• the risk that payments from third-party payors, including government healthcare programs, may decrease or not increase as our costs increase;

• adverse developments affecting the medical practices of our physician partners;

• our ability to maintain favorable relations with our physician partners;

• our ability to acquire and develop additional surgery centers on favorable terms;

• our ability to grow revenues by increasing procedure volume while maintaining operating margins and profitability at our existing centers;

• our ability to manage the growth in our business;

• our ability to obtain sufficient capital resources to complete acquisitions and develop new surgery centers;

• our ability to compete for physician partners, managed care contracts, patients and strategic relationships;

• adverse weather and other factors beyond our control that may affect our surgery centers;

• our failure to comply with applicable laws and regulations;

• the risk of changes in legislation, regulations or regulatory interpretations that may negatively affect us;

• the risk of becoming subject to federal and state investigation;

• the risk of regulatory changes that may obligate us to buy out the ownership interests of physicians who are minority owners of our surgery centers;

• potential liabilities associated with our status as a general partner of limited partnerships;

• liabilities for claims brought against our facilities;

• our legal responsibility to minority owners of our surgery centers, which may conflict with our interests and prevent us from acting solely in our best interests;

• risks associated with the potential write-off of the impaired portion of intangible assets; and

• potential liabilities relating to the tax deductibility of goodwill.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - (continued)
Overview
We develop, acquire and operate ambulatory surgery centers, or centers or ASCs,
in partnership with physicians. As of September 30, 2009, we owned a majority
interest (51% or greater) in 194 ASCs. The following table presents the number
of procedures performed at our continuing centers and changes in the number of
ASCs in operation, under development and under letter of intent for the three
and nine months ended September 30, 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.

                                                Three Months Ended            Nine Months Ended
                                                  September 30,                 September 30,

                                               2009           2008           2009           2008


Procedures                                     310,676        279,537        927,499        825,702
Continuing centers in operation, end of
period                                             194            175            194            175
Average number of continuing centers in
operation, during period                           194            173            192            171
New centers added during period                      1              3              6              7
Centers disposed during period                       -             (1 )            -             (5 )
Centers under development, end of period             2              3              2              3
Centers held for sale, end of period                (2 )           (2 )           (2 )           (2 )
Centers under letter of intent, end of
period                                               2             13              2             13

Of the continuing centers in operation at September 30, 2009, 136 centers performed gastrointestinal endoscopy procedures, 36 centers performed ophthalmology surgery procedures, 16 centers performed procedures in multiple specialties and six centers performed orthopedic procedures. We intend to expand primarily through the acquisition and development of additional ASCs in targeted surgical specialties and through future same-center growth. Our growth targets for 2009 include the acquisition or development of 13 to 16 surgery centers. We expect our same-center revenue to be flat in 2009, compared to our recent historical average of 3% to 5% growth, due to the economic outlook in 2009, which we believe will result in reduced patient visits and surgical procedures. While we generally own 51% of the entities that own the centers, our consolidated statements of earnings include 100% of the results of operations of the entities, reduced by the noncontrolling interests' share of the net earnings or loss of the center entities. The noncontrolling 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. 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 and, in limited instances, billing for anesthesia services. Facility fees do not include the charges of the patient's surgeon, anesthesiologist or other attending physicians, which are billed directly by the physicians. 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 32% of our revenues in both the nine months ended September 30, 2009 and 2008 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.
Effective January 1, 2008, the Centers for Medicare and Medicaid Services, or 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 75% of the procedures performed by our surgery centers, and certain ophthalmology and pain procedures. We estimate that our net earnings per share were negatively impacted by $0.05 in 2008 by the revised payment system. Based upon our current procedure mix, payor mix and volume, we believe the 2009 payment rates will reduce our net earnings per diluted share in 2009 by approximately $0.07 as compared to 2008 and that our diluted earnings per share in each of 2010 and 2011 will be reduced by an incremental $0.06 as compared to the prior year as a result of the scheduled reduction in rates in those years. Beginning in 2010,

