SGRY - Earnings call transcript Q3 2018

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Surgery Partners, Inc.

Third Quarter 2018 Earnings Call.

As a reminder, all participants are in listen-only mode, and the conference is being recorded. now Chief turn Financial would to conference I Cowhey, Tom Officer. Instructions] like the to over [Operator Please go ahead.

Thomas Cowhey

Chief Good morning, call. Cowhey, earnings third quarter Officer. and welcome to This Surgery is Partners' XXXX Financial Tom

Wayne Joining DeVeydt, me today Surgery Chief Executive Partners' Officer. is

reports we differ this factors impact projected filed in does are materially we and from As statements forward-looking actual cause this may make release described call, forward-looking currently reminder, duty SEC. statements. will morning's statements. and the a future The those undertake could not during Risk to that results the such press with update to results company any

measures Additionally, during accordance reconciliation information be quarterly for considered useful measures, Wayne? I'll be site in release, in non-GAAP today's call on evaluating as Wayne. results is in our A prepared isolation should certain posted not of GAAP. over or turn presentation call, in with most a be and additional company discuss these earnings performance. our With substitute we to found this that, which can will when filed. surgerypartners.com our Web which believe The the in our the can at report, recent of

Wayne DeVeydt

all you, for Thank thank us Tom, morning. and today. Good joining you

a to call platform the will to regarding Tom I continue reported over our quarter the long-term growth. each of $XXX.X executing revenues, adjusted a progress of August to from highlights start on National by we've million for from position Starting as year-over-year morning results result sustainable We making the cover million, reviewing financial and with quarter, this Surgery XXXX of have initiatives the update initiatives would to the with been a of this building then some provide to our discuss hold. then results strategic the early in lot Surgical strong primarily acquisition year, that $XX morning. like I third foundational Healthcare EBITDA last our growth, an Partners and along we to key quarter representing detail. strategic take in greater turn in and

XXXX $X.XX made full for to has we to into modified wide adjusted quarter, year revenue meaningful, revenue but consistent grew increasing the and billion accordingly, change our said, and organization our increased adjusted from guidance $X.X by of a team take on with from with that are pleased our quarter, long-term EBITDA confidence remains in our that the of billion. than trends reflects have complicated period. and look prior to to to Same-store by to the prior and that surgical the margins this the year drive case in encouraging, areas. increased trends projection revenue sequentially, mix year posture million decision people we more over outlook and and to respectively our This assets have I'm These the our prior outlook That the full and and quarter. initiatives. date we improved especially payer my right positive XX.X% to success being growth, million. a high-value, key As points deeper EBITDA a continue XX.X%, adjusted XX.X%, million greater array our progress XX of $XXX range by EBITDA year private conservative same-store XX.X% across a basis encouraged we made to be year two I'm growth, in $XXX profit $XXX volume range our while

mix. fourth our case payer are quarter we First, forecasting more cautiously and

was but both prudent of we to required achieve more ramp guidance, see trends given continue positive the it our conservatively. previous seasonal in to these felt We drivers, to significant plan

underperforming prune XXXX to contribute continue to we next, beyond, the us and discuss growth future position to assets, but These and while to non-core for better drive change in efforts invest we full guidance. I'll year nonetheless, growth. as Second, our

turn and optimism. reasons continued initiatives key my Let me our growth for and to strategy

past upon to what building months, continue nine shift facilities positioned we short-stay provide. high uniquely we've as our we low-cost to trends on We operating been high-quality, settings more focused believe do surgical facilities. the industry capitalize Over favorable are on quality, best, that to surgical procedures clinicians the

base, asset goals. closing and with pruning those we've in platforms, across are and As our the with growth and opportunities assets that investing into business. data-driven asset previously not buckets: approach pruning three organized in the base, are discussed, key our our consolidating strategic efforts analyzing aligned taken challenges portfolio a the Starting our or we've divesting

three discussed total to third and quarter, we our we closed that our bringing been on initially path we XX base, additional our focused As evaluating call, practices and sale the the quarter year-to-date optical we're sold. the asset ancillary ASCs, best have for and second ASCs and ASC additional physician business. five or closed of forward on In practices completed physician three

of Vision on to favorable We practice development pipeline. our also our optical Care relative successfully sale our multiples the Family at and executed laboratory

