable to noncontrolling interests were $1.6 million and $2.4 million in 2009 and 2008, respectively.
Liquidity and Capital Resources
Cash and cash equivalents at December 31, 2010 and 2009 were $34.1 million and $29.4 million, respectively. At December 31, 2010, we had working capital of $89.4 million, compared to $80.2 million at December 31, 2009. Operating activities for 2010 generated $230.6 million in cash flow, which was comparable to cash flow generated from operating activities in 2009 of $232.6 million. Positive operating cash flows of individual centers are the sole source of cash used to make distributions to our wholly owned subsidiaries, as well as to the other partners, which the centers are obligated to make on a monthly basis in accordance with each partnership’s partnership or operating agreement. Distributions to noncontrolling interests, which is considered a financing activity, in the year ended December 31, 2010 and 2009, were $132.1 million and $130.1 million, respectively. Distributions to noncontrolling interests increased $2.0 million, primarily as a result of additional centers in operation.
The principal source of our operating cash flow is the collection of accounts receivable from governmental payors, commercial payors and individuals. Each of our surgery centers bills for services as delivered, usually within several days following the date of the procedure. Generally, unpaid amounts that are 30 days past due are rebilled based on a standard set of procedures. If amounts remain uncollected after 60 days, our surgery centers proceed with a series of late-notice notifications until amounts are either collected, contractually written off in accordance with contracted rates or determined to be uncollectible, typically after 90 to 120 days. Receivables determined to be uncollectible are written off and such amounts are applied to our estimate of allowance for bad debts as previously established in accordance with our policy for allowance for bad debt expense. The amount of actual write-offs of account balances for each of our surgery centers is continuously compared to established allowances for bad debt to ensure that such allowances are adequate. At December 31, 2010 and 2009, our accounts receivable represented 31 and 32 days of revenue outstanding, respectively.
During 2010, we had total acquisitions and capital expenditures of $73.0 million, which included:
    $53.7 million for acquisitions of interests in ASCs and related transactions;
 
    $20.5 million for new or replacement property at existing centers, including $4.0 million in new capital leases; and
 
    $2.8 million for centers under development.
As of December 31, 2010, the Company had a purchase price payable of $3.9 million for an acquisition completed immediately prior to the end of the year and funded in January 2011 through borrowings under our revolving credit facility.
In December 2010, we entered into two separate agreements to purchase a controlling interest in two centers for $21.3 million. The consummation of the acquisitions is contingent upon the satisfaction of closing conditions customary for transactions of this type. We anticipate closing these transactions in April 2011 and intend to fund the acquisitions through a combination of operating cash flow and borrowings under our revolving credit facility.
During 2010, we had unfunded construction and equipment purchase commitments for centers under development or under renovation of approximately $1.0 million, which we intend to fund through additional borrowings of long-term debt, operating cash flow and capital contributions by our partners. During 2010, we received $60,000 in proceeds from the sale of a surgery center and $73,000 in capital contributions from our noncontrolling partners.
During 2010, we had net repayments on long-term debt of $19.3 million, and at December 31, 2010 we had $188.0 million outstanding under our revolving credit agreement and $75.0 million of senior secured notes outstanding. At December 31, 2010, we were in compliance with all covenants contained in our revolving credit agreement and note purchase agreement.
We refinanced our revolving credit facility on May 28, 2010. Our revolving credit agreement permits us to borrow up to $375.0 million to, among other things, finance our acquisition and development projects and any future stock repurchase programs at an interest rate equal to, at our option, the base rate plus 1.25% to 2.50%, or LIBOR plus 2.25% to 3.50%, or a combination thereof; provides for a fee of 0.25% to 0.625% of unused commitments; and contains certain covenants relating to the ratio of debt to net worth, operating performance and minimum net worth. Borrowings under the revolving credit agreement mature in May 2015 and are secured primarily by a pledge of the stock of our subsidiaries that serve as the general partners of our limited partnerships and our partnership and membership interests in the limited partnerships and limited liability companies.
On May 28, 2010, we issued, pursuant to a note purchase agreement, $75.0 million of 6.04% senior secured notes due May 29, 2020. The senior secured notes are pari passu with the indebtedness under our revolving credit facility and require payment of principal beginning in year four. The note purchase agreement governing the senior secured notes contains covenants similar to the covenants contained in the revolving credit agreement.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (continued)
Fees associated with the refinancing of our revolving credit facility, an increase in the interest rate under our new revolving credit facility, and fixed rate senior secured notes outstanding resulted in an increase in interest expense and a decrease in operating cash flow of approximately $5.5 million in 2010.
In September 2008, our board of directors authorized a stock repurchase program for up to $25.0 million of our outstanding common stock, which we fully executed during 2008 and 2009, resulting in the purchase of 1,347,752 shares. In October 2010, our board of directors approved a new stock repurchase program for up to $40.0 million of our outstanding shares of common stock to be purchased over the following 18 months. We intend to fund the purchase price for any shares acquired using primarily cash generated from our operations and borrowings under our revolving credit agreement.
The following schedule summarizes all of our contractual obligations by period as of December 31, 2010 (in thousands):
                                         
    Payments Due by Period
        Less than             More than  
    Total     1 Year     1-3 Years     3-5 Years     5 Years  
     
 
Long-term debt, including interest (1)
  $ 329,391     $ 14,517     $ 32,763     $ 226,736     $ 55,375  
Capital lease obligations, including interest
    18,962       3,498       3,734       1,961       9,769  
Operating leases, including renewal option periods (2)
    404,982       35,385       67,739       64,451       237,407  
Construction in progress commitments
    1,008       1,008                    
Liability for unrecognized tax benefits
    8,434             8,434              
Purchase commitment
    25,152       25,152                    
     
 
Total contractual cash obligations
  $ 787,929     $ 79,560     $ 112,670     $ 293,148     $ 302,551  
     
 
(1)   Our long-term debt may increase based on future acquisition activity. We will use our operating cash flow to repay existing long-term debt under our revolving credit and note agreements prior to or on its maturity date.
 
(2)   Operating lease obligations do not include common area maintenance, or CAM, insurance or tax payments for which the Company is also obligated. Total expense related to CAM, insurance and taxes for the 2010 fiscal year was approximately $5.4 million.
In addition, as of February 24, 2011, we had available under our revolving credit agreement $191.5 million for acquisition borrowings, of which we expect to use approximately $21.3 million to acquire two centers in April 2011.
Based upon our current operations and anticipated growth, we believe our operating cash flow and borrowing capacity will be adequate to meet our working capital and capital expenditure requirements for the next 12 to 18 months. In addition to acquiring and developing single ASCs, we may from time to time consider other acquisitions or strategic joint ventures involving other companies, multiple-center chains or networks of ASCs. Such acquisitions, joint ventures or other opportunities may require an amendment to our current credit agreement or additional external financing. As previously discussed, we cannot assure you that any required financing will be available, or will be available on terms acceptable to us.
Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board, or FASB, issued guidance that establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with Generally Accepted Accounting Principles, or GAAP. Use of the new Codification is effective for interim and annual periods ending after September 15, 2009. We have used the new Codification in reference to GAAP in this annual report on Form 10-K and such use has not impacted our consolidated results.
In June 2009, the FASB amended the consolidation guidance related to variable-interest entities. The amendments include the elimination of the exemption for qualifying special purpose entities, revised criteria for determining the primary beneficiary of a variable-interest entity, and expanded the requirements for reconsideration of the primary beneficiary. This standard is effective for us on January 1, 2010. The adoption of this standard did not have a material impact on our consolidated results of operations or financial condition.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are subject to market risk from exposure to changes in interest rates based on our financing, investing and cash management activities. We utilize a balanced mix of maturities along with both fixed-rate and variable-rate debt to manage our exposures to changes in interest rates. Indebtedness outstanding pursuant to our revolving credit facility bears interest at a variable rate indexed to the base rate or LIBOR plus the applicable margin. Indebtedness outstanding pursuant to our senior secured notes bears interest of a fixed rate of 6.04%. We entered into an interest rate swap agreement in April 2006 in which $50.0 million of the principal amount outstanding under the revolving credit facility will bear interest at a fixed-rate of 5.365% for the period from April 28, 2006 to April 28, 2011. Interest rate changes would result in gains or losses in the market value of our debt portfolio due to differences in market interest rates and the rates at the inception of the debt agreements. Based upon our indebtedness at December 31, 2010, a 100 basis point interest rate change would impact our net earnings and cash flow by approximately $900,000 annually. Although there can be no assurances that interest rates will not change significantly, we do not expect changes in interest rates to have a material effect on our income or cash flows in 2011.
As previously discussed, we refinanced our revolving credit facility and entered into a private placement debt arrangement in May 2010. These new credit agreements provide for additional fees and higher interest spreads. Accordingly, we expect our interest expense will increase and our operating cash flow will decrease by approximately $3.5 million in 2011 due to the full year impact of the refinancing.
The table below provides information as of December 31, 2010 about our long-term debt obligations based on maturity dates that are sensitive to changes in interest rates, including principal cash flows and related weighted average interest rates by expected maturity dates (in thousands, except percentage data):
                                                                 
                                                            Fair  
                                                            Value at  
    Years Ended December 31,                     December 31,  
    2011     2012     2013     2014     2015     Thereafter     Total     2010  
     
 
Fixed rate
  $ 5,801     $ 4,760     $ 8,655     $ 12,085     $ 61,235     $ 55,573     $ 148,109     $ 148,109  
Average interest rate
    5.1 %     4.7 %     5.5 %     6.0 %     3.6 %     6.0 %                
 
Variable rate
  $ 848     $ 840     $ 774     $ 375     $ 138,654     $ 263     $ 141,754     $ 150,935  
Average interest rate
    4.9 %     5.0 %     5.1 %     4.0 %     3.0 %     3.9 %                
The difference in maturities of long-term obligations and overall increase in total borrowings from 2009 to 2010 principally resulted from the refinancing of our revolving credit facility, or new senior secured notes, and our borrowings associated with acquisitions of surgery centers. The average interest rates on these borrowings at December 31, 2010 remained consistent as compared to December 31, 2009. Included in the table above is $50.0 million of fixed rate debt set to mature during 2015 which will revert to variable rate debt during the second quarter of 2011 due to the maturity of the interest rate swap agreement that currently fixes the interest on that debt.

