The surgery center dam was broken in 1982, when Medicare approved 200 procedures that could be performed away from a hospital operating room. Today, some 5,000 medical procedures are outpatient-approved, and it's not difficult to see why.

"In 1982, Medicare was paying $2,000 per case per facility," Vick said. "In 1984, in a surgery center, that figure per case per facility fell to $500."

The centers offer lower cost and higher volume. In a hospital operating room, perhaps two outpatient procedures per morning may be performed, interspersed with emergency cases, inpatient surgeries and cleanup. In a surgery center, it's normal to have four cases per morning.

That's not to say opening a surgery center is risk-free. There are tremendous up-front costs, long waits for state and Medicare approvals, and the possibility of "blackballing" by local hospitals affected by the center, according to Charles Jacobson.

"Up-front equipment needed in a surgery center is extremely expensive, running in the $1 million to $2.5 million range," said Jacobson, vice president of Health Care Development for The Stellar Group, Jacksonville, Fla. "It can take two months to get the proper certifications and managed care contracts in place. You may need up to six months and $1 million before you see a patient."

On the other hand, Vick said physician-owners in some centers could split $1 million in profit in a year of operation, but "the revenue from their individual practices is probably three or four times that figure."

Hospitals affected by construction of a surgery center -- in Laurel's case primarily Latrobe Area, Westmoreland Regional and Frick -- basically have three choices in dealing with the new competition for outpatient revenue. They can try to be the center's corporate "big brother," perhaps as a joint venture. They can compete, basically ignoring the new center and focusing on building their own outpatient business. Or, they can fight.

In the Laurel Center case, the physicians say they were turned down when they asked hospital officials to join them in the project; hospital officials say they never were asked.

"We certainly view them as competition, and the situation is troubling," said David Gallatin, chief executive of Westmoreland-Latrobe Health Partners, the temporary name for the three hospitals' new combined system.

"The ambulatory surgery center at Westmoreland hospital is 60 percent utilized, Latrobe's is 55 percent utilized and Frick's is 35 percent utilized. It makes no sense to invest in a surgery center outside the hospitals," said Dr. Angelo DeMezza, Westmoreland's chief medical officer. "There are better ways to provide care than by duplicating services -- particularly since this center is for-profit."

"The hospital is still working off an old, industrial model," orthopedic surgeon Lauro said. "It's not like we make a bunch of money and draw off the hospitals. There is a lot of money wasted in health care -- it's going somewhere, but I don't know where.

"This is retaining work in the county and we all still do our inpatient work in the hospitals," he said. "This will allow more inpatient work, and allow the hospitals to focus on their core competencies, to do them better and more efficiently."

In some cases, The Stellar Group's Jacobson said, hospitals have played their hole card, which he called "economic credentialing" -- offering admitting privileges to physicians based on the amount of business brought to the hospital. A physician who sends outpatients elsewhere might not be allowed to practice at all in this hospital.

Gallatin said there had been instances elsewhere where doctors were "credentialed off" hospital staffs but would not say whether such a move ever had been considered locally. "It's an option available to us, as is recruiting new physicians," Gallatin said.

In the meantime, Lauro and his fellow physician-investors wait for the surgery center's Medicare application to be approved. Once that happens, other insurers will follow suit and the doors will open.

Rule of thumb for successful surgery centers is 1,000 cases per operating room per year, consultant Jacobson said.

Lauro is projecting perhaps 1,500 total patients during the facility's first year, but he hopes physicians other than the partners use the center.