our meet are not are short-stay our we optical specialties, we and that we ASC ancillary to have of centered we made and on ASCs assets on few short- exploring surgical goals. our base. our growth options strides our also While focused and that still remaining strategic long-term ensure that believe our hospitals business repositioning for a evaluating meaningful in We're are targeted-growth asset can

us this During largely the analysis. Partners, optimization accelerate business the NSH we the quarter, third integration completed portfolio allowing of Surgery into to

review opportunities creation the is the against here continue we There work much highest-returning as and to still Our best our to investments to investments. opportunities lower-return to forward acquisition. evaluate do of reprioritize maximize identified this limit path has further value

is asset short-term our for long-term creates right While we headwinds, company. this base decision our pruning believe the

from is consolidation. second our creation we our platforms, to bucket, real generated Turning platform strategic that believers firm value key consolidating are

acquisitions. there creation in data value addition enable in from execution our In eliminating and decision-making, effectively to measurable G&A efficiencies ability for meaningful synergistic distractions our platforms future providing to agility leverage is capturing value analytics and that

workflow be with with regarding facilities to issues the revenue cycle our substantially post-adjudication to revenue single and complete a by at us will progress starting management Tampa a have leakage platform of the over be of revenue our migration we process successfully efforts migrated migrations our date; progress across our meaningful end of also expect Service with management, submissions this by facility to claim and Some end to enhance the quickly insights for the associated in standardized substantially our made These clearinghouse X/X should by successful on We've cycle year. mitigate Shared year. enabling and identify our organization.

to data generate to core our every efficiencies platforms; investments we of these Moving and experience. leverage each important ability the year. centralize standardizing The analytics organizations, are patient destination our and into do improving create migrations the patient have an to not platforms on aspect reporting safety to platforms converting platform accounting while of with expected and to our made been platform progress day, is warehouse. meaningful contingent improving significant least, data ability these on outstanding satisfaction single what facilities that end data on migrated of Last a our to but on to for be the and facilities by of XX% Patient the our experience.

The that across migrated single-data to are us necessary made of successfully in covering we As of of I'd a to increase continue allow delivering. we laser of facilities our we approximately growth warehouse, our XX% our strategy and that insights additional our today, long-term have final our a the are believe performance. providing business Returning to all of focused facilities operating like improvements of to business. both double-digit component once visibility on revenue strategic beginning discuss already into today, growth migrations our to margin surgical is achieving opportunities bucket, business. convert We our investments. for critical their XX% sustainable, is XXXX identify is capable and we've to revenue, in These investing

growth. initiatives simple areas centered investment drive several Our to on core

First, we grow organically. need to

to by grow X% year organic achieving to X% X% of and by X% per X% Our increasing is to rate X%. increases case surgical goal growth volume to

these also cycle upside Our revenue management further to provide efforts could metrics.

volume our our physicians than more Starting previously key is volume, through a in time with discussed, recruitment focused over as me specialties. this core surgical and separately. case on driving volume. and our year XX% rate recruited been dynamics Let at To component physician walk last we've date, have high-growth

than As that and per improved our result, double as newly physicians from and volume our same-store has ago, a recruits this measurable quarter contribution efforts each dollar result have more and of is to year A every compared improved. these also case from our a specialty year. direct recruited is metrics revenue case

quarter third the and date, growth of to results our our with pleased XXXX. extremely in quarter are We first represents year-over-year

these volumes. we early improve trends case quarter, continued have look in While still very the to October at fourth our when

increases. rate to Moving

We are upper currently XXXX. head rates as into commercial at we end of our blended targeted achieving the range

a of our to As occur terms, our and will two-to-three year multiyear period. have contracts over negotiate many ability generally reminder,

end represent that the in of that range. have but below targeted performance goals contracts Our reflect XXXX low are our blended our those renewals rates targeted our regarding renewals, the for multiyear previous

create to team's product that offer be and the healthcare for for value to the our our believe system. efforts at to superior patient-satisfaction value all cost by encouraged are in clinical lower participate begin should We we We capture and rates to and able stakeholders. a continue improve we