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Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
AmSurg Corp.
Nashville, Tennessee
We have audited the accompanying consolidated balance sheets of AmSurg Corp. and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of earnings, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the consolidated financial statements, effective January 1, 2009, the Company adopted the amended provisions of Financial Accounting Standards Accounting Standards Codification (“ASC”) 805, Business Combinations, which resulted in the Company changing the method in which it accounts for business combinations.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
Nashville, Tennessee
February 25, 2011

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Consolidated Balance Sheets
December 31, 2010 and 2009
(Dollars in thousands)
                 
    2010     2009  
     
Assets
               
 
               
Current assets:
               
Cash and cash equivalents
  $ 34,147     $ 29,377  
Accounts receivable, net of allowance of $13,070 and $12,375, respectively
    67,617       66,886  
Supplies inventory
    10,157       8,745  
Deferred income taxes
    1,509       2,324  
Prepaid and other current assets
    18,660       15,408  
Current assets held for sale
    866       34  
     
 
               
Total current assets
    132,956       122,774  
 
               
Property and equipment, net
    119,167       120,158  
Goodwill
    894,497       813,876  
Intangible assets, net
    11,361       9,797  
Long-term assets held for sale
    7,897       170  
Long-term receivables
          56  
     
 
               
Total assets
  $ 1,165,878     $ 1,066,831  
     
 
               
Liabilities and Equity
               
 
               
Current liabilities:
               
Current portion of long-term debt
  $ 6,648     $ 5,989  
Accounts payable
    15,291       14,821  
Accrued salaries and benefits
    17,952       18,156  
Other accrued liabilities
    3,136       3,208  
Current income taxes payable
          402  
Current liabilities held for sale
    536       37  
     
 
               
Total current liabilities
    43,563       42,613  
 
               
Long-term debt
    283,215       296,783  
Deferred income taxes
    90,089       71,665  
Other long-term liabilities
    24,404       22,036  
Commitments and contingencies
               
Noncontrolling interests — redeemable
    147,740       123,363  
Preferred stock, no par value, 5,000,000 shares authorized, no shares issued or outstanding
           
 
               
Equity:
               
Common stock, no par value 70,000,000 shares authorized, 31,039,770 and 30,674,525 shares outstanding, respectively
    171,522       163,729  
Retained earnings
    393,061       343,236  
Accumulated other comprehensive loss, net of income taxes
    (515 )     (1,849 )
     
 
               
Total AmSurg Corp. equity
    564,068       505,116  
Noncontrolling interests — non-redeemable
    12,799       5,255  
     
 
               
Total equity
    576,867       510,371  
     
 
               
Total liabilities and equity
  $ 1,165,878     $ 1,066,831  
     
See accompanying notes to the consolidated financial statements.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Consolidated Statements of Earnings
Years Ended December 31, 2010, 2009 and 2008
(In thousands, except earnings per share
)
                         
    2010     2009     2008  
     
 
Revenues
  $ 710,409     $ 658,223     $ 588,658  
 
                       
Operating expenses:
                       
Salaries and benefits
    213,274       197,569       170,456  
Supply cost
    94,064       81,607       69,223  
Other operating expenses
    148,878       134,574       121,564  
Depreciation and amortization
    24,910       22,351       20,172  
     
 
                       
Total operating expenses
    481,126       436,101       381,415  
     
 
                       
Operating income
    229,283       222,122       207,243  
Interest expense
    13,371       7,647       9,704  
     
 
                       
Earnings from continuing operations before income taxes
    215,912       214,475       197,539  
Income tax expense
    34,324       35,067       32,472  
     
 
                       
Net earnings from continuing operations
    181,588       179,408       165,067  
 
                       
Discontinued operations:
                       
Earnings from operations of discontinued interests in surgery centers, net of income tax
    1,640       2,644       2,632  
Loss on disposal of discontinued interests in surgery centers, net of income tax
    (2,732 )     (702 )     (1,773 )
     
 
                       
Net (loss) gain from discontinued operations
    (1,092 )     1,942       859  
     
 
                       
Net earnings
    180,496       181,350       165,926  
 
                       
Less net earnings attributable to noncontrolling interests:
                       
Net earnings from continuing operations
    129,641       127,582       116,467  
Net earnings from discontinued operations
    1,030       1,620       2,413  
     
 
                       
Total net earnings attributable to noncontrolling interests
    130,671       129,202       118,880  
     
 
                       
Net earnings attributable to AmSurg Corp. common shareholders
  $ 49,825     $ 52,148     $ 47,046  
     
 
                       
Amounts attributable to AmSurg Corp. common shareholders:
                       
Earnings from continuing operations, net of income tax
  $ 51,947     $ 51,826     $ 48,600  
Discontinued operations, net of income tax
    (2,122 )     322       (1,554 )
     
 
                       
Net earnings attributable to AmSurg Corp. common shareholders
  $ 49,825     $ 52,148     $ 47,046  
     
 
                       
Earnings per share-basic:
                       
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
  $ 1.72     $ 1.69     $ 1.54  
Net (loss) gain from discontinued operations attributable to AmSurg Corp. common shareholders
    (0.07 )     0.01       (0.05 )
     
 
                       
Net earnings attributable to AmSurg Corp. common shareholders
  $ 1.65     $ 1.71     $ 1.49  
     
 
                       
Earnings per share-diluted:
                       
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders
  $ 1.69     $ 1.68     $ 1.52  
Net (loss) gain from discontinued operations attributable to AmSurg Corp. common shareholders
    (0.07 )     0.01       (0.05 )
     
 
                       
Net earnings attributable to AmSurg Corp. common shareholders
  $ 1.62     $ 1.69     $ 1.47  
     
 
                       
Weighted average number of shares and share equivalents outstanding:
                       
Basic
    30,255       30,576       31,503  
Diluted
    30,689       30,862       31,963  
See accompanying notes to the consolidated financial statements.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2010, 2009 and 2008
(In thousands
)
                         
    2010     2009     2008  
     
 
Net earnings
  $ 180,496     $ 181,350     $ 165,926  
 
                       
Other comprehensive income, net of tax:
                       
Unrealized gain (loss) on interest rate swap, net of tax
    1,334       1,002       (1,414 )
     
 
                       
Comprehensive income, net of tax
    181,830       182,352       164,512  
 
                       
Less comprehensive income attributable to noncontrolling interests
    130,671       129,202       118,880  
     
 
                       
Comprehensive income attributable to AmSurg Corp. common shareholders
  $ 51,159     $ 53,150     $ 45,632  
     
See accompanying notes to the consolidated financial statements.

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Item 8.  Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Consolidated Statements of Changes in Equity
Years Ended December 31, 2010, 2009 and 2008
(In thousands
)
                                                                 
                                   
    AmSurg Corp. Shareholders                                  
                                                    Non-        
          Non-             Controlling        
                            Accumulated     Controlling             Interests —        
                            Other     Interests —     Total     Redeemable        
    Common Stock     Retained     Comprehensive     Non-     Equity     (Temporary     Net  
    Shares     Amount     Earnings     Loss     Redeemable     (Permanent)     Equity)     Earnings  
 
Balance at January 1, 2008
    31,203     $ 168,620     $ 244,042     $ (1,437 )   $ 2,537     $ 413,762     $ 59,469          
Issuance of restricted common stock
    147                                              
Cancellation of restricted common stock
    (10 )                                            
Stock options exercised
    519       9,970                         9,970                
Stock repurchased
    (517 )     (12,413 )                       (12,413 )              
Share-based compensation
          4,710                         4,710                
Tax benefit related to exercise of stock options
          1,305                         1,305                
Net earnings
                47,046             3,308       50,354       115,572     $ 165,926  
 
                                                             
Distributions to noncontrolling interests, net of capital contributions
                            (3,087 )     (3,087 )     (115,100 )        
Acquisitions and other transactions impacting noncontrolling interests
                            119       119       3,261          
Loss on interest rate swap, net of income tax expense of $911
                      (1,414 )           (1,414 )              
             
 
                                                               
Balance at December 31, 2008
    31,342       172,192       291,088       (2,851 )     2,877       463,306       63,202          
Issuance of restricted common stock
    162                                              
Cancellation of restricted common stock
    (14 )     (26 )                       (26 )              
Stock options exercised
    15       201                         201                
Stock repurchased
    (831 )     (12,587 )                       (12,587 )              
Share-based compensation
          4,068                         4,068                
Tax benefit related to exercise of stock options
          2                         2                
Net earnings
                52,148             4,065       56,213       125,137     $ 181,350  
 
                                                             
Distributions to noncontrolling interests, net of capital contributions
                            (3,848 )     (3,848 )     (126,797 )        
Sale of noncontrolling interests
          (121 )                       (121 )     947          
Acquisitions and other transactions impacting noncontrolling interests
                            2,161       2,161       60,874          
Gain on interest rate swap, net of income tax benefit of $646
                      1,002             1,002                
             
 
                                                               
Balance at December 31, 2009
    30,674     $ 163,729     $ 343,236     $ (1,849 )   $ 5,255     $ 510,371     $ 123,363          
See accompanying notes to the consolidated financial statements.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Consolidated Statements of Changes in Equity — (continued)
Years Ended December 31, 2010, 2009 and 2008
(In thousands
)
                                                                 
    AmSurg Corp. Shareholders                            
                        Non-        
          Non-             Controlling        
                          Accumulated     Controlling             Interests —        
                Other     Interests —     Total     Redeemable        
    Common Stock     Retained     Comprehensive     Non-     Equity     (Temporary     Net  
    Shares     Amount     Earnings     Loss     Redeemable     (Permanent)     Equity)     Earnings  
     
 
Balance at December 31, 2009
    30,674     $ 163,729     $ 343,236     $ (1,849 )   $ 5,255     $ 510,371     $ 123,363          
Issuance of restricted common stock
    233                                              
Cancellation of restricted common stock
    (25 )     (15 )                       (15 )              
Stock options exercised
    158       2,583                         2,583                
Share-based compensation
          4,869                         4,869                
Tax benefit related to exercise of stock options
          71                         71                
Net earnings
                49,825             4,546       54,371       126,125     $ 180,496  
 
                                                             
Distributions to noncontrolling interests, net of capital contributions
                            (4,844 )     (4,844 )     (127,193 )        
Purchase of noncontrolling interests
            893                   (137 )     756       (1,046 )        
Sale of noncontrolling interests
          (608 )                 434       (174 )     614          
Acquisitions and other transactions impacting noncontrolling interests
                            7,545       7,545       25,877          
Gain on interest rate swap, net of income tax expense of $860
                      1,334             1,334                
             
Balance at December 31, 2010
    31,040     $ 171,522     $ 393,061     $ (515 )   $ 12,799     $ 576,867     $ 147,740          
             
See accompanying notes to the consolidated financial statements.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Consolidated Statements of Cash Flows
Years Ended December 31, 2010, 2009 and 2008
(In thousands
)
                         
    2010     2009     2008  
     
Cash flows from operating activities:
                       
Net earnings
  $ 180,496     $ 181,350     $ 165,926  
Adjustments to reconcile net earnings to net cash provided by operating activities:
                       