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - (continued)
reimbursement rates for our ASCs should be increased annually based on increases in the CPI. In October 2009, CMS announced final reimbursement rates for 2010, which included a 1.2% CPI increase. There can be no assurance, however, that CMS will not further revise the payment system to reduce or eliminate these annual increases, or that any annual CPI increases will be material. Any increase in reimbursement rates as a result of a CPI adjustment in 2011 could partially offset the scheduled payment reductions in 2011.
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. 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 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. Several commercial payors also do not reimburse providers for certain preventable adverse events. In addition, 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. 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.
Critical Accounting Policies
A summary of significant accounting policies is disclosed in our 2008 Annual Report on Form 10-K. Our critical accounting policies are further described under the caption "Critical Accounting Policies" in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2008 Annual Report on Form 10-K. There have been no changes in the nature of our critical accounting policies or the application of those policies since December 31, 2008.
Results of Operations
Our revenues are directly related to the number of procedures performed at our centers. Our overall growth in procedure volume is impacted directly by the increase in the number of centers in operation and the growth in procedure volume at existing centers. We increase our number of centers through both acquisitions and developments. Procedure growth at any 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 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 2009 same-center group, comprised of 173 centers and constituting approximately 90% of our total number of centers, had 0% revenue growth during the nine months ended September 30, 2009. We expect our same-center revenue to be flat in 2009. We have reduced our same-center revenue growth target for 2009 from our recent historical averages of 3% to 5% due to the economic outlook in 2009, which we believe will result in reduced patient visits and surgical procedures as patients delay care.
Expenses directly and indirectly related to procedures performed at our 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.
Our interest expense results primarily from our borrowings used to fund acquisition and development activity, as well as interest incurred on capital leases.
Beginning in 2009, we adopted updates to Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic, or ASC, 810, Consolidations. While the adoption of certain updates to ASC 810 did not have an impact on our net earnings or net earnings per diluted share, the presentation of our financial statements has been changed. Net earnings attributable to noncontrolling interests, previously referred to as minority interest, is now reported after net earnings. 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. 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.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - (continued)
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.
The most significant impact of this financial statement presentation is on the determination of pre-tax earnings, which is presented before net earnings attributable to noncontrolling interests has 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 39.6%. 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 supplementally disclosed on the consolidated statements of earnings.
The following table shows certain statement of earnings items expressed as a percentage of revenues for the three and nine months ended September 30, 2009 and 2008:

                                                       Three Months Ended            Nine Months Ended
                                                         September 30,                 September 30,

                                                       2009           2008           2009          2008


Revenues                                                 100.0 %       100.0 %         100.0 %      100.0 %

Operating expenses:
Salaries and benefits                                     30.6          29.3            30.0         29.1
Supply cost                                               12.1          11.5            12.2         11.6
Other operating expenses                                  20.1          20.8            20.4         20.5
Depreciation and amortization                              3.4           3.5             3.4          3.5


Total operating expenses                                  66.2          65.1            66.0         64.7


Operating income                                          33.8          34.9            34.0         35.3

Interest expense                                           1.1           1.6             1.2          1.8


Earnings from continuing operations before
income taxes                                              32.7          33.3            32.8         33.5

Income tax expense                                         5.3           5.3             5.4          5.4


Net earnings from continuing operations, net of
income tax expense                                        27.4          28.0            27.4         28.1

Discontinued operations:
(Loss) earnings from operations of discontinued
interests in surgery centers, net of income tax
(benefit) expense                                            -          (0.1 )             -            -
(Gain) loss on disposal of discontinued
interests in surgery centers, net of income tax
expense (benefit)                                          0.2           0.4             0.1         (0.1 )


Net gain (loss) from discontinued operations               0.2           0.3             0.1         (0.1 )


Net earnings                                              27.6          28.3            27.5         28.0

Less net earnings attributable to noncontrolling
interests:
Net earnings from continuing operations                   19.4          19.7            19.5         19.9
Net earnings from discontinued operations                    -           0.4               -          0.2


Total net earnings attributable to
noncontrolling interests                                  19.4          20.1            19.5         20.1


Net earnings attributable to AmSurg Corp. common
shareholders                                               8.2 %         8.2 %           8.0 %        7.9 %


Amounts attributable to AmSurg Corp. common
shareholders:
Earnings from continuing operations, net of tax            8.0 %         8.4 %           8.0 %        8.2 %
Discontinued operations, net of tax                        0.2          (0.2 )             -         (0.3 )


Net earnings attributable to AmSurg Corp. common
shareholders                                               8.2 %         8.2 %           8.0 %        7.9 %

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - (continued)
Revenues increased $17.1 million, or 11%, to $167.9 million and increased $53.1 million, or 12%, to $500.1 million in the three and nine months ended September 30, 2009, respectively, from $150.7 million and $447.1 million in the comparable 2008 periods. Our procedures increased by 31,139, or 11%, to 310,676 and increased 101,797, or 12%, to 927,499 in the three and nine months ended September 30, 2009, respectively, from 279,537 and 825,702 in the comparable 2008 periods. The additional revenues and procedures resulted primarily from:
• centers acquired and opened in 2008, which contributed $14.7 million and $47.9 million of additional revenues in the three and nine months ended September 30, 2009, respectively, due to having a full period of operations in 2009; and

• centers acquired and opened in 2009, which generated $2.4 million and $6.0 million in revenues during the three and nine months ended September 30, 2009, respectively.