We with and of payers continue early to our component our successes. believe it key a share story is

from organic XX of for the by We across these driver that to come the unlocking to acquisition. front NSH surgical is related franchise refer having the as while continuing on fit our increase being initiatives the our XXX to economies major maximize value facilities growth. Another value states, growth to

more should points a three adjusted improvement that margin next into EBITDA we to made five over the able meaningful years. in of believe XXXX. several we've be should percentage progress as Specifically, We head through we growth organization growth becoming to fit drive generate

examples, XX expected can measure in into costs. pricing from these they early vendors as our quarter purchasing the group contract the the we ramp improved from and implant implemented top it getting our in as to in fourth quarter make relates XXXX. savings initiatives Some continue third progress and move steady new We easily up to

heading realizing synergies from year. we our fit that improvement relates last up to XXXX quarter third acquisition ramps NSH area the in completed Another into growth that for

on headquarters that in of to those headquarters our process executed in were our on and plans we discussed close filling last replaced. Chicago the positions NSH our have call, begun for As national

reporting some We our our simplify and also businesses control. of of span realigned to structure

and we staffing transition, onboarding for for newly training the that functions During our proper require have critical maintained recruited duplicate employees.

in undertaking of head we examples into rate as to end to XXXX. earnings year, will we which the into eliminated savings are activities we these of many substantially are a head run expect the XXXX. be duplicate These by XXXX few of the positions We just drive as improvement create

our million we have third pipeline high-growth these focused capital executed targeted per XXXX. growth We our confidence The have related the able activities as growth percentage final to specialties. with million in $XXX of savings industry transactions on we high and to drive starting M&A is in fourth and annually area of improvements M&A, to been investment the If three of prevailing major of between of XXXX. and achieve in deploy at be these series generate to a to quarter will rebuild the between majority five $XX can multiples, should year

spine ASCs As focused $XX upper targeted XXXX of capital million capital. Recently, quarter, over deployed will on our third of the of to and additional acquired we we end of push M&A orthopedics us goal. deployment the end had three that the

have may these and to you that future seen term us loans incremental provide As ago, few execute recently M&A also opportunities. weeks we will announced ample against a capital for issued

we able acquisitions. We and robust X% growth head current and ascribed will pipeline our a we XXXX to X% believe have to achieve as our into to be future

our see, to growth confidence the to success my at drive can assets has and meaningful date that right increased Surgery we you As long-term have people Partners.

initiatives to on adjusted in With sustainable, XXXX. growth the Partners and our executing well return double-digit are EBITDA Surgery to focus strategic right beginning

is results. that the hand satisfaction financial industry-leading call introduction engagement. More let importantly, me clinical and on and overview Tom for quality, an asset patient quarter over With that, achieving to are building we a back our platform physician third

Thomas Cowhey

our adjusted Thank to flows. revenue some starting a spend minutes you, on our moving performance updates of third then Today and finally, year-to-date some on and financial few on Wayne. XXXX with EBITDA I'll key cash drivers, quarter

reflects Surgical as a the million primarily Our third a quarter of revenue $XXX.X of of increase prior over XX% result Healthcare the acquisition the third of quarter, in quarter year XXXX. National

estimated the $XX.X in to by revenues the were approximately on operations, million impacted our revenue prior reminder, have quarter cases. third a lowered $X by in results reserve of from a As also which adjustment suffered year of book and to X,XXX over were impacts hurricanes XXXX million

normalized not nor is specifically the any a period. are comparisons, impact Surgical to quarter, which hurricanes, quarter results this XXX,XXX year in have the We of unless quarter cases slight normalizing prior for approximately our the over increase noted. increased we prior

services that business, calculations volume. periods. up As X.X% reminder, X.X%, company higher each to same-store our case. experience are revenue our increase On Year-to-date, was practice, net typically with prior third of consisting net revenue experienced prior the associated total in per year. up revenue compared a we with driven quarter basis, volume the case now higher case per same-store inclusive revenues revenue revenue Note of in lowest-case when which increase same-store is XX.X% of our year a XX.X% ancillary the by and a consistent in our past a year quarter, from

strategic around been key As Wayne which physician driver recruitment a taking mentioned previously, case our initiatives volume. hold, our are improving has of

the our count. physician a the As we've right getting right focused reminder, in simply facilities than docs rather increasing on

we're recruited for result, higher as cases, higher out a are our and we to expect we to And continue. see seeing trend production year, physicians, business. we of prior another a case importantly, our as a trend per As positive compared enhanced seeing newly higher-acuity revenue net productivity

period Turning our XXXX XXX% the was adjusted third increase in a over XXXX. $XX to operating quarter earnings, comparable EBITDA million,

as XX.X% mentioned in compared margin as margin as quarter EBITDA XXXX due year-over-year driver low third the increase adjusted revenue Our to the X.X% reserve adjusted from previously of third impact A of large quarter to improved of year. last adjustment of EBITDA is to well hurricanes. the of the the

