Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 08, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Surgery Partners, Inc. | |
Entity Central Index Key | 1,638,833 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 48,891,520 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 79,123 | $ 174,914 |
Accounts receivable, less allowance for doubtful accounts of $3,416 and $2,026, respectively | 286,260 | 288,023 |
Inventories | 44,360 | 44,951 |
Prepaid expenses and other current assets | 53,575 | 55,337 |
Total current assets | 463,318 | 563,225 |
Property and equipment, net of accumulated depreciation of $49,534 and $19,680, respectively | 420,013 | 398,536 |
Intangible assets, net | 55,607 | 58,908 |
Goodwill | 3,372,606 | 3,346,838 |
Investments in and advances to affiliates | 80,785 | 74,282 |
Long-term deferred tax assets | 126,660 | 132,319 |
Other long-term assets | 39,675 | 48,665 |
Total assets | 4,558,664 | 4,622,773 |
Current liabilities: | ||
Accounts payable | 76,979 | 84,710 |
Accrued payroll and benefits | 41,563 | 49,625 |
Other current liabilities | 122,938 | 109,944 |
Current maturities of long-term debt | 54,106 | 58,726 |
Total current liabilities | 295,586 | 303,005 |
Long-term debt, less current maturities | 2,118,567 | 2,130,556 |
Other long-term liabilities | 247,311 | 222,480 |
Non-controlling interests—redeemable | 317,541 | 299,316 |
Stockholders' equity: | ||
Preferred stock, $0.01 par value, 20,000,000 shares authorized, no shares issued or outstanding | 0 | 0 |
Common stock, $0.01 par value, 300,000,000 shares authorized, 48,891,520 shares issued and outstanding at September 30, 2018; 48,687,136 shares issued and outstanding at December 31, 2017 | 489 | 487 |
Additional paid-in capital | 671,252 | 695,560 |
Accumulated other comprehensive loss | (1,389) | 0 |
Retained deficit | (99,280) | (41,316) |
Total Surgery Partners, Inc. stockholders' equity | 571,072 | 654,731 |
Non-controlling interests—non-redeemable | 657,694 | 681,879 |
Total stockholders' equity | 1,228,766 | 1,336,610 |
Total liabilities and stockholders' equity | 4,558,664 | 4,622,773 |
Redeemable Preferred Stock | ||
Current liabilities: | ||
Redeemable preferred stock - Series A, 310,000 shares authorized, issued and outstanding at both September 30, 2018 and December 31, 2017; redemption value of $350,893 and $330,806, respectively | $ 350,893 | $ 330,806 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Allowance for doubtful accounts | $ 3,416 | $ 2,026 |
Accumulated depreciation | 49,534 | 19,680 |
Redeemable preferred stock, redemption value | $ 350,893 | $ 330,806 |
Preferred stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (shares) | 20,000,000 | 20,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 300,000,000 | 300,000,000 |
Common stock, shares issued (shares) | 48,891,520 | 48,687,136 |
Common stock, shares outstanding (shares) | 48,891,520 | 48,687,136 |
Redeemable Preferred Stock | ||
Redeemable preferred stock, shares authorized (shares) | 310,000 | 310,000 |
Redeemable preferred stock, shares issued (shares) | 310,000 | 310,000 |
Redeemable preferred stock, shares outstanding (shares) | 310,000 | 310,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | Aug. 31, 2017 | Sep. 30, 2018 | ||
Revenues | $ 132,258 | $ 443,932 | $ 1,306,076 | |||
Operating expenses: | ||||||
Salaries and benefits | 41,784 | 131,441 | 395,196 | |||
Supplies | 35,028 | 120,123 | 355,701 | |||
Professional and medical fees | 11,254 | 34,902 | 107,294 | |||
Lease expense | 6,858 | 21,629 | 64,910 | |||
Other operating expenses | 8,000 | 26,194 | 78,590 | |||
Cost of revenues | 102,924 | 334,289 | 1,001,691 | |||
General and administrative expenses | 7,777 | 19,478 | 69,729 | |||
Depreciation and amortization | 3,330 | 16,945 | 49,379 | |||
Provision for doubtful accounts | 3,690 | 11,555 | 25,788 | |||
Income from equity investments | (712) | (1,861) | (6,283) | |||
Loss on disposals and deconsolidations, net | 333 | 12,631 | 15,875 | |||
Transaction and integration costs | 2,983 | 7,099 | 23,771 | |||
Loss on debt refinancing | 0 | 0 | 0 | |||
Gain on litigation settlement | 0 | 0 | 0 | |||
Gain on acquisition escrow release | 0 | 0 | 0 | |||
Other (income) expense | 7 | (1,207) | (3,601) | |||
Total operating expenses | 120,332 | 398,929 | 1,176,349 | |||
Operating income (loss) | 11,926 | 45,003 | 129,727 | |||
Gain on amendment to tax receivable agreement | 1,098 | 0 | 0 | |||
Interest expense, net | (15,883) | (37,159) | (107,368) | |||
Income (loss) before income taxes | (2,859) | 7,844 | 22,359 | |||
Income tax expense (benefit) | (211) | 5,825 | 10,905 | |||
Net income (loss) | (2,648) | 2,019 | 11,454 | |||
Less: Net income attributable to non-controlling interests | (6,492) | (23,000) | (69,418) | |||
Net loss attributable to Surgery Partners, Inc. | (9,140) | (20,981) | (57,964) | |||
Less: Amounts attributable to participating securities | (18,199) | (8,245) | (23,973) | |||
Net loss attributable to common stockholders | $ (27,339) | $ (29,226) | $ (81,937) | |||
Net loss per share attributable to common stockholders | ||||||
Basic (in USD per share) | $ (0.57) | $ (0.61) | $ (1.71) | |||
Diluted (in USD per share) | [1] | $ (0.57) | $ (0.61) | $ (1.71) | ||
Weighted average common shares outstanding | ||||||
Basic (shares) | 48,314,746 | 48,037,634 | 48,020,369 | |||
Diluted (shares) | [1] | 48,314,746 | 48,037,634 | 48,020,369 | ||
Predecessor | ||||||
Revenues | $ 174,079 | $ 748,615 | ||||
Operating expenses: | ||||||
Salaries and benefits | 61,240 | 241,149 | ||||
Supplies | 48,078 | 193,322 | ||||
Professional and medical fees | 14,229 | 57,931 | ||||
Lease expense | 9,203 | 36,503 | ||||
Other operating expenses | 11,022 | 43,267 | ||||
Cost of revenues | 143,772 | 572,172 | ||||
General and administrative expenses | 12,601 | 46,797 | ||||
Depreciation and amortization | 7,599 | 30,124 | ||||
Provision for doubtful accounts | 4,834 | 16,297 | ||||
Income from equity investments | (896) | (3,148) | ||||
Loss on disposals and deconsolidations, net | 114 | 1,715 | ||||
Transaction and integration costs | 2,343 | 5,584 | ||||
Loss on debt refinancing | 18,211 | 18,211 | ||||
Gain on litigation settlement | 0 | (3,794) | ||||
Gain on acquisition escrow release | (1,000) | (1,000) | ||||
Other (income) expense | (3) | (307) | ||||
Total operating expenses | 187,575 | 682,651 | ||||
Operating income (loss) | (13,496) | 65,964 | ||||
Gain on amendment to tax receivable agreement | 15,294 | 15,294 | ||||
Interest expense, net | (18,147) | (68,929) | ||||
Income (loss) before income taxes | (16,349) | 12,329 | ||||
Income tax expense (benefit) | (20,718) | (18,089) | ||||
Net income (loss) | 4,369 | 30,418 | ||||
Less: Net income attributable to non-controlling interests | (8,813) | (42,087) | ||||
Net loss attributable to Surgery Partners, Inc. | (4,444) | (11,669) | ||||
Less: Amounts attributable to participating securities | 0 | 0 | ||||
Net loss attributable to common stockholders | $ (4,444) | $ (11,669) | ||||
Net loss per share attributable to common stockholders | ||||||
Basic (in USD per share) | $ (0.09) | $ (0.24) | ||||
Diluted (in USD per share) | [1] | $ (0.09) | $ (0.24) | |||
Weighted average common shares outstanding | ||||||
Basic (shares) | 48,146,611 | 48,121,404 | ||||
Diluted (shares) | [1] | 48,146,611 | 48,121,404 | |||
[1] | The impact of potentially dilutive securities for all periods presented was not considered because the effect would be anti-dilutive in those periods. |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | Aug. 31, 2017 | Sep. 30, 2018 | |
Net income (loss) | $ (2,648) | $ 2,019 | $ 11,454 | ||
Other comprehensive income, net of tax: | |||||
Derivative activity | 0 | (1,389) | (1,389) | ||
Comprehensive (loss) income | (2,648) | 630 | 10,065 | ||
Less: Comprehensive loss attributable to non-controlling interests | (6,492) | (23,000) | (69,418) | ||
Comprehensive loss attributable to Surgery Partners, Inc. | $ (9,140) | $ (22,370) | $ (59,353) | ||
Predecessor | |||||
Net income (loss) | $ 4,369 | $ 30,418 | |||
Other comprehensive income, net of tax: | |||||
Derivative activity | 0 | 0 | |||
Comprehensive (loss) income | 4,369 | 30,418 | |||
Less: Comprehensive loss attributable to non-controlling interests | (8,813) | (42,087) | |||
Comprehensive loss attributable to Surgery Partners, Inc. | $ (4,444) | $ (11,669) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Equity - 9 months ended Sep. 30, 2018 - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Retained Deficit | Non-Controlling Interests— Non-Redeemable | |
Beginning Balance, stockholders' equity (shares) at Dec. 31, 2017 | 48,687,136 | 48,687,136 | |||||
Beginning Balance, stockholders' equity at Dec. 31, 2017 | $ 1,336,610 | $ 487 | $ 695,560 | $ (41,316) | $ 681,879 | ||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net (loss) income | (9,074) | (57,964) | 48,890 | ||||
Equity-based compensation | 6,303 | 6,303 | |||||
Preferred dividends | (23,973) | (23,973) | |||||
Other comprehensive loss | (1,389) | $ (1,389) | |||||
Issuance of restricted and unrestricted shares (shares) | 512,948 | ||||||
Issuance of restricted and unrestricted shares | $ 5 | (5) | |||||
Cancellation of restricted shares (in shares) | (151,746) | ||||||
Cancellation of restricted shares | (1,127) | $ (1) | (1,126) | ||||
Repurchase of shares (shares) | (156,818) | ||||||
Repurchase of shares | (1,982) | $ (2) | (1,980) | ||||
Acquisition and disposal of shares of non-controlling interests, net (1) | [1] | (19,093) | (3,527) | (15,566) | |||
Distributions to non-controlling interests—non-redeemable holders | $ (57,509) | (57,509) | |||||
Ending Balance, stockholders' equity (shares) at Sep. 30, 2018 | 48,891,520 | 48,891,520 | |||||
Ending Balance, stockholders' equity at Sep. 30, 2018 | $ 1,228,766 | $ 489 | $ 671,252 | $ (1,389) | $ (99,280) | $ 657,694 | |
[1] | Includes post acquisition date adjustments. |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Aug. 31, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | |
Cash flows from operating activities: | ||||
Net income | $ (2,648) | $ 11,454 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 3,330 | 49,379 | ||
Non-cash interest (income) expense, net | (130) | (1,041) | ||
Equity-based compensation | 1,683 | 6,303 | ||
Loss on disposals and deconsolidations, net | 333 | 15,875 | ||
Loss on debt refinancing | 0 | 0 | ||
Gain on amendment to tax receivable agreement | (1,098) | 0 | ||
Deferred income taxes | (465) | 9,464 | ||
Provision for doubtful accounts | 3,690 | 25,788 | ||
Income from equity investments, net of distributions received | (203) | (186) | ||
Changes in operating assets and liabilities, net of acquisitions and divestitures: | ||||
Accounts receivable | (2,795) | (23,665) | ||
Other operating assets and liabilities | (2,919) | 5,683 | ||
Net cash provided by operating activities | (1,222) | 99,054 | ||
Cash flows from investing activities: | ||||
Purchases of property and equipment | (1,840) | (26,618) | ||
Payments for acquisitions, net of cash acquired | (1,163) | (55,213) | ||
Proceeds from divestitures | 0 | 18,031 | ||
Other investing activities | 0 | (2,811) | ||
Net cash used in investing activities | (3,003) | (66,611) | ||
Cash flows from financing activities: | ||||
Principal payments on long-term debt | (3,609) | (94,880) | ||
Borrowings of long-term debt | 0 | 62,759 | ||
Payments of debt issuance costs | (4) | 0 | ||
Proceeds from preferred stock issuance | 0 | 0 | ||
Payments of stock issuance costs | 0 | 0 | ||
Payments of preferred dividends | 0 | (7,810) | ||
Distributions to non-controlling interest holders | (6,444) | (80,091) | ||
Payments related to ownership transactions with non-controlling interest holders | 30 | (483) | ||
Repurchase of shares | 0 | (1,982) | ||
Principal payments on financing lease obligations | (253) | (4,622) | ||
Other financing activities | 0 | (1,125) | ||
Net cash used in financing activities | (10,280) | (128,234) | ||
Net decrease in cash, cash equivalents and restricted cash | (14,505) | (95,791) | ||
Cash, cash equivalents and restricted cash at beginning of period | 214,521 | 175,229 | ||
Cash, cash equivalents and restricted cash at end of period | 200,016 | $ 214,521 | $ 214,521 | $ 79,438 |
Predecessor | ||||
Cash flows from operating activities: | ||||
Net income | 4,369 | 30,418 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 7,599 | 30,124 | ||
Non-cash interest (income) expense, net | 4,874 | |||
Equity-based compensation | 1,628 | 3,697 | ||
Loss on disposals and deconsolidations, net | 114 | 1,715 | ||
Loss on debt refinancing | 18,211 | 18,211 | ||
Gain on amendment to tax receivable agreement | (15,294) | (15,294) | ||
Deferred income taxes | (18,703) | |||
Provision for doubtful accounts | 4,834 | 16,297 | ||
Income from equity investments, net of distributions received | 489 | |||
Changes in operating assets and liabilities, net of acquisitions and divestitures: | ||||
Accounts receivable | 8,837 | |||
Other operating assets and liabilities | (12,947) | |||
Net cash provided by operating activities | 67,718 | |||
Cash flows from investing activities: | ||||
Purchases of property and equipment | (18,773) | |||
Payments for acquisitions, net of cash acquired | (725,853) | |||
Proceeds from divestitures | 70 | |||
Other investing activities | 0 | |||
Net cash used in investing activities | (744,556) | |||
Cash flows from financing activities: | ||||
Principal payments on long-term debt | (1,164,237) | |||
Borrowings of long-term debt | 1,805,966 | |||
Payments of debt issuance costs | (58,591) | |||
Proceeds from preferred stock issuance | 310,000 | |||
Payments of stock issuance costs | (18,347) | |||
Payments of preferred dividends | 0 | |||
Distributions to non-controlling interest holders | (50,343) | |||
Payments related to ownership transactions with non-controlling interest holders | (1,518) | |||
Repurchase of shares | 0 | |||
Principal payments on financing lease obligations | (796) | |||
Other financing activities | (789) | |||
Net cash used in financing activities | 821,345 | |||
Net decrease in cash, cash equivalents and restricted cash | 144,507 | |||
Cash, cash equivalents and restricted cash at beginning of period | $ 214,521 | 70,014 | ||
Cash, cash equivalents and restricted cash at end of period | $ 214,521 | $ 214,521 |
Organization, Basis of Presenta
Organization, Basis of Presentation and Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization, Basis of Presentation and Significant Accounting Policies | Organization, Basis of Presentation and Significant Accounting Policies Organization Surgery Partners, Inc. , a Delaware corporation, acting through its subsidiaries, owns and operates a national network of surgical facilities and ancillary services. The surgical facilities, which include ambulatory surgery centers ("ASCs") and surgical hospitals, primarily provide non-emergency surgical procedures across many specialties, including, among others, gastroenterology ("GI"), general surgery, ophthalmology, orthopedics and pain management. The surgical hospitals also provide services such as diagnostic imaging, laboratory, obstetrics, oncology, pharmacy, physical therapy and wound care. Ancillary services are comprised of a diagnostic laboratory, multi-specialty physician practices, urgent care facilities, anesthesia services and optical services. Unless context otherwise indicates, Surgery Partners, Inc. and its subsidiaries are referred to herein as the "Company." As of September 30, 2018 , the Company owned or operated a portfolio of 124 surgical facilities, comprised of 106 ASCs and 18 surgical hospitals in 32 states. The Company owns a majority of these facilities in partnership with physicians and, in some cases, healthcare systems in the markets and communities it serves. The Company owned a majority interest in 84 of the surgical facilities and consolidated 105 of these facilities for financial reporting purposes. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation of the Company's financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 . The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in partnerships and limited liability companies controlled by the Company through its ownership of a majority voting interest or other rights granted to the Company by contract to manage and control the affiliate's business. All significant intercompany balances and transactions are eliminated in consolidation. In connection with the change of control effective August 31, 2017, the Company elected to apply “pushdown” accounting by applying the guidance in Accounting Standards Codification Topic ("ASC") 805, Business Combinations . Accordingly, the condensed consolidated financial statements of the Company for periods before and after August 31, 2017 reflect different bases of accounting, and the financial positions and results of operations of those periods are not comparable. Throughout the Company's condensed consolidated financial statements and the accompanying notes herein, periods prior to the change of control are identified as "Predecessor" and periods after the change of control are identified as "Successor." See Note 2. Acquisitions and Developments for further discussion of the change of control. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes. Examples include, but are not limited to, estimates of accounts receivable allowances, professional and general liabilities and the estimate of deferred tax assets or liabilities. Actual results could differ from those estimates. Variable Interest Entities The condensed consolidated financial statements include the accounts of variable interest entities ("VIEs") in which the Company is the primary beneficiary under the provisions of ASC 810, Consolidation . The Company has the power to direct the activities that most significantly impact a VIEs economic performance, and the Company would absorb the majority of the expected losses from any of these entities should such expected losses occur. As of September 30, 2018 (Successor), the consolidated VIEs include four surgical facilities, three anesthesia practices and four physician practices. During the nine months ended September 30, 2018 (Successor), the Company divested of one surgical facility and acquired a physician practice, which were classified as VIEs. As of December 31, 2017 (Successor), the consolidated VIEs included five surgical facilities, three anesthesia practices and three physician practices. The total assets (excluding goodwill and intangible assets, net) of the consolidated VIEs included in the accompanying condensed consolidated balance sheets as of September 30, 2018 (Successor) and December 31, 2017 (Successor), were $6.5 million and $13.1 million , respectively, and the total liabilities of the consolidated VIEs were $3.4 million and $5.8 million , respectively. Fair Value of Financial Instruments 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 Company uses fair value measurements based on quoted prices in active markets for identical assets or liabilities (Level 1), inputs other than quoted prices in active markets that are either directly or indirectly observable (Level 2), or unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions (Level 3), depending on the nature of the item being valued. The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, restricted invested assets and accounts payable approximate their fair values. A summary of the carrying amounts and fair values of the Company's long-term debt follows (in thousands): Successor Carrying Amount Fair Value September 30, December 31, 2017 September 30, December 31, 2017 2017 Senior Secured Credit Facilities: Revolver $ 11,000 $ — $ 11,000 $ — Term Loan $ 1,271,397 $ 1,280,532 $ 1,272,986 $ 1,267,189 Senior Unsecured Notes due 2021 $ 407,372 $ 409,235 $ 423,667 $ 422,535 Senior Unsecured Notes due 2025 $ 370,000 $ 370,000 $ 355,200 $ 346,413 The fair values of the Term Loan, Senior Unsecured Notes due 2021 and the Senior Unsecured Notes due 2025 were based on a Level 2 inputs using quoted prices for identical liabilities in inactive markets at September 30, 2018 (Successor) and December 31, 2017 (Successor). The carrying amounts related to the Company's other long-term debt obligations, including the Revolver, approximate their fair values. During the nine months ended September 30, 2018 (Successor), the Company entered into certain derivative financial instruments. A