Cover
Cover - shares | 6 Months Ended | |
Jun. 30, 2023 | Jul. 25, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-37576 | |
Entity Registrant Name | Surgery Partners, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 47-3620923 | |
Entity Address, Address Line One | 340 Seven Springs Way, Suite 600 | |
Entity Address, City or Town | Brentwood | |
Entity Address, State or Province | TN | |
Entity Address, Postal Zip Code | 37027 | |
City Area Code | 615 | |
Local Phone Number | 234-5900 | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Trading Symbol | SGRY | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 126,498,920 | |
Entity Central Index Key | 0001638833 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Jun. 30, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 177.4 | $ 282.9 |
Accounts receivable | 449.9 | 456.3 |
Inventories | 70.3 | 71.4 |
Prepaid expenses | 39.3 | 31.4 |
Other current assets | 73.3 | 79 |
Total current assets | 810.2 | 921 |
Property and equipment, net of accumulated depreciation of $403.4 and $374.3, respectively | 826 | 876.6 |
Goodwill and other intangible assets, net | 4,291.2 | 4,179.4 |
Investments in and advances to affiliates | 192.2 | 190.3 |
Right-of-use operating lease assets | 267.2 | 279.1 |
Long-term deferred tax assets | 105.7 | 91.5 |
Other long-term assets | 128.1 | 144.2 |
Total assets | 6,620.6 | 6,682.1 |
Current liabilities: | ||
Accounts payable | 131.5 | 151.6 |
Accrued payroll and benefits | 64.3 | 68.9 |
Other current liabilities | 198.1 | 210.1 |
Current maturities of long-term debt | 64.7 | 62.8 |
Total current liabilities | 458.6 | 493.4 |
Long-term debt, less current maturities | 2,504.8 | 2,559 |
Right-of-use operating lease liabilities | 264.1 | 271.4 |
Other long-term liabilities | 82.2 | 75.4 |
Non-controlling interests—redeemable | 328.1 | 342 |
Stockholders' equity: | ||
Preferred stock, $0.01 par value; shares authorized - 20,310,000; shares issued or outstanding - none | 0 | 0 |
Common stock, $0.01 par value; shares authorized - 300,000,000; shares issued and outstanding - 126,492,822 and 125,960,834, respectively | 1.3 | 1.3 |
Additional paid-in capital | 2,501.4 | 2,478 |
Accumulated other comprehensive income | 78.8 | 76.2 |
Retained deficit | (563.3) | (557.3) |
Total Surgery Partners, Inc. stockholders' equity | 2,018.2 | 1,998.2 |
Non-controlling interests—non-redeemable | 964.6 | 942.7 |
Total stockholders' equity | 2,982.8 | 2,940.9 |
Total liabilities and stockholders' equity | $ 6,620.6 | $ 6,682.1 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Jun. 30, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Accumulated depreciation on property and equipment | $ 403.4 | $ 374.3 |
Preferred stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (shares) | 20,310,000 | 20,310,000 |
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) | 126,492,822 | 125,960,834 |
Common stock, shares outstanding (shares) | 126,492,822 | 125,960,834 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | ||
Income Statement [Abstract] | |||||
Revenues | $ 667,600,000 | $ 615,400,000 | $ 1,333,800,000 | $ 1,211,600,000 | |
Operating expenses: | |||||
Salaries and benefits | 195,200,000 | 181,900,000 | 397,400,000 | 360,800,000 | |
Supplies | 182,200,000 | 173,500,000 | 370,600,000 | 345,100,000 | |
Professional and medical fees | 72,900,000 | 66,700,000 | 147,500,000 | 130,300,000 | |
Lease expense | 21,800,000 | 20,200,000 | 43,200,000 | 40,200,000 | |
Other operating expenses | 41,400,000 | 38,500,000 | 87,000,000 | 75,800,000 | |
Cost of revenues | 513,500,000 | 480,800,000 | 1,045,700,000 | 952,200,000 | |
General and administrative expenses | 31,200,000 | 26,100,000 | 63,200,000 | 55,600,000 | |
Depreciation and amortization | 24,400,000 | 28,000,000 | 58,100,000 | 55,400,000 | |
Transaction and integration costs | 12,000,000 | 8,200,000 | 24,500,000 | 15,300,000 | |
Grant funds | 0 | (100,000) | (1,100,000) | (1,300,000) | |
Net (gain) loss on disposals, consolidations and deconsolidations | (8,800,000) | 1,100,000 | 1,700,000 | 1,000,000 | |
Equity in earnings of unconsolidated affiliates | (2,600,000) | (2,600,000) | (5,900,000) | (5,700,000) | |
Litigation settlements | 1,500,000 | 0 | 4,500,000 | (32,800,000) | |
Other income, net | (1,200,000) | (2,600,000) | (900,000) | (5,000,000) | |
Total operating expenses | 570,000,000 | 538,900,000 | 1,189,800,000 | 1,034,700,000 | |
Operating income | 97,600,000 | 76,500,000 | 144,000,000 | 176,900,000 | |
Interest expense, net | (47,700,000) | (56,900,000) | (94,500,000) | (113,200,000) | |
Income before income taxes | 49,900,000 | 19,600,000 | 49,500,000 | 63,700,000 | |
Income tax benefit (expense) | 7,800,000 | (4,300,000) | 9,400,000 | (5,600,000) | |
Net income | 57,700,000 | 15,300,000 | 58,900,000 | 58,100,000 | |
Less: Net income attributable to non-controlling interests | (38,800,000) | (33,700,000) | (64,900,000) | (64,300,000) | |
Net income (loss) attributable to Surgery Partners, Inc. | $ 18,900,000 | $ (18,400,000) | $ (6,000,000) | $ (6,200,000) | |
Net income (loss) per share attributable to common stockholders | |||||
Basic (in USD per share) | $ 0.15 | $ (0.21) | $ (0.05) | $ (0.07) | |
Diluted (in USD per share) | [1] | $ 0.15 | $ (0.21) | $ (0.05) | $ (0.07) |
Weighted average common shares outstanding | |||||
Basic (shares) | 125,718 | 88,900 | 125,463 | 88,450 | |
Diluted (shares) | [1] | 127,370 | 88,900 | 125,463 | 88,450 |
[1]The impact of potentially dilutive securities for the three months ended June 30, 2022 and the six months ended June 30, 2023 and 2022, was not considered because the effect would be anti-dilutive. |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 57.7 | $ 15.3 | $ 58.9 | $ 58.1 |
Other comprehensive income, net of tax: | ||||
Derivative activity, net of tax of $0 | 13.9 | 19 | 2.6 | 75.8 |
Comprehensive income | 71.6 | 34.3 | 61.5 | 133.9 |
Less: Comprehensive income attributable to non-controlling interests | (38.8) | (33.7) | (64.9) | (64.3) |
Comprehensive income (loss) attributable to Surgery Partners, Inc. | $ 32.8 | $ 0.6 | $ (3.4) | $ 69.6 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Statement of Comprehensive Income [Abstract] | ||||
Derivative activity, tax | $ 0 | $ 0 | $ 0 | $ 0 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions | Total | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive (Loss) Income | Retained Deficit | Non-Controlling Interests— Non-Redeemable |
Balance at beginning of period (shares) at Dec. 31, 2021 | 89,333,000 | |||||
Balance at beginning of period at Dec. 31, 2021 | $ 1,969.6 | $ 0.9 | $ 1,622.3 | $ (31.5) | $ (502.7) | $ 880.6 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net (loss) income | 32.2 | 12.2 | 20 | |||
Equity-based compensation (shares) | 572,000 | |||||
Equity-based compensation | 7.7 | 7.7 | ||||
Other Comprehensive income (loss) | 56.8 | 56.8 | ||||
Acquisition and disposal of shares of non-controlling interests, net | (29.1) | (4.8) | (24.3) | |||
Distributions to non-controlling interests—non-redeemable holders | (24.6) | (24.6) | ||||
Balance at end of period (shares) at Mar. 31, 2022 | 89,905,000 | |||||
Balance at end of period at Mar. 31, 2022 | 2,012.6 | $ 0.9 | 1,625.2 | 25.3 | (490.5) | 851.7 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net (loss) income | 4.3 | (18.4) | 22.7 | |||
Equity-based compensation (shares) | 30,000 | |||||
Equity-based compensation | 4.4 | 4.4 | ||||
Other Comprehensive income (loss) | 19 | 19 | ||||
Acquisition and disposal of shares of non-controlling interests, net | 27.9 | (10.8) | 38.7 | |||
Distributions to non-controlling interests—non-redeemable holders | (27.7) | (27.7) | ||||
Balance at end of period (shares) at Jun. 30, 2022 | 89,935,000 | |||||
Balance at end of period at Jun. 30, 2022 | $ 2,040.5 | $ 0.9 | 1,618.8 | 44.3 | (508.9) | 885.4 |
Balance at beginning of period (shares) at Dec. 31, 2022 | 125,960,834 | 125,961,000 | ||||
Balance at beginning of period at Dec. 31, 2022 | $ 2,940.9 | $ 1.3 | 2,478 | 76.2 | (557.3) | 942.7 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net (loss) income | (6.7) | (25) | 18.3 | |||
Equity-based compensation (shares) | 519,000 | |||||
Equity-based compensation | 3.7 | 3.7 | ||||
Other Comprehensive income (loss) | (11.3) | (11.3) | ||||
Acquisition and disposal of shares of non-controlling interests, net | 46.1 | (3.6) | 49.7 | |||
Distributions to non-controlling interests—non-redeemable holders | (30.2) | (30.2) | ||||
Balance at end of period (shares) at Mar. 31, 2023 | 126,480,000 | |||||
Balance at end of period at Mar. 31, 2023 | 2,942.5 | $ 1.3 | 2,478.1 | 64.9 | (582.3) | 980.5 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net (loss) income | 46.6 | 19 | 27.6 | |||
Equity-based compensation (shares) | 13,000 | |||||
Equity-based compensation | 4.5 | 4.5 | ||||
Other Comprehensive income (loss) | 13.9 | 13.9 | ||||
Acquisition and disposal of shares of non-controlling interests, net | (0.9) | 18.8 | (19.7) | |||
Distributions to non-controlling interests—non-redeemable holders | $ (23.8) | (23.8) | ||||
Balance at end of period (shares) at Jun. 30, 2023 | 126,492,822 | 126,493,000 | ||||
Balance at end of period at Jun. 30, 2023 | $ 2,982.8 | $ 1.3 | $ 2,501.4 | $ 78.8 | $ (563.3) | $ 964.6 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Cash flows from operating activities: | ||
Net income | $ 58.9 | $ 58.1 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 58.1 | 55.4 |
Non-cash lease expense | 17.9 | 17.1 |
Non-cash interest expense, net | 13.1 | 12.4 |
Equity-based compensation expense | 8.8 | 8 |
Net loss on disposals, consolidations and deconsolidations | 1.7 | 1 |
Deferred income taxes | (11.5) | 4.9 |
Equity in earnings of unconsolidated affiliates, net of distributions received | (0.8) | (0.4) |
Changes in operating assets and liabilities, net of acquisitions and divestitures: | ||
Accounts receivable | (5.1) | 5.4 |
Medicare accelerated payments and deferred governmental grants | (1.2) | (40.2) |
Other operating assets and liabilities | (13.3) | 0.2 |
Net cash provided by operating activities | 126.6 | 121.9 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (50.1) | (40.6) |
Payments for acquisitions, net of cash acquired | (43.5) | (74.9) |
Proceeds from disposals of facilities and other assets | 26.1 | 0 |
Purchases of equity investments | (48.4) | (65.8) |
Proceeds from sales of equity investments | 0 | 11.5 |
Other investing activities | (26) | (11.6) |
Net cash used in investing activities | (141.9) | (181.4) |
Cash flows from financing activities: | ||
Principal payments on long-term debt | (31.5) | (33.3) |
Borrowings of long-term debt | 26.5 | 12.4 |
Payments of debt issuance costs | (1.4) | 0 |
Distributions to non-controlling interest holders | (76.9) | (75.2) |
Receipts (payments) related to ownership transactions with non-controlling interest holders | 0.6 | (4) |
Other financing activities | (7.5) | (2.9) |
Net cash used in financing activities | (90.2) | (103) |
Net decrease in cash and cash equivalents | (105.5) | (162.5) |
Cash and cash equivalents at beginning of period | 282.9 | 389.9 |
Cash and cash equivalents at end of period | $ 177.4 | $ 227.4 |
Organization and Summary of Acc
Organization and Summary of Accounting Policies | 6 Months Ended |
Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Summary of Accounting Policies | Organization and Summary of 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, general surgery, ophthalmology, orthopedics and pain management. The Company's surgical hospitals also provide services such as diagnostic imaging, laboratory, obstetrics, oncology, pharmacy, physical therapy and wound care. Ancillary services are comprised of multi-specialty physician practices, urgent care facilities and anesthesia services. Unless the context otherwise indicates, Surgery Partners, Inc. and its subsidiaries are referred to herein as "Surgery Partners," "we," "us," "our" or the "Company." As of June 30, 2023, the Company owned or operated a portfolio of 152 surgical facilities, comprised of 134 ASCs and 18 surgical hospitals in 32 states. The Company owns these facilities in partnership with physicians and, in some cases, health care systems in the markets and communities it serves. The Company owned a majority interest in 92 of these surgical facilities and consolidated 119 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 year ended December 31, 2022 (the "2022 Annual Report on Form 10-K"). 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. 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. Revenues The Company's revenues generally relate to contracts with patients in which the performance obligations are to provide health care services. The Company recognizes revenues in the period in which its obligations to provide health care services are satisfied and reports the amount that reflects the consideration the Company expects to be entitled to receive. The contractual relationships with patients, in most cases, also involve a third-party payor (e.g., Medicare, Medicaid and private insurance organizations, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by or negotiated with the third-party payors. The payment arrangements with third-party payors for the services provided to the related patients typically specify payments at amounts less than the Company's standard charges. 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: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Patient service revenues: Surgical facilities revenues 96.0 % 95.9 % 96.0 % 95.8 % Ancillary services revenues 2.6 % 2.8 % 2.5 % 2.8 % Total patient service revenues 98.6 % 98.7 % 98.5 % 98.6 % Other service revenues 1.4 % 1.3 % 1.5 % 1.4 % Total revenues 100.0 % 100.0 % 100.0 % 100.0 % Patient service revenues. This revenue is related to charging facility fees in exchange for providing patient care. The fee charged for health care 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 and discounts from third-party payors. 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. Other service 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 and other non-patient services. The management 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. 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 millions): Three Months Ended June 30, 2023 2022 Amount % Amount % Patient service revenues: Private insurance $ 341.6 51.9 % $ 309.5 51.0 % Government 278.2 42.3 % 258.1 42.5 % Self-pay 17.1 2.6 % 16.5 2.7 % Other (1) 21.1 3.2 % 23.2 3.8 % Total patient service revenues 658.0 100.0 % 607.3 100.0 % Other service revenues 9.6 8.1 Total revenues $ 667.6 $ 615.4 Six Months Ended June 30, 2023 2022 Amount % Amount % Patient service revenues: Private insurance $ 677.2 51.5 % $ 608.6 50.9 % Government 566.0 43.1 % 507.0 42.4 % Self-pay 32.7 2.5 % 33.2 2.8 % Other (1) 38.5 2.9 % 46.2 3.9 % Total patient service revenues 1,314.4 100.0 % 1,195.0 100.0 % Other service revenues 19.4 16.6 Total revenues $ 1,333.8 $ 1,211.6 (1) Other is comprised of anesthesia service agreements, automobile liability, letters of protection and other payor types. Accounts Receivable Accounts receivable from third-party payors are recorded net of estimated implicit price concessions, which are estimated based on the historical trend of the Company's surgical hospitals’ cash collections and contractual write-offs, and for the Company's surgical facilities in general, established fee schedules, relationships with payors and procedure statistics. While changes in estimated reimbursement from third-party payors remain a possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on its financial condition or results of operations. Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), private insurance organizations, 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 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. Amounts are classified outside of self-pay if the Company has an agreement with the third-party payor or has verified a patient’s coverage prior to services rendered. The Company's policy is to collect co-payments and deductibles prior to providing medical services. 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's collection policies and procedures are based on the type of payor, size of claim and estimated collection percentage for each patient account. The Company analyzes accounts receivable at each of its surgical facilities to ensure the proper collection and aged category. Collection efforts include direct contact with third-party payors or patients, written correspondence and the use of legal or collection agency assistance, as required. 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 carryforward exists, the Company makes a determination as to whether the 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 our expectations for future operating results on a consolidated basis or at the state jurisdiction level vary from actual results due to changes in health care regulations, general economic conditions, or other factors, we may need to adjust the valuation allowance, for all or a portion of our deferred tax assets. Our income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in our valuation allowance in the period when the change in circumstances occurs. These changes could have a significant impact on our future earnings. 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's effective tax rate was (19.0)% for the six months ended June 30, 2023 compared to 8.8% for the six months ended June 30, 2022. For the six months ended June 30, 2023, the effective tax rate differed from the federal corporate tax rate of 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and discrete tax benefits of (i) $1.8 million related to the vesting of restricted stock awards, and (ii) $15.9 million related to entity divestitures. For the six months ended June 30, 2022, the effective tax rate differed from 21% primarily due to earnings attributable to non-controlling interests, an increase in the Company’s valuation allowance attributable to interest expense limitations, and discrete tax benefits of (i) $4.6 million related to the vesting of restricted stock awards, (ii) $1.8 million attributable to non-recurring earnings’ impact on the Company’s valuation allowance, and (iii) $1.0 million related to entity divestitures. Based upon the application of interim accounting guidance, the tax rate as a percentage of net income after income attributable to non-controlling interests will vary based upon the relative net income from period to period. Goodwill Goodwill represents the excess of the fair value of the consideration provided in an acquisition plus the fair value of any non-controlling interests 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 and disposals for the six months ended June 30, 2023 is included in Note 2. "Acquisitions and Disposals." A summary of activity related to goodwill for the six months ended June 30, 2023 is as follows (in millions): Balance at December 31, 2022 $ 4,137.1 Acquisitions, including post acquisition adjustments 134.6 Disposals (35.8) Balance at June 30, 2023 $ 4,235.9 A detailed evaluation of potential impairment indicators was performed as of June 30, 2023, which specifically considered recent increases in interest rates, inflation risk and market volatility. On the basis of available evidence as of June 30, 2023, no indicators of impairment were identified. Future estimates of fair value could be adversely affected if the actual outcome of one or more of the Company's assumptions changes materially in the future, including a material decline in the Company’s stock price and the fair value of its long-term debt, lower than expected surgical case volumes, higher market interest rates or increased operating costs. Such changes impacting the calculation of fair value could result in a material impairment charge in the future. Derivative Instruments and Hedging Activities The Company records all derivatives on the balance sheet at fair value and any financing elements treated as debt instruments are recorded at amortized cost. 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 risks even though hedge accounting does not apply or the Company elects not to apply hedge accounting. 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 non-controlling interests—redeemable is as follows (in millions): Six Months Ended June 30, 2023 2022 Balance at beginning of period $ 342.0 $ 330.2 Net income attributable to non-controlling interests—redeemable 19.0 21.6 Acquisition of shares of non-controlling interests, net—redeemable (10.0) 12.9 Distributions to non-controlling interest—redeemable holders (22.9) (22.9) Balance at end of period $ 328.1 $ 341.8 Medicare Accelerated Payments and Deferred Governmental Grants The Company received grant funds distributed under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and other governmental assistance programs. The recognition of amounts received is conditioned upon attestation with terms and conditions that funds were used for COVID-19 related healthcare expenses or lost revenues. During the three and six months ended June 30, 2023, the Company recognized grant funds received as a reduction in operating expenses in the amount of none and $1.1 million, respectively. During the three and six months ended June 30, 2022, the Company recognized grant funds received as a reduction in operating expenses in the amount of $0.1 million and $1.3 million, respectively. There were no remaining unrecognized grant funds as of June 30, 2023. As of December 31, 2022 approximately $3 million of unrecognized grant funds received was reflected as a component of other current liabilities within the condensed consolidated balance sheets. The Company received accelerated payments under the Medicare Accelerated and Advance Payment Program. The payments received were deferred and included in the condensed consolidated balance sheets. As of June 30, 2023 and December 31, 2022, the remaining deferred accelerated payments was minimal. During the three and six months ended June 30, 2022, approximately $25 million and $43 million, respectively, was repaid in accordance with the terms of the program. These repayments are included as a component of the change in Medicare accelerated payments and deferred government grants in the condensed consolidated statements of cash flows. The Company’s accounting policies for relief received under the CARES Act and other governmental assistance programs, including the recognition of grant funds, is unchanged from the policies described in Note 1 to the Company’s consolidated financial statements included in the 2022 Annual Report on Form 10-K. 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 inputs classified into the following hierarchy: • Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These may include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. • Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, 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 under Level 3 calculations. A summary of the carrying amounts and estimated fair values of the Company's long-term debt follows (in millions): Carrying Amount Fair Value June 30, December 31, June 30, December 31, Senior secured term loan $ 1,370.2 $ 1,370.0 $ 1,366.8 $ 1,359.7 6.750% senior unsecured notes due 2025 $ 185.0 $ 185.0 $ 183.8 $ 183.4 10.000% senior unsecured notes due 2027 $ 320.0 $ 320.0 $ 326.4 $ 326.8 The fair values in the table above were based on Level 2 inputs using quoted prices for identical liabilities in inactive markets. The carrying amounts related to the Company's other long-term debt obligations, including finance lease obligations, approximate their fair values based on Level 3 inputs. Variable Interest Entities The condensed consolidated financial statements include the accounts of variable interest entities ("VIE") in which the Company is the primary beneficiary under the provisions of the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification 810, " Consolidation ". The Company has the power to direct the activities that most significantly impact a VIE's economic performance. Additionally, the Company would absorb the majority of the expected losses from any of these entities should such expected losses occur. As of June 30, 2023, the Company's consolidated VIEs consisted of seven surgical facilities and five 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 June 30, 2023 and December 31, 2022 were $65.6 million and $64.9 million, respectively, and the total liabilities of the consolidated VIEs were $38.4 million and $40.9 million, respectively. |