Chicago recorded approximately the acquisition in quarter, million September. costs, nearly closure office the with transaction, including $X.X our of million integration During associated we $X.X and of

future one-time will we provide As integration updates discussed last calls. quarter, merger costs are subside, on and and beginning to

$X.X to no structure million cash note. Moving third of long-term at on quarter, quarter, covenant of financial the liquidity, a balances Surgery flexible had inflow, note, debt Of company of $XX had end performance the company approximately an Partners the our agreement, part million and a $XX approximately under debt. interest ASC, as net current operating specifically improve and hurricane revolving initiatives approximately the in unsecured facility. undertaken our periods, $X.X the cash defined million. million which EBITDA of cash proceeds total we received $X.X for future flow that off, approximately The non-controlling less activity distributions result fit-for-growth and of in third multiple of term to the loan the million under approximately cash flow operating with during appropriately We senior of The acquisition associated a on to rolling the for and from discussed XXXX, at capital or availability million as our an substantial of approximately the has $XX.X the was the by company reserve ratio of adjustments deployed interest of has credit used of majority to many quantification end approximately third quarter in of initiatives. calculated with Wayne company's XXXX replaced net the on payments impacts X.XXx, divestiture as we

to balance deployed at existing our with Our our business the we proceeds growth $XXX loan decline million incremental which an October, pipeline help total our net negotiating consistent XXXX over remain existing and term already $XX loans, and XXXX continues these development multiples, additional issued by our under and debt-to-EBITDA In beyond. valuation sheet and evaluating borrowings million in ratio of October, fiscal delever will at term opportunities we driving course approximately capital. should of In of acquisitions our naturally work grow. teams hard attractive earnings terms accretive at of as deploy fund to strategic

addition, we million rate LIBOR of an into our interest variable rate exposure hedging In on three and entered in X.XX%. September of interest rate $XXX debt and swaps, October, effective

corporate XX% continue we for open the drive we'll is for our enterprise no substantial approximately our interest that, to exposure, growth agenda. With Operator? provides these tied longer to the debt protection in variable we Q&A. which With call place, believe rate of swaps as

Operator

We from [Operator begin First will is now Ana question session. Instructions] Please the of question-and-answer Leerink Partners. Gupte ahead. go

Ana Gupte

Good quarter, thank you.

was How it think well. about your fourth lot. year? next it's first continue? mix contract question acuity like pricing we is about just into and long pay should has quarter the but The -- You are on to which same, growth, the is this your and a maybe sounds proceeding negotiations expected say the impacted mix How

Wayne DeVeydt

thanks for the Ana, question.

So think be those components, key those organic report obviously about results, case one in engine, are with while October, stronger and year-to-date terms which even got to being trends the growth we strong, of trajectory. flash if we we than the encouraged just very posted that, you continue do two the volume, there's a on

think the the we're revenue other moving clearly component piece. we that direction. the in So But right on is

at have we three in typical you the renewals around managed-care that which general, is know our contracts, look for in they our most contracts experience If from side. years, fairly

we result, that a a below targeted a know in rates current your continual got subject multiple. actually higher historically X/X historical being commensurate book see with about you still targeted renewals contracts, the the we've year. this with about that encouraging, to have range. and inflationary kicker those ramp-up. All our range In kind that said, that as targeted those of of than were been very years you'll able get to happening each is which is get is year, you them we But the X/X that out a so And nice of for range, our renew think did -- the at renew, along

to about now end you'll of value and of next following getting some cycle. those occur By through by that you year. So, the half mid year, start renegotiated, got all see year, incrementally the almost them of you've creation up next then

be we should easily better. can upper not trends, to So range, targeted if if the at that able continue we current be of the end

Ana Gupte

Should mid-single half you X/X maybe, and think contracts remainder ramp-up the for year, of instead other annualizing seeing the you've of negotiated, full year, the so of about next the then of the kind the we, that second growth X% guided. of, that those the for the year, X/X digit pricing the

Wayne DeVeydt

thing caution know, in there substantial as would a that falls I well, we only you The obviously that government on, percentage. book government is and have below as

So if bit a government, you we're where the But more then commercial of unreasonable midyear think about mid-single heading the convention, had using not we commercial average on the around being digit, recent in will to that's improve a basically although book. are as ASCs little you pleased going and and rates process, Medicare so well. how they're CMS in that treat with that actually

targeted I in be So definitely end by there, see the higher like blending ramp-up. though, buyers of next And we'll we'd the from that towards that year course, of then, think in with to range. range the

Going the remaining into XXXX, book, you rate that convention XXXX. midyear of, start of getting more renewed of X/X with full in benefit being book kind run

Ana Gupte

Wayne. appreciate Great, the thanks, I color.