summary of the fair values of the Company's derivative financial instruments follows (in thousands): Successor Fair Value September 30, December 31, 2017 Derivative liabilities Interest rate swap agreement $ 1,389 $ — The fair value of the derivative financial instruments was based on a quoted market price, or a Level 2 computation. As of September 30, 2018 (Successor), the fair value of the derivative liabilities was included in other long-term liabilities in the condensed consolidated balance sheets. As of December 31, 2017 (Successor), the Company had no derivative financial instruments. The Company maintains a supplemental executive retirement savings plan (the "SERP") for certain executives. The SERP is a non-qualified deferred compensation plan for eligible executive officers and other key employees of the Company that allows participants to defer portions of their compensation. The fair value of the SERP asset and liability was based on a quoted market price, or a Level 1 computation. As of both September 30, 2018 (Successor) and December 31, 2017 (Successor), the fair value of both the assets and liabilities in the SERP were $1.6 million and were included in other long-term assets and other long-term liabilities in the condensed consolidated balance sheets. Revenues In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers . The Company adopted the new standard effective January 1, 2018, using the modified retrospective method. The adoption of the new standard did not have an impact on our recognition of net revenues for any periods prior to adoption. The majority of the “Provision for doubtful accounts” will continue to be recognized as an operating expense rather than as a direct reduction to revenues, given the Company’s practice of assessing a patient’s ability to pay prior to or on the date of providing healthcare services. After initial recognition, the Company’s accounts receivables are subject to impairment assessments periodically based on changes in credit risks using historical trends of cash collections, write-offs, accounts receivable agings and other factors. The Company's revenues generally relate to contracts with patients in which the performance obligations are to provide healthcare services. The Company recognizes revenues in the period in which our obligations to provide health care services are satisfied and reports the amount that reflects the consideration the Company expects to be entitled to. The Company's performance obligations are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans, employers and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans, employers and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services provided to the related patients typically specify payments at amounts less than the Company's standard charges. Medicare generally pays for services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. The Company continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. A summary of revenues by service type as a percentage of total revenues follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Patient service revenues: Surgical facilities revenues 93.2 % 94.0 % 95.5 % 93.2 % 91.4 % Ancillary services revenues 4.7 % 4.2 % 2.7 % 4.8 % 7.0 % 97.9 % 98.2 % 98.2 % 98.0 % 98.4 % Other service revenues: Optical services revenues 0.6 % 0.7 % 1.1 % 0.6 % 1.0 % Other revenues 1.5 % 1.1 % 0.7 % 1.4 % 0.6 % 2.1 % 1.8 % 1.8 % 2.0 % 1.6 % Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Patient service revenues. This includes revenue related to charging facility fees in exchange for providing patient care. The fee charged for healthcare procedures performed in surgical facilities varies depending on the type of service provided, but usually includes all charges for usage of an operating room, a recovery room, special equipment, medical supplies, nursing staff and medications. The fee does not normally include professional fees charged by the patient’s surgeon, anesthesiologist or other attending physician, which are billed directly by such physicians to the patient or third-party payor. However, in several surgical facilities, the Company charges for anesthesia services. Ancillary service revenues include fees for patient visits to the Company's physician practices, pharmacy services and diagnostic tests ordered by physicians. Patient service revenues are recognized as performance obligations are satisfied. Performance obligations are based on the nature of services provided. Typically, the Company recognizes revenue at a point in time in which services are rendered and the Company has no obligation to provide further patient services. As the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service. The Company determines the transaction price based on gross charges for services provided, net of estimated contractual adjustments, discounts from third-party payors, including Medicare and Medicaid. The Company estimates its contractual adjustments and discounts based on contractual agreements, its discount policies and historical experience. Changes in estimated contractual adjustments and discounts are recorded in the period of change. During the three and nine months ended September 30, 2018 (Successor), the Company recognized an increase in patient service revenues as a result of changes in estimates to third-party settlements related to prior years of approximately $1.4 million for both periods. There were no adjustments as a result of changes in estimates to third-party settlements related to prior years for the one month ended September 30, 2017 (Successor). During the two and eight months ended August 31, 2017 (Predecessor), the Company recognized an increase to patient service revenues as a result of changes in estimates to third-party settlements related to prior years of approximately $0.6 million and $1.1 million , respectively. The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in thousands): Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, 2018 2017 2017 Amount % Amount % Amount % Patient service revenues: Private insurance $ 230,718 53.1 % $ 72,930 56.2 % $ 80,166 46.9 % Government 166,880 38.4 % 46,162 35.5 % 73,734 43.1 % Self-pay 12,742 2.9 % 3,861 3.0 % 4,119 2.4 % Other (1) 24,345 5.6 % 6,883 5.3 % 12,909 7.6 % Total patient service revenues 434,685 100.0 % 129,836 100.0 % 170,928 100.0 % Other service revenues: Optical services revenues 2,699 888 1,905 Other revenues 6,548 1,534 1,246 Total revenues $ 443,932 $ 132,258 $ 174,079 Successor Predecessor Nine Months Ended September 30, September 1 to September 30, January 1 to August 31, 2018 2017 2017 Amount % Amount % Amount % Patient service revenues: Private insurance $ 682,479 53.3 % $ 72,930 56.2 % $ 360,092 48.9 % Government 493,362 38.6 % 46,162 35.5 % 308,993 42.0 % Self-pay 39,050 3.1 % 3,861 3.0 % 15,949 2.2 % Other (1) 64,075 5.0 % 6,883 5.3 % 51,374 6.9 % Total patient service revenues 1,278,966 100.0 % 129,836 100.0 % 736,408 100.0 % Other service revenues: Optical services revenues 8,437 888 7,629 Other revenues 18,673 1,534 4,578 Total revenues $ 1,306,076 $ 132,258 $ 748,615 (1) Other is comprised of anesthesia service agreements, auto liability, letters of protection and other payor types. Other service revenues. Optical service revenues consist of product sales from the Company's optical laboratories as well as handling charges billed to the members of the Company's optical products purchasing organization. The Company's optical products purchasing organization negotiates volume buying discounts with optical products manufacturers. The buying discounts and any handling charges billed to the members of the buying group represent the revenue recognized for financial reporting purposes. The Company satisfies the performance obligation and recognizes revenue when the orders are shipped to members. The Company bases its estimates for sales returns and discounts on historical experience and has not experienced significant fluctuations between estimated and actual return activity and discounts given. The Company's optical laboratories manufacture and distribute corrective lenses and eyeglasses to ophthalmologists and optometrists. The Company satisfies the performance obligation and recognize revenue when the product is shipped, net of allowance for discounts. Other revenues include management and administrative service fees derived from the non-consolidated facilities that the Company accounts for under the equity method, management of surgical facilities in which it does not own an interest, and management services provided to physician practices for which the Company is not required to provide capital or additional assets. These agreements typically require the Company to provide recurring management services over a multi-year period which are billed and collected on a monthly basis. The fees derived from these management arrangements are based on a predetermined percentage of the revenues of each facility or practice and are recognized in the period in which management services are rendered and billed. Cash, Cash Equivalents and Restricted Cash The following table reconciles cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the totals shown within the condensed consolidated statement of cash flows (in thousands): Successor September 30, December 31, Cash and cash equivalents $ 79,123 $ 174,914 Restricted invested assets included in other long-term assets 315 315 Total cash, cash equivalents and restricted cash in the statement of cash flows $ 79,438 $ 175,229 Restricted invested assets included in other long-term assets on the condensed consolidated balance sheet represents restricted cash held in accordance with the provisions of the operating lease agreement at the Company's Chesterfield, Missouri facility. The Company has a deposit with the landlord that shall be held as security for performance under the Company's covenants and obligations within the agreement through January 2024. Accounts Receivable and Allowances for Contractual Adjustments and Doubtful Accounts With the Company's adoption of ASC 2014-09 on January 1, 2018, for those accounts in which the Company has an unconditional right to payment, subject only to the passage of time, the right is recorded as a receivable. Accounts receivable are recorded net of contractual adjustments and allowances for doubtful accounts to reflect accounts receivable at net realizable value. Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies, employers and patients. Management recognizes that revenues and receivables from government agencies are significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies. Concentration of credit risk with respect to other payors is limited because of the large number of such payors. The Company had a net third-party Medicaid settlements liability of $7.7 million and $1.0 million as of September 30, 2018 (Successor) and December 31, 2017 (Successor), respectively, included in other current liabilities in the condensed consolidated balance sheets. The Company recognizes that final reimbursement of accounts receivable is subject to final approval by each third-party payor. However, because the Company has contracts with its third-party payors and also verifies insurance coverage of the patient before medical services are rendered, the amounts that are pending approval from third-party payors are not considered significant. The Company's policy is to collect co-payments and deductibles prior to providing medical services. It is also the Company's policy to verify a patient’s insurance prior to the patient’s procedure. Patient services of the Company are primarily non-emergency, which allows the surgical facilities to control the procedures for which third-party reimbursement is sought and obtained. The Company does not require collateral from self-pay patients. The Company analyzes accounts receivable at each of its facilities to ensure the proper aged category and collection assessment. At a consolidated level, the Company's policy is to review accounts receivable aging, by facility, to determine the appropriate allowance for doubtful accounts. Patient account balances are reviewed for delinquency based on contractual terms. This review is supported by an analysis of the actual revenues, contractual adjustments and cash collections received. An account balance is written off only after the Company has pursued collection with legal or collection agency assistance or otherwise has deemed an account to be uncollectible. The receivables related to the Company's optical products purchasing organization are recognized separately from patient accounts receivable, as discussed above, and are included in other current assets in the condensed consolidated balance sheets. Such receivables were $9.3 million and $7.6 million at September 30, 2018 (Successor) and December 31, 2017 (Successor), respectively. Goodwill Goodwill represents the fair value of the consideration provided in an acquisition over the fair value of net assets acquired and is not amortized. Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries. A summary of the Company's acquisitions for the nine months ended September 30, 2018 is included in Note 2. Acquisitions and Developments. A summary of activity related to goodwill for the nine months ended September 30, 2018 (Successor) follows (in thousands): Successor Balance at December 31, 2017 $ 3,346,838 Acquisitions, including post acquisition adjustments 57,710 Divestitures and deconsolidations (31,942 ) Balance at September 30, 2018 $ 3,372,606 Other Current Liabilities A summary of other current liabilities follows (in thousands): Successor September 30, December 31, Interest payable $ 28,322 $ 20,537 Amounts due to patients and payors 22,400 18,096 Accrued expenses and other 72,216 71,311 Total $ 122,938 $ 109,944 Other Long-Term Liabilities A summary of other long-term liabilities follows (in thousands): Successor September 30, December 31, Facility lease obligations $ 138,116 $ 121,627 Other 109,195 100,853 Total $ 247,311 $ 222,480 At four of the Company's surgical facilities, the Company has financing obligations payable to the lessors of certain land, buildings and improvements. Payments are allocated to principal adjustments of the financing obligations and interest expense. The current portions of the financing obligations were $6.8 million and $6.3 million at September 30, 2018 (Successor) and December 31, 2017 (Successor), respectively, and were included in other current liabilities in the condensed consolidated balance sheets. The long-term portions of the financing obligations are included as facility lease obligations in the table above. In 2017, one of the Company's surgical facilities entered into a development agreement to construct a new hospital. Due to certain provisions of the agreement, the surgical facility is deemed the owner during construction, and as such, the Company records the ongoing costs as incurred as a deferred financing obligation. As of September 30, 2018 (Successor), the Company has recorded a total of $36.7 million of costs for this project, of which $23.1 million was recorded during the nine months ended September 30, 2018 (Successor). These project costs are included as non-cash additions to property and equipment, net in the condensed consolidated balance sheet and as a component of facility lease obligations. Derivative Instruments and Hedging Activities In accordance with ASC 815, Derivatives and Hedging (“ASC 815”), the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance in ASU 2011-04, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Non-Controlling Interests—Redeemable Each partnership and limited liability company through which the Company owns and operates its surgical facilities is governed by a partnership or operating agreement, respectively. In certain circumstances, the applicable partnership or operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physician limited partners’ or physician minority members’, as applicable, ownership if certain adverse regulatory events occur, such as it becoming illegal for the physician(s) to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility. The non-controlling interests — redeemable are reported outside of stockholders' equity in the condensed consolidated balance sheets. A summary of activity related to the non-controlling interests—redeemable follows (in thousands): Successor Balance at December 31, 2017 $ 299,316 Net income attributable to non-controlling interests—redeemable 20,528 Acquisition and disposal of shares of non-controlling interests, net—redeemable (1) 20,279 Distributions to non-controlling interest—redeemable holders (22,582 ) Balance at September 30, 2018 $ 317,541 (1) Includes post acquisition date adjustments. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, " Revenue from Contracts with Customers ," along with subsequent amendments, updates and an extension of the effective date (collectively the "New Revenue Standard"), which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare industry. This five-step process requires significant management judgment in addition to changing the way many companies recognize revenue in their financial statements. The Company adopted this ASU on January 1, 2018 using the modified retrospective approach. The adoption of this standard did not have a significant impact on the recognition of net revenues for any period. Adoption of the standard resulted in the Company revising its related disclosures. In February 2016, the FASB issued ASU 2016-02, " Leases, " which will require, among other items, lessees to recognize most leases as assets and liabilities on the balance sheet. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. In preparation of adopting the new standard, the Company has engaged outside consultants to assist in the identification of the Company's population of leases, implementing a new software for lease accounting and assisting in evaluating new accounting policy elections. The Company will adopt this ASU on January 1, 2019 and believes the primary effect of adopting the new standard will be to record right-of-use assets and obligations for current operating leases with material increases in reported property and equipment and liabilities. The Company is still evaluating the effect of adoption on financial disclosures, policies, procedures and control framework. In November 2016, the FASB issued ASU 2016-18, " Statement of Cash Flows – Restricted Cash ," which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company adopted this ASU on January 1, 2018 and retrospectively applied the guidance to all periods presented in the condensed consolidated statement of cash flows. The retrospective application to prior periods had no impact on the Company's cash flows from operating, investing and financing activities as previously disclosed. The adoption of this ASU resulted in the modification of the Company's presentation of the reconciliation of beginning-of-period and end-of-period total amounts shown on the condensed consolidated statement of cash flows to include restricted cash as discussed under the heading "Cash and Cash Equivalents" above. |
Acquisitions and Developments