Depreciation and amortization
    24,910       22,351       20,172  
Net loss on sale of long-lived assets
    4,243       455       922  
Share-based compensation
    4,869       4,068       4,710  
Excess tax benefit from share-based compensation
    (200 )     (32 )     (1,351 )
Deferred income taxes
    18,247       14,703       14,729  
Increase (decrease) in cash and cash equivalents, net of effects of acquisitions and dispositions, due to changes in:
                       
Accounts receivable, net
    713       1,494       3,792  
Supplies inventory
    (541 )     (60 )     (83 )
Prepaid and other current assets
    (3,364 )     (733 )     2,344  
Accounts payable
    (220 )     1,289       (1,904 )
Accrued expenses and other liabilities
    168       6,666       (487 )
Other, net
    1,254       1,033       926  
     
 
                       
Net cash flows provided by operating activities
    230,575       232,584       209,696  
 
                       
Cash flows from investing activities:
                       
Acquisition of interests in surgery centers and related transactions
    (53,690 )     (95,826 )     (118,671 )
Acquisition of property and equipment
    (19,275 )     (19,930 )     (18,379 )
Proceeds from sale of interests in surgery centers
    60       1,298       3,812  
Repayment of notes receivable
          1,666       1,458  
     
 
                       
Net cash flows used in investing activities
    (72,905 )     (112,792 )     (131,780 )
 
                       
Cash flows from financing activities:
                       
Proceeds from long-term borrowings
    176,619       137,178       157,787  
Repayment on long-term borrowings
    (195,960 )     (116,951 )     (114,788 )
Distributions to noncontrolling interests
    (132,110 )     (130,855 )     (118,769 )
Proceeds from issuance of common stock upon exercise of stock options
    2,583       201       9,970  
Repurchase of common stock
          (12,587 )     (12,413 )
Capital contributions and ownership transactions by noncontrolling interests
    224       1,036       582  
Excess tax benefit from share-based compensation
    200       32       1,351  
Financing cost incurred
    (4,456 )     (17 )     (41 )
     
 
                       
Net cash flows used in financing activities
    (152,900 )     (121,963 )     (76,321 )
     
 
                       
Net increase (decrease) in cash and cash equivalents
    4,770       (2,171 )     1,595  
Cash and cash equivalents, beginning of year
    29,377       31,548       29,953  
     
 
                       
Cash and cash equivalents, end of year
  $ 34,147     $ 29,377     $ 31,548  
     
See accompanying notes to the consolidated financial statements.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements
1. Summary of Significant Accounting Policies
a. Principles of Consolidation
AmSurg Corp. (the “Company”), through its wholly owned subsidiaries, owns majority interests, primarily 51%, in limited partnerships and limited liability companies (“LLCs”) which own and operate ambulatory surgery centers (“centers”). The Company also has majority ownership interests in other limited partnerships and LLCs formed to develop additional centers. The consolidated financial statements include the accounts of the Company and its subsidiaries and the majority owned limited partnerships and LLCs in which the Company’s wholly owned subsidiaries are the general partner or majority member. Consolidation of such limited partnerships and LLCs is necessary as the Company’s wholly owned subsidiaries have 51% or more of the financial interest, are the general partner or majority member with all the duties, rights and responsibilities thereof, are responsible for the day-to-day management of the limited partnerships and LLCs and have control of the entities. The responsibilities of the Company’s noncontrolling partners (limited partners and noncontrolling members) are to supervise the delivery of medical services, with their rights being restricted to those that protect their financial interests, such as approval of the acquisition of significant assets or the incurrence of debt which they are generally required to guarantee on a pro rata basis based upon their respective ownership interests. Intercompany profits, transactions and balances have been eliminated. All limited partnerships and LLCs and noncontrolling partners and members are referred to herein as partnerships and partners, respectively.
Ownership interests in subsidiaries held by parties other than the Company are identified and generally presented in the consolidated financial statements within the equity section but separate from the Company’s equity. However, in instances in which certain redemption features that are not solely within the control of the Company are present, classification of noncontrolling interests outside of permanent equity is required. Consolidated net income attributable to the Company and to the noncontrolling interests are identified and presented on the face of the consolidated statements of earnings; changes in ownership interests are accounted for as equity transactions; and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary is measured at fair value. Certain transactions with noncontrolling interests are also classified within financing activities in the statements of cash flows.
As further described in note 13, upon the occurrence of various fundamental regulatory changes, the Company would be obligated, under the terms of certain of its partnership and operating agreements, to purchase the noncontrolling interests related to substantially all of certain of the Company’s partnerships. While the Company believes that the likelihood of a change in current law that would trigger such purchases was remote as of December 31, 2010, the occurrence of such regulatory changes is outside the control of the Company. As a result, these noncontrolling interests that are subject to this redemption feature are not included as part of the Company’s equity and are classified as noncontrolling interests — redeemable on the Company’s consolidated balance sheets.
Center profits and losses are allocated to the Company’s partners in proportion to their ownership percentages and reflected in the aggregate as net earnings attributable to noncontrolling interests. The partners of the Company’s center partnerships typically are organized as general partnerships, limited partnerships or limited liability companies that are not subject to federal income tax. Each partner shares in the pre-tax earnings of the center in which it is a partner. Accordingly, the earnings attributable to noncontrolling interests in each of the Company’s partnerships are generally determined on a pre-tax basis. Total net earnings attributable to noncontrolling interests are presented after net earnings. However, the Company considers the impact of the net earnings attributable to noncontrolling interests on earnings before income taxes in order to determine the amount of pre-tax earnings on which the Company must determine its tax expense. In addition, distributions from the partnerships are made to both the Company’s wholly owned subsidiaries and the partners on a pre-tax basis.
The Company operates in one reportable business segment, the ownership and operation of ambulatory surgery centers.
b. Cash and Cash Equivalents
Cash and cash equivalents are comprised principally of demand deposits at banks and other highly liquid short-term investments with maturities of less than three months when purchased.
c. Supplies Inventory
Supplies inventory consists of medical and drug supplies and is recorded at cost on a first-in, first-out basis.
d. Prepaid and Other Current Assets
At December 31, 2010, prepaid and other current assets were comprised of short-term investments of $6,450,000, other prepaid expenses of $4,386,000, prepaid insurance expense of $3,402,000, other current receivables of $2,063,000, current income tax receivable of $1,555,000 and other current assets of $804,000. At December 31, 2009, prepaid and other current assets were comprised of short-term investments of $4,544,000, other prepaid expenses of $3,930,000, prepaid insurance expense of $3,412,000, other current receivables of $2,904,000, and other current assets of $618,000.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
e. Property and Equipment, net
Property and equipment are stated at cost. Equipment held under capital leases is stated at the present value of minimum lease payments at the inception of the related leases. Depreciation for buildings and improvements is recognized under the straight-line method over 20 to 40 years or, for leasehold improvements, over the remaining term of the lease plus renewal options for which failure to renew the lease imposes a penalty on the Company in such an amount that a renewal appears, at the inception of the lease, to be reasonably assured. The primary penalty to which the Company is subject is the economic detriment associated with existing leasehold improvements which might be impaired if a decision is made not to continue the use of the leased property. Depreciation for movable equipment and software and software development costs is recognized over useful lives of three to ten years.
f. Goodwill
The Company evaluates goodwill for impairment at least on an annual basis and more frequently if certain indicators are encountered. Goodwill is to be tested at the reporting unit level, defined as an operating segment or one level below an operating segment (referred to as a component), with the fair value of the reporting unit being compared to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired. The Company has determined that it has one operating, as well as one reportable, segment. For impairment testing purposes, the centers qualify as components of that operating segment. Because they have similar economic characteristics, the components are aggregated and deemed a single reporting unit. The Company completed its annual impairment test as of December 31, 2010, and determined that goodwill was not impaired.
g. Intangible Assets
Intangible assets consist primarily of deferred financing costs of the Company and certain amortizable and non-amortizable non-compete and customer agreements. Deferred financing costs and amortizable non-compete agreements and customer agreements are amortized over the term of the related debt as interest expense and the contractual term or estimated life (five to ten years) of the agreements as amortization expense, respectively.
h. Other Long-Term Liabilities
At December 31, 2010, other long-term liabilities are comprised of deferred rent of $8,555,000, tax-effected unrecognized benefits of $8,434,000 (see note 1(k)), purchase price obligation of $3,895,000, unfavorable lease liability of $2,581,000, negative fair value of our interest rate swap of $902,000 and other long-term liabilities of $37,000. At December 31, 2009, other long-term liabilities are comprised of deferred rent of $7,544,000, tax-effected unrecognized benefits of $8,383,000 (see note 1(k)), unfavorable lease liability of $2,959,000, negative fair value of our interest rate swap of $3,095,000 and other long-term liabilities of $55,000.
i. Revenue Recognition
Center revenues consist of billing for the use of the centers’ facilities (the “facility fee”) directly to the patient or third-party payor and, in limited instances, billing for anesthesia services. Such revenues are recognized when the related surgical procedures are performed. Revenues exclude any amounts billed for physicians’ surgical services, which are billed separately by the physicians to the patient or third-party payor.
Revenues from centers are recognized on the date of service, net of estimated contractual adjustments from third-party medical service payors including Medicare and Medicaid (see note 1(o)). During the years ended December 31, 2010, 2009 and 2008, the Company derived approximately 31%, 33% and 34%, respectively, of its revenues from government healthcare programs, primarily Medicare. Concentration of credit risk with respect to other payors is limited due to the large number of such payors.
j. Operating Expenses
Substantially all of the Company’s operating expenses relate to the cost of revenues and the delivery of care at the Company’s surgery centers. Such costs primarily include the surgery centers’ clinical and administrative salaries and benefits, supply cost, rent and other variable expenses, such as linen cost, repair and maintenance of equipment, billing fees and bad debt expense. Bad debt expense was approximately $16,945,000, $16,781,000 and $17,015,000 for the years ended December 31, 2010, 2009 and 2008, respectively.
k. Income Taxes
The Company files a consolidated federal income tax return. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
The Company applies recognition thresholds and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return as it relates to accounting for uncertainty in income taxes. In addition, it is the Company’s policy to recognize interest accrued and penalties, if any, related to unrecognized benefits as income tax expense in its statement of earnings. The Company does not expect significant changes to its tax positions or liability for tax uncertainties during the next 12 months.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company’s tax years for 2006 through 2008 are subject to examination by the tax authorities. In limited instances, the Company is subject to certain state income tax examinations for years prior to 2006.
l. Earnings Per Share
Basic earnings per share is computed by dividing net earnings attributable to AmSurg Corp. common shareholders by the combined weighted average number of common shares, while diluted earnings per share is computed by dividing net earnings attributable to AmSurg Corp. common shareholders by the weighted average number of such common shares and dilutive share equivalents.
m. Share-Based Compensation
Transactions in which the Company receives employee and non-employee services in exchange for the Company’s equity instruments or liabilities that are based on the fair value of the Company’s equity securities or may be settled by the issuance of these securities are accounted using a fair value method. The Company applies the Black-Scholes method of valuation in determining share-based compensation expense.
Benefits of tax deductions in excess of recognized compensation cost are reported as a financing cash flow, thus reducing the Company’s net operating cash flows and increased its financing cash flows by $200,000, $32,000 and $1,351,000 for the years ended December 31, 2010, 2009 and 2008, respectively.
The Company examines its concentrations of holdings, its historical patterns of award exercises and forfeitures as well as forward-looking factors, in an effort to determine if there were any discernable employee populations. From this analysis, the Company has identified three employee populations, consisting of senior executives, officers and all other recipients. The expected volatility rate applied was estimated based on historical volatility. The expected term assumption applied is based on contractual terms, historical exercise and cancellation patterns and forward-looking factors where present for each population identified. The risk-free interest rate used is based on the U.S. Treasury yield curve in effect at the time of the grant. The pre-vesting forfeiture rate is based on historical rates and forward-looking factors for each population identified. The Company will adjust the estimated forfeiture rate to its actual experience. The Company intends to retain its earnings to finance growth and development of the business and does not expect to disclose or pay any cash dividends in the foreseeable future.
n. Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles, or GAAP, 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 those estimates.
The determination of contractual and bad debt allowances constitutes a significant estimate. Some of the factors considered by management in determining the amount of such allowances are the historical trends of the centers’ cash collections and contractual and bad debt write-offs, accounts receivable agings, established fee schedules, contracts with payors and procedure statistics. Accordingly, net accounts receivable at December 31, 2010 and 2009 reflect allowances for contractual adjustments of $118,503,000 and $100,088,000, respectively, and allowance for bad debt expense of $13,070,000 and $12,375,000, respectively.
o. Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (“FASB”) issued guidance that establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Use of the new Codification is effective for interim and annual periods ending after September 15, 2009. The Company has used the new Codification in reference to GAAP in this annual report on Form 10-K and such use has not impacted the consolidated results of the Company.
In June 2009, the FASB amended the consolidation guidance related to variable-interest entities. The amendments include the elimination of the exemption for qualifying special purpose entities, revised criteria for determining the primary beneficiary of a variable-interest entity, and expanded the requirements for reconsideration of the primary beneficiary. This standard was effective for the Company on January 1, 2010. The adoption of this standard did not have an impact on the Company’s consolidated results of operations or financial condition.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
p. Reclassifications
Certain prior year amounts have been reclassified to reflect the impact of additional discontinued operations as further discussed in note 2(c).
2. Acquisitions and Dispositions
a. Acquisitions
In December 2007, the FASB issued ASC 805, Business Combinations (“ASC 805”). ASC 805 was effective for the Company on January 1, 2009 and has been applied prospectively to business combinations for which the acquisition date is on or after January 1, 2009. Upon adoption of ASC 805, there was no impact on the Company’s consolidated results of operations and financial condition for acquisitions previously completed. The adoption of ASC 805 did not have a material effect on the Company’s consolidated results of operations or cash flows.
In accordance with ASC 805, the Company accounts for its business combinations under the fundamental requirements of the acquisition method of accounting and under the premise that an acquirer be identified for each business combination. The acquirer is the entity that obtains control of one or more businesses in the business combination and the acquisition date is the date the acquirer achieves control. The assets acquired, liabilities assumed (including contingencies, if any) and any noncontrolling interests in the acquired business at the acquisition date are recognized at their fair values as of that date, and the direct costs incurred in connection with the business combination are recorded and expensed separately from the business combination.
As a significant part of its growth strategy, the Company acquires controlling interests in centers. The Company, through a wholly owned subsidiary and in separate transactions, acquired at least a 51% controlling interests in 7 and 11 centers during 2010 and 2009, respectively. The aggregate amount paid for the acquisitions was approximately $53,690,000 and $95,826,000 during 2010 and 2009, respectively, which was paid in cash and funded by a combination of operating cash flow and borrowings under the Company’s revolving credit agreement. In addition, the Company had a purchase price payable of $3,895,000 for a December 31, 2010 acquisition, which, was reflected as other long-term liabilities in the balance sheet as of December 31, 2010. The total fair value of an acquisition includes an amount allocated to goodwill, which results from the centers’ favorable reputations in their markets, their market positions and their ability to deliver quality care with high patient satisfaction consistent with the Company’s business model.
The acquisition date fair value of the total consideration transferred and acquisition date fair value of each major class of consideration for the acquisitions completed during 2010 and 2009, including post acquisition date adjustments recorded to finalize purchase price allocations, are as follows (in thousands):
                 