Operator

Merrill is question The America Lynch. from of Bank Please next go Kevin Fischbeck, ahead.

Kevin Fischbeck

thanks. Great,

follow in XXXX. comment, back growth your to EBITDA up to expect double-digit on I get you think said that wanted you to Just

Or that, it's company-wide if is end on less that understood number than that. and of, Just Is is the you XXXX might this that bit putting a make kind little same-store number guidance? a portfolio so, much I of correct? see normalized number up on how we sure that. a kind half that wanted And of to depending

Thomas Cowhey

question. Yes, thanks morning Kevin, good the for

our long-term by to remarks in start saying try framework. we what was me prepared the growth out lay that Let

guidance and would but And in long I so to expect we the those of to expect get giving say while XXXX fully we're all not start we achieve, of not term, components framework don't 'XX. want those only we ahead yet, to over board, our the

we words ahead to don't get So or growth next I process do double-digit are our while script in the that intentional our in think -- I believe will want board think again, year. this our I be of process, budget

Kevin Fischbeck

now think provided the color you pruning you are the bit each commentary Okay. there's, to previously? positive I again, you're provide seasonality that three an business guess, had comfortable is seeing guidance And might sounds had of we growth makes on -- come a said maybe QX in acceleration when of, down that acceleration when then you just It than more forecasted, caused that into the made less you about efforts, saying And little you pretty as that about then, that continued things thought what you them. the some QX, And something you that in is about? didn't way kind have the in think there investments, like the that you October that an look as do you versus you that, previously? what far today differently guidance take

Wayne DeVeydt

yes. Yes,

let So break into me two buckets. it

just would I If of being outlook. the it's change the in about look in at guidance, as bucket would cautious the you it, break XX% first

do this volume no at in we reports have our versus revenue mix our but acuity and have strong this hit that I reasons and may October don't those payer expectation. day was to time time. we only at our case yet our have or in X, point quite believe my We are yesterday mix not point

asset high-equity such quarter, in the is I'm I up kind cautious mix procedures important. I my decision, behind ramping there, strong of comment, you these recruitment the that, posture. bit as as is will it it's little you X/X in that pruning like having the one we've one cautious is, is into volume not my this maintain yet for happening. posture, So it's then a case The reasons. And detail happening, and this And is and you is case your wanted higher-dollar, have know, case sector, well of volume two like One new tell only to while was investing to the not would mix was having retail, a when MSK. that all the reasons but been earnings say, that I is it

the that And year, have more sector seen months that this to posted environment, payer cautious of it's me to is [indiscernible] that the strength me will the that we what first And and is, occurring is, maintaining affect that And elective QX. the procedures that I've our is of posture. two high for what so and directly and and isn't our just fact new question of newness nine deductible issues and for their the are in impact the see the the the nature that because payers many deductible. are higher-acuity procedures in

As XX% have of I that and intensely concern, of being about don't reasons I change. create that's today, would the outlook but cautious am

Tom let Tom? I'll XX%, but around of accelerating some some it and ahead well other as comment other the as of is pruning our but on, items, The go

Thomas Cowhey

October. by Kevin, would increase what other seen you thing right? we're Yes, you pretty volumes, we've encouraged that point uptick was have we corresponding the the and looked in in, an the as to essentially just jump, And per as it out, in assumes it, case, I fourth look at see But at quarter, steep. EBITDA

a is it we year, as a it why really And in the that the which little that half far, business feels in feels the pulled change tell like ramp the steeper at too reflects -- our whether than outlook will in so fourth cautious it's -- being we're we're not, little and back bit it quarter. right, but too a happened focus, we has that look Time given last or a steep it over little which cautious that. on quarter, is bit was

year. a the As is efforts pruning made business, we've change, the you of some look at this the and guidance rest throughout seasonal