Acquisitions and Developments | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Acquisitions and Developments | Acquisitions and Developments The Company accounts for its business combinations in accordance with the fundamental requirements of the acquisition method of accounting and under the premise that an acquirer can 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 and any non-controlling 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. Any goodwill recognized is determined as the excess of the fair value of the consideration conveyed plus the fair value of any non-controlling interests in the acquisition over the fair value of the net assets acquired. Acquisitions in which the Company is able to exert significant influence but does not have control are accounted for using the equity method. Acquired assets and assumed liabilities typically include, but are not limited to, fixed assets, intangible assets and professional liabilities. The valuations are based on appraisal reports, discounted cash flow analyses, actuarial analyses or other appropriate valuation techniques to determine the fair value of the assets acquired or liabilities assumed. Fair value attributable to non-controlling interests is based on a Level 3 computation using 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 non-controlling interests, primarily from acquisitions of surgical facilities. Such multiples, based on earnings, are used as a benchmark for the discount to be applied for the lack of control or marketability. Fair value attributable to the property and equipment acquired is based on Level 3 computations using key inputs such as cost trend data and comparable asset sales. Fair value attributable to the intangible assets acquired is based on Level 3 computations using key inputs such as the Company's internally-prepared financial projections. Fair values assigned to acquired working capital are based on carrying amounts reported by the acquiree at the date of acquisition, which approximate their fair values. The preliminary estimated fair value assigned to goodwill is primarily attributable to the acquisitions 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. Acquisitions During the nine months ended September 30, 2018 (Successor), the Company acquired a controlling interest in two surgical facilities in new markets, a surgical facility in an existing market, which was merged into an existing facility and a physician practice for a combined cash purchase price of $32.9 million , net of cash acquired. The Company also acquired a controlling interest in an integrated physician practice, including multiple practice and surgical facility locations, in an existing market for a purchase price of $21.1 million , net of cash acquired. The purchase price for the 2018 acquisitions was funded through cash from operations. The total consideration related to these acquisitions was allocated to the assets acquired and liabilities assumed based upon their respective acquisition date fair values. The aggregate amounts preliminarily recognized for each major class of assets acquired and liabilities assumed for acquisitions completed in the nine months ended September 30, 2018 (Successor), including post acquisition date adjustments, are as follows (in thousands): Cash consideration $ 54,308 Fair value of non-controlling interests 28,776 Aggregate acquisition date fair value $ 83,084 Net assets acquired: Current Assets $ 4,708 Property and equipment 2,301 Goodwill 75,947 Other long-term assets 3,460 Current liabilities (2,332 ) Long-term liabilities (1,000 ) Aggregate acquisition date fair value $ 83,084 The fair values assigned to certain assets and liabilities assumed by the Company have been estimated on a preliminary basis and are subject to change as new facts and circumstances emerge that were present at the date of acquisition. The goodwill acquired in connection with the 2018 acquisitions was allocated to the Company's reportable segments as follows: $68.6 million to surgical facility services and $7.4 million to ancillary services. Approximately $49.9 million of goodwill recorded for the 2018 acquisitions is deductible for tax purposes. The results of operations of the acquisitions are included in the Company’s results of operations beginning on the dates of acquisitions, and were not considered significant for the nine months ended September 30, 2018 (Successor). During the one month ended September 30, 2017 (Successor), the Company completed acquisitions in existing markets of one physician practice and the assets of an endoscopy practice for a combined purchase price of $1.2 million . During the eight months ended August 31, 2017 (Predecessor), the Company completed acquisitions (excluding the NSH Holdco, Inc. acquisition) in existing markets of three physician practices for a combined cash purchase price of $14.2 million . During the nine months ended September 30, 2018 (Successor), no significant changes were made to the purchase price allocation of assets and liabilities, existing at the date of acquisition, related to individual acquisitions completed in 2017, excluding the acquisition of NSH as discussed below. 2018 Disposals and Deconsolidation During the nine months ended September 30, 2018 (Successor), the Company sold its interests in three surgery centers and its optical laboratory for net cash proceeds of $17.6 million , and recognized a net pretax loss of $9.5 million included in loss on disposals and deconsolidations, net in the condensed consolidated statement of operations for the three and nine months ended September 30, 2018 (Successor). This non-cash loss was primarily a result of the write-off of the net assets of the facility (net of proceeds received) and was primarily driven by the write-off of the associated goodwill. During the nine months ended September 30, 2018 (Successor), the Company sold a portion of its interest in one surgery center for net cash proceeds of $0.5 million . As a result of this transaction, the Company lost control of the previously controlled entity but retains a noncontrolling interest, resulting in the deconsolidation of the previously consolidated entity. The remaining noncontrolling interest was accounted for as an equity method investment, and initially measured and recorded at fair value as of the date of the transaction. The fair value measurement utilizes Level 3 inputs, which include unobservable data, to measure the fair value of the retained noncontrolling interest. The fair value determination was based on a combination of multiple valuation methods, which included discounted cash flow and market value approach, which incorporates estimates of future earnings and market valuation multiples for certain guideline companies. The fair value of the investment of $2.0 million was recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets. Further, the transaction resulted in a pretax gain on deconsolidation of $1.1 million , which is included in loss on disposals and deconsolidations, net, in the accompanying condensed consolidated statement of operations for the three and nine months ended September 30, 2018 (Successor). The gain was determined based on the difference between the fair value of the Company's retained interest in the entity and the carrying value of both the tangible and intangible assets of the entity immediately prior to the transaction less cash proceeds received. Acquisition of NSH On August 31, 2017 (Predecessor), the Company completed its acquisition of NSH Holdco, Inc. (“NSH”) for total cash consideration of $711.7 million , net of cash acquired, including $19.6 million funded to an escrow account. During the nine months ended September 30, 2018 (Successor), information existing at the acquisition date became known to the Company as part of its continuing evaluation of the assets and liabilities existing at the date of acquisition, resulting in a net increase to goodwill of $1.1 million . The corresponding changes to certain classes of assets and liabilities from the preliminary allocation recorded at August 31, 2017 (Predecessor), are reflected in the table below, which has been finalized as of September 30, 2018 (Successor). The increase to goodwill during the period includes a working capital settlement payment resulting in additional cash consideration of $1.2 million . The acquisition date fair value for each major class of assets acquired and liabilities assumed, including post acquisition date adjustments, are as follows (in thousands): Cash consideration $ 764,007 Fair value of non-controlling interests 325,965 Acquisition date fair value $ 1,089,972 Net assets acquired: Cash and cash equivalents $ 51,159 Accounts receivable 71,639 Inventories 14,986 Prepaid expenses and other current assets 18,367 Property and equipment 174,100 Intangible assets 27,881 Goodwill 871,373 Investments in and advances to affiliates 29,737 Long-term deferred tax assets 20,212 Other long-term assets 26,988 Accounts payable (29,652 ) Accrued payroll and benefits (30,853 ) Other current liabilities (23,937 ) Current maturities of long-term debt (16,416 ) Long-term debt, less current maturities (42,770 ) Other long-term liabilities (72,842 ) Acquisition date fair value $ 1,089,972 Change of Control - Pushdown Accounting On August 31, 2017, BCPE Seminole Holdings LP (“Bain”), a fund advised by an affiliate of Bain Capital Private Equity, completed its purchase of 26,455,651 shares of the Company's common stock at a purchase price of $19.00 per share in cash (the “Private Sale”). As a result of the Private Sale and the Preferred Private Placement (defined in Note 4. Redeemable Preferred Stock), Bain became the controlling stockholder of the Company, holding preferred and common stock that collectively represent approximately 65.7% of the voting power of all classes of capital stock of the Company as of August 31, 2017. In connection with this change of control, the Company elected to apply “pushdown” accounting by applying the guidance in ASC 805, Business Combinations . In accordance with ASC 805, all identifiable assets and liabilities of the Company were measured at and adjusted to fair value as of August 31, 2017, and similarly goodwill was recognized based on the terms of the transaction and the fair value of the new basis of the net assets of the Company. During the nine months ended September 30, 2018 (Successor), information existing at the transaction date became known to the Company as part of its evaluation of the assets and liabilities existing at August 31, 2017, resulting in a net decrease to goodwill of $18.2 million and corresponding changes to certain classes of assets and liabilities from the preliminary allocation recorded, that are reflected in the table below, which has been finalized as of September 30, 2018 (Successor). The transaction date fair value recognized in connection with the application of pushdown accounting for each major class of assets and liabilities as of August 31, 2017, including post transaction date adjustments, are as follows (in thousands): Equity attributable to Surgery Partners, Inc. $ 721,764 Redeemable preferred stock 310,000 Fair value of non-controlling interests 939,083 Transaction date fair value $ 1,970,847 Net assets: Cash and cash equivalents 214,206 Accounts receivable 252,911 Inventories 44,310 Prepaid expenses and other current assets 61,438 Property and equipment 379,685 Intangible assets 63,978 Goodwill 3,281,728 Investments in and advances to affiliates 75,113 Restricted invested assets 315 Long-term deferred tax asset 206,073 Other long-term assets 50,666 Accounts payable (64,921 ) Accrued payroll and benefits (56,535 ) Other current liabilities (97,617 ) Current maturities of long-term debt (49,942 ) Long-term debt, less current maturities (2,142,375 ) Long-term tax receivable agreement liability (78,498 ) Other long-term liabilities (169,688 ) Transaction date fair value $ 1,970,847 The post transaction date adjustments for pushdown accounting during the period includes a net increase of $3.9 million to the preliminary amounts assigned to intangible assets. The remaining adjustments to goodwill are attributable to a $17.9 million decrease to the preliminary fair value assigned to non-controlling interests, a $1.1 million increase related to the Acquisition of NSH (discussed above), and a $2.5 million increase to other long-term liabilities. |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt A summary of long-term debt follows (in thousands): Successor September 30, December 31, 2017 Senior Secured Credit Facilities: Revolver $ 11,000 $ — Term Loan (1) 1,271,397 1,280,532 Senior Unsecured Notes due 2021 (2) 407,372 409,235 Senior Unsecured Notes due 2025 370,000 370,000 Notes payable and secured loans 88,068 101,921 Capital lease obligations 24,836 27,594 Total debt 2,172,673 2,189,282 Less: Current maturities 54,106 58,726 Total long-term debt $ 2,118,567 $ 2,130,556 (1) In connection with the application of pushdown accounting, the Company remeasured and recorded the Term Loan at fair value using a measurement date of August 31, 2017. The fair value was based on a Level 2 input using quoted prices for identical liabilities in inactive markets. As a result, the Company recorded a fair value discount as of the measurement date, which is reported in the consolidated balance sheets as a direct rededuction from the face amount the Term Loan and amortized to interest expense over the life of the Term Loan. The unamortized fair value discount as of September 30, 2018 (Successor) and December 31, 2017 (Successor) was $5.7 million and $6.2 million , respectively. (2) In connection with the application of pushdown accounting, the Company remeasured and recorded the Senior Unsecured Notes due 2021 at fair value using a measurement date of August 31, 2017. The fair value was based on a Level 2 input using quoted prices for identical liabilities in inactive markets. As a result, the Company recorded a fair value premium as of the measurement date, which is reported in the consolidated balance sheets as a direct addition to the face amount the notes and amortized to interest expense over the life of the Senior Unsecured Notes due 2021. The unamortized fair value premium as of September 30, 2018 (Successor) and December 31, 2017 (Successor) was $7.4 million and $9.2 million , respectively. |
Derivatives and Hedging Activit
Derivatives and Hedging Activities | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives and Hedging Activities | Derivatives and Hedging Activities Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. During 2018 , such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings, as documented at hedge inception in accordance with the Company’s accounting policy election. The earnings recognition of excluded components is presented in interest expense. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. Over the next 12 months, the Company estimates that an additional $1.1 million will be reclassified as a reduction to interest expense. As of September 30, 2018 (Successor), the Company had one interest rate swap with a current notional amount of $330.0 million and a termination date of November 30, 2023 . The Company had no derivative instruments as of December 31, 2017 (Successor). The Company classifies its derivative financial instruments of $1.4 million as a long-term liability on the Balance Sheet as of September 30, 2018 (Successor). The Company had no derivative financial instruments as of December 31, 2017 (Successor). The table below presents the effect of fair value and cash flow hedge accounting on the Company's consolidated balance sheets. Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Derivatives in Cash Flow Hedging Relationships Losses related to effective portion of derivatives recognized in accumulated OCI, gross of tax effect $ (1,389 ) $ — $ — $ (1,389 ) $ — Loss related to effective portion of derivatives reclassified from accumulated OCI to interest expense, gross of tax effect — — — — — |
Redeemable Preferred Stock
Redeemable Preferred Stock | 9 Months Ended |
Sep. 30, 2018 | |
Temporary Equity Disclosure [Abstract] | |
Redeemable Preferred Stock | Redeemable Preferred Stock On August 31, 2017 (Predecessor), the Company issued 310,000 shares of Series A Preferred Stock to Bain at a purchase price of $1,000 per share for an aggregate purchase price of $310.0 million (the "Preferred Private Placement"). The net proceeds from the issuance were used to finance a portion of the NSH acquisition. A summary of activity related to the redeemable preferred stock follows (in thousands): Successor Balance at December 31, 2017 $ 330,806 Dividends accrued 23,973 Cash dividends declared (3,886 ) Balance at September 30, 2018 $ 350,893 There were no unpaid cash dividends declared at September 30, 2018 (Successor). The cash dividends declared but unpaid at December 31, 2017 (Successor) was $3.9 million , and were included in other current liabilities in the condensed consolidated balance sheet. The aggregate and per share amounts of unpaid cumulative preferred dividends as of September 30, 2018 (Successor) were $25.3 million and $81.70 , respectively. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic and diluted earnings per share are calculated in accordance with ASC 260, Earnings Per Share , based on the weighted-average number of shares outstanding in each period and dilutive stock options, unvested shares and warrants, to the extent such securities exist and have a dilutive effect on earnings per share. Beginning in the Successor period, in connection with the issuance of the Series A Preferred Stock, the Company began computing basic and diluted earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation method that determines earnings per share for common shares and participating securities according to their participation rights in dividends and undistributed earnings. A reconciliation of the numerator and denominator of basic and diluted earnings per share follows (in thousands except share and per share amounts): Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Numerator: Net loss attributable to Surgery Partners, Inc. $ (20,981 ) $ (9,140 ) $ (4,444 ) $ (57,964 ) $ (11,669 ) Less: amounts allocated to participating securities (1) 8,245 2,633 — 23,973 — Less: mark to redemption adjustment — 15,566 — — — Net loss attributable to common stockholders $ (29,226 ) $ (27,339 ) $ (4,444 ) $ (81,937 ) $ (11,669 ) Denominator: Weighted average shares outstanding- basic 48,037,634 48,314,746 48,146,611 48,020,369 48,121,404 Effect of dilutive securities (2) — — — — — Weighted average shares outstanding- diluted 48,037,634 48,314,746 48,146,611 48,020,369 48,121,404 Loss per share: Basic $ (0.61 ) $ (0.57 ) $ (0.09 ) $ (1.71 ) $ (0.24 ) Diluted (2) $ (0.61 ) $ (0.57 ) $ (0.09 ) $ (1.71 ) $ (0.24 ) Dilutive securities outstanding not included in the computation of (loss) earnings per share as their effect is antidilutive: Stock options 144,795 — — 153,884 — Restricted shares 134,054 112,529 34,506 140,552 105,944 Convertible preferred stock — — N/A — N/A (1) Includes dividends accrued during the Successor periods for the Series A Preferred Stock. The Series A Preferred Stock does not participate in undistributed losses. There were no participating securities during the Predecessor periods. (2) The impact of potentially dilutive securities for all periods presented was not considered because the effect would be anti-dilutive in each period. Share Repurchase Transactions On December 15, 2017 (Successor), the Company's Board of Directors authorized a share repurchase program of up to $50.0 million of the Company's issued and outstanding common stock from time to time. The timing and size of repurchases will be determined based on market conditions and other factors. The authorization does not obligate the repurchase of any shares and the Company may repurchase shares of common stock at any time without prior notice. The share repurchases will be made in accordance with applicable securities laws in open market or privately negotiated transactions. The authorization does not have a specified expiration date, and the share repurchase program may be suspended, recommenced or discontinued at any time or from time to time without prior notice. There were no share repurchases under the share repurchase program during the three months ended September 30, 2018 (Successor). During the nine months ended September 30, 2018 (Successor), the Company repurchased 156,818 shares of its common stock stock at an average price of $12.64 per share through market purchases. At September 30, 2018 (Successor), the Company had $46.0 million of repurchase authorization available under the December 2017 authorization. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company uses the asset and liability method to account for income taxes. Under this method, deferred income 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. If a net operating loss ("NOL") or Section 163(j) interest (“163(j)”) carryforward exists, the Company makes a determination as to whether the NOL or 163(j) carryforward will be utilized in the future. A valuation allowance is established for certain carryforwards when their recoverability is deemed to be uncertain. The carrying value of the net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, the Company may be required to adjust its deferred tax valuation allowances. The Company and certain of its subsidiaries file a consolidated federal income tax return. The partnerships, limited liability companies, and certain non-consolidated physician practice corporations also file separate income tax returns. The Company's allocable portion of each partnership's and limited liability company's income or loss is included in taxable income of the Company. The remaining income or loss of each partnership and limited liability company is allocated to the other owners. The Company, or one or more of its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for years prior to 2015 or state income tax examinations for years prior to 2014. Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”) imposes an annual limit on the ability of a corporation that undergoes an “ownership change” to use its NOLs to reduce its tax liability. An “ownership change” is generally defined as any change in ownership of more than 50.0% of a corporation’s “stock” by its “5-percent shareholders” (as defined in Section 382) over a rolling three-year period based upon each of those shareholder’s lowest percentage of stock owned during such period. As a result of the Symbion acquisition, approximately $179.0 million in NOL carryforwards are subject to an annual Section 382 base limitation of $4.9 million , and, as a result of the NovaMed acquisition, approximately $17.0 million in NOL carryforwards are subject to an annual Section 382 base limitation of $4.9 million . As a result of the NSH acquisition, approximately $20.5 million in NOL carryforwards are subject to an annual Section 382 base limitation of $2.8 million . The Private Sale resulted in an ownership change as defined in Section 382. As a result, approximately $449.7 million in NOL carryforwards are subject to an annual Section 382 base limitation of $14.2 million . At this time, the Company does not believe this limitation, when combined with amounts allowable due to net unrecognized built in gains, will affect its ability to use any NOLs before they expire. However, no such assurances can be provided. If the Company's ability to utilize its NOLs to offset taxable income generated in the future is subject to this limitation, it could have an adverse effect on the Company's business, prospects, results of operations and financial condition. The Tax Cuts and Jobs Act (the "Tax Act") was enacted on December 22, 2017. The Tax Act reduced the US federal corporate tax rate from 35% to 21%, allows for 100% expensing of qualified capital expenditures, and limits interest expense deductions beginning in 2018. The Company's accounting for the Tax Act is incomplete. As of the year ended December 31, 2017 (Successor), the Company was able to reasonably estimate certain effects and, therefore, recorded a provisional adjustment associated with the tax rate change (as discussed further in the 2017 form 10-K). The Company has not made any additional measurement-period adjustments to this item during the nine months ended September 30, 2018 . The Company completed its the accounting for its 2017 temporary book/tax differences when it filed its 2017 federal tax return during the third quarter. However, the Company requires additional time to complete the analysis of the tax impact of the deferred re-measurement and record the adjustment. The Company expects to complete the accounting within the prescribed measurement period. For the following tax reform items, the Company was able to reasonably estimate certain effects of the Tax Act in the nine months ended September 30, 2018 and, therefore, recorded provisional adjustments as follows: Interest Expense Limitation: Under the Tax Act, interest expense is limited to 30% of the Company’s adjusted taxable income beginning in 2018 resulting in a temporary book to tax difference. Any disallowed interest expense is carried forward indefinitely. The Company was able to reasonably estimate the interest limitation and recorded an estimate for the disallowed interest expense. The provisional amount of disallowed interest expense as of September 30, 2018 is $69.8 million . The Company has recorded a valuation allowance of $11.4 million on a tax-effected basis against the deferred tax asset resulting from the disallowed interest expense. However, the Company is continuing to gather additional information to more precisely compute the amount of the interest limitation, and the accounting for this item is not yet complete as the Company is waiting for additional guidance to be released around the application of the law. The Company expects to complete its accounting within the prescribed measurement period. 100% Bonus Depreciation: Qualified capital expenditures placed in service after September 27, 2017 are eligible for 100% expensing under the Tax Act. The Company was able to reasonably estimate the 100% bonus depreciation expense and made a provisional estimate. However, the Company is continuing to gather additional information to more precisely compute the amount of 100% bonus depreciation, and the accounting for this item is not yet complete because the Company needs additional time to complete an accurate and thorough analysis of its fixed assets. The Company expects to complete its accounting within the prescribed measurement period. The Company's effective tax rate was 48.8% for the nine months ended September 30, 2018 (Successor), compared to 7.4% for the one month ended September 30, 2017 (Successor) and (146.7)% for the eight months ended August 31, 2018 (Predecessor). The increase in the effective tax rate was primarily due to the Tax Act, which implemented an interest expense limitation resulting in a deferred tax asset that required a valuation allowance to be reported at its net realizable value. The Company recorded additional tax expense in 2018 to account for the gain on divestitures and valuation allowances on state tax attributes resulting from legislative changes enacted during the second quarter. The effective tax rate was further impacted by the Tax Act due to the reduced the U.S. federal corporate income tax rate, as discussed above, effective January 1, 2018. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Professional, General and Workers' Compensation Liability Risks The Company is subject to claims and legal actions in the ordinary course of business, including claims relating to patient treatment, employment practices and personal injuries. The Company maintains general liability and professional liability insurance in excess of self-insured retentions, on a claims-made basis through third party commercial insurance carriers. Although management believes the coverage is sufficient for the Company's operations, some claims may potentially exceed the scope of coverage in effect. The Company also maintains workers' compensation insurance, subject to a deductible. Plaintiffs in these matters may request punitive or other damages that may not be covered by insurance. The Company is not aware of any such proceedings that are reasonably possible to have a material adverse effect on the Company's business, financial position, results of operations or liquidity. Insurance Reserves The Company expenses the costs under the self-insured retention exposure for general and professional liability and workers' compensation claims which relate to (i) claims made during the policy period, which are offset by insurance recoveries and (ii) an estimate of claims incurred but not yet reported that are expected to be reported after the policy period expires. Reserves and provisions are based upon periodic actuarially determined estimates. The reserves are estimated using individual case-basis valuations and actuarial analysis. Reserves for professional, general and workers' compensation claim liabilities are determined with no regard for expected insurance recoveries and are presented gross on the condensed consolidated balance sheets. Total professional, general and workers' compensation claim liabilities as of September 30, 2018 (Successor) and December 31, 2017 (Successor) are $19.8 million and $21.0 million , respectively. The balances include expected insurance recoveries of $14.7 million and $12.8 million , respectively. Laws and Regulations Laws and regulations governing the Company's business, including those relating to the Medicare and Medicaid programs, are complex and subject to interpretation. These laws and regulations govern every aspect of how the Company's surgical facilities conduct their operations, from licensing requirements to how and whether the Company's facilities may receive payments pursuant to the Medicare and Medicaid programs. Compliance with such laws and regulations can be subject to future government agency review and interpretation as well as legislative changes to such laws. Noncompliance with such laws and regulations may subject the Company to significant regulatory action including fines, penalties, and exclusion from the Medicare, Medicaid and other federal healthcare programs. From time to time, governmental regulatory agencies will conduct inquiries of the Company's practices, including, but not limited to, the Company's compliance with federal and state fraud and abuse laws, billing practices and relationships with physicians. On October 23, 2017, the Company received a civil investigative demand (“CID”) from the federal government under the False Claims Act (“FCA”) for documents and information dating back to January 1, 2010 relating to the medical necessity of certain drug tests conducted by the Company’s physicians and submitted to laboratories owned and operated by the Company. The government’s investigation remains ongoing and the Company intends to continue to respond to the CID and engage in further discussions with the U.S. Attorney’s Office in connection with the FCA investigation. In addition, the Company has been informed by CMS that payments to its diagnostic laboratory, Logan Laboratories, have been suspended pending further investigation by CMS. The Company is unable to predict the duration, scope or outcome of these investigations. While it is possible that a loss related to these matters may be incurred, given the ongoing nature of these investigations, management cannot reasonably estimate the potential magnitude of any such loss or range of loss, or the cost of the ongoing investigation, the entirety of which has been recorded in our operating expenses to date. An adverse outcome in these matters or any related litigation, including a determination that we were not, or are not, in compliance with the existing laws or regulations could result in the imposition of fines, civil and criminal penalties, equitable remedies, including disgorgement, injunctive relief, and/or other sanctions against us, and remediation of any such findings could have an adverse effect on the Company’s financial condition and results of operations. See Item 1A “Risk Factors” in our Annual Report on Form 10-K for the period ended December 31, 2017 under the heading “Risk Factors - Risks Related to Government Regulation - Companies within the healthcare industry continue to be the subject of federal and state audits and investigations, and we may be subject to such audits and investigations, including actions for false and other improper claims .” Acquired Facilities The Company, through its wholly-owned subsidiaries or controlled partnerships and limited liability companies, has acquired and will continue to acquire surgical facilities with prior operating histories. Such facilities may have unknown or contingent liabilities, including liabilities for failure to comply with healthcare laws and regulations, such as billing and reimbursement, fraud and abuse and similar anti-referral laws. Although the Company attempts to assure that no such liabilities exist, obtain indemnification from prospective sellers covering such matters and institute policies designed to conform centers to its standards following completion of acquisitions, there can be no assurance that the Company will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. There can be no assurance that any such matter will be covered by indemnification or, if covered, that the liability sustained will not exceed contractual limits or the financial capacity of the indemnifying party. The Company cannot predict whether federal or state statutory or regulatory provisions will be enacted that would prohibit or otherwise regulate relationships which the Company has established or may establish with other healthcare providers or have materially adverse effects on its business or revenues arising from such future actions. Management believes, however, that it will be able to adjust the Company's operations so as to be in compliance with any statutory or regulatory provision as may be applicable. Potential Physician Investor Liability A majority of the physician investors in the partnerships and limited liability companies which operate the Company's surgical facilities carry general and professional liability insurance on a claims-made basis. Each partnership or limited liability company may, however, be liable for damages to persons or property arising from occurrences at the surgical facilities. Although the various physician investors and other surgeons generally are required to obtain general and professional liability insurance with tail coverage that extends beyond the period of any claims-made policies, such individuals may not be able to obtain coverage in amounts sufficient to cover all potential liability. Since most insurance policies contain exclusions, the physician investors will not be insured against all possible occurrences. In the event of an uninsured or underinsured loss, the value of an investment in the partnership interests or limited liability company membership units and the amount of distributions could be adversely affected. Tax Receivable Agreement On May 9, 2017, the Company entered into an agreement to amend that certain Income Tax Receivable Agreement, dated September 30, 2015 (as amended, the “TRA”), by and between the Company, and the other parties referred to therein, which amendment became effective on August 31, 2017. Pursuant to the amendment to the TRA, the Company agreed to make payments to H.I.G., the Company's former controlling shareholder, in its capacity as the stockholders representative pursuant to a fixed payment schedule. The amounts payable under the TRA are calculated as the product of (i) an annual base amount and (ii) the maximum corporate federal income tax rate for the applicable year plus three percent. The amounts payable under the TRA are related to the Company’s projected realized tax savings over the next six years and are not dependent on the Company’s actual tax savings over such period. The calculation of amounts payable pursuant to the TRA is thus dependent on the maximum corporate federal income tax rate. To the extent that the Company is unable to make payments under the TRA and such inability is a result of the terms of credit agreements and other debt documents that are materially more restrictive than those existing as of September 30, 2015, such payments will be deferred and will accrue interest at a rate of LIBOR plus 500 basis points until paid. If the terms of such credit agreements and other debt documents cause the Company to be unable to make payments under the TRA and such terms are not materially more restrictive than those existing as of September 30, 2015, such payments will be deferred and will accrue interest at a rate of LIBOR plus 300 basis points until paid. Assuming the Company’s effective tax rate is 24% , calculated as the maximum corporate federal tax rate plus three percent, throughout the remaining term of the TRA, the Company estimates that the total remaining amounts payable under the TRA was approximately $65.1 million as of both September 30, 2018 (Successor) and December 31, 2017 (Successor). As a result of the amendment to the TRA, the Company was required to value the liability under the TRA by discounting the fixed payment schedule using the Company’s incremental borrowing rate. The carrying value of the liability under the TRA, reflecting the discount, was $47.8 million as of September 30, 2018 (Successor) and $44.3 million as of December 31, 2017 (Successor). Contingent Consideration In connection with certain prior period acquisitions, pursuant to the applicable purchase agreements, the Company was required to pay consideration to the prior owners of the applicable facilities should the requirements for continuing employment agreed to in the purchase agreements be met. In accordance with ASC 805, Business Combinations, contingent consideration with a continuing employment provision is recognized ratably over the defined performance period as compensation expense. As disclosed in the footnotes to the condensed consolidated statements of operations, the Company recognized contingent acquisition compensation expense of $0.5 million and $1.5 million for the three and nine months ended September 30, 2018 (Successor), respectively, $0.6 million for the one month ended September 30, 2017 (Successor), and $1.2 million and $5.1 million for the two and eight months ended August 31, 2017 (Predecessor), respectively. Other In connection with the Company's integration of the corporate office functions related to the acquisition of NSH, the Company closed it's Chicago, Illinois office on September 30, 2018 (Successor). As a result, the Company recognized a cease-use liability of $1.4 million , representing the estimated costs that will continue to be incurred under the office lease for its remaining term. The estimated costs were included as transaction and integration costs in the condensed consolidated statement of operations for the three and nine months ended September 30, 2018 (Successor) and as a component of other current liabilities and other long-term liabilities in the condensed consolidated balance sheet as of September 30, 2018 (Successor). During the second quarter 2018, the Company recognized a liability of $4.5 million for estimated severance costs in connection with the corporate office integration. The estimated costs were included as transaction and integration costs in the condensed consolidated statement of operations for the nine months ended September 30, 2018 (Successor) and the unpaid severance was included as a component of accrued payroll and benefits in the condensed consolidated balance sheet as of September 30, 2018 (Successor). |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company operates in three major lines of business that are also the Company's reportable operating segments - the operation of surgical facilities, the operation of ancillary services and the operation of optical services. "All other" primarily consists of the Company's corporate general and administrative functions. The following tables present financial information for each reportable segment (in thousands): Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Revenues: Surgical facility services $ 420,514 $ 125,595 $ 167,765 $ 1,234,984 $ 688,725 Ancillary services 20,719 5,775 4,409 62,655 52,261 Optical services 2,699 888 1,905 8,437 7,629 Total $ 443,932 $ 132,258 $ 174,079 $ 1,306,076 $ 748,615 Adjusted EBITDA (1) : Surgical facility services $ 74,525 $ 20,947 $ 27,726 $ 216,540 $ 125,912 Ancillary services 875 (1,265 ) (10,737 ) 2,925 (6,526 ) Optical services 571 193 555 2,087 2,214 All other (16,983 ) (5,033 ) (9,142 ) (60,087 ) (36,036 ) Total $ 58,988 $ 14,842 $ 8,402 $ 161,465 $ 85,564 (1) When the Company uses the term “Adjusted EBITDA,” it is referring to income before income taxes adjusted for (a) net income attributable to non-controlling interests, (b) depreciation and amortization, (c) interest expense, net, (d) equity-based compensation, (e) contingent acquisition compensation expense, (f) transaction, integration and acquisition costs, (g) gain on litigation settlement, (h) gain on acquisition escrow release, (i) reserve adjustments, (j) loss on disposals and deconsolidations, net, (k) gain on amendment to tax receivable agreement and (l) loss on debt refinancing. Adjusted EBITDA is the primary profit/loss metric reviewed by the chief operating decision maker in making key business decisions and on allocation of resources. Adjusted EBITDA is not a measurement of financial performance under GAAP, and should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with generally accepted accounting principles. The items excluded from Adjusted EBITDA are significant components in understanding and evaluating the Company's financial performance. The Company's calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. A reconciliation of Adjusted EBITDA to income before income taxes included in the condensed consolidated statement of operations is as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Adjusted EBITDA $ 58,988 $ 14,842 $ 8,402 $ 161,465 $ 85,564 Net income attributable to non-controlling interests 23,000 6,492 8,813 69,418 42,087 Depreciation and amortization (16,945 ) (3,330 ) (7,599 ) (49,379 ) (30,124 ) Interest expense, net (37,159 ) (15,883 ) (18,147 ) (107,368 ) (68,929 ) Equity-based compensation (1,526 ) (1,683 ) (1,628 ) (6,303 ) (3,697 ) Contingent acquisition compensation expense (503 ) (605 ) (1,210 ) (1,510 ) (5,057 ) Transaction, integration and acquisition costs (1) (7,489 ) (3,457 ) (2,949 ) (25,419 ) (7,677 ) Gain on litigation settlement — — — — 3,794 Gain on acquisition escrow release — — 1,000 — 1,000 Reserve adjustments (2) 2,109 — — (2,670 ) — Loss on disposals and deconsolidations, net (12,631 ) (333 ) (114 ) (15,875 ) (1,715 ) Gain on amendment to tax receivable agreement — 1,098 15,294 — 15,294 Loss on debt refinancing — — (18,211 ) — (18,211 ) Income before income taxes $ 7,844 $ (2,859 ) $ (16,349 ) $ 22,359 $ 12,329 (1) This amount includes transaction and integration costs of $7.1 million and $23.8 million for the three and nine months ended September 30, 2018 (Successor), respectively, $3.0 million for the one month ended September 30, 2017 (Successor), and $2.3 million and $5.6 million for the two and eight months ended August 31, 2017 (Predecessor), respectively. This amount includes acquisition costs of $0.4 million and $1.6 million for the three and nine months ended September 30, 2018 (Successor), respectively, $0.5 million for the one month ended September 30, 2017 (Successor), and $0.6 million and $2.1 million for the two and eight months ended August 31, 2017 (Predecessor), respectively. (2) This amount represents adjustments to revenue in connection with applying consistent policies across the combined company as a result of the integration of Surgery Partners and NSH. Successor September 30, December 31, Assets: Surgical facility services $ 4,015,094 $ 4,072,521 Ancillary services 110,588 104,274 Optical services 34,811 48,309 All other 398,171 397,669 Total assets $ 4,558,664 $ 4,622,773 Successor Predecessor Nine Months Ended September 30, September 1 to September 30, January 1 to August 31, 2018 2017 2017 Cash purchases of property and equipment, net: Surgical facility services $ 21,590 $ 1,613 $ 14,582 Ancillary services 334 2 1,875 Optical services 42 23 73 All other 4,652 202 2,243 Total cash purchases of property and equipment, net $ 26,618 $ 1,840 $ 18,773 |