Acquisitions and Disposals
Acquisitions and Disposals | 6 Months Ended |
Jun. 30, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Acquisitions and Disposals | Acquisitions and Disposals Acquisitions During the six months ended June 30, 2023: • The Company acquired a controlling interest in a surgical facility and a physician practice for aggregate cash consideration of $17.9 million, net of cash acquired, and non-cash consideration of $1.3 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities. In connection with these acquisitions, the Company preliminarily recognized non-controlling interests of $12.0 million and goodwill of $27.4 million. • The Company acquired a controlling interest in two surgical facilities and an in-development de novo surgical facility, which were previously accounted for as equity method investments, for aggregate cash consideration of $26.9 million, net of cash acquired. The Company also amended the operating agreement of a previously non-controlled surgical facility resulting in the Company obtaining a controlling interest in the facility. These transactions resulted in the consolidation of the previously non-consolidated entities. The previously held non-controlling interests were remeasured and recorded at fair value as of the dates of the transactions. The fair value measurement utilizes Level 3 inputs, which includes unobservable data. The acquisition date fair value of the previously held non-controlling interests was $27.3 million. As a result of increasing its ownership interest, the Company recognized a net loss of $7.1 million included in net (gain) loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the six months ended June 30, 2023. The net loss was determined based on the difference between the fair value of the Company's previously held non-controlling interests in the entities and the carrying values immediately prior to the transactions. In connection with the consolidation of these facilities, the Company preliminarily recognized non-controlling interests of $55.2 million and goodwill of $106.3 million. • The Company acquired non-controlling interests in four surgical facilities and two in-development de novo surgical facilities for aggregate cash consideration of $48.4 million. The non-controlling interests were accounted for as equity method investments and recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets. The Company also paid cash consideration of $20.0 million to acquire management rights from the prior management service provider related to three of the aforementioned surgical facilities. Management rights agreements are accounted for and recorded as a component of intangible assets, net in the accompanying condensed consolidated balance sheets. The cash paid to acquire the management rights is presented as a component of other investing activities on the condensed consolidated statements of cash flows. During the six months ended June 30, 2022: • The Company acquired a controlling interest in four surgical facilities, two of which were merged into existing surgical facilities, for aggregate cash consideration of $74.9 million, net of cash acquired, and non-cash consideration of $2.6 million, which consisted of a non-controlling interest in one of the Company's existing surgical facilities. In connection with the acquisitions the Company preliminarily recognized non-controlling interests of $41.5 million and goodwill of $114.4 million. • The Company acquired non-controlling interests in five surgical facilities and four in-development de novo surgical facilities for aggregate cash consideration of $65.8 million. The non-controlling interests were accounted for as equity method investments and recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets. Disposals During the six months ended June 30, 2023: • The Company sold its interests in four surgical facilities for aggregate net cash proceeds of $30.4 million, a portion of which was held in escrow pursuant to the purchase agreements for such transactions. In connection with these transactions, the Company recognized a pre-tax gain of $26.7 million included in net (gain) loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the six months ended June 30, 2023. • The Company disposed of its non-controlling interests in a surgical facility and in-development de novo surgical facility, which were previously accounted for as equity method investments, for cash proceeds of $1.5 million. In connection with these transactions, the Company recognized a pre-tax loss of $13.7 million included in net (gain) loss on disposals, consolidations and deconsolidations in the condensed consolidated statements of operations for the six months ended June 30, 2023. During the six months ended June 30, 2022: • The Company sold its interests in a surgical facility, which was previously accounted for as an equity method investment, for net cash proceeds of $11.5 million, and recognized a pre-tax loss of $0.4 million included in net (gain) loss on disposals and consolidations in the condensed consolidated statements of operations for the six months ended June 30, 2022. • The Company contributed its interests in two surgical facilities as non-cash consideration for non-controlling interests in two new separate entities. As a result of these transactions, the Company lost control of the previously controlled surgical facilities but retains a non-controlling interest in each, resulting in the deconsolidation of the previously consolidated entities. The remaining non-controlling interests were accounted for as equity method investments, and initially measured and recorded at fair value as of the dates of the transactions. The fair value measurement utilizes Level 3 inputs, which includes unobservable data, to measure the fair value of the retained non-controlling interests. 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 investments of $9.8 million was recorded as a component of investments in and advances to affiliates in the accompanying condensed consolidated balance sheets. Further, based on the valuation, the transactions resulted in a pretax net loss on deconsolidations of $5.6 million, which is included in net (gain) loss on disposals, consolidations and deconsolidations in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2022. The net loss was determined based on the difference between the fair value of the Company’s retained interests in the entities and the carrying values of both the tangible and intangible assets of the entities immediately prior to the transactions. |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 30, 2023 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt A summary of long-term debt follows (in millions): June 30, December 31, Senior secured term loan (1) $ 1,370.2 $ 1,370.0 6.750% senior unsecured notes due 2025 185.0 185.0 10.000% senior unsecured notes due 2027 320.0 320.0 Notes payable and other secured loans 178.5 171.3 Finance lease obligations 524.9 585.7 Less: unamortized debt issuance costs and discounts (9.1) (10.2) Total debt 2,569.5 2,621.8 Less: Current maturities 64.7 62.8 Total long-term debt $ 2,504.8 $ 2,559.0 (1) Includes unamortized fair value discount of $1.9 million and $2.1 million as of June 30, 2023 and December 31, 2022, respectively. On January 13, 2023, the Company entered into an amendment to its credit agreement, dated as of August 31, 2017 (the "Credit Agreement"), to provide a $203.8 million increase in the outstanding commitments under its revolving credit facility (the "Revolver"). As of June 30, 2023, the Company's availability on its Revolver was $545.9 million (including outstanding letters of credit of $7.9 million). There were no outstanding borrowings under the Revolver as of both June 30, 2023 and December 31, 2022. |
Leases
Leases | 6 Months Ended |
Jun. 30, 2023 | |
Leases [Abstract] | |
Leases | Leases The Company's operating leases are primarily for real estate, including medical office buildings, and corporate and other administrative offices. The Company's finance leases are primarily for medical equipment and information technology and telecommunications assets. The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets (in millions): Classification in Consolidated Balance Sheets June 30, 2023 December 31, 2022 Assets: Operating lease assets Right-of-use operating lease assets $ 267.2 $ 279.1 Finance lease assets Property and equipment, net of accumulated depreciation 461.6 529.6 Total leased assets $ 728.8 $ 808.7 Liabilities: Operating lease liabilities: Current Other current liabilities $ 37.2 $ 36.5 Long-term Right-of-use operating lease liabilities 264.1 271.4 Total operating lease liabilities 301.3 307.9 Finance lease liabilities: Current Current maturities of long-term debt 20.9 20.9 Long-term Long-term debt, less current maturities 504.0 564.8 Total finance lease liabilities 524.9 585.7 Total lease liabilities $ 826.2 $ 893.6 The following table presents the components of the Company's lease expense included in the condensed consolidated statement of operations (in millions): Six Months Ended June 30, 2023 2022 Operating lease costs $ 33.2 $ 32.7 Finance lease costs: Amortization of leased assets 18.3 18.9 Interest on lease liabilities 23.8 19.7 Total finance lease costs 42.1 38.6 Variable and short-term lease costs 10.4 8.5 Total lease costs $ 85.7 $ 79.8 The following table presents supplemental cash flow information (dollars in millions): Six Months Ended June 30, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 32.2 $ 31.7 Operating cash outflows from finance leases $ 22.6 $ 19.6 Financing cash outflows from finance leases $ 12.6 $ 12.1 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 15.1 $ 31.1 Finance leases $ 23.6 $ 91.9 |
Leases | Leases The Company's operating leases are primarily for real estate, including medical office buildings, and corporate and other administrative offices. The Company's finance leases are primarily for medical equipment and information technology and telecommunications assets. The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets (in millions): Classification in Consolidated Balance Sheets June 30, 2023 December 31, 2022 Assets: Operating lease assets Right-of-use operating lease assets $ 267.2 $ 279.1 Finance lease assets Property and equipment, net of accumulated depreciation 461.6 529.6 Total leased assets $ 728.8 $ 808.7 Liabilities: Operating lease liabilities: Current Other current liabilities $ 37.2 $ 36.5 Long-term Right-of-use operating lease liabilities 264.1 271.4 Total operating lease liabilities 301.3 307.9 Finance lease liabilities: Current Current maturities of long-term debt 20.9 20.9 Long-term Long-term debt, less current maturities 504.0 564.8 Total finance lease liabilities 524.9 585.7 Total lease liabilities $ 826.2 $ 893.6 The following table presents the components of the Company's lease expense included in the condensed consolidated statement of operations (in millions): Six Months Ended June 30, 2023 2022 Operating lease costs $ 33.2 $ 32.7 Finance lease costs: Amortization of leased assets 18.3 18.9 Interest on lease liabilities 23.8 19.7 Total finance lease costs 42.1 38.6 Variable and short-term lease costs 10.4 8.5 Total lease costs $ 85.7 $ 79.8 The following table presents supplemental cash flow information (dollars in millions): Six Months Ended June 30, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 32.2 $ 31.7 Operating cash outflows from finance leases $ 22.6 $ 19.6 Financing cash outflows from finance leases $ 12.6 $ 12.1 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 15.1 $ 31.1 Finance leases $ 23.6 $ 91.9 |