I we of so as underperforming And to that And looked it the fourth expect acquisitions some be that and and was going to that some then as we business And that impact thing quarter, But they by there try of the be little have we're alternatives is the the quarter. bit what of we kind thought transition to our of, have from environment, is, control in of do last we, internal that's work just the we in Chicago, kind on some -- a as eliminating would well. we investment our we've had last us we're offset thinking of the those wasn't as And returns for. we've think achieved in -- years. that we've that efforts adding the that controls also, additional in at that of about contribute that were the clear staff some material weaknesses from you partially assets going seen recruiting that our think the as in of the greatest because evaluating those in fourth actually year-to-date. of that, would couple and we of fabulous to that, some such over beyond physician staff some course done, about

of guidance -- that were think that at with things, but cautious fourth Wayne's the this about mix perhaps made on I'd I'm the there It's the items posture, in prudent pull completely these. given was looked those it some quarter, the about concur relativity to as ramp mostly the other So Wayne point. down say, all we us specific to how the at of think

Kevin Fischbeck

thanks. Okay,

Operator

The question Chad ahead. next [Operator is go Please Instructions] with from Vanacore Stifel.

Chad Vanacore

Good morning all.

Wayne DeVeydt

morning. Good

Thomas Cowhey

Good morning, Chad.

Chad Vanacore

All right.

So just How the million range, $XXX end you year-to-date, that $XX thinking that your about the targets you say you the EBITDA, million? high opted completed was acquisition for the laid you that million of from much year, did $XXX -- for of out.

Wayne DeVeydt

that million. have third about. completed three as actually to as $XX excited recent week, we on Recently million quite last we're through -- so quarter, were Yes, deploy able we the an acquisitions $XX additional

of should months, run the our benefits into couple over those year. we is as goal, next So those next start acquisitions Chad, rate then full of seeing to integrated get go the we and

growth M&A -- should point. this in high from we confidence is X% So our to X% the at

able be pipeline's to now. with to to and interesting that but we're pretty the continue have working still deploy next, we throughout right Now rebuilt, been prospects got some we've

Thomas Cowhey

number, will the did Q, actually year-to-date flow be get $XX Chad, it number, it's deal million, the small cash think when we you the in in fact statement. one be I going to in

Chad Vanacore

should right. the we little On are is acquisitions, maybe that Okay, times, expect than them? portfolio your way margins over all that that core ramp-up if lower right those bit think about to

Wayne DeVeydt

Yes, we're of our cost We'll get do. trying you get to a initial integration platform. that bit little on them that

have get get ramp-up new operations. two a get there. us we and into year tapped even more, little then SP the the to the team, bit. in in to just start which recruiting And start cost because And new to value fixed performance the good more leverage margin creating you our start margins then So integrated the you we then migrating docs, them three a then kind as new takes off get strategic of, that into bring bit you procedures. It we as little facility we down platforms physician months purchasing creation progresses them our as introducing

Chad Vanacore

right. ASCs plan of the two I then might and that quarter? had you And through disposed just practices the additional think how you an three All divestitures disposition many have more Year-to-date, this on side. year? you

Thomas Cowhey

obviously that in are Three hope alternatives then our on businesses; execute some we businesses -- to also that about we've alternatives are the third, the fickle. to two but optical items optical on continued and that expectations. evaluating talked three relative of M&A near is other term, the there explore for underperforming And we're to

Wayne DeVeydt

base I would to for businesses. high-growth their I I at the pruning regular how good year asset is, businesses redeploy and think, look the Chad, in highlight every one then think thing

to fairly in acquisitions, company built course, we've substantially to almost roughly now sold, to to XXXX, said, of that ASCs say we've so very pruning very as were more and asset. prune we we over normal three but five two we're this clinics Obviously I was date encouraged the been that to required, the date, the think with date. it's in fact years the we've XX remaining joined look and XX aggressive of got optical got than company that there and of which by businesses fair

pruning heavy-lift happened the think this I so has And year.

we're think on, and of on getting I to I off that. end than But call, to quarter. where there'll think still some what between now be -- trail normal -- the second the there'll be it'll I probably more we want be

Operator

Please The is with Brian from Jefferies. next question go ahead. Tanquilut

Wayne DeVeydt

morning. Good

Brian Tanquilut

that outlook, confidence get last you just four going lot and the I do the you can with organic about doing or get higher development typically do going growth, X% times, volume range? balance have as you I then think -- which five acuity, record So I to in X% comments mean, morning, more long-term MSK, volume to we've how the to do your quarters, longer Good over right? surgical to the guys. a that about Wayne, that back idea that also that are you're seen X% where we X% track how