    2010     2009  
    Acquisitions     Acquisitions  
     
 
Accounts receivable
  $ 2,471     $ 4,603  
Prepaid and other current assets
    1,072       616  
Property and equipment
    4,291       13,337  
Accounts payable
    (946 )     (898 )
Other accrued liabilities
    (198 )     (955 )
Long-term debt
    (2,410 )     (9,876 )
Goodwill and other intangible assets (approximately $55,400 and $92,283 deductible
for tax purposes, respectively)
    86,852       152,227  
     
 
Total fair value
    91,132       159,054  
Less: Fair value attributable to noncontrolling interests
    33,547       63,228  
     
 
Acquisition date fair value of total consideration transferred
    57,585       95,826  
Less: Purchase price payable at December 31, 2010 and 2009, respectively
    (3,895 )      
     
 
Cash paid for acquisition of interests in surgery centers
  $ 53,690     $ 95,826  
     
Fair value attributable to noncontrolling interests is based on significant inputs that are not observable in the market. Key inputs used to determine the fair value include financial multiples used in the purchase of noncontrolling interests in centers. Such multiples, based on earnings, are used as a benchmark for the discount to be applied for the lack of control or marketability. The fair value of noncontrolling interests may be subject to adjustment as the Company completes its initial accounting for acquired intangible assets. The Company incurred and expensed in other operating expenses approximately $248,000 and $324,000 in acquisition related costs, primarily attorney fees for the years ended December 31, 2010 and 2009, respectively.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
Revenues and net earnings included in the years ended December 31, 2010 and 2009 associated with these acquisitions are as follows (in thousands):
                 
    2010     2009  
     
 
Revenues
  $ 17,397     $ 10,327  
 
               
Net earnings
    5,358       3,721  
Less: Net earnings attributable to noncontrolling interests
    2,708       2,264  
     
 
               
Net earnings attributable to AmSurg Corp. common shareholders
  $ 2,650     $ 1,457  
     
b. Pro Forma Information
The unaudited consolidated pro forma results for the years ended December 31, 2010 and 2009, assuming all 2010 and 2009 acquisitions had been consummated on January 1, 2009, are as follows (in thousands, except per share data):
                 
    2010     2009  
     
 
Revenues
  $ 728,284     $ 734,837  
Net earnings
    184,999       203,663  
Amounts attributable to AmSurg Corp. common shareholders:
               
Net earnings from continuing operations
    53,462       60,267  
Net earnings
    51,340       60,589  
Net earnings from continuing operations per common share:
               
Basic
  $ 1.77     $ 1.97  
Diluted
  $ 1.74     $ 1.95  
Net earnings:
               
Basic
  $ 1.70     $ 1.98  
Diluted
  $ 1.67     $ 1.96  
Weighted average number of shares and share equivalents:
               
Basic
    30,255       30,576  
Diluted
    30,689       30,862  
c. Dispositions
The Company initiated the dispositions due to management’s assessment of the limited growth opportunities at these centers. Results of operations of the centers discontinued for the years ended December 31, 2010, 2009 and 2008, are as follows (in thousands):
                         
    2010     2009     2008  
     
For the year ended December 31:
                       
Cash proceeds from disposal
  $ 60     $ 400     $ 3,644  
Net (loss) gain from discontinued operations
    (1,092 )     1,942       859  
Net (loss) gain from discontinued operations attributable to AmSurg Corp.
    (2,122 )     322       (1,554 )
At December 31, 2010 and 2009, the Company held its interests in five and one center, respectively, classified as discontinued. Centers classified as discontinued at December 31, 2010 will either be sold in 2011 or closed as they fulfill their near-term lease obligations. The results of operations of discontinued centers have been classified as discontinued operations in all periods presented. Results of operations of the combined discontinued surgery centers for the years ended December 31, 2010, 2009 and 2008 are as follows (in thousands):
                         
    2010     2009     2008  
     
 
Revenues
  $ 10,299     $ 12,243     $ 17,559  
Earnings before income taxes
    2,033       3,305       3,237  
Net earnings
    1,640       2,644       2,632  

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
3. Property and Equipment
Property and equipment at December 31, 2010 and 2009 were as follows (in thousands):
                 
    2010     2009  
     
 
Land and improvements
  $     $ 164  
Building and improvements
    106,678       106,639  
Movable equipment, software and software development costs
    154,317       143,990  
Construction in progress
    8,154       2,521  
     
 
               
 
    269,149       253,314  
Less accumulated depreciation
    (149,982 )     (133,156 )
     
 
               
Property and equipment, net
  $ 119,167     $ 120,158  
     
The Company capitalized interest in the amount of $54,000, $66,000 and $96,000 for the years ended December 31, 2010, 2009 and 2008, respectively. At December 31, 2010, the Company and its partnerships had unfunded construction and equipment purchases of approximately $1,008,000 in order to complete construction in progress. Depreciation expense for continuing and discontinued operations for the years ended December 31, 2010, 2009 and 2008 was $25,279,000, $22,784,000 and $21,185,000, respectively.
4. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the years ended December 31, 2010 and 2009 are as follows (in thousands):
                 
    2010     2009  
     
 
Balance, beginning of year
  $ 813,876     $ 661,693  
Purchase price allocations
    86,539       152,594  
Disposals
    (5,918 )     (411 )
     
 
               
Balance, end of year
  $ 894,497     $ 813,876  
     
Amortizable intangible assets at December 31, 2010 and 2009 consisted of the following (in thousands):
                                                 
    2010     2009  
    Gross                     Gross              
    Carrying     Accumulated             Carrying     Accumulated        
    Amount     Amortization     Net     Amount     Amortization     Net  
         
 
Deferred financing cost
  $ 4,516     $ (567 )   $ 3,949     $ 2,780     $ (2,310 )   $ 470  
Customer and non-compete agreements
    3,180       (1,818 )     1,362       3,180       (1,618 )     1,562  
         
 
                                               
Total amortizable intangible assets
  $ 7,696     $ (2,385 )   $ 5,311     $ 5,960     $ (3,928 )   $ 2,032  
         