Derivatives and Hedging Activit
Derivatives and Hedging Activities | 6 Months Ended |
Jun. 30, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives and Hedging Activities | Derivatives and Hedging Activities 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 and interest rate caps as part of its interest rate risk management strategy. During 2023 and 2022, such derivatives have been used to hedge the variable cash flows associated with existing variable-rate debt. The key terms of interest rate swaps and interest rate caps outstanding are presented below: June 30, 2023 December 31, 2022 Description Effective Date Notional Amount (in millions) Status Notional Amount (in millions) Status Maturity Date Pay-fixed swap May 7, 2021 $ 435.0 Active $ 435.0 Active March 31, 2025 Pay-fixed swap May 7, 2021 330.0 Active 330.0 Active March 31, 2025 Pay-fixed swap May 7, 2021 435.0 Active 435.0 Active March 31, 2025 Interest rate cap September 30, 2021 155.2 Active 159.1 Active March 31, 2025 Interest rate cap September 30, 2021 8.9 Active 159.1 Active March 31, 2025 Pay-fixed swap November 30, 2018 165.0 Active 165.0 Active November 30, 2023 Pay-fixed swap November 30, 2018 120.0 Active 120.0 Active November 30, 2023 Pay-fixed swap June 28, 2019 150.0 Active 150.0 Active November 30, 2023 Receive-fixed swap April 30, 2021 (165.0) Active (165.0) Active November 30, 2023 Receive-fixed swap April 30, 2021 (120.0) Active (120.0) Active November 30, 2023 Receive-fixed swap April 30, 2021 (150.0) Active (150.0) Active November 30, 2023 $ 1,364.1 $ 1,518.2 As of June 30, 2023, the Company had nine interest rate swaps with a total net notional amount of $1.2 billion. Of the nine interest rate swaps, three are pay-fixed, receive 1-Month LIBOR (subject to a minimum of 0.75%) interest rate swaps designated in cash flow hedging relationships with a total notional amount of $1.2 billion and a termination date of March 31, 2025. The remaining six interest rate swaps are undesignated and consist of three pay-fixed, receive 1-Month LIBOR (subject to a minimum of 1.00%) interest rate swaps and three pay 1-Month LIBOR (subject to a minimum of 1.00%), receive-fixed interest rate swaps with a termination date of November 30, 2023. The pay-floating, receive-fixed swaps are designed to economically offset the undesignated pay-fixed, receive-floating swaps. As of June 30, 2023, the Company had two interest rate caps designated in cash flow hedging relationships with a total notional amount of $164.1 million. The interest rate caps each have a termination date of March 31, 2025. During the six months ended June 30, 2023, the Company partially terminated a previously undesignated portion of one of its interest rate caps. In connection with the termination, the Company received $8.6 million, which is included as a component of operating activities in the condensed consolidated statements of cash flows for the six months ended June 30, 2023. The pay-fixed, receive floating interest rate swaps did not meet the requirements to be considered derivatives in their entirety as a result of the financing component. Accordingly, the swaps are considered hybrid instruments, consisting of a financing element treated as a debt instrument and an embedded at-market derivative that was designated as a cash flow hedge. Within the Company’s condensed consolidated balance sheets, the financing elements treated as debt instruments described above are carried at amortized cost and the embedded at-market derivatives and the undesignated swaps are recorded at fair value. The cash flows related to the portion treated as debt are classified as financing activities in the condensed consolidated statements of cash flows while the portion treated as an at-market derivative are classified as operating activities. Cash settlements related to the undesignated swaps will offset and are classified as operating activities in the condensed consolidated cash flows. Within the Company’s condensed consolidated balance sheets, the interest rate caps, including the undesignated portion, are recorded at fair value. The cash flows related to the interest rate caps, including the undesignated portion, are classified as operating activities in the condensed consolidated statements of cash flows. Our interest rate swap agreements, excluding the portion treated as debt, are recognized at fair value in the condensed consolidated balance sheets and are valued using pricing models that rely on market observable inputs such as yield curve data, which are classified as Level 2 inputs within the fair value hierarchy. The fair value of the interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The interest rate caps are classified using Level 2 inputs within the fair value hierarchy. 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 ("OCI") 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. Amounts reported in accumulated OCI 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 $47.4 million will be reclassified as a decrease to interest expense. The following table presents the fair values of our derivatives and their location on the condensed consolidated balance sheets (in millions): June 30, 2023 December 31, 2022 Location Assets Liabilities Assets Liabilities Derivatives not designated as hedging instruments Interest rate caps Other long-term assets $ — $ — $ 9.0 $ — Interest rate swaps Other long-term assets 4.8 — 8.5 — Interest rate swaps Other long-term liabilities — 4.8 — 8.5 Derivatives in cash flow hedging relationships Interest rate caps Other long-term assets 9.4 — 10.4 — Interest rate swaps Other long-term assets 78.2 — 85.5 — Interest rate swaps Other long-term liabilities (1) — 24.8 — 31.9 Total $ 92.4 $ 29.6 $ 113.4 $ 40.4 (1) The balance is related to the financing component of the pay-fixed, receive floating interest rate swaps. The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and condensed consolidated statement of operations (in millions): Three Months Ended June 30, Six Months Ended June 30, Location 2023 2022 2023 2022 Derivatives not designated as hedging instruments Loss recognized in income Other income, net $ — $ — $ 0.6 $ 0.1 Derivatives in cash flow hedging relationships Gain recognized in OCI (effective portion) $ 21.9 $ 12.7 $ 16.7 $ 63.1 (Gain) loss reclassified from accumulated OCI into income (effective portion) (1) Interest expense, net $ (8.0) $ 6.3 $ (14.1) $ 12.7 |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jun. 30, 2023 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic and diluted earnings per share are calculated 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. A reconciliation of the numerator and denominator of basic and diluted earnings per share follows (dollars in millions, except per share amounts; shares in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Numerator: Net income (loss) attributable to Surgery Partners, Inc. $ 18.9 $ (18.4) $ (6.0) $ (6.2) Denominator: Weighted average shares outstanding- basic 125,718 88,900 125,463 88,450 Weighted average shares outstanding- diluted (1) 127,370 88,900 125,463 88,450 Income (loss) per share: Basic $ 0.15 $ (0.21) $ (0.05) $ (0.07) Diluted (1) $ 0.15 $ (0.21) $ (0.05) $ (0.07) Dilutive securities outstanding not included in the computation of income (loss) per share as their effect is antidilutive: Stock options — 1,559 1,407 1,599 Restricted shares — 628 147 644 (1) The impact of potentially dilutive securities for the three months ended June 30, 2022 and the six months ended June 30, 2023 and 2022, was not considered because the effect would be anti-dilutive. |
Other Current Liabilities
Other Current Liabilities | 6 Months Ended |
Jun. 30, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Other Current Liabilities | Other Current Liabilities A summary of other current liabilities is as follows (in millions): June 30, December 31, Right-of-use operating lease liabilities $ 37.2 $ 36.5 Amounts due to patients and payors 28.4 31.9 Cost report liabilities 24.3 23.5 Interest payable 17.7 19.4 Acquisition escrow 17.4 28.8 Accrued expenses and other 73.1 70.0 Total $ 198.1 $ 210.1 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Professional, General, Workers' Compensation and Cyber 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 professional, general, workers' compensation and cyber liability insurance in excess of self-insured retentions 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. 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. Total professional, general and workers' compensation claim liabilities as of June 30, 2023 and December 31, 2022 were $22.5 million and $20.8 million, respectively. Expected insurance recoveries of $12.7 million as of both June 30, 2023 and December 31, 2022 are included as a component of other current assets and other long-term assets in the condensed consolidated balance sheets. In May 2023, we experienced a cybersecurity incident that temporarily disrupted certain facilities in our Idaho market. We estimate that this incident had an adverse pre-tax impact of approximately $5 million during the three months ended June 30, 2023. This estimate includes lost revenue from the associated business interruption and other related expenses. We have filed a claim with the insurance carrier related to this incident. No insurance recoveries were recognized during the three months ended June 30, 2023. Stockholder Litigation On December 4, 2017, a purported Company stockholder filed an action in the Delaware Court of Chancery (the "Delaware Action"). That action is captioned Witmer v. H.I.G. Capital, L.L.C., et al., C.A. No. 2017-0862. The plaintiff in the Delaware Action asserted claims against (i) certain current and former members of the Company’s Board of Directors (together, the "Directors"); (ii) H.I.G. Capital, LLC and certain of its affiliates (collectively, "H.I.G."); and (iii) Bain Capital Private Equity, L.P. and certain of its affiliates (collectively, "Bain Capital" and, together with the Directors and H.I.G., the "Defendants"). The parties to the Delaware Action negotiated a final stipulation of settlement (the “Settlement Stipulation”), which governs the terms of the settlement of the Delaware Action, and which they filed with the Court of Chancery on November 22, 2021. On February 11, 2022, the Court of Chancery approved the settlement of the Delaware Action as memorialized in the Settlement Stipulation. That decision became final and non-appealable on March 14, 2022. The case is now closed. Pursuant to the settlement, the Company received $32.8 million in March 2022, which was included in litigation settlement in the condensed consolidated statements of operations for the six months ended June 30, 2022. |
Segment Reporting
Segment Reporting | 6 Months Ended |