Subsequent Events (Notes)
Subsequent Events (Notes) | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On October 23, 2018, Surgery Partners, Inc. (the “Company”) announced that SP Holdco I, Inc., a Delaware corporation (“Holdings”), and Surgery Center Holdings, Inc., a Delaware corporation (the “Borrower”), each a wholly-owned subsidiary of the Company, together with certain wholly-owned subsidiaries of the Borrower, entered into an incremental term loan amendment, dated as of October 23, 2018 (“the Amendment”), with Jefferies Finance LLC, as administrative agent and collateral agent, and the other financial institutions party thereto from time to time, which amended and supplemented the credit agreement, dated as of August 31, 2017, by and among the Borrower, Holdings, certain wholly-owned subsidiaries of the Borrower party thereto from time to time, Jefferies Finance LLC, as administrative agent and collateral agent, and the other financial institutions party thereto from time to time (the “Credit Agreement”) to provide for a $180.0 million senior secured incremental term loan (the “Incremental Term Loan”). The Incremental Term Loan was fully drawn on October 23, 2018 and bears interest at a rate per annum equal to (x) LIBOR plus a margin ranging from 3.00% to 3.25% per annum, depending on the Borrower's first lien net leverage ratio or (y) an alternate base rate (which will be the highest of (i) the prime rate, (ii) 0.5% per annum above the federal funds effective rate, (iii) one-month LIBOR plus 1.00% per annum and (iv) 2.00% per annum) plus a margin ranging from 2.00% to 2.25% per annum, depending on the Borrower's first lien net leverage ratio. The Incremental Term Loan is subject to maturity, amortization and other terms consistent with the existing term loans outstanding under the Credit Agreement on the date of the Amendment. Subsequent to the balance sheet date, the Company entered into two interest rate swaps with notional amounts of $330 million and $240 million and termination dates of November 30, 2023. On October 31, 2018, the Company purchased three surgery centers for a combined purchase price of $50.0 million . The Company funded the purchase price with the cash flow received from the proceeds received from the $180.0 million Incremental Term Loan borrowings. As of the date of this filing, the Company has not completed its preliminary estimation of the fair values assigned to the assets acquired and liabilities assumed. |
Organization, Basis of Presen_2
Organization, Basis of Presentation and Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation of the Company's financial position and results of operations have been included. The Company’s fiscal year ends on December 31 and interim results are not necessarily indicative of results for a full year or any other interim period. The information contained in these condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 . |
Principles of Consolidation | The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in partnerships and limited liability companies controlled by the Company through its ownership of a majority voting interest or other rights granted to the Company by contract to manage and control the affiliate's business. All significant intercompany balances and transactions are eliminated in consolidation. |
Pushdown Accounting | In connection with the change of control effective August 31, 2017, the Company elected to apply “pushdown” accounting by applying the guidance in Accounting Standards Codification Topic ("ASC") 805, Business Combinations . Accordingly, the condensed consolidated financial statements of the Company for periods before and after August 31, 2017 reflect different bases of accounting, and the financial positions and results of operations of those periods are not comparable. Throughout the Company's condensed consolidated financial statements and the accompanying notes herein, periods prior to the change of control are identified as "Predecessor" and periods after the change of control are identified as "Successor." See Note 2. Acquisitions and Developments for further discussion of the change of control. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and footnotes. Examples include, but are not limited to, estimates of accounts receivable allowances, professional and general liabilities and the estimate of deferred tax assets or liabilities. Actual results could differ from those estimates. |
Variable Interest Entities | Variable Interest Entities The condensed consolidated financial statements include the accounts of variable interest entities ("VIEs") in which the Company is the primary beneficiary under the provisions of ASC 810, Consolidation . The Company has the power to direct the activities that most significantly impact a VIEs economic performance, and the Company would absorb the majority of the expected losses from any of these entities should such expected losses occur. As of September 30, 2018 (Successor), the consolidated VIEs include four surgical facilities, three anesthesia practices and four physician practices. During the nine months ended September 30, 2018 (Successor), the Company divested of one surgical facility and acquired a physician practice, which were classified as VIEs. As of December 31, 2017 (Successor), the consolidated VIEs included five surgical facilities, three anesthesia practices and three physician practices. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments 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 Company uses fair value measurements based on quoted prices in active markets for identical assets or liabilities (Level 1), inputs other than quoted prices in active markets that are either directly or indirectly observable (Level 2), or unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions (Level 3), depending on the nature of the item being valued. The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, restricted invested assets and accounts payable approximate their fair values. The fair value of the derivative financial instruments was based on a quoted market price, or a Level 2 computation. As of September 30, 2018 (Successor), the fair value of the derivative liabilities was included in other long-term liabilities in the condensed consolidated balance sheets. As of December 31, 2017 (Successor), the Company had no derivative financial instruments. The Company maintains a supplemental executive retirement savings plan (the "SERP") for certain executives. The SERP is a non-qualified deferred compensation plan for eligible executive officers and other key employees of the Company that allows participants to defer portions of their compensation. The fair value of the SERP asset and liability was based on a quoted market price, or a Level 1 computation. The fair values of the Term Loan, Senior Unsecured Notes due 2021 and the Senior Unsecured Notes due 2025 were based on a Level 2 inputs using quoted prices for identical liabilities in inactive markets at September 30, 2018 (Successor) and December 31, 2017 (Successor). The carrying amounts related to the Company's other long-term debt obligations, including the Revolver, approximate their fair values. |
Revenues | Revenues In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers . The Company adopted the new standard effective January 1, 2018, using the modified retrospective method. The adoption of the new standard did not have an impact on our recognition of net revenues for any periods prior to adoption. The majority of the “Provision for doubtful accounts” will continue to be recognized as an operating expense rather than as a direct reduction to revenues, given the Company’s practice of assessing a patient’s ability to pay prior to or on the date of providing healthcare services. After initial recognition, the Company’s accounts receivables are subject to impairment assessments periodically based on changes in credit risks using historical trends of cash collections, write-offs, accounts receivable agings and other factors. The Company's revenues generally relate to contracts with patients in which the performance obligations are to provide healthcare services. The Company recognizes revenues in the period in which our obligations to provide health care services are satisfied and reports the amount that reflects the consideration the Company expects to be entitled to. The Company's performance obligations are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans, employers and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans, employers and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services provided to the related patients typically specify payments at amounts less than the Company's standard charges. Medicare generally pays for services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. The Company continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. Patient service revenues. This includes revenue related to charging facility fees in exchange for providing patient care. The fee charged for healthcare procedures performed in surgical facilities varies depending on the type of service provided, but usually includes all charges for usage of an operating room, a recovery room, special equipment, medical supplies, nursing staff and medications. The fee does not normally include professional fees charged by the patient’s surgeon, anesthesiologist or other attending physician, which are billed directly by such physicians to the patient or third-party payor. However, in several surgical facilities, the Company charges for anesthesia services. Ancillary service revenues include fees for patient visits to the Company's physician practices, pharmacy services and diagnostic tests ordered by physicians. Patient service revenues are recognized as performance obligations are satisfied. Performance obligations are based on the nature of services provided. Typically, the Company recognizes revenue at a point in time in which services are rendered and the Company has no obligation to provide further patient services. As the Company primarily performs outpatient procedures, performance obligations are generally satisfied same day and revenue is recognized on the date of service. The Company determines the transaction price based on gross charges for services provided, net of estimated contractual adjustments, discounts from third-party payors, including Medicare and Medicaid. The Company estimates its contractual adjustments and discounts based on contractual agreements, its discount policies and historical experience. Changes in estimated contractual adjustments and discounts are recorded in the period of change. Other service revenues. Optical service revenues consist of product sales from the Company's optical laboratories as well as handling charges billed to the members of the Company's optical products purchasing organization. The Company's optical products purchasing organization negotiates volume buying discounts with optical products manufacturers. The buying discounts and any handling charges billed to the members of the buying group represent the revenue recognized for financial reporting purposes. The Company satisfies the performance obligation and recognizes revenue when the orders are shipped to members. The Company bases its estimates for sales returns and discounts on historical experience and has not experienced significant fluctuations between estimated and actual return activity and discounts given. The Company's optical laboratories manufacture and distribute corrective lenses and eyeglasses to ophthalmologists and optometrists. The Company satisfies the performance obligation and recognize revenue when the product is shipped, net of allowance for discounts. Other revenues include management and administrative service fees derived from the non-consolidated facilities that the Company accounts for under the equity method, management of surgical facilities in which it does not own an interest, and management services provided to physician practices for which the Company is not required to provide capital or additional assets. These agreements typically require the Company to provide recurring management services over a multi-year period which are billed and collected on a monthly basis. The fees derived from these management arrangements are based on a predetermined percentage of the revenues of each facility or practice and are recognized in the period in which management services are rendered and billed. |
Cash, Cash Equivalents and Restricted Cash | Restricted invested assets included in other long-term assets on the condensed consolidated balance sheet represents restricted cash held in accordance with the provisions of the operating lease agreement at the Company's Chesterfield, Missouri facility. The Company has a deposit with the landlord that shall be held as security for performance under the Company's covenants and obligations within the agreement through January 2024. |
Accounts Receivable and Allowances for Contractual Adjustments and Doubtful Accounts | Accounts Receivable and Allowances for Contractual Adjustments and Doubtful Accounts With the Company's adoption of ASC 2014-09 on January 1, 2018, for those accounts in which the Company has an unconditional right to payment, subject only to the passage of time, the right is recorded as a receivable. Accounts receivable are recorded net of contractual adjustments and allowances for doubtful accounts to reflect accounts receivable at net realizable value. Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies, employers and patients. Management recognizes that revenues and receivables from government agencies are significant to the Company's operations, but it does not believe that there is significant credit risk associated with these government agencies. Concentration of credit risk with respect to other payors is limited because of the large number of such payors. The Company had a net third-party Medicaid settlements liability of $7.7 million and $1.0 million as of September 30, 2018 (Successor) and December 31, 2017 (Successor), respectively, included in other current liabilities in the condensed consolidated balance sheets. The Company recognizes that final reimbursement of accounts receivable is subject to final approval by each third-party payor. However, because the Company has contracts with its third-party payors and also verifies insurance coverage of the patient before medical services are rendered, the amounts that are pending approval from third-party payors are not considered significant. The Company's policy is to collect co-payments and deductibles prior to providing medical services. It is also the Company's policy to verify a patient’s insurance prior to the patient’s procedure. Patient services of the Company are primarily non-emergency, which allows the surgical facilities to control the procedures for which third-party reimbursement is sought and obtained. The Company does not require collateral from self-pay patients. The Company analyzes accounts receivable at each of its facilities to ensure the proper aged category and collection assessment. At a consolidated level, the Company's policy is to review accounts receivable aging, by facility, to determine the appropriate allowance for doubtful accounts. Patient account balances are reviewed for delinquency based on contractual terms. This review is supported by an analysis of the actual revenues, contractual adjustments and cash collections received. An account balance is written off only after the Company has pursued collection with legal or collection agency assistance or otherwise has deemed an account to be uncollectible. The receivables related to the Company's optical products purchasing organization are recognized separately from patient accounts receivable, as discussed above, and are included in other current assets in the condensed consolidated balance sheets. |
Goodwill | Goodwill Goodwill represents the fair value of the consideration provided in an acquisition over the fair value of net assets acquired and is not amortized. Additions to goodwill include amounts resulting from new business combinations and incremental ownership purchases in the Company's subsidiaries. |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities In accordance with ASC 815, Derivatives and Hedging (“ASC 815”), the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. In accordance with the FASB’s fair value measurement guidance in ASU 2011-04, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. |