Amortization of intangible assets for the years ended December 31, 2010, 2009 and 2008 was $1,184,000, $492,000 and $480,000, respectively. Included in amortization expense for the year ended December 31, 2010 is $434,000 of previously unamortized deferred financing costs expensed in conjunction with the refinancing of the revolving credit facility (see note 5). Estimated amortization of intangible assets for the five years and thereafter subsequent to December 31, 2010, with a weighted average amortization period of 4.9 years, is $1,111,000, $1,111,000, $1,108,000, $1,101,000, $598,000 and $282,000.
At December 31, 2010 and 2009, other non-amortizable intangible assets related to restrictive covenant arrangements were $6,050,000 and $7,765,000, respectively.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
5. Long-term Debt
Long-term debt at December 31, 2010 and 2009 was comprised of the following (in thousands):
                 
    2010     2009  
     
$375,000,000 credit agreement at base rate, or LIBOR plus 1.25% to 3.50%, or a combination thereof (average rate of 3.0% at December 31, 2010), due May 2015
  $ 188,000     $ 276,300  
Fixed rate senior secured notes (rate of 6.04%)
    75,000        
Other debt at an average rate of 4.6%, due through 2016
    12,933       14,250  
Capitalized lease arrangements at an average rate of 5.5%, due through 2026
    13,930       12,222  
     
 
               
 
    289,863       302,772  
Less current portion
    6,648       5,989  
     
 
Long-term debt
  $ 283,215     $ 296,783  
     
The Company refinanced its revolving credit facility on May 28, 2010. The new revolving credit agreement permits the Company to borrow up to $375,000,000 to, among other things, finance its acquisition and development projects and any future stock repurchase programs at an interest rate equal to, at the Company’s option, the base rate plus 1.25% to 2.50%, or LIBOR plus 2.25% to 3.50%, or a combination thereof; provides for a fee of 0.25% to 0.625% of unused commitments; and contains certain covenants relating to the ratio of debt to operating performance measurements, interest coverage ratios and minimum net worth. Borrowings under the revolving credit agreement mature in May 2015 and are secured primarily by a pledge of the stock of our subsidiaries that serve as the general partners of our limited partnerships and our partnership and membership interests in the limited partnerships and limited liability companies. The Company was in compliance with all covenants contained in the revolving credit agreement at December 31, 2010.
On May 28, 2010, the Company issued, pursuant to a note purchase agreement, $75,000,000 of 6.04% senior secured notes due May 28, 2020. The senior secured notes are pari passu with the indebtedness under the Company’s revolving credit facility and require payment of principal beginning in year four. The note purchase agreement governing the senior secured notes contains covenants similar to the covenants in the revolving credit agreement. The Company was in compliance with all covenants contained in the note purchase agreement at December 31, 2010.
Certain partnerships included in the Company’s consolidated financial statements have loans with local lending institutions, included above in other debt, which are collateralized by certain assets of the centers with a book value of approximately $43,649,000. The Company and the partners have guaranteed payment of the loans in proportion to the relative partnership interests.
Principal payments required on long-term debt in the five years and thereafter subsequent to December 31, 2010 are $6,649,000, $5,600,000, $9,429,000, $12,460,000, $199,889,000 and $55,836,000.
6. Derivative Instruments
The Company entered into an interest rate swap agreement in April 2006, the objective of which is to hedge exposure to the variability of the future expected cash flows attributable to the variable interest rate of a portion of the Company’s outstanding balance under its revolving credit agreement. The interest rate swap has a notional amount of $50,000,000. The Company pays to the counterparty a fixed-rate of 5.365% of the notional amount of the interest rate swap and receives a floating rate from the counterparty based on LIBOR. The interest rate swap matures in April 2011. In the opinion of management, the interest rate swap (as a cash flow hedge) is a fully effective hedge. Payments or receipts of cash under the interest rate swap are shown as a part of operating cash flows, consistent with the interest expense incurred pursuant to the revolving credit agreement. The value of the swap represents the estimated amount the Company would have paid as of December 31, 2010 upon termination of the swap agreement based on a valuation obtained from the financial institution that is the counterparty to the interest rate swap agreement. An increase in the fair value of the interest rate swap, net of tax, of $1,334,000 and $1,002,000 was included in other comprehensive income in the years ended December 31, 2010 and 2009, respectively. A decrease in the fair value of the interest rate swap, net of tax of $1,414,000 was included in other comprehensive income for the year ended December 31, 2008. Accumulated other comprehensive loss, net of income taxes, was $515,000 and $1,849,000 as of December 31, 2010 and 2009, respectively.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
The fair values of derivative instruments in the consolidated balance sheets as of December 31, 2010 and 2009 were as follows (in thousands):
                                                                 
    Asset Derivatives December 31,     Liability Derivatives December 31,  
    2010     2009     2010     2009  
    Balance Sheet     Fair     Balance Sheet     Fair     Balance Sheet     Fair     Balance Sheet     Fair  
    Location     Value     Location     Value     Location     Value     Location     Value  
Derivatives designated
as hedging
instruments
  Other           Other           Other           Other        
  assets,
net
  $     assets,
net
  $     long-term liabilities   $ 902     long-term liabilities   $ 3,095  
                         
7. Fair Value Measurements
The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. The inputs used by the Company to measure fair value are classified into the following fair value hierarchy:
     
Level 1:
  Quoted prices in active markets for identical assets or liabilities.
 
   
Level 2:
  Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.
 
   
Level 3:
  Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.
The Company adopted the updated guidance of the FASB related to fair value measurements and disclosures, which requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. In addition, in the reconciliation for fair value measurements using significant unobservable inputs, or Level 3, a reporting entity should disclose separately information about purchases, sales, issuances and settlements. The updated guidance also requires that an entity should provide fair value measurement disclosures for each class of assets and liabilities and disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements for Level 2 and Level 3 fair value measurements. The guidance was effective for the Company January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the roll forward activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. Therefore, the Company has not yet adopted the guidance with respect to the roll forward activity in Level 3 fair value measurements. The adoption of the updated guidance for Levels 1 and 2 fair value measurements did not have an impact on the Company’s consolidated results of operations or financial condition.
In determining the fair value of assets and liabilities that are measured on a recurring basis at December 31, 2010 and 2009, the Company utilized Level 2 inputs to perform such measurements methods which were commensurate with the market approach (in thousands):
                 
    December 31,
2010
  December 31,
2009
     
Assets:
               
Supplemental executive retirement savings plan investments
  $ 6,450     $ 4,544  
     
 
               
Liabilities:
               
Interest rate swap agreement
  $ 902     $ 3,095  
     
The fair value of the supplemental executive retirement savings plan investments, which are included in prepaid and other current assets, was determined using the calculated net asset values obtained from the plan administrator and observable inputs of similar public mutual fund investments. The fair value of the interest rate swap agreement, which is included in other long-term liabilities, was determined by a valuation obtained from the financial institution that is the counterparty to the interest rate swap agreement. The valuation, which represents the amount that the Company would have paid as of December 31, 2010 upon termination of the agreement, considered current interest rate swap rates, the critical terms of the agreement and interest rate projections. There were no transfers to or from Levels 1 and 2 during the three and nine months ended December 31, 2010.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
Cash and cash equivalents, receivables and payables are reflected in the financial statements at cost, which approximates fair value. The fair value of fixed rate long-term debt, with a carrying value of $148,109,000, was $150,935,000 at December 31, 2010. The fair value of variable-rate long-term debt approximates its carrying value of $141,754,000 at December 31, 2010. The fair value of fixed rate long-term debt, with a carrying value of $63,348,000, was $59,548,000 at December 31, 2009. The fair value of variable-rate long-term debt, with a carrying value of $231,350,000, was $227,536,000 at December 31, 2009. The fair value is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company for similar debt instruments of comparable maturities by its lenders.
8. Leases
The Company has entered into various building and equipment capital and operating leases for its surgery centers in operation and under development and for office space, expiring at various dates through 2030. Future minimum lease payments, including payments during expected renewal option periods, at December 31, 2010 were as follows (in thousands):
                 
    Capitalized        
Year Ended   Equipment     Operating  
December 31,   Leases     Leases  
 
 
2011
  $ 3,498     $ 35,385  
2012
    2,436       34,232  
2013
    1,298       33,507  
2014
    1,012       32,916  
2015
    949       31,535  
Thereafter
    9,769       237,407  
     
 
               
Total minimum rentals
    18,962     $ 404,982  
 
             
Less amounts representing interest at rates ranging from 3.8% to 9.7%
    5,032          
 
             
 
               
Capital lease obligations
  $ 13,930          
 
             
At December 31, 2010, buildings and equipment with a cost of approximately $18,000,000 and accumulated depreciation of approximately $4,027,000 were held under capital leases. The Company and the partners in the partnerships have guaranteed payment of certain of these leases. Rental expense for operating leases for the years ended December 31, 2010, 2009 and 2008 was approximately $37,301,000, $35,401,000 and $32,782,000, respectively.
9. Shareholders’ Equity
a. Common Stock
In September 2008, the Company’s Board of Directors authorized a stock repurchase program for up to $25,000,000 of the Company’s outstanding common stock over the following 12 months. During the year ended December 31, 2008, the Company purchased 517,052 shares of the Company’s common stock for approximately $12,413,000, at an average price of $24 per share. During the year ended December 31, 2009, the Company purchased 830,700 shares of the Company’s common stock for approximately $12,587,000, at an average price of $15 per share, which completed the $25,000,000 stock repurchase program authorized by the Company’s Board of Directors in September 2008.
On April 22, 2009 the Company’s Board of Directors approved an additional stock repurchase program for up to $40,000,000 of the Company’s shares of common stock over the following 18 months. This plan expired in October 2010 with no shares having been purchased pursuant to the plan.
On October 20, 2010, the board of directors approved a new stock repurchase program for up to $40,000,000 of the Company’s shares of common stock over the following 18 months. As of December 31, 2010, no shares had been repurchased pursuant to this plan.
b. Shareholder Rights Plan
In 1999, the Company’s Board of Directors adopted a shareholder rights plan and declared a distribution of one stock purchase right for each outstanding share of the Company’s common stock to shareholders of record on December 16, 1999 and for each share of common stock issued thereafter. The shareholder rights plan expired on December 2, 2009.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
c. Stock Incentive Plans
In May 2006, the Company adopted the AmSurg Corp. 2006 Stock Incentive Plan. The Company also has options outstanding under the AmSurg Corp. 1997 Stock Incentive Plan, under which no additional options may be granted. Under these plans, the Company has granted restricted stock and non-qualified options to purchase shares of common stock to employees and outside directors from its authorized but unissued common stock. Restricted stock granted to outside directors in 2010 vests over a two year period. Restricted stock granted to outside directors prior to 2010 vests one-third on the date of grant, with the remaining shares vesting over a two-year term and is restricted from trading for five years from the date of grant. Restricted stock granted to employees in 2010 vests over four years in three equal installments beginning on the second anniversary of the date of grant. Restricted stock granted to employees prior to December 31, 2010, vests at the end of four years from the date of grant. The fair value of restricted stock is determined based on the closing bid price of the Company’s common stock on the grant date.
Options are granted at market value on the date of the grant. Prior to 2007, granted options vested ratably over four years. Options granted in 2007 and 2008 vest at the end of four years from the grant date. Options have a term of ten years from the date of grant. No options were issued in 2010 and 2009. At December 31, 2010, 2,760,250 shares were authorized for grant under the 2006 Stock Incentive Plan and 1,488,039 shares were available for future equity grants, including 751,878 shares available for issuance as restricted stock.
Other information pertaining to share-based activity for the years ended December 31, 2010, 2009 and 2008 was as follows (in thousands):
                         