Jun. 30, 2023 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company currently operates in two major lines of business that are also the Company's reportable operating segments - the operation of surgical facilities and the operation of ancillary services. The Surgical Facility Services segment includes the operation of ASCs, surgical hospitals and anesthesia services. The Ancillary Services segment consists of multi-specialty physician practices. The "All other" line item primarily consists of the Company's corporate general and administrative functions. The following tables present financial information for each reportable segment (in millions): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues: Surgical Facility Services $ 650.2 $ 597.9 $ 1,299.2 $ 1,176.7 Ancillary Services 17.4 17.5 34.6 34.9 Total $ 667.6 $ 615.4 $ 1,333.8 $ 1,211.6 Adjusted EBITDA: Surgical Facility Services $ 126.7 $ 108.7 $ 245.5 $ 209.7 Ancillary Services (0.1) (0.8) (1.5) (0.7) All other (26.4) (21.8) (53.7) (45.8) Total $ 100.2 $ 86.1 $ 190.3 $ 163.2 Reconciliation of Adjusted EBITDA: Income before income taxes $ 49.9 $ 19.6 $ 49.5 $ 63.7 Net income attributable to non-controlling interests (38.8) (33.7) (64.9) (64.3) Interest expense, net 47.7 56.9 94.5 113.2 Depreciation and amortization 24.4 28.0 58.1 55.4 Equity-based compensation expense 4.6 4.3 8.8 8.0 Transaction, integration and acquisition costs (1) 13.0 8.2 25.8 15.3 Net (gain) loss on disposals, consolidations and deconsolidations (8.8) 1.1 1.7 1.0 Litigation settlements and regulatory change impact (2) 1.7 1.7 9.7 (29.1) Undesignated derivative activity — — 0.6 — Other (3) 6.5 — 6.5 — Adjusted EBITDA $ 100.2 $ 86.1 $ 190.3 $ 163.2 (1) This amount includes transaction and integration costs of $12.0 million and $8.2 million for the three months ended June 30, 2023 and 2022, respectively. This amount further includes start-up costs related to de novo surgical facilities of $1.0 million for the three months ended June 30, 2023, with no comparable costs for the three months ended June 30, 2022. This amount includes transaction and integration costs of $24.5 million and $15.3 million for the six months ended June 30, 2023 and 2022, respectively. This amount further includes start-up costs related to de novo surgical facilities of $1.3 million for the six months ended June 30, 2023, with no comparable costs for the six months ended June 30, 2022. (2) This amount includes a litigation settlement loss of $1.5 million for the three months ended June 30, 2023, with no comparable costs for the three months ended June 30, 2022. This amount also includes other litigation costs of $0.2 million and $1.7 million for the three months ended June 30, 2023 and 2022, respectively. This amount includes a litigation settlement loss of $4.5 million and a gain of $32.8 million for the six months ended June 30, 2023 and 2022, respectively. This amount also includes other litigation costs of $0.8 million and $3.7 million for the six months ended June 30, 2023 and 2022, respectively. Additionally, the six months ended June 30, 2023, includes $4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection. (3) This amount includes estimates for the net impact of a cyber event and losses from a divested business. June 30, December 31, Assets: Surgical Facility Services $ 6,031.2 $ 6,001.1 Ancillary Services 39.6 41.7 All other 549.8 639.3 Total assets $ 6,620.6 $ 6,682.1 Six Months Ended June 30, 2023 2022 Cash purchases of property and equipment: Surgical Facility Services $ 49.5 $ 36.9 Ancillary Services 0.6 0.5 All other — 3.2 Total cash purchases of property and equipment $ 50.1 $ 40.6 |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Pay vs Performance Disclosure | ||||
Net income (loss) attributable to Surgery Partners, Inc. | $ 18.9 | $ (18.4) | $ (6) | $ (6.2) |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Jun. 30, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Organization and Summary of A_2
Organization and Summary of Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2023 | |
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 year ended December 31, 2022 (the "2022 Annual Report on Form 10-K"). |
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. |
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. |
Revenues | Revenues The Company's revenues generally relate to contracts with patients in which the performance obligations are to provide health care services. The Company recognizes revenues in the period in which its obligations to provide health care services are satisfied and reports the amount that reflects the consideration the Company expects to be entitled to receive. The contractual relationships with patients, in most cases, also involve a third-party payor (e.g., Medicare, Medicaid and private insurance organizations, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by or negotiated with the third-party payors. The payment arrangements with third-party payors for the services provided to the related patients typically specify payments at amounts less than the Company's standard charges. 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 revenue is related to charging facility fees in exchange for providing patient care. The fee charged for health care 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 and discounts from third-party payors. 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. Other service 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 and other non-patient services. The management 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. |
Accounts Receivable | Accounts Receivable Accounts receivable from third-party payors are recorded net of estimated implicit price concessions, which are estimated based on the historical trend of the Company's surgical hospitals’ cash collections and contractual write-offs, and for the Company's surgical facilities in general, established fee schedules, relationships with payors and procedure statistics. While changes in estimated reimbursement from third-party payors remain a possibility, the Company expects that any such changes would be minimal and, therefore, would not have a material effect on its financial condition or results of operations. Accounts receivable consists of receivables from federal and state agencies (under the Medicare and Medicaid programs), private insurance organizations, 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 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. Amounts are classified outside of self-pay if the Company has an agreement with the third-party payor or has verified a patient’s coverage prior to services rendered. The Company's policy is to collect co-payments and deductibles prior to providing medical services. 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. |
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 carryforward exists, the Company makes a determination as to whether the 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 our expectations for future operating results on a consolidated basis or at the state jurisdiction level vary from actual results due to changes in health care regulations, general economic conditions, or other factors, we may need to adjust the valuation allowance, for all or a portion of our deferred tax assets. Our income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in our valuation allowance in the period when the change in circumstances occurs. These changes could have a significant impact on our future earnings. 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. |
Goodwill | GoodwillGoodwill represents the excess of the fair value of the consideration provided in an acquisition plus the fair value of any non-controlling interests 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 The Company records all derivatives on the balance sheet at fair value and any financing elements treated as debt instruments are recorded at amortized cost. 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 risks even though hedge accounting does not apply or the Company elects not to apply hedge accounting. 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. |
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 inputs classified into the following hierarchy: • Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These may include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. • Level 3: Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, 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 under Level 3 calculations. |
Variable Interest Entities | Variable Interest Entities The condensed consolidated financial statements include the accounts of variable interest entities ("VIE") in which the Company is the primary beneficiary under the provisions of the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification 810, " Consolidation |
Organization and Summary of A_3
Organization and Summary of Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Revenues | A summary of revenues by service type as a percentage of total revenues follows: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Patient service revenues: Surgical facilities revenues 96.0 % 95.9 % 96.0 % 95.8 % Ancillary services revenues 2.6 % 2.8 % 2.5 % 2.8 % Total patient service revenues 98.6 % 98.7 % 98.5 % 98.6 % Other service revenues 1.4 % 1.3 % 1.5 % 1.4 % Total revenues 100.0 % 100.0 % 100.0 % 100.0 % 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 millions): Three Months Ended June 30, 2023 2022 Amount % Amount % Patient service revenues: Private insurance $ 341.6 51.9 % $ 309.5 51.0 % Government 278.2 42.3 % 258.1 42.5 % Self-pay 17.1 2.6 % 16.5 2.7 % Other (1) 21.1 3.2 % 23.2 3.8 % Total patient service revenues 658.0 100.0 % 607.3 100.0 % Other service revenues 9.6 8.1 Total revenues $ 667.6 $ 615.4 Six Months Ended June 30, 2023 2022 Amount % Amount % Patient service revenues: Private insurance $ 677.2 51.5 % $ 608.6 50.9 % Government 566.0 43.1 % 507.0 42.4 % Self-pay 32.7 2.5 % 33.2 2.8 % Other (1) 38.5 2.9 % 46.2 3.9 % Total patient service revenues 1,314.4 100.0 % 1,195.0 100.0 % Other service revenues 19.4 16.6 Total revenues $ 1,333.8 $ 1,211.6 |
Schedule of Rollforward of Goodwill | A summary of activity related to goodwill for the six months ended June 30, 2023 is as follows (in millions): Balance at December 31, 2022 $ 4,137.1 Acquisitions, including post acquisition adjustments 134.6 Disposals (35.8) Balance at June 30, 2023 $ 4,235.9 |
Schedule of Rollforward of Noncontrolling Interest - Redeemable | A summary of activity related to non-controlling interests—redeemable is as follows (in millions): Six Months Ended June 30, 2023 2022 Balance at beginning of period $ 342.0 $ 330.2 Net income attributable to non-controlling interests—redeemable 19.0 21.6 Acquisition of shares of non-controlling interests, net—redeemable (10.0) 12.9 Distributions to non-controlling interest—redeemable holders (22.9) (22.9) Balance at end of period $ 328.1 $ 341.8 |
Schedule of Carrying Amounts and Fair Values of Long-Term Debt | A summary of the carrying amounts and estimated fair values of the Company's long-term debt follows (in millions): Carrying Amount Fair Value June 30, December 31, June 30, December 31, Senior secured term loan $ 1,370.2 $ 1,370.0 $ 1,366.8 $ 1,359.7 6.750% senior unsecured notes due 2025 $ 185.0 $ 185.0 $ 183.8 $ 183.4 10.000% senior unsecured notes due 2027 $ 320.0 $ 320.0 $ 326.4 $ 326.8 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Debt Disclosure [Abstract] | |
Summary of Long-term Debt | A summary of long-term debt follows (in millions): June 30, December 31, Senior secured term loan (1) $ 1,370.2 $ 1,370.0 6.750% senior unsecured notes due 2025 185.0 185.0 10.000% senior unsecured notes due 2027 320.0 320.0 Notes payable and other secured loans 178.5 171.3 Finance lease obligations 524.9 585.7 Less: unamortized debt issuance costs and discounts (9.1) (10.2) Total debt 2,569.5 2,621.8 Less: Current maturities 64.7 62.8 Total long-term debt $ 2,504.8 $ 2,559.0 (1) Includes unamortized fair value discount of $1.9 million and $2.1 million as of June 30, 2023 and |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Leases [Abstract] | |