Staff at newly acquired and developed centers, as well as the additional staffing required at existing centers due to increased volume, resulted in a 13% increase in salaries and benefits at our surgery centers in the three and nine months ended September 30, 2009, respectively. We experienced a 34% and 26% increase in salaries and benefits at our corporate offices during the three and nine months ended September 30, 2009, respectively. The increase in corporate office salaries and benefits was primarily due to higher bonus expense incurred during the 2009 periods, year over year salary increases, and additional employees, primarily in our information technology area. Salaries and benefits increased in total by 16% and 15% to $51.3 million and $149.7 million in the three and nine months ended September 30, 2009, respectively, from $44.2 million and $130.1 million in the comparable 2008 periods. Salaries and benefits as a percentage of revenues increased in the three and nine months ended September 30, 2009 compared to the comparable 2008 periods primarily due to the impact of flat revenue growth within our same center group against the increase in corporate salaries and benefits, as described above, in 2009. Supply cost was $20.4 million and $61.2 million in the three and nine months ended September 30, 2009, respectively, an increase of $3.0 million and $9.3 million, or 17% and 18%, over supply cost in the comparable 2008 periods. This increase was primarily the result of additional procedure volume. Our average supply cost per procedure in the three and nine months ended September 30, 2009 increased by approximately $3. This increase is primarily related to higher utilization of disposable supplies at our gastroenterology centers and greater use of premium cataract lenses at our ophthalmology centers. Other operating expenses increased $2.3 million, or 7%, and $10.3 million, or 11%, to $33.7 million and $102.1 million in the three and nine months ended September 30, 2009, respectively, from $31.4 million and $91.8 million in the comparable 2008 periods. The additional expense in the 2009 periods resulted primarily from:
• centers acquired or opened during 2008, which resulted in an increase of $2.5 million and $8.6 million in other operating expenses in the three and nine months ended September 30, 2009, respectively;

• an increase of $500,000 and $1.9 million in other operating expenses at our 2009 same-center group in the three and nine months ended September 30, 2009, respectively, resulting primarily from additional procedure volume and general inflationary cost increases; and

• centers acquired and opened during 2009, which resulted in an increase of $500,000 and $1.1 million in other operating expenses in the three and nine months ended September 30, 2009, respectively.

Depreciation and amortization expense increased $491,000, or 9%, and $1.5 million, or 10%, to $5.7 million and $17.1 million in the three and nine months ended September 30, 2009, respectively, from the comparable 2008 periods, primarily as a result of centers acquired since 2008 and newly developed centers in operation, which have an initially higher level of depreciation expense due to their construction costs.
We anticipate further increases in operating expenses in 2009, primarily due to additional acquired centers and additional start-up centers 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 procedure volume at the center grows to a more normal operating level, which generally is expected to occur within 12 months after the center opens. At September 30, 2009, we had two centers under development and one center that had been open for less than one year. Interest expense decreased $410,000 and $1.6 million, or 18% and 22%, to $1.9 million and $6.0 million in the three and nine months ended September 30, 2009, respectively, from the comparable 2008 periods, primarily due to a reduced average interest rate in 2009 on our variable interest debt. See "- Liquidity and Capital Resources."
We recognized income tax expense from continuing operations of $8.9 million and $26.9 million in the three and nine months ended September 30, 2009, respectively, compared to $8.0 million and $24.3 million in the comparable 2008 periods. Our effective tax rate in the three and nine months ended September 30, 2009 was 16.3% and 16.4%, respectively, 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, 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.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations - (continued)
Net earnings attributable to noncontrolling interests in the three and nine months ended September 30, 2009 increased $2.2 million and $7.6 million, or 7% and 8%, to $32.5 million and $97.5 million, respectively, from the comparable 2008 periods, 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 19.4% and 19.5% from 20.1% and 20.1% in the three and nine months ended September 30, 2009, respectively, as a result of reduced center profit margins caused by lower same-center revenue growth.
We have two centers classified as held for sale at September 30, 2009. The net earnings from operations of all centers disposed of or to be disposed of in 2009 and 2008 have been reclassified to discontinued operations in all periods presented.
Liquidity and Capital Resources
Cash and cash equivalents at September 30, 2009 and 2008 were $30.6 million and . . .