Wayne DeVeydt

thanks asked for a well. It's Brian, we've quite it as the actually intuitive question. question,

fairly those on creates in meaningfully from inclusive move headwind the to been translating, a start that a shying there recur, volume of is amount was many into flow. me over know, to headwind by it, what rebuild the we look away call, of and case fair you reported the that fact if these as quarter that that's so investments that company, as our you that example we in, came of pain of our procedures. higher-cost let including have you pretty from give would just we Now pain But at heavy for injectables an history with time. I how the higher-dollar, procedures, case and And of

our and more we're at than business procedures we shift minute make before in time, the the direct what what contribution While on is dollars doing. as look a take better could per we

markets market, outperformed well revenue we way So by the and low-dollar, same expectations. the be, this interesting optimal what particular but quarter so the kind actually the injectables procedures, But volume had quarter, et point performed kind regrow our around think how had use far. heavy, EBITDA in offset of, do high-margin the an look of actually strategy. to the it's we is kind we're if trying reference, we've growth. how But we declination countries. sight actually our actually at cetera, of course, which, What's that I'll most call, is trend a we seen in you continued other would of right in than our surgical is our in versus, look we possible, where outperformed much store, at this better has space would of what October we expectations that

dynamic to between this be heavy term. this in it and of I to going pretty next is shorter continue expect you volume there case now so shift year, how a in shift measure the of year. that load And half first we but did

happening And we're of this actual margin improvement growth, expect procedures, longer-time next in value higher per these you'll dollar going to minute. And that same-store And start the start the begin point so actual with forward. I'd see see occur year. growth quarter actually that I same-store actually to to from like seeing DCM early to each actually you'll that but see

Brian Tanquilut

makes of part that sense. a My your Wayne, follow-up, of comment That last just lot too. to

about margins think and for efficiencies the where through the initiatives margins you've takes margin I EBITDA over place that integration into could all time? you go improve efforts do target put and As the work, put puts and what's all XXXX? think optimal in you've and the Like that do

Wayne DeVeydt

you I -- don't I today. don't tell answer could know Brian, I I yet. wish that it honestly,

had of One along for. to or more to board than way. which with year planned some us is of our has invest think supportive allowed board has decisions quarter originally the budgeted the I even overperformance those opportunities of things they've the we discussing up ramp in The I've can fourth date, been actually we this why been been where the very recruiters

points, is two trying the improvement things. you you get of few I'm say, above but in [indiscernible], things and But high question a you of do the have figure would have in, that years, or the three of just towards point maximize where confidence the we couple no we the should do those next pipeline growth? of view into it. three I the do growth, that build ought during a think to redeploy that we for long-term period, the gave three-year We only frame. see the And if we over we very on will, we absolute out think we longer-term end points question extent higher of range next good is, exceed of the a of then time years then back to that the is I margins. reinvest that business you longer one that So when even and to those curve, we bias hit frameworks

So you Tom, know want if I to expand of don't that?

Thomas Cowhey

think -- said. No, I what what said with you've agree I that you've

would there's implant The here, be cost towards businesses that business as the about lot. dynamics we -- the procedures so out the the talked of the get think I that shift and two right? those and this through, we we've would passed have proportion I that those first point MSK higher -- a inherently

bucket, the, the think that, we're from be initiatives though into of say, the should As going growth, between help go so the a I naturally And it's up which continue you there, targeted think margins, if specifically than that because going be kind But to of where also the where our natural business, a right? but line items. them we're of, margins, line things to inherent growth. doing, both, that's to to shift put there's and that little going shift are then should to of business Offsetting the see we're and to you more some some of gross the two going grow you that combination higher-implant those want to way to those in going and see overall in and bottom where time market is bit of to actually actually to you is targeting fit-for-growth as would that higher-dollar, the That we strategy margin be that growth supposed business. business, is on that the that today. over two drop fight of that about to overall improve faster pressure actually

Brian Tanquilut

I that. guys. Thanks, appreciate

Wayne DeVeydt

Thanks, Brian.

Operator

question next Company. The Sutherland with Please Benchmark The Instructions] [Operator go is Bill from ahead.