Schedule of Components of Right-of-use Assets and Liabilities Related to Leases | The following table presents the components of the Company's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets (in millions): Classification in Consolidated Balance Sheets June 30, 2023 December 31, 2022 Assets: Operating lease assets Right-of-use operating lease assets $ 267.2 $ 279.1 Finance lease assets Property and equipment, net of accumulated depreciation 461.6 529.6 Total leased assets $ 728.8 $ 808.7 Liabilities: Operating lease liabilities: Current Other current liabilities $ 37.2 $ 36.5 Long-term Right-of-use operating lease liabilities 264.1 271.4 Total operating lease liabilities 301.3 307.9 Finance lease liabilities: Current Current maturities of long-term debt 20.9 20.9 Long-term Long-term debt, less current maturities 504.0 564.8 Total finance lease liabilities 524.9 585.7 Total lease liabilities $ 826.2 $ 893.6 |
Schedule of Lease Expense and Cash Flow Information | The following table presents the components of the Company's lease expense included in the condensed consolidated statement of operations (in millions): Six Months Ended June 30, 2023 2022 Operating lease costs $ 33.2 $ 32.7 Finance lease costs: Amortization of leased assets 18.3 18.9 Interest on lease liabilities 23.8 19.7 Total finance lease costs 42.1 38.6 Variable and short-term lease costs 10.4 8.5 Total lease costs $ 85.7 $ 79.8 The following table presents supplemental cash flow information (dollars in millions): Six Months Ended June 30, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 32.2 $ 31.7 Operating cash outflows from finance leases $ 22.6 $ 19.6 Financing cash outflows from finance leases $ 12.6 $ 12.1 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 15.1 $ 31.1 Finance leases $ 23.6 $ 91.9 |
Derivatives and Hedging Activ_2
Derivatives and Hedging Activities (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Interest Rate Swaps and Interest Rate Caps Outstanding | During 2023 and 2022, such derivatives have been used to hedge the variable cash flows associated with existing variable-rate debt. The key terms of interest rate swaps and interest rate caps outstanding are presented below: June 30, 2023 December 31, 2022 Description Effective Date Notional Amount (in millions) Status Notional Amount (in millions) Status Maturity Date Pay-fixed swap May 7, 2021 $ 435.0 Active $ 435.0 Active March 31, 2025 Pay-fixed swap May 7, 2021 330.0 Active 330.0 Active March 31, 2025 Pay-fixed swap May 7, 2021 435.0 Active 435.0 Active March 31, 2025 Interest rate cap September 30, 2021 155.2 Active 159.1 Active March 31, 2025 Interest rate cap September 30, 2021 8.9 Active 159.1 Active March 31, 2025 Pay-fixed swap November 30, 2018 165.0 Active 165.0 Active November 30, 2023 Pay-fixed swap November 30, 2018 120.0 Active 120.0 Active November 30, 2023 Pay-fixed swap June 28, 2019 150.0 Active 150.0 Active November 30, 2023 Receive-fixed swap April 30, 2021 (165.0) Active (165.0) Active November 30, 2023 Receive-fixed swap April 30, 2021 (120.0) Active (120.0) Active November 30, 2023 Receive-fixed swap April 30, 2021 (150.0) Active (150.0) Active November 30, 2023 $ 1,364.1 $ 1,518.2 |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The following table presents the fair values of our derivatives and their location on the condensed consolidated balance sheets (in millions): June 30, 2023 December 31, 2022 Location Assets Liabilities Assets Liabilities Derivatives not designated as hedging instruments Interest rate caps Other long-term assets $ — $ — $ 9.0 $ — Interest rate swaps Other long-term assets 4.8 — 8.5 — Interest rate swaps Other long-term liabilities — 4.8 — 8.5 Derivatives in cash flow hedging relationships Interest rate caps Other long-term assets 9.4 — 10.4 — Interest rate swaps Other long-term assets 78.2 — 85.5 — Interest rate swaps Other long-term liabilities (1) — 24.8 — 31.9 Total $ 92.4 $ 29.6 $ 113.4 $ 40.4 (1) The balance is related to the financing component of the pay-fixed, receive floating interest rate swaps. |
Schedule of Effect of Interest Rate Swaps | The following table presents the pre-tax effect of the interest rate swaps and caps on the Company's accumulated OCI and condensed consolidated statement of operations (in millions): Three Months Ended June 30, Six Months Ended June 30, Location 2023 2022 2023 2022 Derivatives not designated as hedging instruments Loss recognized in income Other income, net $ — $ — $ 0.6 $ 0.1 Derivatives in cash flow hedging relationships Gain recognized in OCI (effective portion) $ 21.9 $ 12.7 $ 16.7 $ 63.1 (Gain) loss reclassified from accumulated OCI into income (effective portion) (1) Interest expense, net $ (8.0) $ 6.3 $ (14.1) $ 12.7 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Reconciliation of Numerator and Denominator of Basic and Diluted Earnings per Share | A reconciliation of the numerator and denominator of basic and diluted earnings per share follows (dollars in millions, except per share amounts; shares in thousands): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Numerator: Net income (loss) attributable to Surgery Partners, Inc. $ 18.9 $ (18.4) $ (6.0) $ (6.2) Denominator: Weighted average shares outstanding- basic 125,718 88,900 125,463 88,450 Weighted average shares outstanding- diluted (1) 127,370 88,900 125,463 88,450 Income (loss) per share: Basic $ 0.15 $ (0.21) $ (0.05) $ (0.07) Diluted (1) $ 0.15 $ (0.21) $ (0.05) $ (0.07) Dilutive securities outstanding not included in the computation of income (loss) per share as their effect is antidilutive: Stock options — 1,559 1,407 1,599 Restricted shares — 628 147 644 (1) The impact of potentially dilutive securities for the three months ended June 30, 2022 and the six months ended June 30, 2023 and 2022, was not considered because the effect would be anti-dilutive. |
Other Current Liabilities (Tabl
Other Current Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Other Liabilities Disclosure [Abstract] | |
Summary of Other Current Liabilities | A summary of other current liabilities is as follows (in millions): June 30, December 31, Right-of-use operating lease liabilities $ 37.2 $ 36.5 Amounts due to patients and payors 28.4 31.9 Cost report liabilities 24.3 23.5 Interest payable 17.7 19.4 Acquisition escrow 17.4 28.8 Accrued expenses and other 73.1 70.0 Total $ 198.1 $ 210.1 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Segment Reporting [Abstract] | |
Schedule of Segment Revenue and Operating Income | The following tables present financial information for each reportable segment (in millions): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues: Surgical Facility Services $ 650.2 $ 597.9 $ 1,299.2 $ 1,176.7 Ancillary Services 17.4 17.5 34.6 34.9 Total $ 667.6 $ 615.4 $ 1,333.8 $ 1,211.6 Adjusted EBITDA: Surgical Facility Services $ 126.7 $ 108.7 $ 245.5 $ 209.7 Ancillary Services (0.1) (0.8) (1.5) (0.7) All other (26.4) (21.8) (53.7) (45.8) Total $ 100.2 $ 86.1 $ 190.3 $ 163.2 Reconciliation of Adjusted EBITDA: Income before income taxes $ 49.9 $ 19.6 $ 49.5 $ 63.7 Net income attributable to non-controlling interests (38.8) (33.7) (64.9) (64.3) Interest expense, net 47.7 56.9 94.5 113.2 Depreciation and amortization 24.4 28.0 58.1 55.4 Equity-based compensation expense 4.6 4.3 8.8 8.0 Transaction, integration and acquisition costs (1) 13.0 8.2 25.8 15.3 Net (gain) loss on disposals, consolidations and deconsolidations (8.8) 1.1 1.7 1.0 Litigation settlements and regulatory change impact (2) 1.7 1.7 9.7 (29.1) Undesignated derivative activity — — 0.6 — Other (3) 6.5 — 6.5 — Adjusted EBITDA $ 100.2 $ 86.1 $ 190.3 $ 163.2 (1) This amount includes transaction and integration costs of $12.0 million and $8.2 million for the three months ended June 30, 2023 and 2022, respectively. This amount further includes start-up costs related to de novo surgical facilities of $1.0 million for the three months ended June 30, 2023, with no comparable costs for the three months ended June 30, 2022. This amount includes transaction and integration costs of $24.5 million and $15.3 million for the six months ended June 30, 2023 and 2022, respectively. This amount further includes start-up costs related to de novo surgical facilities of $1.3 million for the six months ended June 30, 2023, with no comparable costs for the six months ended June 30, 2022. (2) This amount includes a litigation settlement loss of $1.5 million for the three months ended June 30, 2023, with no comparable costs for the three months ended June 30, 2022. This amount also includes other litigation costs of $0.2 million and $1.7 million for the three months ended June 30, 2023 and 2022, respectively. This amount includes a litigation settlement loss of $4.5 million and a gain of $32.8 million for the six months ended June 30, 2023 and 2022, respectively. This amount also includes other litigation costs of $0.8 million and $3.7 million for the six months ended June 30, 2023 and 2022, respectively. Additionally, the six months ended June 30, 2023, includes $4.4 million related to the impact of recent changes in Florida law regarding the use of letters of protection. (3) This amount includes estimates for the net impact of a cyber event and losses from a divested business. |
Schedule of Reconciliation of Assets from Segment to Consolidated | June 30, December 31, Assets: Surgical Facility Services $ 6,031.2 $ 6,001.1 Ancillary Services 39.6 41.7 All other 549.8 639.3 Total assets $ 6,620.6 $ 6,682.1 |
Schedule of Financial Information by Reportable Segment | Six Months Ended June 30, 2023 2022 Cash purchases of property and equipment: Surgical Facility Services $ 49.5 $ 36.9 Ancillary Services 0.6 0.5 All other — 3.2 Total cash purchases of property and equipment $ 50.1 $ 40.6 |
Organization and Summary of A_4
Organization and Summary of Accounting Policies - Organization (Details) | Jun. 30, 2023 facility state |
Summary of Investment Holdings [Line Items] | |
Number of surgical facilities owned | 152 |
Number of states in which entity operates | state | 32 |
Number of surgical facilities owned, majority interest | 92 |
Number of surgical facilities owned, consolidated | 119 |
Facilities, Ambulatory Surgery Centers | |
Summary of Investment Holdings [Line Items] | |
Number of surgical facilities owned | 134 |
Facilities, Surgical Hospitals | |
Summary of Investment Holdings [Line Items] | |
Number of surgical facilities owned | 18 |
Organization and Summary of A_5
Organization and Summary of Accounting Policies - Schedule of Revenues by Service Type (Details) - Revenue Source - Revenue | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Revenue from External Customer [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 100% | 100% | 100% | 100% |
Patent service revenues | ||||
Revenue from External Customer [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 98.60% | 98.70% | 98.50% | 98.60% |
Surgical Facility Services | ||||
Revenue from External Customer [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 96% | 95.90% | 96% | 95.80% |
Ancillary Services | ||||
Revenue from External Customer [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 2.60% | 2.80% | 2.50% | 2.80% |
Other service revenues | ||||
Revenue from External Customer [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 1.40% | 1.30% | 1.50% | 1.40% |
Organization and Summary of A_6
Organization and Summary of Accounting Policies - Schedule of Revenues by Sources (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 667.6 | $ 615.4 | $ 1,333.8 | $ 1,211.6 |
Patient service revenues | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 658 | $ 607.3 | $ 1,314.4 | $ 1,195 |
Patient service revenues | Customer | Revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 100% | 100% | 100% | 100% |
Private insurance | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 341.6 | $ 309.5 | $ 677.2 | $ 608.6 |
Private insurance | Customer | Revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 51.90% | 51% | 51.50% | 50.90% |
Government | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 278.2 | $ 258.1 | $ 566 | $ 507 |
Government | Customer | Revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 42.30% | 42.50% | 43.10% | 42.40% |
Self-pay | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 17.1 | $ 16.5 | $ 32.7 | $ 33.2 |
Self-pay | Customer | Revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 2.60% | 2.70% | 2.50% | 2.80% |