    2010   2009   2008
     
 
Share-based compensation expense
  $ 4,869     $ 4,068     $ 4,710  
Fair value of shares vested
    1,647       5,382       6,523  
Cash received from option exercises
    2,583       201       9,970  
Tax benefit from option exercises
    200       34       1,549  
As of December 31, 2010, the Company had total unrecognized compensation cost of approximately $6,200,000 related to non-vested awards, which the Company expects to recognize through 2014 and over a weighted-average period of 1.0 years.
Average outstanding share-based awards to purchase approximately 2,384,000, 2,457,000 and 907,000 shares of common stock that had an exercise price in excess of the average market price of the common stock during the years ended December 31, 2010, 2009 and 2008, respectively, were not included in the calculation of diluted securities under the treasury method for purposes of determining diluted earnings per share due to their anti-dilutive impact.
A summary of the status of and changes for non-vested restricted shares for the three years ended December 31, 2010, is as follows:
                 
            Weighted
    Number   Average
    of   Exercise
    Shares   Price
     
 
Non-vested shares at January 1, 2008
    193,999     $ 23.13  
Shares granted
    147,724       24.79  
Shares vested
    (4,210 )     24.94  
Shares forfeited
    (9,762 )     24.01  
 
               
Non-vested shares at December 31, 2008
    327,751     $ 23.83  
Shares granted
    162,507       19.34  
Shares vested
    (9,666 )     22.55  
Shares forfeited
    (14,205 )     23.59  
 
               
 
               
Non-vested shares at December 31, 2009
    466,387     $ 22.29  
Shares granted
    233,460       21.83  
Shares vested
    (8,973 )     20.45  
Shares forfeited
    (25,965 )     22.21  
 
               
 
               
Non-vested shares at December 31, 2010
    664,909     $ 22.16  
 
               

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
A summary of stock option activity for the three years ended December 31, 2010 is summarized as follows:
                         
                    Weighted
            Weighted   Average
    Number   Average   Remaining
    of   Exercise   Contractual
    Shares   Price   Term (in years)
     
 
Outstanding at January 1, 2008
    3,674,474     $ 21.72       7.1  
Options granted
    203,911       24.75          
Options exercised with total intrinsic value of $3,947,000
    (518,702 )     19.25          
Options terminated
    (83,880 )     24.26          
 
                       
 
                       
Outstanding at December 31, 2008
    3,275,803     $ 22.23       6.7  
Options granted
                   
Options exercised with total intrinsic value of $112,000
    (14,699 )     13.67          
Options terminated
    (110,052 )     23.73          
 
                       
 
                       
Outstanding at December 31, 2009
    3,151,052     $ 22.22       5.0  
Options granted
                   
Options exercised with total intrinsic value of $511,000
    (157,750 )     16.38          
Options terminated
    (91,313 )     23.73          
 
                       
 
                       
Outstanding at December 31, 2010 with aggregate intrinsic value of $2,411,000
    2,901,989     $ 22.49       4.5  
 
                       
 
                       
Vested or expected to vest at December 31, 2010 with total intrinsic value of $2,411,000
    2,901,989     $ 22.49       4.5  
 
                       
 
                       
Exercisable at December 31, 2010 with total intrinsic value of $2,411,000
    2,434,647     $ 22.33       4.0  
 
                       
The aggregate intrinsic value represents the total pre-tax intrinsic value received by the option holders on the exercise date or that would have been received by the option holders had all holders of in-the-money outstanding options at December 31, 2010 exercised their options at the Company’s closing stock price on December 31, 2010.
The Company issued no options during the years ended December 31, 2010 and 2009. The Company, using the Black-Scholes option pricing model for all stock option awards on the date of grant, determined that the weighted average fair value of options at the date of grant issued during the year ended December 31, 2008 were $8.20, by applying the following assumptions:
         
Expected term/life of options in years
    5.1  
Forfeiture rate
    3.0 %
Average risk-free interest rate
    2.7 %
Volatility rate
    31.9 %
Dividends
     

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
d. Earnings per Share
The following is a reconciliation of the numerator and denominators of basic and diluted earnings per share (in thousands, except per share amounts):
                         
    Earnings     Shares     Per Share  
    (Numerator)     (Denominator)     Amount  
     
For the year ended December 31, 2010:
                       
Net earnings from continuing operations attributable to AmSurg Corp. per common share (basic)
  $ 51,947       30,255     $ 1.72  
Effect of dilutive securities options and non-vested shares
          434          
             
 
                       
Net earnings from continuing operations attributable to AmSurg Corp. per common share (diluted)
  $ 51,947       30,689     $ 1.69  
             
 
                       
Net earnings attributable to AmSurg Corp. per common share (basic)
  $ 49,825       30,255     $ 1.65  
Effect of dilutive securities options and non-vested shares
          434          
             
 
                       
Net earnings attributable to AmSurg Corp. per common share (diluted)
  $ 49,825       30,689     $ 1.62  
             
 
                       
For the year ended December 31, 2009:
                       
Net earnings from continuing operations attributable to AmSurg Corp. per common share (basic)
  $ 51,826       30,576     $ 1.69  
Effect of dilutive securities options and non-vested shares
          286          
             
 
                       
Net earnings from continuing operations attributable to AmSurg Corp. per common share (diluted)
  $ 51,826       30,862     $ 1.68  
             
 
                       
Net earnings attributable to AmSurg Corp. per common share (basic)
  $ 52,148       30,576     $ 1.71  
Effect of dilutive securities options and non-vested shares
          286          
             
 
                       
Net earnings attributable to AmSurg Corp. per common share (diluted)
  $ 52,148       30,862     $ 1.69  
             
 
                       
For the year ended December 31, 2008:
                       
Net earnings from continuing operations attributable to AmSurg Corp. per common share (basic)
  $ 48,600       31,503     $ 1.54  
Effect of dilutive securities options and non-vested shares
          460          
             
 
                       
Net earnings from continuing operations attributable to AmSurg Corp. per common share (diluted)
  $ 48,600       31,963     $ 1.52  
             
 
                       
Net earnings attributable to AmSurg Corp. per common share (basic)
  $ 47,046       31,503     $ 1.49  
Effect of dilutive securities options and non-vested shares
          460          
             
 
                       
Net earnings attributable to AmSurg Corp. per common share (diluted)
  $ 47,046       31,963     $ 1.47  
             

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
10. Income Taxes
Total income taxes expense (benefit) for the years ended December 31, 2010, 2009 and 2008 was included within the following sections of the consolidated financial statements as follows (in thousands):
                         
    2010     2009     2008  
     
 
Income from continuing operations
  $ 34,324     $ 35,067     $ 32,472  
Discontinued operations
    (1,126 )     907       2,141  
Shareholders’ equity
    (71 )     (2 )     (1,305 )
Other comprehensive income (loss)
    860       646       (911 )
     
 
                       
Total
  $ 33,987     $ 36,618     $ 32,397  
     
Income tax expense from continuing operations for the years ended December 31, 2010, 2009 and 2008 was comprised of the following (in thousands):
                         
    2010     2009     2008  
     
Current:
                       
Federal
  $ 11,321     $ 16,742     $ 19,798  
State
    3,347       4,367       3,980  
Deferred:
                       
Federal
    16,760       11,805       7,296  
State
    2,896       2,153       1,398  
     
 
                       
Income tax expense
  $ 34,324     $ 35,067     $ 32,472  
     
Income tax expense from continuing operations for the years ended December 31, 2010, 2009 and 2008 differed from the amount computed by applying the U.S. federal income tax rate of 35% to earnings before income taxes as a result of the following (in thousands):
                         
    2010     2009     2008  
     
 
Statutory federal income tax
  $ 75,569     $ 75,068     $ 69,139  
Less federal income tax assumed directly by noncontrolling interests
    (45,374 )     (44,654 )     (40,783 )
State income taxes, net of federal income tax benefit
    4,114       4,214       3,373  
Increase in valuation allowances
    222       327       564  
Interest related to unrecognized tax benefits
    (151 )     2       57  
Other
    (56 )     110       122  
     
 
                       
Income tax expense
  $ 34,324     $ 35,067     $ 32,472  
     
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. Increases and (decreases) in interest obligations of $(191,000), $18,000 and $57,000 were recognized in the consolidated statement of earnings for the years ended December 31, 2010, 2009 and 2008, respectively, resulting in a total recognition of interest obligations of approximately $1,373,000 and $1,564,000 in the consolidated balance sheet at December 31, 2010 and 2009, respectively. No amounts for penalties have been recorded.
The Company primarily has unrecognized tax benefits that represent an amortization deduction which is temporary in nature. A reconciliation of the beginning and ending amount of the liability associated with unrecognized tax benefits for the years ended December 31, 2010, 2009 and 2008 is as follows (in thousands):
                         
    2010     2009     2008  
     
 
Balance at beginning of year
  $ 6,766     $ 6,190     $ 5,569  
Additions for tax positions of current year
    378       576       621  
     
 
                       
Balance at end of year
  $ 7,144     $ 6,766     $ 6,190  
     

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will increase $362,000 within the next 12 months due to continued amortization deductions. The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is approximately $100,000.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2010 and 2009 were as follows (in thousands):
                 
    2010   2009
     
Deferred tax assets:
               
Allowance for uncollectible accounts
  $ 1,315     $ 1,137  
Accrued assets and other
    1,800       2,943  
Valuation allowances
    (925 )     (1,066 )
     
 
               
Total current deferred tax assets
    2,190       3,014  
 
               
Share-based compensation
    8,945       7,269  
Interest on unrecognized tax benefits
    533       667  
Accrued liabilities and other
    2,242       3,264  
Operating and capital loss carryforwards
    4,155       3,875  
Valuation allowances
    (4,045 )     (3,272 )
     
 
               
Total non-current deferred tax assets
    11,830       11,803  
     
 
               
Total deferred tax assets
    14,020       14,817  
 
Deferred tax liabilities:
               