Non-Controlling Interests—Redeemable | Non-Controlling Interests—Redeemable Each partnership and limited liability company through which the Company owns and operates its surgical facilities is governed by a partnership or operating agreement, respectively. In certain circumstances, the applicable partnership or operating agreements for the Company's surgical facilities provide that the facilities will purchase all of the physician limited partners’ or physician minority members’, as applicable, ownership if certain adverse regulatory events occur, such as it becoming illegal for the physician(s) to own an interest in a surgical facility, refer patients to a surgical facility or receive cash distributions from a surgical facility. The non-controlling interests — redeemable are reported outside of stockholders' equity in the condensed consolidated balance sheets. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, " Revenue from Contracts with Customers ," along with subsequent amendments, updates and an extension of the effective date (collectively the "New Revenue Standard"), which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance, including guidance specific to the healthcare industry. This five-step process requires significant management judgment in addition to changing the way many companies recognize revenue in their financial statements. The Company adopted this ASU on January 1, 2018 using the modified retrospective approach. The adoption of this standard did not have a significant impact on the recognition of net revenues for any period. Adoption of the standard resulted in the Company revising its related disclosures. In February 2016, the FASB issued ASU 2016-02, " Leases, " which will require, among other items, lessees to recognize most leases as assets and liabilities on the balance sheet. Qualitative and quantitative disclosures will be enhanced to better understand the amount, timing and uncertainty of cash flows arising from leases. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. In preparation of adopting the new standard, the Company has engaged outside consultants to assist in the identification of the Company's population of leases, implementing a new software for lease accounting and assisting in evaluating new accounting policy elections. The Company will adopt this ASU on January 1, 2019 and believes the primary effect of adopting the new standard will be to record right-of-use assets and obligations for current operating leases with material increases in reported property and equipment and liabilities. The Company is still evaluating the effect of adoption on financial disclosures, policies, procedures and control framework. In November 2016, the FASB issued ASU 2016-18, " Statement of Cash Flows – Restricted Cash ," which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company adopted this ASU on January 1, 2018 and retrospectively applied the guidance to all periods presented in the condensed consolidated statement of cash flows. The retrospective application to prior periods had no impact on the Company's cash flows from operating, investing and financing activities as previously disclosed. The adoption of this ASU resulted in the modification of the Company's presentation of the reconciliation of beginning-of-period and end-of-period total amounts shown on the condensed consolidated statement of cash flows to include restricted cash as discussed under the heading "Cash and Cash Equivalents" above. |
Business Combinations | The Company accounts for its business combinations in accordance with the fundamental requirements of the acquisition method of accounting and under the premise that an acquirer can 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 and any non-controlling 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. Any goodwill recognized is determined as the excess of the fair value of the consideration conveyed plus the fair value of any non-controlling interests in the acquisition over the fair value of the net assets acquired. Acquisitions in which the Company is able to exert significant influence but does not have control are accounted for using the equity method. Acquired assets and assumed liabilities typically include, but are not limited to, fixed assets, intangible assets and professional liabilities. The valuations are based on appraisal reports, discounted cash flow analyses, actuarial analyses or other appropriate valuation techniques to determine the fair value of the assets acquired or liabilities assumed. Fair value attributable to non-controlling interests is based on a Level 3 computation using 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 non-controlling interests, primarily from acquisitions of surgical facilities. Such multiples, based on earnings, are used as a benchmark for the discount to be applied for the lack of control or marketability. Fair value attributable to the property and equipment acquired is based on Level 3 computations using key inputs such as cost trend data and comparable asset sales. Fair value attributable to the intangible assets acquired is based on Level 3 computations using key inputs such as the Company's internally-prepared financial projections. Fair values assigned to acquired working capital are based on carrying amounts reported by the acquiree at the date of acquisition, which approximate their fair values. The preliminary estimated fair value assigned to goodwill is primarily attributable to the acquisitions 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. |
Earnings Per Share | Earnings Per Share Basic and diluted earnings per share are calculated in accordance with ASC 260, Earnings Per Share , based on the weighted-average number of shares outstanding in each period and dilutive stock options, unvested shares and warrants, to the extent such securities exist and have a dilutive effect on earnings per share. Beginning in the Successor period, in connection with the issuance of the Series A Preferred Stock, the Company began computing basic and diluted earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation method that determines earnings per share for common shares and participating securities according to their participation rights in dividends and undistributed earnings. |
Income Taxes | Income Taxes The Company uses the asset and liability method to account for income taxes. Under this method, deferred income 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. If a net operating loss ("NOL") or Section 163(j) interest (“163(j)”) carryforward exists, the Company makes a determination as to whether the NOL or 163(j) carryforward will be utilized in the future. A valuation allowance is established for certain carryforwards when their recoverability is deemed to be uncertain. The carrying value of the net deferred tax assets assumes that the Company will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, the Company may be required to adjust its deferred tax valuation allowances. The Company and certain of its subsidiaries file a consolidated federal income tax return. The partnerships, limited liability companies, and certain non-consolidated physician practice corporations also file separate income tax returns. The Company's allocable portion of each partnership's and limited liability company's income or loss is included in taxable income of the Company. The remaining income or loss of each partnership and limited liability company is allocated to the other owners. The Company, or one or more of its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for years prior to 2015 or state income tax examinations for years prior to 2014. Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended (the “Code”) imposes an annual limit on the ability of a corporation that undergoes an “ownership change” to use its NOLs to reduce its tax liability. An “ownership change” is generally defined as any change in ownership of more than 50.0% of a corporation’s “stock” by its “5-percent shareholders” (as defined in Section 382) over a rolling three-year period based upon each of those shareholder’s lowest percentage of stock owned during such period. |
Organization, Basis of Presen_3
Organization, Basis of Presentation and Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Carrying Amounts and Fair Values of Long-Term Debt | A summary of the carrying amounts and fair values of the Company's long-term debt follows (in thousands): Successor Carrying Amount Fair Value September 30, December 31, 2017 September 30, December 31, 2017 2017 Senior Secured Credit Facilities: Revolver $ 11,000 $ — $ 11,000 $ — Term Loan $ 1,271,397 $ 1,280,532 $ 1,272,986 $ 1,267,189 Senior Unsecured Notes due 2021 $ 407,372 $ 409,235 $ 423,667 $ 422,535 Senior Unsecured Notes due 2025 $ 370,000 $ 370,000 $ 355,200 $ 346,413 |
Summary of Fair Value of Derivative Liabilities | During the nine months ended September 30, 2018 (Successor), the Company entered into certain derivative financial instruments. A summary of the fair values of the Company's derivative financial instruments follows (in thousands): Successor Fair Value September 30, December 31, 2017 Derivative liabilities Interest rate swap agreement $ 1,389 $ — |
Schedule of Revenues by Service Type | A summary of revenues by service type as a percentage of total revenues follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Patient service revenues: Surgical facilities revenues 93.2 % 94.0 % 95.5 % 93.2 % 91.4 % Ancillary services revenues 4.7 % 4.2 % 2.7 % 4.8 % 7.0 % 97.9 % 98.2 % 98.2 % 98.0 % 98.4 % Other service revenues: Optical services revenues 0.6 % 0.7 % 1.1 % 0.6 % 1.0 % Other revenues 1.5 % 1.1 % 0.7 % 1.4 % 0.6 % 2.1 % 1.8 % 1.8 % 2.0 % 1.6 % Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % |
Schedule of Revenue Sources for Patient Service Revenues | The following table sets forth patient service revenues by type of payor and as a percentage of total patient service revenues for the Company's consolidated surgical facilities (dollars in thousands): Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, 2018 2017 2017 Amount % Amount % Amount % Patient service revenues: Private insurance $ 230,718 53.1 % $ 72,930 56.2 % $ 80,166 46.9 % Government 166,880 38.4 % 46,162 35.5 % 73,734 43.1 % Self-pay 12,742 2.9 % 3,861 3.0 % 4,119 2.4 % Other (1) 24,345 5.6 % 6,883 5.3 % 12,909 7.6 % Total patient service revenues 434,685 100.0 % 129,836 100.0 % 170,928 100.0 % Other service revenues: Optical services revenues 2,699 888 1,905 Other revenues 6,548 1,534 1,246 Total revenues $ 443,932 $ 132,258 $ 174,079 Successor Predecessor Nine Months Ended September 30, September 1 to September 30, January 1 to August 31, 2018 2017 2017 Amount % Amount % Amount % Patient service revenues: Private insurance $ 682,479 53.3 % $ 72,930 56.2 % $ 360,092 48.9 % Government 493,362 38.6 % 46,162 35.5 % 308,993 42.0 % Self-pay 39,050 3.1 % 3,861 3.0 % 15,949 2.2 % Other (1) 64,075 5.0 % 6,883 5.3 % 51,374 6.9 % Total patient service revenues 1,278,966 100.0 % 129,836 100.0 % 736,408 100.0 % Other service revenues: Optical services revenues 8,437 888 7,629 Other revenues 18,673 1,534 4,578 Total revenues $ 1,306,076 $ 132,258 $ 748,615 (1) Other is comprised of anesthesia service agreements, auto liability, letters of protection and other payor types. |
Schedule of Cash, Cash Equivalents and Restricted Cash | The following table reconciles cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the totals shown within the condensed consolidated statement of cash flows (in thousands): Successor September 30, December 31, Cash and cash equivalents $ 79,123 $ 174,914 Restricted invested assets included in other long-term assets 315 315 Total cash, cash equivalents and restricted cash in the statement of cash flows $ 79,438 $ 175,229 |
Schedule of Rollforward of Goodwill | A summary of activity related to goodwill for the nine months ended September 30, 2018 (Successor) follows (in thousands): Successor Balance at December 31, 2017 $ 3,346,838 Acquisitions, including post acquisition adjustments 57,710 Divestitures and deconsolidations (31,942 ) Balance at September 30, 2018 $ 3,372,606 |
Schedule of Other Current Liabilities | A summary of other current liabilities follows (in thousands): Successor September 30, December 31, Interest payable $ 28,322 $ 20,537 Amounts due to patients and payors 22,400 18,096 Accrued expenses and other 72,216 71,311 Total $ 122,938 $ 109,944 |
Schedule of Other Long-Term Liabilities | A summary of other long-term liabilities follows (in thousands): Successor September 30, December 31, Facility lease obligations $ 138,116 $ 121,627 Other 109,195 100,853 Total $ 247,311 $ 222,480 |
Schedule of Rollforward of Noncontrolling Interest - Redeemable | A summary of activity related to the non-controlling interests—redeemable follows (in thousands): Successor Balance at December 31, 2017 $ 299,316 Net income attributable to non-controlling interests—redeemable 20,528 Acquisition and disposal of shares of non-controlling interests, net—redeemable (1) 20,279 Distributions to non-controlling interest—redeemable holders (22,582 ) Balance at September 30, 2018 $ 317,541 (1) Includes post acquisition date adjustments. |
Acquisitions and Developments (
Acquisitions and Developments (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Schedule of Assets Acquired and Liabilities Assumed | The aggregate amounts preliminarily recognized for each major class of assets acquired and liabilities assumed for acquisitions completed in the nine months ended September 30, 2018 (Successor), including post acquisition date adjustments, are as follows (in thousands): Cash consideration $ 54,308 Fair value of non-controlling interests 28,776 Aggregate acquisition date fair value $ 83,084 Net assets acquired: Current Assets $ 4,708 Property and equipment 2,301 Goodwill 75,947 Other long-term assets 3,460 Current liabilities (2,332 ) Long-term liabilities (1,000 ) Aggregate acquisition date fair value $ 83,084 The acquisition date fair value for each major class of assets acquired and liabilities assumed, including post acquisition date adjustments, are as follows (in thousands): Cash consideration $ 764,007 Fair value of non-controlling interests 325,965 Acquisition date fair value $ 1,089,972 Net assets acquired: Cash and cash equivalents $ 51,159 Accounts receivable 71,639 Inventories 14,986 Prepaid expenses and other current assets 18,367 Property and equipment 174,100 Intangible assets 27,881 Goodwill 871,373 Investments in and advances to affiliates 29,737 Long-term deferred tax assets 20,212 Other long-term assets 26,988 Accounts payable (29,652 ) Accrued payroll and benefits (30,853 ) Other current liabilities (23,937 ) Current maturities of long-term debt (16,416 ) Long-term debt, less current maturities (42,770 ) Other long-term liabilities (72,842 ) Acquisition date fair value $ 1,089,972 The transaction date fair value recognized in connection with the application of pushdown accounting for each major class of assets and liabilities as of August 31, 2017, including post transaction date adjustments, are as follows (in thousands): Equity attributable to Surgery Partners, Inc. $ 721,764 Redeemable preferred stock 310,000 Fair value of non-controlling interests 939,083 Transaction date fair value $ 1,970,847 Net assets: Cash and cash equivalents 214,206 Accounts receivable 252,911 Inventories 44,310 Prepaid expenses and other current assets 61,438 Property and equipment 379,685 Intangible assets 63,978 Goodwill 3,281,728 Investments in and advances to affiliates 75,113 Restricted invested assets 315 Long-term deferred tax asset 206,073 Other long-term assets 50,666 Accounts payable (64,921 ) Accrued payroll and benefits (56,535 ) Other current liabilities (97,617 ) Current maturities of long-term debt (49,942 ) Long-term debt, less current maturities (2,142,375 ) Long-term tax receivable agreement liability (78,498 ) Other long-term liabilities (169,688 ) Transaction date fair value $ 1,970,847 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
Summary of long-term debt | A summary of long-term debt follows (in thousands): Successor September 30, December 31, 2017 Senior Secured Credit Facilities: Revolver $ 11,000 $ — Term Loan (1) 1,271,397 1,280,532 Senior Unsecured Notes due 2021 (2) 407,372 409,235 Senior Unsecured Notes due 2025 370,000 370,000 Notes payable and secured loans 88,068 101,921 Capital lease obligations 24,836 27,594 Total debt 2,172,673 2,189,282 Less: Current maturities 54,106 58,726 Total long-term debt $ 2,118,567 $ 2,130,556 (1) In connection with the application of pushdown accounting, the Company remeasured and recorded the Term Loan at fair value using a measurement date of August 31, 2017. The fair value was based on a Level 2 input using quoted prices for identical liabilities in inactive markets. As a result, the Company recorded a fair value discount as of the measurement date, which is reported in the consolidated balance sheets as a direct rededuction from the face amount the Term Loan and amortized to interest expense over the life of the Term Loan. The unamortized fair value discount as of September 30, 2018 (Successor) and December 31, 2017 (Successor) was $5.7 million and $6.2 million , respectively. (2) In connection with the application of pushdown accounting, the Company remeasured and recorded the Senior Unsecured Notes due 2021 at fair value using a measurement date of August 31, 2017. The fair value was based on a Level 2 input using quoted prices for identical liabilities in inactive markets. As a result, the Company recorded a fair value premium as of the measurement date, which is reported in the consolidated balance sheets as a direct addition to the face amount the notes and amortized to interest expense over the life of the Senior Unsecured Notes due 2021. The unamortized fair value premium as of September 30, 2018 (Successor) and December 31, 2017 (Successor) was $7.4 million and $9.2 million , respectively. |
Derivatives and Hedging Activ_2
Derivatives and Hedging Activities (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of the Effect of Fair Value and Cash Flow Hedge Accounting | The table below presents the effect of fair value and cash flow hedge accounting on the Company's consolidated balance sheets. Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Derivatives in Cash Flow Hedging Relationships Losses related to effective portion of derivatives recognized in accumulated OCI, gross of tax effect $ (1,389 ) $ — $ — $ (1,389 ) $ — Loss related to effective portion of derivatives reclassified from accumulated OCI to interest expense, gross of tax effect — — — — — |
Redeemable Preferred Stock (Tab
Redeemable Preferred Stock (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Temporary Equity Disclosure [Abstract] | |
Activity Related to Redeemable Preferred Stock | A summary of activity related to the redeemable preferred stock follows (in thousands): Successor Balance at December 31, 2017 $ 330,806 Dividends accrued 23,973 Cash dividends declared (3,886 ) Balance at September 30, 2018 $ 350,893 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | A reconciliation of the numerator and denominator of basic and diluted earnings per share follows (in thousands except share and per share amounts): Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Numerator: Net loss attributable to Surgery Partners, Inc. $ (20,981 ) $ (9,140 ) $ (4,444 ) $ (57,964 ) $ (11,669 ) Less: amounts allocated to participating securities (1) 8,245 2,633 — 23,973 — Less: mark to redemption adjustment — 15,566 — — — Net loss attributable to common stockholders $ (29,226 ) $ (27,339 ) $ (4,444 ) $ (81,937 ) $ (11,669 ) Denominator: Weighted average shares outstanding- basic 48,037,634 48,314,746 48,146,611 48,020,369 48,121,404 Effect of dilutive securities (2) — — — — — Weighted average shares outstanding- diluted 48,037,634 48,314,746 48,146,611 48,020,369 48,121,404 Loss per share: Basic $ (0.61 ) $ (0.57 ) $ (0.09 ) $ (1.71 ) $ (0.24 ) Diluted (2) $ (0.61 ) $ (0.57 ) $ (0.09 ) $ (1.71 ) $ (0.24 ) Dilutive securities outstanding not included in the computation of (loss) earnings per share as their effect is antidilutive: Stock options 144,795 — — 153,884 — Restricted shares 134,054 112,529 34,506 140,552 105,944 Convertible preferred stock — — N/A — N/A (1) Includes dividends accrued during the Successor periods for the Series A Preferred Stock. The Series A Preferred Stock does not participate in undistributed losses. There were no participating securities during the Predecessor periods. (2) The impact of potentially dilutive securities for all periods presented was not considered because the effect would be anti-dilutive in each period. |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Reconciliation of Revenue from Segments to Consolidated | The following tables present financial information for each reportable segment (in thousands): Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Revenues: Surgical facility services $ 420,514 $ 125,595 $ 167,765 $ 1,234,984 $ 688,725 Ancillary services 20,719 5,775 4,409 62,655 52,261 Optical services 2,699 888 1,905 8,437 7,629 Total $ 443,932 $ 132,258 $ 174,079 $ 1,306,076 $ 748,615 Adjusted EBITDA (1) : Surgical facility services $ 74,525 $ 20,947 $ 27,726 $ 216,540 $ 125,912 Ancillary services 875 (1,265 ) (10,737 ) 2,925 (6,526 ) Optical services 571 193 555 2,087 2,214 All other (16,983 ) (5,033 ) (9,142 ) (60,087 ) (36,036 ) Total $ 58,988 $ 14,842 $ 8,402 $ 161,465 $ 85,564 (1) When the Company uses the term “Adjusted EBITDA,” it is referring to income before income taxes adjusted for (a) net income attributable to non-controlling interests, (b) depreciation and amortization, (c) interest expense, net, (d) equity-based compensation, (e) contingent acquisition compensation expense, (f) transaction, integration and acquisition costs, (g) gain on litigation settlement, (h) gain on acquisition escrow release, (i) reserve adjustments, (j) loss on disposals and deconsolidations, net, (k) gain on amendment to tax receivable agreement and (l) loss on debt refinancing. Adjusted EBITDA is the primary profit/loss metric reviewed by the chief operating decision maker in making key business decisions and on allocation of resources. Adjusted EBITDA is not a measurement of financial performance under GAAP, and should not be considered in isolation or as a substitute for net income, operating income or any other measure calculated in accordance with generally accepted accounting principles. The items excluded from Adjusted EBITDA are significant components in understanding and evaluating the Company's financial performance. The Company's calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. |