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 21.1 | $ 23.2 | $ 38.5 | $ 46.2 |
Other | Customer | Revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue by service type as a proportion of total revenues (as a percent) | 3.20% | 3.80% | 2.90% | 3.90% |
Other service revenues | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenues | $ 9.6 | $ 8.1 | $ 19.4 | $ 16.6 |
Organization and Summary of A_7
Organization and Summary of Accounting Policies - Income Taxes (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Effective tax rate (percent) | (19.00%) | 8.80% |
Tax benefits related to vesting of restricted stock awards | $ 1.8 | $ 4.6 |
Tax benefits related to the sale of partnership interests | $ 15.9 | 1 |
Tax benefits attributable to non-recurring earnings' impact on the valuation allowance | $ 1.8 |
Organization and Summary of A_8
Organization and Summary of Accounting Policies - Schedule of Rollforward of Goodwill (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2023 USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, beginning of period | $ 4,137.1 |
Acquisitions, including post acquisition adjustments | 134.6 |
Disposals | (35.8) |
Goodwill, end of period | $ 4,235.9 |
Organization and Summary of A_9
Organization and Summary of Accounting Policies - Schedule of Non-Controlling Interests - Redeemable (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Non-Controlling Interests - Redeemable [Roll Forward] | ||
Balance at beginning of period | $ 342 | $ 330.2 |
Net income attributable to non-controlling interests—redeemable | 19 | 21.6 |
Acquisition of shares of non-controlling interests, net—redeemable | (10) | 12.9 |
Distributions to non-controlling interest—redeemable holders | (22.9) | (22.9) |
Balance at end of period | $ 328.1 | $ 341.8 |
Organization and Summary of _10
Organization and Summary of Accounting Policies - Medicare Accelerated Payments and Deferred Governmental Grants (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
Grant funds | $ 0 | $ 100,000 | $ 1,100,000 | $ 1,300,000 | |
Unrecognized grant funds received | $ 0 | $ 0 | $ 3,000,000 | ||
Repayments of grants received | $ 25,000,000 | $ 43,000,000 |
Organization and Summary of _11
Organization and Summary of Accounting Policies - Schedule of Carrying Amount and Fair Value of Long-Term Debt (Details) - USD ($) $ in Millions | Jun. 30, 2023 | Dec. 31, 2022 |
Secured Debt | Senior secure term loan | Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 1,370.2 | $ 1,370 |
Secured Debt | Senior secure term loan | Fair Value | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 1,366.8 | 1,359.7 |
Senior Notes | 6.750% senior unsecured notes due 2025 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Stated interest rate (percent) | 6.75% | |
Senior Notes | 6.750% senior unsecured notes due 2025 | Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 185 | 185 |
Senior Notes | 6.750% 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 | $ 183.8 | 183.4 |
Senior Notes | 10.000% senior unsecured notes due 2027 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Stated interest rate (percent) | 10% | |
Senior Notes | 10.000% senior unsecured notes due 2027 | Carrying Amount | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 320 | 320 |
Senior Notes | 10.000% senior unsecured notes due 2027 | Fair Value | Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||
Long-term debt | $ 326.4 | $ 326.8 |
Organization and Summary of _12
Organization and Summary of Accounting Policies - Variable Interest Entities (Details) $ in Millions | Jun. 30, 2023 USD ($) | Jun. 30, 2023 facility | Jun. 30, 2023 physician_practice | Dec. 31, 2022 USD ($) |
Variable Interest Entity [Line Items] | ||||
Number of facilities included in VIE | 7 | 5 | ||
Assets | $ 6,620.6 | $ 6,682.1 | ||
Variable Interest Entity, Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Assets | 65.6 | 64.9 | ||
Liabilities | $ 38.4 | $ 40.9 |
Acquisitions and Disposals - Ac
Acquisitions and Disposals - Acquisitions (Details) $ in Millions | 6 Months Ended | ||
Jun. 30, 2023 USD ($) facility | Jun. 30, 2022 USD ($) facility | Dec. 31, 2022 USD ($) | |
Business Acquisition [Line Items] | |||
Payments for acquisitions, net of cash acquired | $ 43.5 | $ 74.9 | |
Goodwill | $ 4,235.9 | $ 4,137.1 | |
Equity Method Investments | |||
Business Acquisition [Line Items] | |||
Number of non-controlling interests in surgical facilities acquired | facility | 4 | 5 | |
Number of non-controlling interests in in-development de novo surgical facilities acquired | facility | 2 | 4 | |
Surgical Facility and Physician Practice | |||
Business Acquisition [Line Items] | |||
Payments for acquisitions, net of cash acquired | $ 17.9 | ||
Noncash consideration | 1.3 | ||
Recognized non-controlling interests | 12 | ||
Goodwill | 27.4 | ||
Surgical Facilities | |||
Business Acquisition [Line Items] | |||
Payments for acquisitions, net of cash acquired | 26.9 | $ 74.9 | |
Noncash consideration | 2.6 | ||
Recognized non-controlling interests | 55.2 | 41.5 | |
Goodwill | $ 106.3 | $ 114.4 | |
Number of facilities acquired | facility | 2 | 4 | |
Non-controlling interest, fair value | $ 27.3 | ||
Net (loss) gain on fair value of non-controlling interest | 7.1 | ||
Surgical Facilities, Existing Markets | |||
Business Acquisition [Line Items] | |||
Number of facilities acquired | facility | 2 | ||
Surgical Facilities and In-Development De Novo Surgical Facilities | |||
Business Acquisition [Line Items] | |||
Payments for acquisitions, net of cash acquired | 48.4 | $ 65.8 | |
Surgical Facilities and In-Development De Novo Surgical Facilities | Management rights agreement | |||
Business Acquisition [Line Items] | |||
Intangible assets acquired | $ 20 |
Acquisitions and Disposals - Di
Acquisitions and Disposals - Disposals (Details) $ in Millions | 6 Months Ended | |
Jun. 30, 2023 USD ($) facility | Jun. 30, 2022 USD ($) facility business_entity | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Proceeds from disposals of facilities and other assets | $ 26.1 | $ 0 |
Four Surgical Facilities | Disposed of by Sale | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Number of interests sold | facility | 4 | |
Proceeds from disposals of facilities and other assets | $ 30.4 | |
Pre-tax gain (loss) on disposals and deconsolidations | 26.7 | |
2022 Disposals | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Pre-tax gain (loss) on disposals and deconsolidations | (5.6) | |
2022 Disposals | Disposed of by Sale | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Proceeds from disposals of facilities and other assets | 11.5 | |
Pre-tax gain (loss) on disposals and deconsolidations | $ (0.4) | |
Number of surgical facilities contributed as non-cash consideration | facility | 2 | |
Fair value of investments | $ 9.8 | |
2022 Disposals | Disposed of by Sale | Series of Individually Immaterial Business Acquisitions | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Number of facilities acquired | business_entity | 2 | |
Surgical Facilities and In-Development De Novo Surgical Facilities | Disposed of by Sale | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Proceeds from disposals of facilities and other assets | 1.5 | |
Pre-tax gain (loss) on disposals and deconsolidations | $ (13.7) |
Long-Term Debt - Summary of Lon
Long-Term Debt - Summary of Long-term Debt (Details) - USD ($) $ in Millions | Jun. 30, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Finance lease obligations | $ 524.9 | $ 585.7 |
Less: unamortized debt issuance costs and discounts | (9.1) | (10.2) |
Total debt | 2,569.5 | 2,621.8 |
Less: Current maturities | 64.7 | 62.8 |
Total long-term debt | 2,504.8 | 2,559 |
Secured Debt | Senior secure term loan | ||
Debt Instrument [Line Items] | ||
Long-term debt | 1,370.2 | 1,370 |
Unamortized fair value discount | 1.9 | 2.1 |
Senior Notes | 6.750% senior unsecured notes due 2025 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 185 | 185 |
Stated interest rate (percent) | 6.75% | |
Senior Notes | 10.000% senior unsecured notes due 2027 | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 320 | 320 |
Stated interest rate (percent) | 10% | |
Notes payable and other secured loans | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 178.5 | $ 171.3 |
Long-Term Debt - Narrative (Det
Long-Term Debt - Narrative (Details) - Secured Debt - USD ($) | Jan. 13, 2023 | Jun. 30, 2023 | Dec. 31, 2022 |
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Availability on line of credit instrument | $ 545,900,000 | ||
Revolving Credit Facility | The Revolver | |||
Debt Instrument [Line Items] | |||
Line of credit facility, increase in borrowing capacity | $ 203,800,000 | ||
Amount of line of credit outstanding | 0 | $ 0 | |
Letter of Credit | |||
Debt Instrument [Line Items] | |||
Availability on line of credit instrument | $ 7,900,000 |
Leases - Schedule of Components
Leases - Schedule of Components of Right-of-use Assets and Liabilities Related to Leases (Details) - USD ($) $ in Millions | Jun. 30, 2023 | Dec. 31, 2022 |
Assets: | ||
Operating lease assets | $ 267.2 | $ 279.1 |
Finance lease assets | 461.6 | 529.6 |
Total leased assets | 728.8 | 808.7 |
Operating lease liabilities: | ||
Current | 37.2 | 36.5 |
Long-term | 264.1 | 271.4 |
Total operating lease liabilities | 301.3 | 307.9 |
Finance lease liabilities: | ||
Current | 20.9 | 20.9 |
Long-term | 504 | 564.8 |
Finance lease obligations | 524.9 | 585.7 |
Total lease liabilities | $ 826.2 | $ 893.6 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Property and equipment, net of accumulated depreciation of $403.4 and $374.3, respectively | Property and equipment, net of accumulated depreciation of $403.4 and $374.3, respectively |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Other current liabilities | Other current liabilities |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | Less: Current maturities | Less: Current maturities |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Long-term debt, less current maturities | Long-term debt, less current maturities |
Leases - Lease Expense and Cash
Leases - Lease Expense and Cash Flow Information (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Leases [Abstract] | ||
Operating lease costs | $ 33.2 | $ 32.7 |
Finance lease costs: | ||
Amortization of leased assets | 18.3 | 18.9 |
Interest on lease liabilities | 23.8 | 19.7 |
Total finance lease costs | 42.1 | 38.6 |
Variable and short-term lease costs | 10.4 | 8.5 |
Total lease costs | 85.7 | 79.8 |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash outflows from operating leases | 32.2 | 31.7 |
Operating cash outflows from finance leases | 22.6 | 19.6 |
Financing cash outflows from finance leases | 12.6 | 12.1 |
Right-of-use assets obtained in exchange for operating lease obligations | 15.1 | 31.1 |
Right-of-use assets obtained in exchange for finance lease obligations | $ 23.6 | $ 91.9 |
Derivatives and Hedging Activ_3
Derivatives and Hedging Activities - Schedule of Interest Rate Swaps and Interest Rate Caps Outstanding (Details) - USD ($) $ in Millions | Jun. 30, 2023 | Dec. 31, 2022 |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative asset, notional amount | $ 92.4 | $ 113.4 |
Derivative liability, notional amount | (29.6) | (40.4) |
Derivative notional amount | 1,364.1 | 1,518.2 |
Pay-fixed swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative asset, notional amount | 435 | 435 |
Pay-fixed swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative asset, notional amount | 330 | 330 |
Pay-fixed swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative asset, notional amount | 435 | 435 |
Interest rate cap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative asset, notional amount | 155.2 | 159.1 |
Interest rate cap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative asset, notional amount | 8.9 | 159.1 |