Prepaid expenses
    681       690  
Accrued liabilities and other
          203  
Property and equipment, principally due to differences in depreciation
    2,255       1,594  
Goodwill, principally due to differences in amortization
    99,664       81,671  
     
 
               
Total deferred tax liabilities
    102,600       84,158  
     
 
               
Net deferred tax liabilities
  $ 88,580     $ 69,341  
     
The net deferred tax liabilities at December 31, 2010 and 2009 were recorded as follows (in thousands):
                 
    2010   2009
|     |
Current deferred income tax assets
  $ 1,509     $ 2,324  
Non-current deferred income tax liabilities
    90,089       71,665  
     
 
               
Net deferred tax liabilities
  $ 88,580     $ 69,341  
     
The Company has provided valuation allowances on its gross deferred tax assets to the extent that management does not believe that it is more likely than not that such asset will be realized. Capital loss carryforwards will begin to expire in 2013, and state net operating losses will begin to expire in 2015.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
11. Related Party Transactions
Certain surgery centers lease space from entities affiliated with their physician partners at negotiated rates that management believes were equal to fair market value at the inception of the leases based on relevant market data. Certain surgery centers reimburse their physician partners for salaries and benefits and billing fees related to time spent by employees of their practices on activities of the centers at current market rates. In addition, certain centers compensate at market rates their physician partners for physician advisory services provided to the surgery centers, including medical director and performance improvement services.
Related party payments for the years ended December 31, 2010, 2009 and 2008 were as follows (in thousands):
                         
    2010     2009     2008  
     
 
Operating leases
  $ 26,373     $ 18,176     $ 14,235  
Salaries and benefits
    61,524       60,298       64,132  
Billing fees
    11,387       9,589       9,007  
Medical advisory services
    2,245       1,989       1,836  
The Company also reimburses their physician partners for operating expenses paid by the physician partners to third party providers on the behalf of the surgery center. For the years ended December 31, 2010, 2009 and 2008, reimbursed expenses were approximately 5% of other operating expenses as reported in the accompanying consolidated statement of earnings. The Company believes that the foregoing transactions are in its best interests.
It is the Company’s policy that all transactions by the Company with officers, directors, five percent shareholders and their affiliates be entered into only if such transactions are on terms no less favorable to the Company than could be obtained from unaffiliated third parties, are reasonably expected to benefit the Company and are approved by the Nominating and Corporate Governance Committee of the Company’s Board of Directors.
12. Employee Benefit Programs
As of January 1, 1999, the Company adopted the AmSurg 401(k) Plan and Trust. This plan is a defined contribution plan covering substantially all employees of the Company and provides for voluntary contributions by these employees, subject to certain limits. Company contributions are based on specified percentages of employee compensation. The Company funds contributions as accrued. The Company’s contributions for the years ended December 31, 2010, 2009 and 2008 were approximately $561,000, $525,000 and $479,000, respectively, and vest immediately or incrementally over five years, depending on the tenures of the respective employees for which the contributions were made.
As of January 1, 2000, the Company adopted the Supplemental Executive Retirement Savings Plan. This plan is a defined contribution plan covering all officers of the Company and provides for voluntary contributions of up to 50% of employee annual compensation. Company contributions are at the discretion of the Compensation Committee of the Board of Directors and vest incrementally over five years. The employee and employer contributions are placed in a Rabbi Trust and recorded in the accompanying consolidated balance sheets in prepaid and other current assets. Employer contributions to this plan for the years ended December 31, 2010, 2009 and 2008 were approximately $234,000, $1,170,000 and $174,000, respectively.
13. Commitments and Contingencies
The Company and its partnerships are insured with respect to medical malpractice risk on a claims-made basis. The Company also maintains insurance for general liability, director and officer liability and property. Certain policies are subject to deductibles. In addition to the insurance coverage provided, the Company indemnifies its officers and directors for actions taken on behalf of the Company and its partnerships. Management is not aware of any claims against it or its partnerships which would have a material financial impact on the Company.
The Company’s wholly owned subsidiaries, as general partners in the limited partnerships, are responsible for all debts incurred but unpaid by the limited partnership. As manager of the operations of the limited partnerships, the Company has the ability to limit potential liabilities by curtailing operations or taking other operating actions.
In the event of a change in current law that would prohibit the physicians’ current form of ownership in the partnerships, the Company would be obligated to purchase the physicians’ interests in substantially all of the Company’s partnerships. The purchase price to be paid in such event would be determined by a predefined formula, as specified in the partnership agreements. The Company believes the likelihood of a change in current law, which would trigger such purchases, was remote as of December 31, 2010.

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Item 8. Financial Statements and Supplementary Data — (continued)
AmSurg Corp.
Notes to the Consolidated Financial Statements — (continued)
On December 31, 2010, the Company entered into agreements to purchase a controlling interest in two centers for $21,257,000. The consummation of each acquisition is contingent upon the satisfaction of closing conditions customary for transactions of these types. The Company anticipates closing this transaction in April 2011 and intends to fund the acquisition through a combination of operating cash flow and borrowings under its revolving credit facility.
14. Supplemental Cash Flow Information
Supplemental cash flow information for the years ended December 31 2010, 2009 and 2008 is as follows (in thousands):
                         
    2010     2009     2008  
     
Cash paid during the year for:
                       
Interest
  $ 12,219     $ 7,854     $ 10,188  
Income taxes, net of refunds
    16,776       19,336       19,297  
 
                       
Non-cash investing and financing activities:
                       
Increase (decrease) in accounts payable associated with acquisition of property and equipment
    164       (1,892 )     2,098  
Capital lease obligations
    4,057       8,222       970  
Notes received for sale of a partnership interest
                885  
Effect of acquisitions and related transactions:
                       
Assets acquired, net of cash and adjustments
    94,686       170,783       134,512  
Liabilities assumed and noncontrolling interests
    (37,101 )     (74,957 )     (14,861 )
Notes payable and other obligations
    (3,895 )           (980 )
     
 
                       
Payment for interests in surgery centers and related transactions
  $ 53,690     $ 95,826     $ 118,671  
     
15. Subsequent Events
The Company assessed events occurring subsequent to December 31, 2010 for potential recognition and disclosure in the consolidated financial statements. In February 2011, the Company, through a wholly owned subsidiary acquired a majority interest in a surgery center for approximately $3,800,000. Other than as previously described, no events have occurred that would require adjustment to or disclosure in the consolidated financial statements.

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Item 8. Financial Statements and Supplementary Data — (continued)
Quarterly Statement of Earnings Data (Unaudited)
The following table presents certain quarterly statement of earnings data for the years ended December 31, 2009 and 2010. The quarterly statement of earnings data set forth below was derived from our unaudited financial statements and includes all adjustments, consisting of normal recurring adjustments, which we consider necessary for a fair presentation thereof. Results of operations for any particular quarter are not necessarily indicative of results of operations for a full year or predictive of future periods.
                                                                 
    2009     2010  
    Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  
    (In thousands, except per share data)  
Revenues
  $ 160,823     $ 166,122     $ 165,276     $ 166,002     $ 170,116     $ 177,498     $ 178,071     $ 184,724  
Earnings from continuing operations before income taxes
    52,207       55,501       54,085       52,682       51,861       55,411       52,656       55,984  
Net earnings from continuing operations
    43,791       46,309       45,295       44,013       43,240       46,159       44,858       47,331  
Net earnings (loss) from discontinued operations
    524       544       1,027       (153 )     272       469       277       (2,110 )
Net earnings
    44,315       46,853       46,322       43,860       43,512       46,628       45,135       45,221  
 
                                                               
Net earnings (loss) attributable to AmSurg Corp. common shareholders:
                                                               
Continuing
    12,413       13,531       13,153       12,729       12,686       12,965       13,074       13,222  
Discontinued
    203       49       650       (580 )     11       177       44       (2,354 )
     
 
                                                               
Net earnings
  $ 12,616     $ 13,580     $ 13,803     $ 12,149     $ 12,697     $ 13,142     $ 13,118     $ 10,868  
     
 
                                                               
Diluted net earnings from continuing operations per common share
  $ 0.40     $ 0.44     $ 0.43     $ 0.41     $ 0.41     $ 0.42     $ 0.43     $ 0.43  
Diluted net earnings per common share
  $ 0.40     $ 0.44     $ 0.45     $ 0.40     $ 0.41     $ 0.43     $ 0.43     $ 0.35  

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Management’s Report on Internal Control Over Financial Reporting
We are responsible for the preparation and integrity of the consolidated financial statements appearing in our Annual Report. The consolidated financial statements were prepared in conformity with United States generally accepted accounting principles and include amounts based on management’s estimates and judgments. All other financial information in this report has been presented on a basis consistent with the information included in the consolidated financial statements.
We are also responsible for establishing and maintaining adequate internal controls over financial reporting. We maintain a system of internal controls that is designed to provide reasonable assurance as to the fair and reliable preparation and presentation of the consolidated financial statements, as well as to safeguard assets from unauthorized use or disposition. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Our control environment is the foundation for our system of internal controls over financial reporting and is embodied in our Code of Conduct. It sets the tone of our organization and includes factors such as integrity and ethical values. Our internal controls over financial reporting are supported by formal policies and procedures which are reviewed, modified and improved as changes occur in business conditions and operations.
We conducted an evaluation of effectiveness of our internal controls over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, effectiveness of controls and a conclusion on this evaluation. Although there are inherent limitations in the effectiveness of any system of internal controls over financial reporting, based on our evaluation, we have concluded that our internal controls over financial reporting were effective as of December 31, 2010.
The effectiveness of the Company’s internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, and they have issued an attestation report on the Company’s internal control over financial reporting which is set forth in the Report of Independent Registered Public Accounting Firm in Part II, Item 9A of this Annual Report on Form 10-K.
         
/s/ Christopher A. Holden    
Christopher A. Holden   
President and Chief Executive Officer   
 
/s/ Claire M. Gulmi    
Claire M. Gulmi   
Executive Vice President and Chief Financial Officer   

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Item 9A. Controls and Procedures — (continued)
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
AmSurg Corp.
Nashville, Tennessee
We have audited the internal control over financial reporting of AmSurg Corp. and subsidiaries (the “Company”) as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2010 of the Company and our report dated February 25, 2011 expressed an unqualified opinion on those financial statements and included an explanatory paragraph concerning the adoption of the amended provisions of ASC 805, Business Combinations.
         