Schedule of Segment Operating Income | A reconciliation of Adjusted EBITDA to income before income taxes included in the condensed consolidated statement of operations is as follows: Successor Predecessor Successor Predecessor Three Months Ended September 30, September 1 to September 30, July 1 to August 31, Nine Months Ended September 30, January 1 to August 31, 2018 2017 2017 2018 2017 Adjusted EBITDA $ 58,988 $ 14,842 $ 8,402 $ 161,465 $ 85,564 Net income attributable to non-controlling interests 23,000 6,492 8,813 69,418 42,087 Depreciation and amortization (16,945 ) (3,330 ) (7,599 ) (49,379 ) (30,124 ) Interest expense, net (37,159 ) (15,883 ) (18,147 ) (107,368 ) (68,929 ) Equity-based compensation (1,526 ) (1,683 ) (1,628 ) (6,303 ) (3,697 ) Contingent acquisition compensation expense (503 ) (605 ) (1,210 ) (1,510 ) (5,057 ) Transaction, integration and acquisition costs (1) (7,489 ) (3,457 ) (2,949 ) (25,419 ) (7,677 ) Gain on litigation settlement — — — — 3,794 Gain on acquisition escrow release — — 1,000 — 1,000 Reserve adjustments (2) 2,109 — — (2,670 ) — Loss on disposals and deconsolidations, net (12,631 ) (333 ) (114 ) (15,875 ) (1,715 ) Gain on amendment to tax receivable agreement — 1,098 15,294 — 15,294 Loss on debt refinancing — — (18,211 ) — (18,211 ) Income before income taxes $ 7,844 $ (2,859 ) $ (16,349 ) $ 22,359 $ 12,329 (1) This amount includes transaction and integration costs of $7.1 million and $23.8 million for the three and nine months ended September 30, 2018 (Successor), respectively, $3.0 million for the one month ended September 30, 2017 (Successor), and $2.3 million and $5.6 million for the two and eight months ended August 31, 2017 (Predecessor), respectively. This amount includes acquisition costs of $0.4 million and $1.6 million for the three and nine months ended September 30, 2018 (Successor), respectively, $0.5 million for the one month ended September 30, 2017 (Successor), and $0.6 million and $2.1 million for the two and eight months ended August 31, 2017 (Predecessor), respectively. (2) This amount represents adjustments to revenue in connection with applying consistent policies across the combined company as a result of the integration of Surgery Partners and NSH. |
Reconciliation of Assets from Segment to Consolidated | Successor September 30, December 31, Assets: Surgical facility services $ 4,015,094 $ 4,072,521 Ancillary services 110,588 104,274 Optical services 34,811 48,309 All other 398,171 397,669 Total assets $ 4,558,664 $ 4,622,773 |
Schedule of Other Segment Reporting Information | Successor Predecessor Nine Months Ended September 30, September 1 to September 30, January 1 to August 31, 2018 2017 2017 Cash purchases of property and equipment, net: Surgical facility services $ 21,590 $ 1,613 $ 14,582 Ancillary services 334 2 1,875 Optical services 42 23 73 All other 4,652 202 2,243 Total cash purchases of property and equipment, net $ 26,618 $ 1,840 $ 18,773 |
Organization, Basis of Presen_4
Organization, Basis of Presentation and Significant Accounting Policies - Organization (Details) | Sep. 30, 2018surgical_facilitystate |
Products And Services [Line Items] | |
Number of surgical facilities owned | 124 |
Number of states in which entity operates | state | 32 |
Number of surgical facilities owned, majority interest | 84 |
Number of surgical facilities owned, consolidated | 105 |
Facilities, Ambulatory Surgery Centers | |
Products And Services [Line Items] | |
Number of surgical facilities owned | 106 |
Facilities, Surgical Hospitals | |
Products And Services [Line Items] | |
Number of surgical facilities owned | 18 |
Organization, Basis of Presen_5
Organization, Basis of Presentation and Significant Accounting Policies - Variable Interest Entities (Details) $ in Millions | 9 Months Ended | |||||||
Sep. 30, 2018Anesthesia_Practicesurgical_facilityphysician_practice | Sep. 30, 2018surgical_facility | Sep. 30, 2018physician_practice | Sep. 30, 2018USD ($) | Dec. 31, 2017Anesthesia_Practice | Dec. 31, 2017surgical_facility | Dec. 31, 2017physician_practice | Dec. 31, 2017USD ($) | |
Variable Interest Entity [Line Items] | ||||||||
Number of facilities included in VIE | 3 | 4 | 4 | 3 | 5 | 3 | ||
Number of facilities divested | surgical_facility | 1 | |||||||
Variable Interest Entity, Primary Beneficiary, Aggregated Disclosure | ||||||||
Variable Interest Entity [Line Items] | ||||||||
Total assets related to VIE | $ 6.5 | $ 13.1 | ||||||
Total liabilities related to VIE | $ 3.4 | $ 5.8 | ||||||
Variable Interest Entity, Primary Beneficiary | ||||||||
Variable Interest Entity [Line Items] | ||||||||
Number of practices acquired, classified as VIE | physician_practice | 1 |
Organization, Basis of Presen_6
Organization, Basis of Presentation and Significant Accounting Policies - Schedule of Carrying Amount and Fair Value of Long-Term Debt (Details) - Senior Notes - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Senior Unsecured Notes Due 2021 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 407,372 | $ 409,235 |
Senior Unsecured Notes Due 2021 | Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 407,372 | 409,235 |
Senior Unsecured Notes Due 2021 | Fair Value | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 423,667 | 422,535 |
Senior Unsecured Notes Due 2025 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 370,000 | 370,000 |
Senior Unsecured Notes Due 2025 | Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 370,000 | 370,000 |
Senior Unsecured Notes Due 2025 | Fair Value | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 355,200 | 346,413 |
Revolving Credit Facility | 2017 Senior Secured Credit Facility - Revolver | Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 11,000 | 0 |
Revolving Credit Facility | 2017 Senior Secured Credit Facility - Revolver | Fair Value | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 11,000 | 0 |
Revolving Credit Facility | 2017 Senior Secured Credit Facility - Term Loan | Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | 1,271,397 | 1,280,532 |
Revolving Credit Facility | 2017 Senior Secured Credit Facility - Term Loan | Fair Value | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 1,272,986 | $ 1,267,189 |
Organization, Basis of Presen_7
Organization, Basis of Presentation and Significant Accounting Policies - Summary of the Fair Value of Derivative Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Interest rate swap agreement | $ 1,389 | $ 0 |
Organization, Basis of Presen_8
Organization, Basis of Presentation and Significant Accounting Policies - Fair Value of Financial Instruments, Narrative (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Fair Value, Inputs, Level 1 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Assets of SERP | $ 1.6 | $ 1.6 |
Organization, Basis of Presen_9
Organization, Basis of Presentation and Significant Accounting Policies - Schedule of Revenues by Service Type (Details) - USD ($) | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | Aug. 31, 2017 | Sep. 30, 2018 | |
Revenue from External Customer [Line Items] | |||||
Increase of revenue as result of changes in estimates to third-party settlements related to prior years | $ 0 | $ 1,400,000 | $ 1,400,000 | ||
Revenue Source | Revenue | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 100.00% | 100.00% | 100.00% | ||
Revenue Source | Revenue | Healthcare Organization, Patient Service | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 98.20% | 97.90% | 98.00% | ||
Revenue Source | Revenue | Surgical Facility Services | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 94.00% | 93.20% | 93.20% | ||
Revenue Source | Revenue | Ancillary Services | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 4.20% | 4.70% | 4.80% | ||
Revenue Source | Revenue | Healthcare Organization, Other Service | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 1.80% | 2.10% | 2.00% | ||
Revenue Source | Revenue | Optical Services | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 0.70% | 0.60% | 0.60% | ||
Revenue Source | Revenue | Other | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 1.10% | 1.50% | 1.40% | ||
Predecessor | |||||
Revenue from External Customer [Line Items] | |||||
Increase of revenue as result of changes in estimates to third-party settlements related to prior years | $ 600,000 | $ 1,100,000 | |||
Predecessor | Revenue Source | Revenue | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 100.00% | 100.00% | |||
Predecessor | Revenue Source | Revenue | Healthcare Organization, Patient Service | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 98.20% | 98.40% | |||
Predecessor | Revenue Source | Revenue | Surgical Facility Services | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 95.50% | 91.40% | |||
Predecessor | Revenue Source | Revenue | Ancillary Services | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 2.70% | 7.00% | |||
Predecessor | Revenue Source | Revenue | Healthcare Organization, Other Service | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 1.80% | 1.60% | |||
Predecessor | Revenue Source | Revenue | Optical Services | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 1.10% | 1.00% | |||
Predecessor | Revenue Source | Revenue | Other | |||||
Revenue from External Customer [Line Items] | |||||
Service revenues as a percentage of total revenues | 0.70% | 0.60% |
Organization, Basis of Prese_10
Organization, Basis of Presentation and Significant Accounting Policies - Schedule of Revenues by Sources (Details) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | Aug. 31, 2017 | Sep. 30, 2018 | |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 132,258 | $ 443,932 | $ 1,306,076 | ||
Healthcare Organization, Patient Service | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 129,836 | $ 434,685 | $ 1,278,966 | ||
Healthcare Organization, Patient Service | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 100.00% | 100.00% | 100.00% | ||
Healthcare Organization, Patient Service | Private insurance | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 72,930 | $ 230,718 | $ 682,479 | ||
Healthcare Organization, Patient Service | Private insurance | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 56.20% | 53.10% | 53.30% | ||
Healthcare Organization, Patient Service | Government | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 46,162 | $ 166,880 | $ 493,362 | ||
Healthcare Organization, Patient Service | Government | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 35.50% | 38.40% | 38.60% | ||
Healthcare Organization, Patient Service | Self-pay | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 3,861 | $ 12,742 | $ 39,050 | ||
Healthcare Organization, Patient Service | Self-pay | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 3.00% | 2.90% | 3.10% | ||
Healthcare Organization, Patient Service | Other | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 6,883 | $ 24,345 | $ 64,075 | ||
Healthcare Organization, Patient Service | Other | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 5.30% | 5.60% | 5.00% | ||
Optical Services | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 888 | $ 2,699 | $ 8,437 | ||
Other | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 1,534 | $ 6,548 | $ 18,673 | ||
Predecessor | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 174,079 | $ 748,615 | |||
Predecessor | Healthcare Organization, Patient Service | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 170,928 | $ 736,408 | |||
Predecessor | Healthcare Organization, Patient Service | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 100.00% | 100.00% | |||
Predecessor | Healthcare Organization, Patient Service | Private insurance | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 80,166 | $ 360,092 | |||
Predecessor | Healthcare Organization, Patient Service | Private insurance | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 46.90% | 48.90% | |||
Predecessor | Healthcare Organization, Patient Service | Government | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 73,734 | $ 308,993 | |||
Predecessor | Healthcare Organization, Patient Service | Government | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 43.10% | 42.00% | |||
Predecessor | Healthcare Organization, Patient Service | Self-pay | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 4,119 | $ 15,949 | |||
Predecessor | Healthcare Organization, Patient Service | Self-pay | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 2.40% | 2.20% | |||
Predecessor | Healthcare Organization, Patient Service | Other | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 12,909 | $ 51,374 | |||
Predecessor | Healthcare Organization, Patient Service | Other | Customer | Revenue | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Service revenues as a percentage of total revenues | 7.60% | 6.90% | |||
Predecessor | Optical Services | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 1,905 | $ 7,629 | |||
Predecessor | Other | |||||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | |||||
Total revenues | $ 1,246 | $ 4,578 |
Organization, Basis of Prese_11
Organization, Basis of Presentation and Significant Accounting Policies - Cash and Restricted Cash Balances (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Aug. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Cash and cash equivalents | $ 79,123 | $ 174,914 | ||
Restricted invested assets included in other long-term assets | 315 | 315 | ||
Total cash, cash equivalents and restricted cash in the statement of cash flows | $ 79,438 | $ 175,229 | $ 200,016 | $ 214,521 |
Organization, Basis of Prese_12
Organization, Basis of Presentation and Significant Accounting Policies - Accounts Receivable and Allowances for Contractual Adjustments and Doubtful Accounts (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Third-Party Medicaid settlement liability | $ 7.7 | $ 1 |
Optical products receivable | $ 9.3 | $ 7.6 |
Organization, Basis of Prese_13
Organization, Basis of Presentation and Significant Accounting Policies - Rollforward of Goodwill and Information on Impairments (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning of period | $ 3,346,838 |
Acquisitions, including post acquisition adjustments | 57,710 |
Divestitures and deconsolidations | (31,942) |
Goodwill, end of period | $ 3,372,606 |
Organization, Basis of Prese_14
Organization, Basis of Presentation and Significant Accounting Policies - Schedule of Other Current Liabilities (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Interest payable | $ 28,322 | $ 20,537 |
Amounts due to patients and payors | 22,400 | 18,096 |
Accrued expenses and other | 72,216 | 71,311 |
Total | $ 122,938 | $ 109,944 |
Organization, Basis of Prese_15
Organization, Basis of Presentation and Significant Accounting Policies - Schedule of Other Long-Term Liabilities (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Facility lease obligations | $ 138,116 | $ 121,627 |
Other | 109,195 | 100,853 |
Total | 247,311 | 222,480 |
Current portions of the lease obligations | 6,800 | $ 6,300 |
Noncurrent deferred financing obligation, Noncurrent | 36,700 | |
Payments of noncurrent deferred financing obligations | $ 23,100 |
Organization, Basis of Prese_16
Organization, Basis of Presentation and Significant Accounting Policies - Schedule of Non-Controlling Interests - Redeemable (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Non-Controlling Interests - Redeemable [Roll Forward] | |
Beginning balance | $ 299,316 |
Net income attributable to non-controlling interests—redeemable | 20,528 |
Acquisition and disposal of shares of non-controlling interests, net—redeemable | 20,279 |
Distributions to non-controlling interest—redeemable holders | (22,582) |
Ending balance | $ 317,541 |
Acquisitions and Developments -
Acquisitions and Developments - Additional Information (Details) $ / shares in Units, $ in Thousands | Aug. 31, 2017USD ($)$ / sharesshares | Sep. 30, 2017USD ($)physician_practice | Sep. 30, 2018USD ($) | Aug. 31, 2017USD ($)physician_practiceendoscopy_practice$ / shares | Sep. 30, 2018USD ($)surgical_facilityphysician_practicesurgery_center | Dec. 31, 2017USD ($) |
Business Acquisition [Line Items] | ||||||
Goodwill | $ 3,372,606 | $ 3,372,606 | $ 3,346,838 | |||
Fair value of investment | 2,000 | 2,000 | ||||
Gain on deconsolidation | 1,100 | 1,100 | ||||
Payments for acquisitions, net of cash acquired | $ 1,163 | 55,213 | ||||
Bain Capital | ||||||
Business Acquisition [Line Items] | ||||||
Net increase (decrease) to goodwill | $ (18,200) | |||||
Two Surgery Centers | ||||||
Business Acquisition [Line Items] | ||||||
Number of interests disposed (in surgery centers) | surgery_center | 3 | |||||
Net proceeds from sale of interests | $ 17,600 | |||||
Loss sale of interests | $ 9,500 | |||||
Surgery Center | ||||||
Business Acquisition [Line Items] | ||||||
Number of interests disposed (in surgery centers) | surgery_center | 1 | |||||
Net proceeds from sale of interests | $ 500 | |||||
Surgical Facility Acquisitions, New Market | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | surgical_facility | 2 | |||||
Surgical Facility, Existing Market | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | surgical_facility | 1,000 | |||||
Physician Practice | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | physician_practice | 1,000 | |||||
Surgical Facility, Noncontrolling Interest, New Market | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | surgical_facility | 1,000 | |||||
Surgical Facility and Physician Practice Acquisitions | ||||||
Business Acquisition [Line Items] | ||||||
Business acquisition total purchase price | $ 32,900 | |||||
Integrated Physician Practice Acquisitions | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | physician_practice | 1,000 | |||||
Business acquisition total purchase price | $ 21,100 | |||||
Total Acquisitions | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | physician_practice | 1 | |||||
Business acquisition total purchase price | $ 1,200 | |||||
Goodwill | 75,947 | 75,947 | ||||
Tax deductible goodwill | 49,900 | 49,900 | ||||
Endoscopy Practice | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | endoscopy_practice | 1,000 | |||||
NSH | ||||||
Business Acquisition [Line Items] | ||||||
Additional cash consideration paid increasing goodwill | 1,200 | |||||
Surgical Facility Services | Total Acquisitions | ||||||
Business Acquisition [Line Items] | ||||||
Goodwill | 68,600 | 68,600 | ||||
Ancillary Services | Total Acquisitions | ||||||
Business Acquisition [Line Items] | ||||||
Goodwill | $ 7,400 | $ 7,400 | ||||
Predecessor | ||||||
Business Acquisition [Line Items] | ||||||
Payments for acquisitions, net of cash acquired | $ 725,853 | |||||
Predecessor | Bain Capital | ||||||
Business Acquisition [Line Items] | ||||||
Business acquisition total purchase price | $ 1,970,847 | |||||
Goodwill | $ 3,281,728 | $ 3,281,728 | ||||
Shares sold in acquisition (shares) | shares | 26,455,651 | |||||
Share price (in USD per share) | $ / shares | $ 19 | $ 19 | ||||
Percentage of voting interests sold | 65.70% | 65.70% | ||||
Pushdown accounting adjustments, increase (decrease) to intangibles | $ 3,900 | |||||
Pushdown accounting adjustment increase to other long-term liabilities | 2,500 | |||||
Predecessor | Total Acquisitions | ||||||
Business Acquisition [Line Items] | ||||||
Number of businesses acquired | physician_practice | 3 | |||||
Business acquisition total purchase price | $ 14,200 | |||||