Pay-fixed swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative asset, notional amount | 165 | 165 |
Pay-fixed swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative asset, notional amount | 120 | 120 |
Pay-fixed swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative asset, notional amount | 150 | 150 |
Receive-fixed swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative liability, notional amount | (165) | (165) |
Receive-fixed swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative liability, notional amount | (120) | (120) |
Receive-fixed swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Derivative liability, notional amount | $ (150) | $ (150) |
Derivatives and Hedging Activ_4
Derivatives and Hedging Activities - Narrative (Details) $ in Millions | 6 Months Ended | |
Jun. 30, 2023 USD ($) interest_rate_swap | Dec. 31, 2022 USD ($) | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Derivative notional amount | $ | $ 1,364.1 | $ 1,518.2 |
Amount estimated to be reclassified as a reduction to interest expense over next 12 months | $ | $ 47.4 | |
Interest Rate Swap | Derivatives in cash flow hedging relationships | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Number of interest rate swaps | interest_rate_swap | 9 | |
Derivative notional amount | $ | $ 1,200 | |
Three Pay-fixed Interest Rate Swaps Subject To Minimum Of 0.75% | Derivatives in cash flow hedging relationships | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Number of interest rate swaps | interest_rate_swap | 3 | |
Derivative notional amount | $ | $ 1,200 | |
Three Pay-fixed Interest Rate Swaps Subject To Minimum Of 0.75% | Derivatives in cash flow hedging relationships | One-month LIBOR | Minimum | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Variable interest rate of derivative instrument (percent) | 0.75% | |
Six Undersigned Interest Rate Swaps | Derivatives in cash flow hedging relationships | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Number of interest rate swaps | interest_rate_swap | 6 | |
Three Pay-fixed Interest Rate Swaps Subject To Minimum Of 1.00% | Derivatives in cash flow hedging relationships | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Number of interest rate swaps | interest_rate_swap | 3 | |
Three Pay-fixed Interest Rate Swaps Subject To Minimum Of 1.00% | Derivatives in cash flow hedging relationships | One-month LIBOR | Minimum | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Variable interest rate of derivative instrument (percent) | 1% | |
Three Interest Rate Swaps That Pay 1-Month LIBOR Subject To Minimum Of 1.00% | Derivatives in cash flow hedging relationships | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Number of interest rate swaps | interest_rate_swap | 3 | |
Three Interest Rate Swaps That Pay 1-Month LIBOR Subject To Minimum Of 1.00% | Derivatives in cash flow hedging relationships | One-month LIBOR | Minimum | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Variable interest rate of derivative instrument (percent) | 1% | |
Interest Rate Caps | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Number of interest rate swaps | interest_rate_swap | 2 | |
Derivative notional amount | $ | $ 164.1 | |
Interest Rate Caps | Derivatives not designated as hedging instruments | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Gain on termination | $ | $ 8.6 |
Derivatives and Hedging Activ_5
Derivatives and Hedging Activities - Schedule of Derivative Instruments in Statement of Financial Position, Fair Value (Details) - USD ($) $ in Millions | Jun. 30, 2023 | Dec. 31, 2022 |
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Derivative asset, notional amount | $ 92.4 | $ 113.4 |
Derivative liability, notional amount | 29.6 | 40.4 |
Derivatives not designated as hedging instruments | Other long-term assets | Interest Rate Caps | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Derivative asset, notional amount | 0 | 9 |
Derivatives not designated as hedging instruments | Other long-term assets | Interest Rate Swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Derivative asset, notional amount | 4.8 | 8.5 |
Derivatives not designated as hedging instruments | Other long-term liabilities | Interest Rate Swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Derivative liability, notional amount | 4.8 | 8.5 |
Derivatives in cash flow hedging relationships | Other long-term assets | Interest Rate Caps | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Derivative asset, notional amount | 9.4 | 10.4 |
Derivatives in cash flow hedging relationships | Other long-term assets | Interest Rate Swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Derivative asset, notional amount | 78.2 | 85.5 |
Derivatives in cash flow hedging relationships | Other long-term liabilities | Interest Rate Swap | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||
Derivative liability, notional amount | $ 24.8 | $ 31.9 |
Derivatives and Hedging Activ_6
Derivatives and Hedging Activities - Pre-tax Effect of Derivatives on AOCI and Statement of Operations (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||||
Amortization of accumulated OCI related | $ 5.3 | $ 5.3 | $ 10.7 | $ 10.6 |
OCI, Cash Flow Hedge, Reclassification for Discontinuance, Statement of Income or Comprehensive Income [Extensible Enumeration] | Interest expense, net | |||
Derivatives not designated as hedging instruments | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||||
Loss recognized in income | 0 | 0 | $ 0.6 | 0.1 |
Derivatives in cash flow hedging relationships | ||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items] | ||||
Gain recognized in OCI (effective portion) | 21.9 | 12.7 | 16.7 | 63.1 |
Loss (gain) reclassified from accumulated OCI into income (effective portion) | $ (8) | $ 6.3 | $ (14.1) | $ 12.7 |
Earnings Per Share - Summary (D
Earnings Per Share - Summary (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | ||
Numerator: | |||||
Net income (loss) attributable to Surgery Partners, Inc. | $ 18.9 | $ (18.4) | $ (6) | $ (6.2) | |
Denominator: | |||||
Weighted average shares outstanding- basic (shares) | 125,718 | 88,900 | 125,463 | 88,450 | |
Weighted average shares outstanding- diluted (shares) | [1] | 127,370 | 88,900 | 125,463 | 88,450 |
Income (loss) per share: | |||||
Basic (in USD per share) | $ 0.15 | $ (0.21) | $ (0.05) | $ (0.07) | |
Diluted (in USD per share) | [1] | $ 0.15 | $ (0.21) | $ (0.05) | $ (0.07) |
Stock options | |||||
Income (loss) per share: | |||||
Dilutive securities outstanding not included in the computation of income (loss) per share as their effect is antidilutive (shares) | 0 | 1,559 | 1,407 | 1,599 | |
Restricted shares | |||||
Income (loss) per share: | |||||
Dilutive securities outstanding not included in the computation of income (loss) per share as their effect is antidilutive (shares) | 0 | 628 | 147 | 644 | |
[1]The impact of potentially dilutive securities for the three months ended June 30, 2022 and the six months ended June 30, 2023 and 2022, was not considered because the effect would be anti-dilutive. |
Other Current Liabilities - Sum
Other Current Liabilities - Summary (Details) - USD ($) $ in Millions | Jun. 30, 2023 | Dec. 31, 2022 |
Other Liabilities Disclosure [Abstract] | ||
Right-of-use operating lease liabilities | $ 37.2 | $ 36.5 |
Amounts due to patients and payors | 28.4 | 31.9 |
Cost report liabilities | 24.3 | 23.5 |
Interest payable | 17.7 | 19.4 |
Acquisition escrow | 17.4 | 28.8 |
Accrued expenses and other | 73.1 | 70 |
Total | $ 198.1 | $ 210.1 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
Unusual or Infrequent Item, or Both [Line Items] | ||||||
Professional, general and workers' compensation insurance reserve | $ 22,500,000 | $ 22,500,000 | $ 20,800,000 | |||
Expected insurance recoveries | 12,700,000 | 12,700,000 | $ 12,700,000 | |||
Litigation settlement | $ 32,800,000 | (1,500,000) | $ 0 | $ (4,500,000) | $ 32,800,000 | |
Business Interruption and Related Expenses | ||||||
Unusual or Infrequent Item, or Both [Line Items] | ||||||
Business interruption and other expenses loss | 5,000,000 | |||||
Insurance recoveries | $ 0 |
Segment Reporting - Schedule of
Segment Reporting - Schedule of Segment Revenue and Operating Income (Details) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2022 USD ($) | Jun. 30, 2023 USD ($) | Jun. 30, 2022 USD ($) | Jun. 30, 2023 USD ($) segment | Jun. 30, 2022 USD ($) | |
Segment Reporting [Abstract] | |||||
Number of operating segments | segment | 2 | ||||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 667,600,000 | $ 615,400,000 | $ 1,333,800,000 | $ 1,211,600,000 | |
Adjusted EBITDA | 100,200,000 | 86,100,000 | 190,300,000 | 163,200,000 | |
Reconciliation of Adjusted EBITDA: | |||||
Income before income taxes | 49,900,000 | 19,600,000 | 49,500,000 | 63,700,000 | |
Net income attributable to non-controlling interests | (38,800,000) | (33,700,000) | (64,900,000) | (64,300,000) | |
Interest expense, net | 47,700,000 | 56,900,000 | 94,500,000 | 113,200,000 | |
Depreciation and amortization | 24,400,000 | 28,000,000 | 58,100,000 | 55,400,000 | |
Equity-based compensation expense | 4,600,000 | 4,300,000 | 8,800,000 | 8,000,000 | |
Transaction, integration and acquisition costs | 13,000,000 | 8,200,000 | 25,800,000 | 15,300,000 | |
Net (gain) loss on disposals, consolidations and deconsolidations | (8,800,000) | 1,100,000 | 1,700,000 | 1,000,000 | |
Litigation settlements and regulatory change impact | 1,700,000 | 1,700,000 | 9,700,000 | (29,100,000) | |
Undesignated derivative activity | 0 | 0 | 600,000 | 0 | |
Other | 6,500,000 | 0 | 6,500,000 | 0 | |
Adjusted EBITDA | 100,200,000 | 86,100,000 | 190,300,000 | 163,200,000 | |
Transaction and integration costs | 12,000,000 | 8,200,000 | 24,500,000 | 15,300,000 | |
Start-up costs | 1,000,000 | 0 | 1,300,000 | 0 | |
(Loss) gain on litigation settlement | $ 32,800,000 | (1,500,000) | 0 | (4,500,000) | 32,800,000 |
Other litigation costs | 200,000 | 1,700,000 | 800,000 | 3,700,000 | |
Additional interest expense for Florida LOP regulation change | 4,400,000 | ||||
Operating Segments | Surgical Facility Services | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 650,200,000 | 597,900,000 | 1,299,200,000 | 1,176,700,000 | |
Adjusted EBITDA | 126,700,000 | 108,700,000 | 245,500,000 | 209,700,000 | |
Reconciliation of Adjusted EBITDA: | |||||
Adjusted EBITDA | 126,700,000 | 108,700,000 | 245,500,000 | 209,700,000 | |
Operating Segments | Ancillary Services | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 17,400,000 | 17,500,000 | 34,600,000 | 34,900,000 | |
Adjusted EBITDA | (100,000) | (800,000) | (1,500,000) | (700,000) | |
Reconciliation of Adjusted EBITDA: | |||||
Adjusted EBITDA | (100,000) | (800,000) | (1,500,000) | (700,000) | |
All other | |||||
Segment Reporting Information [Line Items] | |||||
Adjusted EBITDA | (26,400,000) | (21,800,000) | (53,700,000) | (45,800,000) | |
Reconciliation of Adjusted EBITDA: | |||||
Adjusted EBITDA | $ (26,400,000) | $ (21,800,000) | $ (53,700,000) | $ (45,800,000) |
Segment Reporting - Assets and
Segment Reporting - Assets and Cash Purchases of Property and Equipment by Operating Segment (Details) - USD ($) $ in Millions | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
Segment Reporting Information [Line Items] | |||
Total assets | $ 6,620.6 | $ 6,682.1 | |
Total cash purchases of property and equipment | 50.1 | $ 40.6 | |
Operating Segments | Surgical Facility Services | |||
Segment Reporting Information [Line Items] | |||
Total assets | 6,031.2 | 6,001.1 | |
Total cash purchases of property and equipment | 49.5 | 36.9 | |
Operating Segments | Ancillary Services | |||
Segment Reporting Information [Line Items] | |||
Total assets | 39.6 | 41.7 | |
Total cash purchases of property and equipment | 0.6 | 0.5 | |
All other | |||
Segment Reporting Information [Line Items] | |||
Total assets | 549.8 | $ 639.3 | |
Total cash purchases of property and equipment | $ 0 | $ 3.2 |