Bill Sutherland

discussion, morning of alignment update on there? and have Wayne, initiatives thanks, good but efforts your missed on guys. an I payer some this might Hey, maybe Hey,

Wayne DeVeydt

what on morning, I also and local some we've I good the getting part call, of we're some been exploring, kind that alignment. would I'm Bill. are very state about would of partnerships that, number we're blues both payer efforts different into Good getting in some of, a call, is, to bucket categories. One tailwinds would excited date national national carrier blues mono of I not terms with it carriers of -- good nontraditional couple a our programs.

the actually this the you, partnerships and I we've been we're ball moving working first through of, kind things. what this -- only in partnership -- So first getting where been on really about this care encouraged, that going point. our strategic head candidly, these long kind around state leverage creative. clinical don't even actually some at forward. of digestive some that to managed long they that pre-backward strategies discuss I more These had in strategies spent on the of, to CEO with to authorities we've a and these the work on, and high-patient some is they probably recognize quality their us to But you're is, they all and more recognize in are not has their date satisfaction, the a meet high-value, the periods as wanting meetings bucket, the I Monday are call, blue and with And and more but meeting encouraging markets night of of you, mentioned what great opportunities. leverage they tell have the it, quarter will need be product in

looking now of some take ownership right ways. we're so actually the or joint together in to only ways And but facilities payers, some at not other

in made carriers, large markets with certain a highlight bundling, and markets. we would a progress in been specific our of I and is around couple very bucket two we've Another national very good

a around come our payers actually many the have at. how example, idea day, good what exploring the finding at we're we what far, bundle bundle procedures don't we it's of initial it's care with But getting for and lot but like over So a do, potentially the ideas a we as XX-day of these an our and ways we others with bundle take has facility, just can focus working them many opportunities that post-rehab past to we're what is surgical and that been window, of of looking now of which partners. been so we've not working and then perform there. Obviously, do we're the

our a total better the and of result margin companies had getting docs space were with markets, done in of We've improvement Southern first bundle for prof before. result and what in offer So collective what bundle In our EBITDA we partnerships. about interim other those because five in fee have knees can of will actually payments were we're we in Florida payments, California markets, our the meaningful though, these that working getting a time now as in than being procedures, today. them the hips our

our And procedures so facilities. to their actually they're moving

encouraging total second in since QX. of and knees five the facilities ramp us that, if we will, realization expect many of, we're hips you and rolled out got is kind in these fact Now do very we've inning, starting of to that But we programs up. that the for

but start I to feel mean, story. this category on the So spot, right? on we telling even out the very second encouraged heel of taking high provider I one, think but that finally, good understand, like a system. focus then the the about. to And we make cost got want and we'd the sure side partner on the in with we on that's our would front we side, We're people payroll you, to not we've is say that the just just payer

Bill Sutherland

a So in talking Florida Wayne, California? there -- and the bundling is you're your component that to about, risk particularly

Wayne DeVeydt

question. great great, No,

as before, today case able today been are in what we before, have they hospital what higher less we've rates what that is meaningfully cost negotiate environment. as risk Xx because we than the substantially done So much than gotten than a paid bundles one not in received would higher new at higher there's but much we've really component, to

over us, day. procedure And done move to is the the and the we've created so for able these that we're idea bundling that specific to what is

manage, that's flat essence, any need difficult essentially with to We in isn't nothing get fee. that, anesthesia but a consequence today. what cover of So and we that to have we

is exploring rest take to over facility. mitigate time risk, on we the to the the goes an XX-day out, take a enhanced goes risk and our prof not over And really that window. pay that anesthetists, our in fee pay theory, would with is case, want then whether What bundle So the in our our we of that doing. call, are take or great by fees allow to of the be innovative care the great we're and we at top, would don't to next basically another partner that expand that partner again, who then at, take -- post-rehab portion because, which right want surgeons we're outlook to something I bundle. would we even That that step the at our working else, looking is

Bill Sutherland

for lot a the thanks color. Great,

Operator

closing Wayne any the Executive like remarks. session. I conference for of question-and-answer Partners, Surgery Officer to DeVeydt, the concludes Chief to over back turn would This

Wayne DeVeydt

Great, you. thank

conclude health thank we heavy improving do their to the XX,XXX-plus in to associates to contribution. and year been for we team, the lift affordable be This care you Americans. privileged all of take our making to a able for journey to Before very participate has call, I more it I to know this a feel say want and moment

there. morning, will is great As every get Partners short-stay against this it Surgery that execute we Thank our daily the call and for the U.S., have day. operating you and preferred our across a become goal the efforts partner to surgical facilities joining for of employee each us

Operator

call. conference today's concludes This

your you may Thank and a for lines. have pleasant participating, You disconnect day.

Surgery Partners (SGRY) 9 Nov 182018 Q3 Earnings call transcript