Predecessor | NSH | ||||||
Business Acquisition [Line Items] | ||||||
Goodwill | 871,373 | 871,373 | ||||
Payments for acquisitions, net of cash acquired | 711,700 | |||||
Acquisition escrow deposit | 19,600 | $ 19,600 | ||||
Net increase (decrease) to goodwill | 1,100 | |||||
Pushdown accounting adjustments, decrease to preliminary fair value assigned to non-controlling interests | $ 17,900 |
Acquisitions and Developments_2
Acquisitions and Developments - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | Aug. 31, 2017 | Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 |
Net assets acquired: | |||||
Goodwill | $ 3,372,606 | $ 3,346,838 | |||
2018 Acquisitions | |||||
Business Acquisition [Line Items] | |||||
Cash consideration | 54,308 | ||||
Fair value of non-controlling interests | 28,776 | ||||
Acquisition date fair value | 83,084 | ||||
Transaction date fair value | $ 1,200 | ||||
Net assets acquired: | |||||
Current Assets | 4,708 | ||||
Property and equipment | 2,301 | ||||
Goodwill | 75,947 | ||||
Other long-term assets | 3,460 | ||||
Current liabilities | (2,332) | ||||
Long-term liabilities | (1,000) | ||||
Acquisition date fair value | $ 83,084 | ||||
Predecessor | Bain Capital | |||||
Business Acquisition [Line Items] | |||||
Equity attributable to Surgery Partners, Inc. | $ 721,764 | ||||
Redeemable preferred stock | 310,000 | ||||
Fair value of non-controlling interests | 939,083 | $ 939,083 | |||
Transaction date fair value | 1,970,847 | ||||
Net assets acquired: | |||||
Cash and cash equivalents | 214,206 | 214,206 | |||
Accounts receivable | 252,911 | 252,911 | |||
Inventories | 44,310 | 44,310 | |||
Prepaid expenses and other current assets | 61,438 | 61,438 | |||
Property and equipment | 379,685 | 379,685 | |||
Intangible assets | 63,978 | 63,978 | |||
Goodwill | 3,281,728 | 3,281,728 | |||
Investments in and advances to affiliates | 75,113 | 75,113 | |||
Restricted invested assets | 315 | 315 | |||
Long-term deferred tax assets | 206,073 | 206,073 | |||
Other long-term assets | 50,666 | 50,666 | |||
Accounts payable | (64,921) | (64,921) | |||
Accrued payroll and benefits | (56,535) | (56,535) | |||
Other current liabilities | (97,617) | (97,617) | |||
Current maturities of long-term debt | (49,942) | (49,942) | |||
Long-term debt, less current maturities | (2,142,375) | (2,142,375) | |||
Long-term tax receivable agreement liability | (78,498) | (78,498) | |||
Other long-term liabilities | (169,688) | (169,688) | |||
Acquisition date fair value | 1,970,847 | 1,970,847 | |||
Predecessor | 2018 Acquisitions | |||||
Business Acquisition [Line Items] | |||||
Transaction date fair value | 14,200 | ||||
Predecessor | NSH | |||||
Business Acquisition [Line Items] | |||||
Cash consideration | 764,007 | ||||
Fair value of non-controlling interests | 325,965 | 325,965 | |||
Acquisition date fair value | 1,089,972 | 1,089,972 | |||
Net assets acquired: | |||||
Cash and cash equivalents | 51,159 | 51,159 | |||
Accounts receivable | 71,639 | 71,639 | |||
Inventories | 14,986 | 14,986 | |||
Prepaid expenses and other current assets | 18,367 | 18,367 | |||
Property and equipment | 174,100 | 174,100 | |||
Intangible assets | 27,881 | 27,881 | |||
Goodwill | 871,373 | 871,373 | |||
Investments in and advances to affiliates | 29,737 | 29,737 | |||
Long-term deferred tax assets | 20,212 | 20,212 | |||
Other long-term assets | 26,988 | 26,988 | |||
Accounts payable | (29,652) | (29,652) | |||
Accrued payroll and benefits | (30,853) | (30,853) | |||
Other current liabilities | (23,937) | (23,937) | |||
Current maturities of long-term debt | (16,416) | (16,416) | |||
Long-term debt, less current maturities | (42,770) | (42,770) | |||
Other long-term liabilities | (72,842) | (72,842) | |||
Acquisition date fair value | $ 1,089,972 | $ 1,089,972 |
Long-Term Debt (Details)
Long-Term Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | ||
Capital lease obligations | $ 24,836 | $ 27,594 |
Debt and capital lease obligations | 2,172,673 | 2,189,282 |
Less: Current maturities | 54,106 | 58,726 |
Total long-term debt | 2,118,567 | 2,130,556 |
Unamortized fair value discount | (5,700) | (6,200) |
Unamortized fair value premium | 7,400 | 9,200 |
Secured Debt | 2017 Senior Secured Credit Facility - Term Loan | ||
Debt Instrument [Line Items] | ||
Long-term debt | 1,271,397 | 1,280,532 |
Secured Debt | Revolving Credit Facility | 2017 Senior Secured Credit Facility - Revolver | ||
Debt Instrument [Line Items] | ||
Long-term debt | 11,000 | 0 |
Senior Notes | Senior Unsecured Notes Due 2021 | ||
Debt Instrument [Line Items] | ||
Long-term debt | 407,372 | 409,235 |
Senior Notes | Senior Unsecured Notes Due 2025 | ||
Debt Instrument [Line Items] | ||
Long-term debt | 370,000 | 370,000 |
Notes payable and secured loans | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 88,068 | $ 101,921 |
Derivatives and Hedging Activ_3
Derivatives and Hedging Activities (Details) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | |
Sep. 30, 2017USD ($) | Aug. 31, 2017USD ($) | Sep. 30, 2018USD ($)swap | Aug. 31, 2017USD ($) | Sep. 30, 2018USD ($)swap | Dec. 31, 2017USD ($) | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||||||
Estimated reduction to interest expense | $ 1,100 | |||||
Number of interest rate swaps | swap | 1 | 1 | ||||
Derivative financial instruments, long-term liability | $ 1,389 | $ 1,389 | $ 0 | |||
Losses related to effective portion of derivatives recognized in accumulated OCI, gross of tax effect | $ 0 | (1,389) | (1,389) | |||
Loss related to effective portion of derivatives reclassified from accumulated OCI to interest expense, gross of tax effect | $ 0 | 0 | 0 | |||
Predecessor | ||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||||||
Losses related to effective portion of derivatives recognized in accumulated OCI, gross of tax effect | $ 0 | $ 0 | ||||
Loss related to effective portion of derivatives reclassified from accumulated OCI to interest expense, gross of tax effect | $ 0 | $ 0 | ||||
Interest Rate Swap One | ||||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||||||
Derivative notional amount | $ 330,000 | $ 330,000 |
Redeemable Preferred Stock - Ad
Redeemable Preferred Stock - Additional Information (Details) - Series A Preferred Stock - USD ($) | Aug. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 |
Temporary Equity [Line Items] | |||
Dividends payable | $ 0 | $ 3,900,000 | |
Cumulative preferred dividends | $ 25,300,000 | ||
Preferred dividends payable (in USD per share) | $ 81.70 | ||
Majority Shareholder | |||
Temporary Equity [Line Items] | |||
Stock issued during period (shares) | 310,000 | ||
Purchase price per share (in USD per share) | $ 1,000 | ||
Proceeds from issuance of preferred shares | $ 310,000,000 |
Redeemable Preferred Stock - Re
Redeemable Preferred Stock - Redeemable Preferred Stock Activity (Details) - Series A Preferred Stock $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Increase (Decrease) in Temporary Equity [Roll Forward] | |
12/31/2017 | $ 330,806 |
Dividends accrued | 23,973 |
Cash dividends declared | (3,886) |
September 30, 2018 | $ 350,893 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | Aug. 31, 2017 | Sep. 30, 2018 | Dec. 15, 2017 | ||
Numerator: | |||||||
Net loss attributable to Surgery Partners, Inc. | $ (9,140,000) | $ (20,981,000) | $ (57,964,000) | ||||
Less: amounts allocated to participating securities | 2,633,000 | 8,245,000 | 23,973,000 | ||||
Less: mark to redemption adjustment | 15,566,000 | 0 | 0 | ||||
Net loss attributable to common stockholders | $ (27,339,000) | $ (29,226,000) | $ (81,937,000) | ||||
Denominator: | |||||||
Weighted average shares outstanding- basic (shares) | 48,314,746 | 48,037,634 | 48,020,369 | ||||
Effect of dilutive securities (shares) | 0 | 0 | 0 | ||||
Weighted average shares outstanding- diluted (shares) | [1] | 48,314,746 | 48,037,634 | 48,020,369 | |||
Loss per share: | |||||||
Basic (in USD per share) | $ (0.57) | $ (0.61) | $ (1.71) | ||||
Diluted (in USD per share) | [1] | $ (0.57) | $ (0.61) | $ (1.71) | |||
Authorized share repurchase amount | $ 50,000,000 | ||||||
Stock repurchased (shares) | 0 | 156,818 | |||||
Average repurchase cost (in USD per share) | $ 12.64 | ||||||
Remaining repurchase authorization available | $ 46,000,000 | $ 46,000,000 | |||||
Stock options | |||||||
Loss per share: | |||||||
Antidilutive securities excluded from computation of (loss) earnings per share (shares) | 0 | 144,795 | 153,884 | ||||
Restricted shares | |||||||
Loss per share: | |||||||
Antidilutive securities excluded from computation of (loss) earnings per share (shares) | 112,529 | 134,054 | 140,552 | ||||
Convertible preferred stock | |||||||
Loss per share: | |||||||
Antidilutive securities excluded from computation of (loss) earnings per share (shares) | 0 | 0 | 0 | ||||
Predecessor | |||||||
Numerator: | |||||||
Net loss attributable to Surgery Partners, Inc. | $ (4,444,000) | $ (11,669,000) | |||||
Less: amounts allocated to participating securities | 0 | 0 | |||||
Less: mark to redemption adjustment | 0 | 0 | |||||
Net loss attributable to common stockholders | $ (4,444,000) | $ (11,669,000) | |||||
Denominator: | |||||||
Weighted average shares outstanding- basic (shares) | 48,146,611 | 48,121,404 | |||||
Effect of dilutive securities (shares) | 0 | 0 | |||||
Weighted average shares outstanding- diluted (shares) | [1] | 48,146,611 | 48,121,404 | ||||
Loss per share: | |||||||
Basic (in USD per share) | $ (0.09) | $ (0.24) | |||||
Diluted (in USD per share) | [1] | $ (0.09) | $ (0.24) | ||||
Predecessor | Stock options | |||||||
Loss per share: | |||||||
Antidilutive securities excluded from computation of (loss) earnings per share (shares) | 0 | 0 | |||||
Predecessor | Restricted shares | |||||||
Loss per share: | |||||||
Antidilutive securities excluded from computation of (loss) earnings per share (shares) | 34,506 | 105,944 | |||||
[1] | The impact of potentially dilutive securities for all periods presented was not considered because the effect would be anti-dilutive in those periods. |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 1 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | |
Operating Loss Carryforwards [Line Items] | |||
Estimated disallowed interest expense | $ 69.8 | ||
Valuation allowance on deferred tax asset | $ 11.4 | ||
Effective tax rate | 7.40% | 48.80% | |
Symbion | |||
Operating Loss Carryforwards [Line Items] | |||
NOL carryforwards | $ 179 | ||
Annual base limitation | 4.9 | ||
NovaMed | |||
Operating Loss Carryforwards [Line Items] | |||
NOL carryforwards | 17 | ||
Annual base limitation | 4.9 | ||
NSH | |||
Operating Loss Carryforwards [Line Items] | |||
NOL carryforwards | 20.5 | ||
Annual base limitation | 2.8 | ||
Bain Capital | |||
Operating Loss Carryforwards [Line Items] | |||
NOL carryforwards | 449.7 | ||
Annual base limitation | $ 14.2 | ||
Predecessor | |||
Operating Loss Carryforwards [Line Items] | |||
Effective tax rate | (146.70%) |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | Jun. 30, 2018 | Aug. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |
Guarantor Obligations [Line Items] | |||||||
Professional, general and workers' compensation insurance reserve | $ 19,800 | $ 19,800 | $ 21,000 | ||||
Expected insurance recoveries | 14,700 | $ 14,700 | 12,800 | ||||
Federal effective tax rate | 24.00% | ||||||
Long-term tax receivable agreement liability | 65,100 | $ 65,100 | 65,100 | ||||
Net long-term tax receivable agreement liability | 47,800 | 47,800 | $ 44,300 | ||||
Contingent acquisition expense | $ 605 | 503 | 1,510 | ||||
Cease-use liability | $ 1,400 | $ 1,400 | |||||
Estimated severance costs incurred | $ 4,500 | ||||||
Predecessor | |||||||
Guarantor Obligations [Line Items] | |||||||
Contingent acquisition expense | $ 1,210 | $ 5,057 | |||||
Materially More Restrictive | LIBOR | |||||||
Guarantor Obligations [Line Items] | |||||||
Debt instrument, basis spread on variable rate | 5.00% | ||||||
Not Materially More Restrictive | LIBOR | |||||||
Guarantor Obligations [Line Items] | |||||||
Debt instrument, basis spread on variable rate | 3.00% |
Segment Reporting - Revenues by
Segment Reporting - Revenues by Reportable Segment (Details) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2017USD ($) | Aug. 31, 2017USD ($) | Sep. 30, 2018USD ($) | Aug. 31, 2017USD ($) | Sep. 30, 2018USD ($)segment | |
Segment Reporting Information [Line Items] | |||||
Number of operating segments | segment | 3 | ||||
Revenues | $ 132,258 | $ 443,932 | $ 1,306,076 | ||
Total segment adjusted EBITDA | 14,842 | 58,988 | 161,465 | ||
Predecessor | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 174,079 | $ 748,615 | |||
Total segment adjusted EBITDA | 8,402 | 85,564 | |||
Operating Segments | Surgical Facility Services | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 125,595 | 420,514 | 1,234,984 | ||
Total segment adjusted EBITDA | 20,947 | 74,525 | 216,540 | ||
Operating Segments | Ancillary Services | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 5,775 | 20,719 | 62,655 | ||
Total segment adjusted EBITDA | (1,265) | 875 | 2,925 | ||
Operating Segments | Optical Services | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 888 | 2,699 | 8,437 | ||
Total segment adjusted EBITDA | 193 | 571 | 2,087 | ||
Operating Segments | Predecessor | Surgical Facility Services | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 167,765 | 688,725 | |||
Total segment adjusted EBITDA | 27,726 | 125,912 | |||
Operating Segments | Predecessor | Ancillary Services | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 4,409 | 52,261 | |||
Total segment adjusted EBITDA | (10,737) | (6,526) | |||
Operating Segments | Predecessor | Optical Services | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 1,905 | 7,629 | |||
Total segment adjusted EBITDA | 555 | 2,214 | |||
All Other | |||||
Segment Reporting Information [Line Items] | |||||
Total segment adjusted EBITDA | $ (5,033) | $ (16,983) | $ (60,087) | ||
All Other | Predecessor | |||||
Segment Reporting Information [Line Items] | |||||
Total segment adjusted EBITDA | $ (9,142) | $ (36,036) |
Segment Reporting - Segment Ope
Segment Reporting - Segment Operating Income (Details) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | Aug. 31, 2017 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | |||||
Total segment adjusted EBITDA | $ 14,842 | $ 58,988 | $ 161,465 | ||
Net income attributable to non-controlling interests | 6,492 | 23,000 | 69,418 | ||
Depreciation and amortization | (3,330) | (16,945) | (49,379) | ||
Interest expense, net | (15,883) | (37,159) | (107,368) | ||
Equity-based compensation | (1,683) | (1,526) | (6,303) | ||
Contingent acquisition compensation expense | (605) | (503) | (1,510) | ||
Transaction, integration and practice acquisition costs | (3,457) | (7,489) | (25,419) | ||
Gain on litigation settlement | 0 | 0 | 0 | ||
Gain on acquisition escrow release | 0 | 0 | 0 | ||
Reserve adjustments | 0 | 2,109 | (2,670) | ||
Loss on disposals and deconsolidations, net | (333) | (12,631) | (15,875) | ||
Gain on amendment to tax receivable agreement | 1,098 | 0 | 0 | ||
Loss on debt refinancing | 0 | 0 | 0 | ||
Income (loss) before income taxes | (2,859) | 7,844 | 22,359 | ||
Transaction and integration costs | 2,983 | 7,099 | 23,771 | ||
Practice acquisition costs | $ 500 | $ 400 | $ 1,600 | ||
Predecessor | |||||
Segment Reporting Information [Line Items] | |||||
Total segment adjusted EBITDA | $ 8,402 | $ 85,564 | |||
Net income attributable to non-controlling interests | 8,813 | 42,087 | |||
Depreciation and amortization | (7,599) | (30,124) | |||
Interest expense, net | (18,147) | (68,929) | |||
Equity-based compensation | (1,628) | (3,697) | |||
Contingent acquisition compensation expense | (1,210) | (5,057) | |||
Transaction, integration and practice acquisition costs | (2,949) | (7,677) | |||
Gain on litigation settlement | 0 | 3,794 | |||
Gain on acquisition escrow release | 1,000 | 1,000 | |||
Reserve adjustments | 0 | 0 | |||
Loss on disposals and deconsolidations, net | (114) | (1,715) | |||
Gain on amendment to tax receivable agreement | 15,294 | 15,294 | |||
Loss on debt refinancing | (18,211) | (18,211) | |||
Income (loss) before income taxes | (16,349) | 12,329 | |||
Transaction and integration costs | 2,343 | 5,584 | |||
Practice acquisition costs | $ 600 | $ 2,100 |
Segment Reporting - Assets by O
Segment Reporting - Assets by Operating Segment (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Segment Reporting Information [Line Items] | ||
Assets | $ 4,558,664 | $ 4,622,773 |
Operating Segments | Surgical Facility Services | ||
Segment Reporting Information [Line Items] | ||
Assets | 4,015,094 | 4,072,521 |
Operating Segments | Ancillary Services | ||
Segment Reporting Information [Line Items] | ||
Assets | 110,588 | 104,274 |
Operating Segments | Optical Services | ||
Segment Reporting Information [Line Items] | ||
Assets | 34,811 | 48,309 |
All Other | ||
Segment Reporting Information [Line Items] | ||
Assets | $ 398,171 | $ 397,669 |
Segment Reporting - Cash Purcha
Segment Reporting - Cash Purchases of Property and Equipment (Details) - USD ($) $ in Thousands | 1 Months Ended | 8 Months Ended | 9 Months Ended |
Sep. 30, 2017 | Aug. 31, 2017 | Sep. 30, 2018 | |
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | $ 1,840 | $ 26,618 | |
Operating Segments | Surgical Facility Services | |||
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | 1,613 | 21,590 | |
Operating Segments | Ancillary Services | |||
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | 2 | 334 | |
Operating Segments | Optical Services | |||
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | 23 | 42 | |
All Other | |||
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | $ 202 | $ 4,652 | |
Predecessor | |||
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | $ 18,773 | ||
Predecessor | Operating Segments | Surgical Facility Services | |||
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | 14,582 | ||
Predecessor | Operating Segments | Ancillary Services | |||
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | 1,875 | ||
Predecessor | Operating Segments | Optical Services | |||
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | 73 | ||
Predecessor | All Other | |||
Segment Reporting Information [Line Items] | |||
Purchases of property and equipment, net | $ 2,243 |
Subsequent Events (Details)
Subsequent Events (Details) | Oct. 31, 2018USD ($)surgery_center | Oct. 23, 2018USD ($) | Nov. 09, 2018USD ($)swap | Sep. 30, 2018USD ($)swap |
Subsequent Event [Line Items] | ||||
Number of interest rate swaps | swap | 1 | |||
Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Number of interest rate swaps | swap | 2 | |||
Senior Notes | Incremental Term Loan | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument face amount | $ 180,000,000 | |||
Federal Funds Rate | Senior Notes | Incremental Term Loan | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, basis spread on variable rate | 0.50% | |||
One Month LIBOR | Senior Notes | Incremental Term Loan | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, basis spread on variable rate | 1.00% | |||
Base Rate | Senior Notes | Incremental Term Loan | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, basis spread on variable rate | 2.00% | |||
Interest Rate Swap One | ||||
Subsequent Event [Line Items] | ||||
Derivative notional amount | $ 330,000,000 | |||
Interest Rate Swap One | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Derivative notional amount | $ 330,000,000 | |||
Interest Rate Swap Two | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Derivative notional amount | $ 240,000,000 | |||
Three Surgery Centers | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Number of businesses acquired | surgery_center | 3 | |||
Business acquisition total purchase price | $ 50,000,000 | |||
Minimum | LIBOR | Senior Notes | Incremental Term Loan | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, basis spread on variable rate | 3.00% | |||
Minimum | Margin Rate | Senior Notes | Incremental Term Loan | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, basis spread on variable rate | 2.00% | |||
Maximum | LIBOR | Senior Notes | Incremental Term Loan | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, basis spread on variable rate | 3.25% | |||
Maximum | Margin Rate | Senior Notes | Incremental Term Loan | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Debt instrument, basis spread on variable rate | 2.25% |