/s/ DELOITTE & TOUCHE LLP  
 
Nashville, Tennessee   
February 25, 2011     

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Item 9A. Controls and Procedures — (continued)
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management team, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of December 31, 2010. Based on that evaluation, our chief executive officer (principal executive officer) and chief financial officer (principal accounting officer) have concluded that our disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
During the fourth fiscal quarter of the period covered by this report, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Item 9B. Other Information
Not applicable.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Information with respect to our directors, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Election of Directors,” is incorporated herein by reference. Pursuant to General Instruction G(3), information concerning our executive officers is included in Part I of this Annual Report on Form 10-K under the caption “Executive Officers of the Registrant.”
Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Section 16(a) Beneficial Ownership Reporting Compliance,” is incorporated herein by reference.
Information with respect to our code of ethics, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Code of Conduct” and “Code of Ethics,” is incorporated herein by reference.
Information with respect to our audit committee and audit committee financial experts, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Election of Directors,” is incorporated herein by reference.
Item 11. Executive Compensation
Information required by this caption, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Executive Compensation,” is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information with respect to security ownership of certain beneficial owners and management and related stockholder matters, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Stock Ownership” and information with respect to our equity compensation plans at December 31, 2010, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Equity Compensation Plan Information,” is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information with respect to certain relationships and related transactions, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Certain Relationships and Related Transactions,” is incorporated herein by reference.
Information with respect to the independence of our directors, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Corporate Governance,” is incorporated herein by reference.

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Item 14. Principal Accountant Fees and Services
Information with respect to the fees paid to and services provided by our principal accountant, set forth in our Definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 19, 2011, under the caption “Fees Billed to Us by Deloitte & Touche LLP During 2010 and 2009,” is incorporated herein by reference.
Part IV
Item 15. Exhibits and Financial Statement Schedules
(a) Financial Statements, Financial Statement Schedules and Exhibits
     (1) Financial Statements: See Item 8 herein.
     (2) Financial Statement Schedules:
     
   Report of Independent Registered Public Accounting Firm
  S-1
   Schedule II — Valuation and Qualifying Accounts
  S-2
   (All other schedules are omitted because they are not applicable or not required, or because the required information is
   included in the consolidated financial statements or notes thereto.)
   
     (3) Exhibits: See the exhibit listing set forth below.

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(3) Exhibits
     
Exhibit   Description
3.1
  Second Amended and Restated Charter of AmSurg, as amended (incorporated by reference to Exhibit 4.2 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2004)
 
   
3.2
  Second Amended and Restated Bylaws of AmSurg, as amended (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K, dated November 29, 2011)
 
   
4.1
  Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form 10/A-4 (filed with the Commission on July 13, 2001))
 
   
10.1*
  Form of Indemnification Agreement with directors, executive officers and advisors (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form 10 (filed with the Commission on March 11, 1997))
 
   
10.2
  Revolving Credit Agreement, dated as of May 28, 2010, among AmSurg, SunTrust Bank, as Administrative Agent, and various banks and other financial institutions (incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K, dated June 2, 2010)
 
   
10.3
  Note Purchase Agreement, dated as of May 28, 2010 among AmSurg, The Prudential Life Insurance Company of America, and various other financial institutions (incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K, dated June 2, 2010)
 
   
10.4*
  Amended and Restated 1997 Stock Incentive Plan (incorporated by reference to Exhibit 4.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2004)
 
   
10.5*
  First Amendment to Amended and Restated 1997 Stock Incentive Plan (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K, dated November 21, 2006)
 
   
10.6*
  Form of Non-Qualified Stock Option Agreement — 1997 Incentive Plan (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K, dated February 2, 2005)
 
   
10.7*
  Form of Restricted Stock Agreement for Non-Employee Directors — 1997 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, dated May 24, 2005)
 
   
10.8
  Lease Agreement dated February 24, 1999 between Burton Hills III, LLC and AmSurg (incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q for the quarter ended June 30, 1999)
 
   
10.9
  First Amendment to Lease Agreement dated June 27, 2001 by and between Burton Hills III, LLC and AmSurg (incorporated by reference to Exhibit 10 of the Quarterly Report on Form 10-Q for the quarter ended September 30, 2002)
 
   
10.10
  Second Amendment to Lease Agreement dated January 31, 2003 by and between Burton Hills III Partnership and AmSurg (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K for the year ended December 31, 2003)
 
   
10.11
  Third Amendment to Lease Agreement dated September 1, 2003 by and between Burton Hills III Partnership and AmSurg (incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K for the year ended December 31, 2003)
 
   
10.12
  Fourth Amendment to Lease Agreement dated October 31, 2003 by and between Burton Hills III Partnership and AmSurg (incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K for the year ended December 31, 2003)
 
   
10.13*
  Amended and Restated Supplemental Executive Retirement Savings Plan, as amended (Restated for SEC electronic purposes only and incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K for the year ended December 31, 2008)
 
   
10.14*
  AmSurg Corp. 2006 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed on May 26, 2010)

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(3) Exhibits – (continued)
     
Exhibit   Description
10.15*
  Form of Restricted Share Award Agreement for Non-Employee Directors — 2006 Incentive Plan (incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K, dated February 21, 2007)
 
   
10.16*
  Form of Non-Qualified Stock Option Agreement for Executive Officers — 2006 Incentive Plan (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K, dated February 21, 2007)
 
   
10.17*
  Form of Restricted Share Award for Employees — 2006 Incentive Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, dated May 26, 2010)
 
   
10.18*
  Restricted Share Award Agreement, dated February 21, 2008, between the Company and Ken P. McDonald (incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K for the year ended December 31, 2007)
 
   
10.19*
  Non-Qualified Stock Option Agreement, dated February 21, 2008, between the Company and Ken P. McDonald (incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K for the year ended December 31, 2007)
 
   
10.20*
  AmSurg Corp. Long-Term Care Plan (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2005)
 
   
10.21*
  Amended and Restated Employment Agreement, dated January 30, 2009, between AmSurg and Christopher A. Holden (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K, dated February 5, 2009)
 
   
10.22*
  Second Amended and Restated Employment Agreement, dated January 30, 2009, between AmSurg and Claire M. Gulmi (incorporated by reference to Exhibit 99.2 to the Current Report on Form 8-K, dated February 5, 2009)
 
   
10.23*
  Second Amended and Restated Employment Agreement, dated January 30, 2009, between AmSurg and David L. Manning (incorporated by reference to Exhibit 99.3 to the Current Report on Form 8-K, dated February 5, 2009)
 
   
10.24*
  Second Amended and Restated Employment Agreement, dated January 30, 2009, between AmSurg and Billie A. Payne (incorporated by reference to Exhibit 99.4 to the Current Report on Form 8-K, dated February 5, 2009)
 
   
10.25*
  Employment Agreement, dated January 30, 2009, between AmSurg and Kevin D. Eastridge (incorporated by reference to Exhibit 99.5 to the Current Report on Form 8-K, dated February 5, 2009)
 
   
10.26*
  Employment Agreement, dated March 23, 2009, between AmSurg and Phillip A. Clendenin (incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K, dated March 27, 2009)
 
   
10.27
  Schedule of Non-employee Director Compensation
 
   
21.1
  Subsidiaries of AmSurg
 
   
23.1
  Consent of Independent Registered Public Accounting Firm
 
   
24.1
  Power of Attorney (appears on page 59)
 
   
31.1
  Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
 
   
31.2
  Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
 
   
32.1
  Section 1350 Certifications
 
   
 
 
  Interactive data files pursuant to Rule 405 of Regulation S-T; (i) the Consolidated Balance Sheets at December 31, 2010 and December 31, 2009, (ii) the Consolidated Statements of Earnings for the years ended December 31, 2010, 2009 and 2008, (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2010, 2009 and 2008, (iv) the Consolidated Statements of Changes in Equity for the years ended December 31, 2010, 2009 and 2008 and (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008.
 
*   Management contract or compensatory plan, contract or arrangement

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Signatures
     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  AMSURG CORP.
 
 
February 25, 2011  By:   /s/ Christopher A. Holden    
    Christopher A. Holden   
    (President and Chief Executive Officer)   
 
     KNOW ALL MEN BY THESE PRESENTS, each person whose signature appears below hereby constitutes and appoints Christopher A. Holden and Claire M. Gulmi, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this report, and to file the same with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
         
Signature   Title   Date
 
 
       
/s/ Christopher A. Holden
 
Christopher A. Holden
  President, Chief Executive Officer and Director (Principal Executive Officer)   February 25, 2011
 
       
/s/ Claire M. Gulmi
 
Claire M. Gulmi
  Executive Vice President, Chief Financial Officer, Secretary and Director
(Principal Financial and Accounting Officer)
  February 25, 2011
 
       
/s/ Steven I. Geringer
 
Steven I. Geringer
  Chairman of the Board    February 25, 2011
 
       
/s/ Thomas G. Cigarran
 
Thomas G. Cigarran
  Director    February 25, 2011
 
       
/s/ James A. Deal
 
James A. Deal
  Director    February 25, 2011
 
       
/s/ Henry D. Herr
 
Henry D. Herr
  Director    February 25, 2011
 
       
/s/ Kevin P. Lavender
 
Kevin P. Lavender
  Director    February 25, 2011
 
       
/s/ Ken P. McDonald
 
Ken P. McDonald
  Director    February 25, 2011
 
       
/s/ John W. Popp, Jr., M.D.
 
John W. Popp, Jr., M.D.
  Director    February 25, 2011

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
AmSurg Corp.
Nashville, Tennessee
We have audited the consolidated financial statements of AmSurg Corp. and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and for each of the three years in the period ended December 31, 2010, and the Company’s internal control over financial reporting as of December 31, 2010, and have issued our reports thereon dated February 25, 2011 which report expresses an unqualified opinion and includes an explanatory paragraph concerning the adoption of the amended provisions of ASC 805, Business Combinations; such reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Nashville, Tennessee
February 25, 2011

S-1


Table of Contents

Schedule
Schedule OF Valuation And Qualifying Accounts Disclosure
AmSurg Corp.
Schedule II — Valuation and Qualifying Accounts
For the Years Ended December 31, 2010, 2009 and 2008
(In thousands)
                                         
            Additions     Deductions        
    Balance at     Charged to     Charged to     Charge-off     Balance  
    Beginning
of Period
    Cost and
Expenses
    Other
Accounts (1)
    Against
Allowances
    at End of
Period
 
Allowance for uncollectible accounts included under the balance sheet caption “Accounts receivable”:
                                       
 
Year ended December 31, 2010
  $ 12,375     $ 17,211     $ 448     $ (16,964 )   $ 13,070  
     
 
Year ended December 31, 2009
  $ 11,757     $ 16,844     $ 1,359     $ (17,585 )   $ 12,375  
     
 
Year ended December 31, 2008
  $ 8,310     $ 17,169     $ 2,401     $ (16,123 )   $ 11,757  
     
 
(1)   Valuation of allowance for uncollectible accounts as of the acquisition date of physician practice-based surgery centers, net of dispositions. See “Item 8 Financial Statements and Supplementary Data — Notes to the Consolidated Financial Statements — Note 2.”

S-2